WEBVTT - Ariel Investments Founder John Rogers Talks New York Knicks Finals Win

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. Our next guest. He's

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<v Speaker 1>been all in really on some of these Jim Dolan

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<v Speaker 1>businesses for quite some time. A long time investor in MSGS,

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<v Speaker 1>the sports business at least a decade, and the largest

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<v Speaker 1>holder in MSG Entertainment. John Rogers joins us right now,

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<v Speaker 1>the legendary value investors, the founder, chairman, co, CEO, and

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<v Speaker 1>CIO over at Aerial Investments. John, Great to have you here.

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<v Speaker 1>We've talked a lot over the years, and you've always

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<v Speaker 1>been banging the drum here on the value and more importantly,

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<v Speaker 1>some of the unlocked value in the MSG stocks. Let's

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<v Speaker 1>start with MSGS. This is the business that includes the

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<v Speaker 1>Knicks as well as the hockey team, the New York Rangers.

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<v Speaker 1>I know it's hard to sort of put a valuation

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<v Speaker 1>on sentiment, but when you walk around this city and

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<v Speaker 1>you feel the excitement, you see jerseys and all the

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<v Speaker 1>paraphernalia selling out, you're already getting words here that whatever

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<v Speaker 1>season tickets are going to look like for the next

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<v Speaker 1>season are going to be a lot higher. Does that

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<v Speaker 1>mean that the value of this stock goes up with it?

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<v Speaker 2>Well? As you know, markets are so efficient and even

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<v Speaker 2>with all this excitement and all this enthusiasm, you know,

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<v Speaker 2>the stocks have done extremely well over this last year

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<v Speaker 2>as people started to see the team coming together, starting

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<v Speaker 2>to see a gel, and the playoffs have gone on,

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<v Speaker 2>the stocks have made new highs. So I do think

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<v Speaker 2>it's going to be a good year. I think it's

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<v Speaker 2>gonna be still more good news, but a lot of

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<v Speaker 2>the good news has already incorporated in the price of

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<v Speaker 2>the publicly traded companies.

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<v Speaker 1>There has been some discussion prior to this series that

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<v Speaker 1>there was the idea that they would actually split MSGS

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<v Speaker 1>into two separate socks. Basically, one stock for the Knicks

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<v Speaker 1>and it's w NBA counterpart, and another for the hockey team,

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<v Speaker 1>the Rangers, and it's our counterpart in the minor leagues here.

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<v Speaker 1>Do you think that that would be a good idea

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<v Speaker 1>to do it this time?

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<v Speaker 2>I think it's an ext idea to split the two

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<v Speaker 2>companies up. I think it will make it much easier

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<v Speaker 2>for a private equity investor to put capital into either

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<v Speaker 2>of the companies or both companies. It will be easier

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<v Speaker 2>for Jim Dolan if he wants to sell one of

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<v Speaker 2>the companies. You know, he might want to sell it

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<v Speaker 2>these all time highs as the stocks have done so extraorninally, well,

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<v Speaker 2>you know, get out on top and realize the valuation

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<v Speaker 2>will probably never be higher than what's happening during this environment,

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<v Speaker 2>after this iconic championship and again all the excitement of

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<v Speaker 2>New York City. So the spin off and splitting up

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<v Speaker 2>the two companies, splitting up into two companies is a really,

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<v Speaker 2>I think a terrific idea.

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<v Speaker 1>Well, I'm curious about that. You've talked in the past

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<v Speaker 1>about this stolen discount, the idea that for better or

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<v Speaker 1>for worse, are there are a lot of people that

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<v Speaker 1>don't look favorably on Jim Dolan as a person and

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<v Speaker 1>to a certain extent, as a manager. And I do

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<v Speaker 1>wonder if it's some reason he was willing to sell

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<v Speaker 1>here at the top, whether that would be welcome by

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<v Speaker 1>investors like yourself.

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<v Speaker 2>Well, I think investors would love it, because the stocks

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<v Speaker 2>have not reflected the entire value of these franchises. As

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<v Speaker 2>we know, the Knicks, who have been rumored to be

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<v Speaker 2>worth ten eleven maybe now it'll be twelve billion dollars,

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<v Speaker 2>you know, probably the highest priced basketball team in history

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<v Speaker 2>if it were ever to be sold. So would be

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<v Speaker 2>the time if to really take advantage of all the enthusiasm.

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<v Speaker 2>You could imagine all those billionaires that are out there

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<v Speaker 2>would want to be part owner of the New York

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<v Speaker 2>Knicks and to be able to be in Madison Square Garden,

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<v Speaker 2>you know, celebrating the next championship as an owner. So

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<v Speaker 2>it is the right time to be thinking about a

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<v Speaker 2>sale and again to be able to realize the value

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<v Speaker 2>because the markets have never really reflected the true underlying

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<v Speaker 2>asset value of Madison Square Garden Sports and the Knicks

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<v Speaker 2>and the Rangers.

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<v Speaker 3>We'll certainly be interesting to follow along and see what

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<v Speaker 3>decision Jim Dolan ultimately makes. But I do want to

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<v Speaker 3>talk about, you know, your other exposure that you have too,

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<v Speaker 3>his sort of publicly listed portfolio here. Of course, Area

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<v Speaker 3>Investments also a big holder in Sphere Entertainment, and I

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<v Speaker 3>just wonder, you know, how how you think about that

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<v Speaker 3>fitting in when you think about Okay, MSG is one

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<v Speaker 3>thing you think about the nixt exposure that you have there.

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<v Speaker 3>How does Sphere factor in?

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<v Speaker 2>Well, Sphere was spun out into a separate company several

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<v Speaker 2>years ago, and you talked about the Dolan discount, The

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<v Speaker 2>stock got extremely cheap. People thought that they had spent,

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<v Speaker 2>you know, way over budget to build the sphere, cost

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<v Speaker 2>over two billion dollars when it was only supposed to

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<v Speaker 2>cost one point three billion, and people sort of gave

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<v Speaker 2>up on it. The stock was sort of treading water,

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<v Speaker 2>you know, forties, thirties, even into the twenties, and now

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<v Speaker 2>it's over one hundred and fifty dollars, so that Dolan

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<v Speaker 2>discount has become a Dolan premium. It's just done exceedingly well,

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<v Speaker 2>and it's been executed in a beautiful way. If you

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<v Speaker 2>go to see a concert at the Sphere, everyone says

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<v Speaker 2>they've never seen anything like it. They don't want to

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<v Speaker 2>go to a traditional venue anymore. Once you've seen an

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<v Speaker 2>act in the Sphere with all the j ordinary technology

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<v Speaker 2>in the world class sound system is just something special.

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<v Speaker 2>And then of course the movie is like now The

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<v Speaker 2>Wizard of Oz that plays every day there, several times

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<v Speaker 2>a day. They used AI to be able to take

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<v Speaker 2>that old movie and make it spectacularly successful in the Sphere.

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<v Speaker 2>So Jim Dolan has executed beautifully from the time that

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<v Speaker 2>he first drew what the Sphere was going to look

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<v Speaker 2>like on a napkin, and now to see way it

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<v Speaker 2>is and starting to grow globally, and you're going to

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<v Speaker 2>start to see more spheres around the world. It's just

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<v Speaker 2>something we couldn't be more excited about. The execution around

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<v Speaker 2>the sphere.

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<v Speaker 3>Well, you think about that Jim Dolan discount flipping into

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<v Speaker 3>a premium as you say, I know we've been focusing

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<v Speaker 3>on MSG and those associated socks, but Sphere shares hire

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<v Speaker 3>by sixty one percent on a total return basis year

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<v Speaker 3>to date. When you have winners like this in your portfolio, John,

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<v Speaker 3>I wonder how you manage them. I mean you think

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<v Speaker 3>about target allocation level, not wanting a particular holding to

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<v Speaker 3>go too big. Is that something that you're thinking about

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<v Speaker 3>as you see these really stellar runs that some of

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<v Speaker 3>these stocks are going on.

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<v Speaker 2>Well, well, it's interesting these have been some of our

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<v Speaker 2>largest holdings. Sphere was our largest holding last year. Madison

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<v Speaker 2>Square Garden Entertainment that owns the garden has been one

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<v Speaker 2>of our top holdings also throughout the year. So we've

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<v Speaker 2>had very, very large positions in our aerial fund in

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<v Speaker 2>two of our favorite stocks. But you're right, at some

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<v Speaker 2>point when the value starts to be realized, it's proven

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<v Speaker 2>for us to scale back. We don't like to have

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<v Speaker 2>one company be more than six percent of the aerial

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<v Speaker 2>fund portfolio. And so it just means that as stocks

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<v Speaker 2>get more expensive, more people realize the economic value of

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<v Speaker 2>those businesses and the cash flows that are there. It's

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<v Speaker 2>a time for us often to be lightening up. But

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<v Speaker 2>now we feel like we're in a great position. We

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<v Speaker 2>think we're well positioned for future growth in all three

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<v Speaker 2>of the companies and just couldn't be more excited to

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<v Speaker 2>be Jim Dolan's partner.

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<v Speaker 1>So, John, I do want to startle this back to

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<v Speaker 1>the next year. I mean, you obviously are a basketball fan.

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<v Speaker 1>You played obviously a Princeton. You know a lot about

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<v Speaker 1>this sport when you look at the team and what

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<v Speaker 1>you saw this year and really coming out of last

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<v Speaker 1>season as well. Is this going to be a one

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<v Speaker 1>off championship wise and we wait another fifty years or

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<v Speaker 1>maybe the start of a multi year run.

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<v Speaker 2>Well, I'm very very optimistic. You know, I'm really good

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<v Speaker 2>friends with Bill Bradley, the former senator who was one

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<v Speaker 2>of the stars of the last Knicks championship, and you know,

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<v Speaker 2>I think we'll be able to have multiple years again.

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<v Speaker 2>In New York, people want to come and play in

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<v Speaker 2>the world's greatest arena in one of the world's greatest cities.

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<v Speaker 2>So it'll help us to attract free agents as time

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<v Speaker 2>goes on, to keep the team fresh and exciting for

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<v Speaker 2>the future. And of course Jalen Brunson is arguably the

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<v Speaker 2>best player in the world. I mean, what he's been

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<v Speaker 2>able to accomplish is this remarkable. The degree of difficulty

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<v Speaker 2>on the shots that he makes, his ability to make

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<v Speaker 2>shots under pressure, there's just really no in life him.

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<v Speaker 2>So I think he is still at the right age

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<v Speaker 2>to be able to help us deliver more championships as

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<v Speaker 2>we go forward, and more value for both the Garden

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<v Speaker 2>as well as the sports. All right, well said, and

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<v Speaker 2>we had your friend Bill Bradley on on Friday, and

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<v Speaker 2>he was giddy about the prospects of actually seen the

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<v Speaker 2>first championship since well he won that championship. And we

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<v Speaker 2>shall also point out also a Princeton Tiger himself. John

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<v Speaker 2>really appreciate it. John Rodgers there the founder, chairman, co.

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<v Speaker 1>CEO and CIO of Aerial Investments, And you know, Katie,

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<v Speaker 1>he's also I think the first guest we've ever had

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<v Speaker 1>that's actually beaten Michael Jordan in a one on one,

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<v Speaker 1>No kidding, that's actually verified.

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<v Speaker 3>That's quite a size and skull it is.

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<v Speaker 1>It is a size and school.

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<v Speaker 2>We should leave with that. Next time.

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<v Speaker 3>Here you go,