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00:00Orioles owner David Rubenstein is out with a new book that focuses on leadership through the lens of sports.
00:04It is called Inside the Owner's Box.
00:07We talked to him about his management philosophy.
00:10Let's start with how you came to own the Baltimore Orioles.
00:13You have this long, illustrious investment career.
00:16There's an inkling that maybe this team will come up for sale.
00:18Why was it something that you had any interest in doing?
00:21Well, I grew up in Baltimore, and I always was a fan of the Orioles as a boy.
00:24And when I was a boy, baseball was the big sport.
00:27So I was a real baseball fan, and the Orioles were my team.
00:30I drifted away when I went to college and then law school, and then I worked in Washington for most
00:36of my career.
00:37But I kept the little tabs with Baltimore, and then when the team possibly came for sale, I thought, okay,
00:43maybe I could do something for Baltimore.
00:45I had done a lot philanthropically in the Washington area and in schools outside of Baltimore and Washington, but I
00:51hadn't done that much for Baltimore.
00:52I was on the Hopkins board, but I'd really given some money to Hopkins, but I really hadn't done that
00:57much compared to Mike Bloomberg, who's given $8 billion or so to Johns Hopkins and done more for Baltimore than
01:03probably anybody.
01:03But I thought if I bought the team, re-energized the team, and made it better and would re-energize
01:09downtown Baltimore, which Baltimore could use.
01:11When I was growing up, Baltimore was the ninth biggest city in the United States, population of 930,000.
01:17Now it's not in the top 20.
01:18There's an enormous amount of flight out of Baltimore, and the corporate headquarters have fled as well.
01:23So Baltimore has some real problems, and I thought maybe if I could re-energize the Euros, I could re
01:27-energize downtown Baltimore, and we're working on it.
01:30It takes a while, though.
01:31Did you think that you would make a profit off of it eventually?
01:34So it's a unique kind of investment in that owning a team, maybe with the exception of a professional football
01:38team, is not one that's bound to make you a lot of money in real time.
01:42People who buy baseball teams don't think they're going to make a lot of operating profit.
01:47In fact, virtually no team makes real operating profit.
01:49But people do tend to make money when they sell the teams.
01:52But my intention was to make this more of a philanthropic thing.
01:55So I intended to, you know, die with the team, and my kids will figure out what to do with
02:00it down the road.
02:01But I didn't intend to go sell it and make a quick profit or anything like that.
02:04How do you begin to value a professional sports team?
02:07I mean, you look at the recent sales that we've seen here most recently out in Los Angeles, extraordinary sums
02:12of money.
02:13How do you begin to piece that together, get a sense of what it's worth?
02:15Well, up until recently, you would look at a multiple of revenue.
02:19You don't look at operating profit so much because teams aren't based on operating profit.
02:23But they don't run the team to make operating profit the way private equity firms do.
02:27But you look at the revenue, and you put a multiple on the revenue.
02:30I think in the case of the world, you put a multiple about six and a half times.
02:33This is probably standard for a team of that size.
02:37Today, people are paying prices that are hard to understand on an operating profit multiple basis.
02:43For example, as you allude to, in the case of the Los Angeles Lakers, they were just sold for $12
02:49.5 billion
02:51after being sold the previous year for $10 billion.
02:53And prior to that, for maybe $6 billion.
02:56We just saw the Boston Celtics being sold for $6.1 billion.
02:59We saw the Seattle Seahawks being sold for $9.6 billion.
03:04And I should point out, Carlisle, my investment firm, is an investor at that price.
03:08So the prices are hard to believe.
03:10Think about this.
03:10When the Yankees were sold in 1972 to George Steinbrenner, the price was $8.8 million.
03:16And he only had about $250,000 to put in.
03:19So he syndicated the rest.
03:21And as one of his partners said, there's nothing so limited as being a limited partner with George Steinbrenner
03:26because he ran everything even though he only invested $250,000.
03:30In those days, in the 20s, the 30s, the 40s, the 50s, the 60s, and 70s, the wealthiest people in
03:36the United States didn't obsess with buying teams.
03:38When you were having teams for sale and the Yankees for sale, the Rockefellers didn't show up.
03:43The Morgans didn't show up.
03:45The wealthiest families said this was de classe.
03:47But now, wealthy people have an obsession, just like regular people, with buying teams and getting the benefits of it.
03:54We just saw Jeff Bezos put $1 billion into buying a soccer team in Liverpool.
03:59And he's not even the majority owner right now.
04:01So it's amazing what's happened.
04:03And it's happened because populations are bigger.
04:05Television markets are bigger.
04:07TV contracts are bigger.
04:09And also the potential profits are bigger.
04:11And it's just a different thing.
04:13And plus, you've got betting now.
04:14And more and more people are focused on it.
04:16And you have people from another country who are focused on your team sometimes.
04:19We have people from overseas who are obsessed with the Dodgers, the Japanese particularly.
04:23We have people in the United States who are obsessed with English Premier Soccer.
04:26It's a different world.
04:27How about the price that teams are paying for players, the size of these contracts?
04:32If you look at Shohei Otani, for instance, is he worth $700 million over however many years?
04:39How do you begin to assess whether or not it's worth ponying up as much as owners have to pony
04:43up for these players?
04:43You've put up some substantial money as well.
04:45Well, look at it this way.
04:46When people want to buy a house, what's the right price?
04:48The price is whatever it takes to get the house.
04:50So if you took that $765 million to get Juan Soto, I guess that was the right price.
04:56In the end, time will tell whether it was a good price or not.
05:00But when Otani got a contract of $701 or $702 million, people thought that was crazy.
05:06It turns out that he's really worth it.
05:09You buy the team, lead this ownership group, buys the team, and you go to spring training.
05:13You go to many games.
05:15What's your takeaway from sort of the degree to which you can change aspects of the way the team is
05:20run versus how much you're a steward of this organization?
05:23In the private equity world, you can make CEO changes repeatedly.
05:28You can do many other things to change the tenor of the company.
05:32And sometimes it works, sometimes it doesn't.
05:33But usually you can make a difference.
05:35In baseball and other sports, it's harder.
05:37Because for one thing, the owners are not the real experts on who's the best player to draft, who's the
05:42player to trade for.
05:43Secondly, you have more competition.
05:46In 1960, the entire NHL was six teams.
05:51The entire NBA in 1960 was eight teams.
05:54Today, each of the major leagues either has 30 or 32 teams.
05:57So you have much more competition.
05:59It's very tough to have 29 competitors in baseball and try to beat 29 other teams.
06:04Whereas in the private equity world, if you have a competitor, you might have two or three competitors in your
06:07industry.
06:08Or maybe four or five.
06:09But you don't usually have 29 competitors.
06:11So it's much more difficult.
06:13The book is based on your interviews with other team owners.
06:15And it makes me wonder just sort of about this kind of team of cognoscenti, those who are like you
06:20owning a team.
06:21And what do you get from them?
06:23To buy this team, you had to get the approval of this group of owners.
06:25What have you learned from other owners broadly about their approach to ownership?
06:28I learned from interviewing them.
06:30The book has my story about why I bought it.
06:32But then the story of other owners, why they bought their teams.
06:35And when I was looking to learn about ownership, I didn't find a lot of books about it.
06:39So I ultimately put in the back of my head, maybe there could be a book there.
06:42And so what I learned is they care about winning more than they care about making money.
06:46Nobody wants to lose money.
06:47And it's actually hard to lose money on a sports team these days.
06:49But most people are focused on, if not all of them, how can I win?
06:53How can I get a championship?
06:55And the money will take care of itself down the road.
06:57And I learned that.
06:58I also learned they actually watch the sports very carefully.
07:01They know the players.
07:02They really are involved.
07:03The owners are not just sitting there saying, the general manager, do what you think is best.
07:06They're involved in improving things.
07:07I'm not a baseball expert.
07:09But our person in charge of it will come to me and say, what do you think about this trade?
07:13What do you think about this draft?
07:15Because I'm going to, in the end, paying the salary of the person.
07:18Before I let you go, I want to ask you about the Kennedy Center, which is still in the news
07:21as it has been for many weeks and months now.
07:25I'm curious what you make of the latest reporting about the state of affairs there.
07:29And I know that there have been some who said, look, you stepped down as chairman when you were asked
07:32to by the president.
07:33That relationship was severed.
07:34Do you have any regrets about not fighting that?
07:36Could you have fought to stay in the position longer?
07:37Well, the law that set up the Kennedy Center said the president of the United States appoints the trustees.
07:42There's some ex-officios, but the president appoints all the trustees.
07:45So I had been the chairman when the president was president in the first four years of his presidency.
07:51And I got along well with him.
07:52But we could never get the honorees to go to the White House.
07:55And he was not happy about that.
07:56The honorees, for whatever reason, didn't want to go there.
07:59The first one who said he wasn't going to go was Norman Lear.
08:01And the other one said, I'm not going either.
08:03So for four years, we never had an event at the White House.
08:05The president was probably not happy about that.
08:07This time around, I think what happened is one of the people that is a MAGA supporter
08:12and thought he should get a Kennedy Center honor had complained that the board was too woke
08:17and that he hadn't gotten a Kennedy Center honor because he was a MAGA supporter.
08:20Whether that's sure or not, that's what I've been told.
08:22And as a result, the president said, I'll take care of it.
08:26And people on his staff said, well, you can make yourself chairman.
08:28And there's nothing prohibiting it.
08:30So he did.
08:31Today, the Kennedy Center has some challenges, for sure.
08:33Right now, it's more or less shut down.
08:36Money has been allocated to fix it, but it's probably going to take a couple years to fix it.
08:40So it's unfortunate.
08:42It was a living memorial to President Kennedy.
08:44I gave the Kennedy Center more than $100 million when I was chairman of the board.
08:48I chaired for 14 years, and I was on the board for 20 years.
08:51And my predecessor was Steve Schwartzman, who's a friend of President Trump's.
08:54And, you know, despite all that, it's shut down now, and I regret it, but nothing I can do about
09:01it.