Magic Means Business
For a kid growing up in L.A. in the early 70s, the Fabulous Forum may as well have been Sleeping Beautys castle at Disneyland, with its snow-white columns and white-hot lights so bright you could see them from the 405. Back then, celebrities were nowhere to be found, and the crowds for the Kings hockey team were painfully thinbut that was just fine with my father, who would schlep us to the games (on school nights, no less!) just to cheer on the purple-and-gold Kings. Those nights, for me, were full of magic and promise.
Then the real Magic showed up. With a smile so dazzling it, too, could be seen from the freeway, Earvin Magic Johnson turned the Lakers into the must-see show in the sports world. Scoring a ticket was near impossible after the player from Michigan State suited up for the 7980 season. But with five championship seasons to his credit, Magic has transcended star status, as he moves from being just another basketball great to a symbol of Los Angeles. Now that hes nowhere near a basketball court, his true talent has emerged. Hes making his dream of revitalizing neighborhoods and employing minorities a reality. His new book, 32 Ways to Be a Champion in Business, shares his secrets. If you asked me to design a postcard of L.A., Id throw in a palm tree, the ocean and Magic Johnson wearing not a Lakers uniform but a suit and tie.
Liz Claman: First of all, I read the book. I was truly impressed, because just about every winning coach and, frankly, a number of star athletes, have written business books with a somewhat hackneyed heres how to get the team spirit to work for your business angle. Yours is differentyou dont lean on the Lakers. Why not?
Magic Johnson: Of course, you bring with you things that make you successful after basketball. You have a sports strategy just like you have to have a business strategy. My work ethic is from sports. But this is it. I run a business every day. I go get the financing, I do it myself. When I started, I didnt send anybody to talk to Peter Guber about allowing me to screen films at the Magic Johnson Theaters. To run a successful business, you really have to do it yourself, and sports analogies only really work when you motivate a crowd or a team. I try to hire people I dont have to motivate. But I do motivate the people working with and for me.
LC: Most NBA players fade from the public eye after retirement and have somebody manage their moneygame over. You chose not to follow that path.
MJ: Im a guy who loves the work. I love coming to this office every day. I came in here to do this interview, then Im gonna work all day. I read all the numbers. I know everything that is going on. I like things going on in my life. I dont want to be on a beach somewhere just relaxing.
LC: At what pivotal moment did you think, Im not just going to fade away when I retire?
MJ: I was sitting on my couch feeling sorry for myself after hearing I was eight months into HIV. Then Cookie, my wife, said, I want you to be the man I married: the dreamer, the one who was going to get into business, not the one sitting here feeling sorry for yourself. And that was the moment I said, Youre right. I wanted to do all these things after basketball, but I was feeling sorry that I wasnt playing. And then I had a conversation with Dr. Buss, who made me see I had to come up with a business plan. It was natural for me to go into urban America, what people now call the emerging market.
LC: When you decided to take that challenge, you took it in the form of building a movie theater in a very densely populated but crime-ridden neighborhood, where the only other theater had a metal detector. Most people would have run screaming from an idea like that. You ran toward it. Why?
MJ: It was an opportunity to make a difference. When I did my research on minorities, at the time they made up 35 percent of all moviegoersan extremely high number. So I said, Wow, if African Americans are going but there are no theaters in that community, if I build one, they will come. And Im going to help them understand that if violence happens, this theater will close. So Im just gonna say, Hey, look, Im building a brand-new theater. Were gonna employ people from this neighborhood, and this is for you. And I talked to both gangs, and they told me they would not do anything bad in the theaters. So we hired some gang members on the construction crew.
LC: So smart.
MJ: A lot of them got permanent jobs. And that was at a time when nobody was investing in the emerging market, black or white. So I came in early, and that theater is still one of the most successful. It still has not had any graffiti on the building or crime inside the theater. Its been a sense of pride for South Central. And Im so happy I started with that movie theater.
LC: Which was toughergetting the financing or getting the gangs to declare your business neutral territory?
MJ: [With a robust laugh.] Oh, getting the financing! The gangsit took all of two hours. That was a quick decision. It took me 9 or 10 tries to get the financing. That was the hard part.
LC: Who said yes first? Im sure you had to rely on your star status, but how many basketballs did you have to autograph before you got one of the many banks you visited to invest?
MJ: I signed about 50 balls and pictures. They all wanted the autographs, but they were not going to back my business plan. CalPERS [California Public Employees Retirement System] really stepped up. They turned me down the first timethey said, Hey, if this is so great, why isnt somebody else doing it in the emerging market? But later they said, You know, were gonna rely on your track record.
LC: What was that moment like, when CalPERS finally told you yes?
MJ: Well, let me just go back to this: When I first talked to them, I was more nervous than when I was playing against Larry Bird and Michael Jordan. I told them, Ive never been this nervous in my life.
LC: So when they said yes?
MJ: Oh, man. It almost brought me to tears. This was the moment Id been waiting for, my chance to show the financial community I am indeed a good businessman. When they gave me that $50 million, it said, If you are successful, you can come back. And I made sure I overdelivered. Thats how I found we could have a $1 billion real-estate fundand we have it now.
LC: Is it true you shed tears on opening night?
MJ: I cried like a baby. Because, you know, your dreams become reality, and you see people coming in, and theyre excited about being there. We allowed the community to buy bricks to put out front in the walkway with their family or business name. We sold out in one day. We wanted to empower the community and make sure they feel theyre a part of this business. A lot of people were crying, too, because they finally got a quality movie theater in their community.
LC: Lets talk about Ladera Center, the shopping mall you opened in South Central. Again, financing is a tricky thing, but you got it. Theres a belief out there that poor urban neighborhoods cant sustain major businesses. Whats your counterargument?
MJ: The counterargument is that in the next couple of years there will be $2 trillion in spending power for minorities. They have disposable income. They want the same proper retail businesses and services suburban America has. And if you give them the same first-rate stores and customer service, we would support them. If you look at all the Starbucks we have, were doing very well. If you look at our Magic Johnson 24-Hour Fitness clubs, were doing very wellwe measure up against all the clubs.
LC: One of the cornerstones of Ladera Center was to get Starbucks to break its own formula of opening mostly in higher-end suburban locations. How did you get them to alter that?
MJ: I owe Howard Schultz and Starbucks a big debt of gratitude, because they were the first big retail to come into urban America. It really made everybody else take note, and they followed Starbucks. That one in Ladera was really big because we were gonna test the first three to see if they would be successful. And once we were hitting our numbers, it allowed Howard to say, Okay, lets deal with the next ones. Its more than just a great cup of coffee; its actually, in our community, become a self-built place. So, not only do you get the best cup of coffee in the world, but we are also a social center.
LC: You also got Starbucks to crack their old model and let you put picnic tables outside.
MJ: Yes, it was important. I have a lot of chess players at my Starbucks. They were taking all my outside seating, and we were missing out on a lot of money from people who wanted to sit outside. Were used to playing chess and dominoes at the park on picnic tables. We made them just for the chess players and freed up the other outside tables for other customers. It worked to perfection. Our chess players start early and stay all night. So they bring up my per cap.
LC: Im sorryper cap? Like per capita?
MJ: What we do is gauge the average ticket per customer. Our average is competitive with other Starbucks stores.
LC: Now your Starbucks has become the hot place for these impromptu speed-chess games. Are you ever tempted to join in?
MJ: [Laughs.] Nooo. I will stay on the sidelines.
LC: But I hear you make a killer cappuccino.
MJ: I just do it for myself and my wife, because she thinks its great even when its not.
LC: Did you have to go to Starbucks school?
MJ: Yeah, exactly. You know I went up to Starbucks for about two weeks. It was really a learning experience when we started.
LC: With each subsequent project, youve had to deal with skeptical white executives who kinda questioned whether minority neighborhoods could sustain their businesses. How did you get T.G.I. Fridays to join the Magic party?
MJ: T.G.I. Fridays wanted to grow their business, and here I was. I had already been successful with the theaters and with Starbucks, so they decided, Lets do this. They wanted to build in that area, but they wanted to do it with somebody. It was just the right timing for me, the right timing for Fridays and the right timing for Ladera. To your point about white executives who dont believe I know what Im doing, let me tell you a quick story about the theaters. I asked them before we opened the movie theater, How many hot dogs do you have? And the manager said, You got enough for a month. We gave you the same amount we give to any other theater in the suburbs. So we open on Friday night, and we sold all the hot dogs on that one night.
LC: [Laughs.] And he had given you what he thought would be good enough for a month?
MJ: Exactly. So he had to go to the supermarket to get hot dogs for Saturday. When he called me on Monday, he said, You must have asked me that for a reason. I said, Yeah, what you didnt knowwhat I was trying to tell youwas that minorities are not gonna go to dinner and the movies, theyre gonna have dinner right in the movies. And so he said, Thank you. You taught me something. I said, I was trying to tell you, but you wouldnt listen! And thats when he finally knew that I knew my business.
LC: Magic, youre not exactly coming off as the spoiled star athlete here. Whered you get your work ethic? And frankly, Id love to hear that story about your father going out on trash runs.
MJ: And thats what Im going to tell you. I would go out on the trash route with my dad in the morning. We would go door to door to corporations, to small-business owners or stop at peoples homes and pick up their trash. We would do it every day, Monday through Saturday. So thats where I really got to work hard. I gained my work ethic from working with him. One day, he said, If you want some extra money, theres the lawn mower, theres the rake, theres the shovel. You can go shovel peoples snow during the wintertime, you can go rake their leaves in the fall and you can go cut their grass in the summertime. That was after I got off the trash truck.
LC: And one winter, he taught you an important story about taking care of the customer...
MJ: Yeah, we had gone to a...like a Jiffy Lube place, a place that takes care of your car and stuff. And I thought we had cleaned the place up good. But there was some trash in the ice, and I didnt get it. My dad always checked behind before he left, and when I got back on the truck, he made me get out of the truck, take the shovel and start breaking the ice. He said, Look, let me tell you something. If you dont do this job the right way, you are gonna just always go through life doing things halfway. Every job you have, whether youre playing basketball or what youre doing in school, you gotta do it the right way. And you gotta make sure you always get the job done. He just blew me away with that. Ive been doing things the right way ever since and making sure everything we do here, everything I do as a man or as a husband, I do the right way. And that I complete the job.
LC: You held a lot of jobs as a kid. My favorite story is the one where you got busted by a CEO for sitting at his desk after you had vacuumed the carpet in his office one night.
MJ: Well, I always tell people, If you dont dream it, you cant become it. And so I had an opportunity to work for two people who became my mentors back in Lansing, Michigan: Joe Ferguson and Greg Eaton. And I was cleaning the building they owned, from Friday at 5 oclock till Sunday. And so I would walk to the seventh floor, to my favorite office, and I would walk in like I was the CEO.
LC: At that ageCEO!
MJ: And then Id recline in the seat and put my feet up on the desk and hit the intercom button like I really had an assistant out front. Id be dreaming and dreamingfor two hours, I felt like I was really calling the shots and I was the CEO. And one night the boss came back while I was supposed to be cleaning up the office, and there I waspretending like I was the CEO. And you know what? He encouraged me to keep dreaming.
MJ: He said one day I would be the CEO of my own companyand here I am today.
LC: Fast forward to 1987, when you wanted to get your brand polished. You went to then superagent Mike Ovitz. Howd that go?
MJ: I never would have thought that a man whoswhat?all of five-nine, five-eight, could make me feel like I was five-five. The first thing he said to me was, Why should I represent you? and I was, like, Wow. And he said, Most athletes you know, they can really excel in their sport, but outside of that, theyre really not committed to anything. Theyve been spoiled. Im not gonna spoil you. Ill think about it, and Ill call you. Just like that, he threw me out! [Laughs.] I was thinking, Oh my goodness, did he just chop my knees off? So, he did some checking, I guess, and he called me back maybe two or three weeks later and told me to come back. He said, People say youre really serious, that you want to be a businessman. And then he asked me, What part of the paper do you read first? I said, Well, the sports. He told me, You have to start with the business section. I was the first athlete he ever represented. And he taught me sooo much.
LC: You and Dr. Jerry Buss, the owner of the Lakers, are close?
MJ: Very close.
LC: What did you learn about business from him?
MJ: Dr. Buss is a master. He was the creator of a happening. He wanted the Lakers to be the place so everybody would be a part of the excitement. And so he sat me down and told me how he was gonna have the Laker girls and start a Laker brand. He wanted to have the most beautiful people in L.A. at the gamehe said if they came, everybody else would come. He started giving away tickets to actors and actresses, and he created this buzz that you had to be at this Laker game cause all the beautiful people of Los Angeles were going. And so he was creating the Laker brand, the brand of the NBA. He would go to the hottest nightclubs so all the people would know Jerry Buss of the Lakers was the pimp. He was teaching me that there was a method to the madness. And I use that same model in my own business. That is why we have the number one brand in urban America. We created thatall our places are happening in the community. Its the place to be. Every place is like a home away from home.
LC: Did you ever try to get fellow Lakers to join you in your business ventures in the early years?
MJ: Yeah. I tried to get them to invest in the early years. There was a radio station outside of Denver, Colorado, I had bought. I asked my teammates if they wanted to own a piece of it. At that time, as a minority, you could buy a radio or TV station at a cheaper price. And they said no. They thought I was just this young guy who didnt know what I was doing, so they all turned me down. We bought that station for...I think it was $1 million, and we sold the land and resold the station. We made, like, $2 million off the deal.
LC: How old were you then?
MJ: I was 22. That was when I started my first deals. We then added the licensing of the NBA.
LC: Im sure it irked some NBA players that even though you were losing on the courts (in the 9192 season against the Bulls), you were still beating them in the business world.
MJ: [Laughs.] I made Michael Jordan so mad. We were talking, and he said, Man, I like that shirt you have on, and I said, I bought you one, too. I gave him his shirt, and he looked and said, Man, this is nice. Who made this? I said, Look inside, and tell me what the hang tag says. And he looks, and it says Magic Tees. And I said, Whether I win or lose the series, I will still be making money off of you. And he stormed off. He was so mad.
LC: Magic Tees actually got the license to Michael Jordans name and number?
MJ: Yeah, we were the official licensee of the NBA. We could sell all the players T-shirts.
LC: So you made money off your opponents?
MJ: Thats right. We were a licensee of the NBA, the NFL, Major League baseballthe NCAA as well. I did that for many years. And Jordan was mad!
LC: Now that youre a major success in the business world, do the athletes come running?
MJ: Oh, yeah. Right now Im going to do some things with Alex Rodriguez from the Yankees.
LC: Most people think of big, strong athletes with five championship rings as a sign of manhood. What is your metric of manhood?
MJ: Manhood is taking care of your family and being able to bless other people. Not yourselfbut whether you can bless other people. Thats what weve been able to do here at my company.
LC: Well, with all of the thousands of minorities you employ, you are blessing other people. At the risk of offending your friends on the court, are your heroes athletes or businesspeople?
MJ: Oh, definitely businesspeople. I mean, when you think about Bill Gates, Howard Schultz, Dr. Buss, Oprah, these are the people I idolize, who I want to be like. Im doing it in my own way.
LC: I would say, Magic, youre extremely inspirational. But how can someone without a championship ring or star power pull off what youve accomplished in the world of business?
MJ: First of all, youre gonna have to make some sacrifices. Youre gonna have to have willpower. Youre gonna have to have a great business plan and a strategy and really be committed. The star power actually worked against me more than it helped me. Because people thought I was a great athlete but a dumb jock at the same time. So what people have to realize for themselves is, yes, its gonna be hard. People are gonna believe in you, but you gotta believe in yourself first and in your business plan and in what youre trying to do. Once they see the passion you have, then theyll listen to you.
LC: After your HIV announcement in 1991, what was the reaction from companies that endorsed you and from potential partners?
MJ: Every one of them dropped me as their spokesperson. They all just ran away. At that time, HIV was something you really didnt talk about as openly as we do today. Those companies were scared to death.
LC: What was the worst thing a potential investor said when you asked for money during that time?
MJ: Someone said, Do you think youre going be around? I felt like he didnt think I was going to be here. I always believed I was gonna be here a long time, but I had never heard anybody outright say that in front of my face.
JC: You refuse to consider proposals that dont bring value to urban America. Why? You could be so much bigger.
MJ: Its not about being bigger; its about being true to the brand, true to the people in those emerging markets and minority communities. And so I want to uplift them. Everything I do has to involve them, to have a component that will enhance the workforce in the community. So I wont touch it if its not true to the minority community.
LC: Youre kind of doing what the Congress and U.S. presidents dream of pulling off but rarely do, and that is creating jobs and providing goods and services in underserved minority communities. If asked, would you serve a U.S. president?
MJ: Wow. [Laughs.] Well, I would serve on the business side. Theyre gonna need somebody to help him in the urban communities. Help small minority-owned businesses, help work with minority firms and women. Thats how I could help. I dont try to create demandI meet demand. Theres been so much demand in the urban communities, and I just meet it. One thing great about Barack Obamahes in shape! I would like to help him with urban policies.
LC: Have the rewards of running your business met those of your star athlete years?
MJ: Oh, theyve passed it.
LC: Come on, really? Five NBA championships?
MJ: Oh, yeah, they have passed it, because long after Im dead and gone, the brand will still be living and people will still be going in those buildings and enjoying themselves or in those different companies and having a good time. You have to remember that when you put more than 30,000 people to work, that means some of their kids, and then some of their kids kids, they work for me, and they have a job because of me. It means youve driven the property values up for their homes. Look where Harlem is today. Because we brought the theater, we brought Starbucks there. Look at South Central nowits changed. And look at all the communities we invest intheyve changed. Weve already facilitated $4 billion in urban revitalization. That has changed the face of urban America.
LC: Magic, youre an amazing athlete, but you may perhaps go down in history as having been a better businessman. Are you okay with that?
MJ: Im fine with that. As a matter of fact, Im happy. I hope that happens.
LC: Thats your dream.
MJ: Yeah, thats my dream, and Im going after it each and every day.
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