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tv   The David Rubenstein Show Peer to Peer Conversations  Bloomberg  January 15, 2022 9:00am-9:31am EST

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♪ david: this is my, uh, kitchen table and also my filing system. over much of the past three decades, i've been an investor. the highest calling of mankind, i've often thought, was private equity. [laughter] and then i started interviewing. i watched your interviews, so i know how to do some interviewing. [laughter] i've learned from doing my interviews how leaders make it to the top. >> i asked how much he wanted, he said 250, is a fine, i did not negotiate, i did no due diligence. david: i have something i would like to sell.
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[laughter] and how they stay there. you don't feel inadequate now because you are only the second wealthiest man in the world, is that right? [laughter] one of the most impressive people i've met in the business world is mellody hobson, co-ceo of of ariel investments and chairman of starbucks as well. i had a chance to talk to her about her incredible business career and now an incredible philanthropic career. you are the chairman of starbucks, you are i think the only black female who is a chairman of a major fortune 500 company. is that right? mellody: correct. david: does that surprise you? mellody: it's disappointing. david: do you see any progress? mellody: i don't know.
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but the idea that i'm the only one today, the second only in history, ursula burns was the chair in the past, that says a lot about where we have to go with race in this country and gender. david: you have a conference that you host and you interviewed me, grilled me about my own situation. mellody: i wasn't that tough, was i? david: i got through it. your husband said i did better than most. why are you so interested in this area and what progress do you think you have made in getting diversity on boards? mellody: it has a lot to do with our founding is the first of our kind in the nation, we will be 39 years old in a month. it has to do with we recognize the board room is where the power is. at the end of the day and in order for a company to be world-class, that is what we
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inspired to invest in, we think you need all perspectives around the table and you need to understand all of the potential preferences of the customers, the buyers that you have. we think a diverse boardroom is essential to the well-being of the company and its stewardship. i say this all of the time. companies that don't understand this are committing corporate suicide. we advocate and a strong way in a -- we advocate in a strong way in terms of the companies we own, the small and mid-cap u.s. names, for there to be diversity in those boardrooms. it may not be there when we first purchase, but you better believe we will push and make sure we will say what is your plan for a diverse board room? and in the last 15 years or so we can point to many companies where we have added diversity to the board. david: let's talk about ariel. you started out of princeton, let's talk about your
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background. you are from where? mellody: chicago. david: you grew up in a very wealthy family? mellody: no, just the opposite. i was one of six kids, my siblings are 20 plus years older than me. they always joke that i was found on the doorstep. my mom worked extra nearly hard. she was in the real estate business and i would call it feast or famine or food, not feast. she struggled a lot. we used to get evicted, i tell the stories, we used to get our car repossessed. david: your mother was supporting the family and the business was not wonderful. mellody: she was a black woman trying to do some thing on her own, it was hard during those times. there was a lot of obstacles for someone like her. she did not have my education, but she was very wise and she
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imparted, i hope, that wisdom in me that allowed me to be the person that i am as did my siblings. david: you were able to overcome this through school. mellody: i was very good at school, yes. david you applied to harvard and : princeton and you got in. harvard is a great place, why did you choose to go to princeton, a great school over harvard? mellody: my mom wanted me to go to harvard, my mom told me harvard was like coca-cola, anywhere in the world that i would go including an african village if i said harvard people would know it. and princeton was like sprite she said, we know it in america. at the end of the day after visiting both, a princeton alum called me every day after i got into princeton and told me why princeton was a better school for me. he ultimately invited me to a
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lunch with bill bradley and between the two of them, the founder of ariel, i was triple teamed and i said any school where people will be this fanatical about the school and having someone go there must be a great place. so against my mother's wishes i chose princeton. david: and you never regret it. mellody: i loved princeton, we are hard-core, we bleed orange and black. david: so you graduated from princeton in what year? mellody: 1991. david: you could have gone to new york or the east coast, but you went to your hometown, and joined a relatively small firm. mellody: it was tiny. i did interview on wall street. one day after making lots of trips into new york on the train to do the interview, one day i called john rogers, then he had the title of president, and i said i wanted to come to ariel because i could see what i could
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learn working with him up close versus the layers down in some of the other firms. he was surprised by the call, he told me i had an open invitation to join after i was an intern and i eagerly went there. i knew from the first day, it is going to sound crazy, that i would work there my whole life. i knew it. david: you have worked there your whole life, you are the only person in your class of princeton who has the same telephone number after you graduated. is that right? mellody: that is right, out of 1100 people. you can tell that stability is important to me. i like the stability and consistency which is the opposite of my childhood. david: ariel is the oldest minority-owned investment firm of it type, and it is a value oriented firm, is that right? you buy stocks that are value oriented. mellody: we cut our teeth in the small and mid-cap space, and in 2011 we branched into global
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with a new york team and office. we do small and mid-cap investing in u.s. stocks and all caps investing in international and global, very recently we went into your business. david: now you are in the most important business of all, private equity? mellody: i don't know if it's the most important, it the hottest one right now. we are trying to do it fairly. david: you invest in cheap stocks. the high flyers have done so well in recent years, has it made you think you should get into that business as well? mellody: i think the opposite. whatever worked in the past will not work in the future. most people fight last year's war. that's not how we think about things. you want to think what has not been successful and that's where you want to be. when we look at this decade where large-cap and growth have dominated in a way we have never seen before, valuations we have never seen before relative to value or cheaper stocks, we see a tremendous opportunity.
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people think we are talking, we are not, i love the data. math has no opinion. when you look at the math, the differences between growth and value, the divergence we have had recently, you can't help but see a tremendous amount of opportunity and value. especially with the backdrop of rising interest rates. david: warren buffett said people would be better off to just put their money in stock index funds rather than people who are picking stocks as your firm does. what do you say to warn about that? mellody: he has outperformed by not owning an index, so he's proved positive it is positive you can outperform the broad market. more importantly, in our world we believe in the efficient market theory, the inefficiency is in the areas that are overlooked, misunderstood, people do not follow it well. some smaller companies tend to
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be less widely followed. you also see that in the international markets. that is where we work and live. so we can exploit those inefficiencies in those areas, which is where we would respectfully disagree with warren buffett. ♪
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david: let me talk about starbucks. you have been on the board how long? mellody: since 2006. david: did you go to starbucks every day? mellody: i drink starbucks a lot, yes. david: do you have to wait in
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line like everybody else? mellody: yes, it's an important part of the process, seeing how everything is working, how long it takes, what is happening in the store. david: now that you are the chair when you walk into any , starbucks, they must know you. mellody: no, that does not happen. it is like being a secret shopper. no, it is good to not be recognized. you can assess how things are going. i take pictures of the cases, i do all sorts of things. david: what is your favorite drink? mellody: i make a joke, i like my coffee black like me. david: howard schultz has been a mentor. is that correct? he is the founder of starbucks. mellody: very important. david: what did he do that made it so successful? there are other coffee chains around the world, what did he do that made it the biggest in the world? mellody: he started saying he wanted to create a different kind of company, and he had a point of view about leading through the lens of humanity. it sounds like it could be a cliche, but it is not at all.
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it's in the dna of the company, how we look at things, it is always through the point of view of people. at the end of the day he put people first, not only in terms of the partners of the company but also in terms of the customer. at the end of the day, that is what made the company so great. david: today you are coming to new york for a board meeting of jp morgan, biggest bank in the world by market capitalization. mellody: eighth largest, i think in the world. largest in america. david: and it is led by jamie dimon who has been ceo for some time. as a board member there, what is your responsibility? is it to help the bank grow, what have you learned from jamie dimon? is he a mentor as well? mellody: any board role you are a fiduciary for the shareholders. howard is the one who taught me this best. whatever you set foot in a room, he taught me you picture two chairs, one is empty, be proud of everything you say to those
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chairs and i have taken that to heart and i do the same thing when i went to jp morgan. i assume there is an employee and a shareholder in that room and i'm supposed to look out for them. that is my job. in terms of what jamie has taught me, howard and jamie have taught me different things, i think howard molded me as a person in terms of my professional self from watching him, especially for so many years and so close. with jamie i have not been there as long, but what i can say is i have learned without question how he has put a world-class team around him to run a complex business and at the end of the day you are only as good as your people. that is what i've learned. david: another initiative you have been involved with is getting jp morgan and others to
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invest in minority-owned businesses. how is that going? mellody: it is targeted at growing minority businesses by bringing capital and customers together. people talk about growing minority businesses. they over rotate on this idea of access to capital. we think access to customers is just as important. john rogers used to talk about that all of the time, customers grow minority businesses. i sat in the boardroom at j.p. morgan and i realized quickly and clearly, if you have got a fistful of receivable, that bank will lend you money. so the idea is how can you create sustainable minority businesses upscale, we think you can do that by becoming tier one suppliers to fortune 500 companies. those companies are looking to diversify their vendor list literally and figuratively, especially after covid.
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david: how is that going? mellody: it's going very well, we are just off to the races. we feel very good. we have not had our final close yet and there are a lot of rules, but we are very optimistic. david: many people who are minorities, african-americans, latinos, others who are not a majority status, not white feel the system is built against them. in fact, i believe when i was growing up in the american dream, but i'm white and believe in it. i have lived the american dream. but many who are minorities don't longer believe in the dream. they don't think you can rise up. your hometown of chicago has had a lot of problems. what do you say to those people? is it possible for people to do what you've done? mellody: i'm an example of the american dream being possible and i can't say that is not the case. i did not come from anything. i did not know anyone. i had no relationships i could leverage in terms of what i became. it was just hard work and
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effort. and along the way, i got lots of breaks and miracles. but the american dream is alive and well for me. but that said, i am a capitalist with a capital c that i think capitalists should work for more people. the system is not as good as it could be. it can be better still when more people of color can participate in the system. when everyone can play, game gets better. we have learned that time and time again. reverend jesse jackson said it about baseball, it was not as good as it could be until jackie robinson can play. you can have the best competitors competing you , ultimately end up with a better outcome globally, domestically inside of a company. and so to me, the american dream is possible, but it is failing a lot of people because of some of these racial blinders that exist. david: why do you need to be the co-ceo of ariel?
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why don't you do nonprofit boards corporate boards, and , other things? mellody: anyone who knows me knows that question to sonic sense, my heart, my love is ariel. ariel is my first child. ♪
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david: some people would say you are on a lot of corporate boards and nonprofits, you have married a wealthy famous person named george lucas, the creator of star wars among other things. why do you need to be the co-ceo of ariel? why don't you do nonprofit boards, corporate boards? why do so want to do this? mellody: anyone who knows me knows that that does make sense for me, because my heart, my love is ariel. it is my first child. it was the thing i thought of when i woke up. it really became a labor of love. john joked that he started it,
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i'll think we compete for the love of ariel but it became part of my dna so leaving it is something i would never consider. i have always wanted it to be there. david: let's talk about the nonprofit things you are doing. one that i want to talk about, you're doing with your husband, building a museum in los angeles for narrative arts i guess, dealing with his art he has purchased and the things he has done. can you explain why you are building a museum and what is so unique? mellody: it is the first museum that has ever been built for the art of storytelling, the narrative. a story that is told in one frame, many directors can see this clearly, you look at a norman rockwell picture, a painting, you can understand the story in one shot. that is what the whole museum is about. we have dedicated the work to building this building, the first of its kind in los angeles.
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it is with the collection george started collecting for a long time. it also has a component that is dedicated to star wars, but the bigger issue is to create an environment, a place where anyone can walk in from any walk of life, from a scholar to a six-year-old and feel not only like they belong there, but they understand what is on the wall. david: you are in effect self - funding this, putting up most of the money. mellody: all. david: more than a billion dollars, let's say it. i don't know anybody who has ever put that much money for a museum. do you think about the cost or you are not worried? mellody: what we have said, and we believe this, is that we are holding society's money. this money is not for us. we have great lives, so please don't think we are struggling here, but it was the wealth that was created from star wars, indiana jones and all of these things, was really quite
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significant and we think it belongs back in society. david: what's it like to be mellody hobson? everyone knows you, you can see anyone you want to see, the most famous friends in the united states. do you ever just say i want to chill out, relax and get away from all this? how do you relax? mellody: i want to put in context i spend time with people who i admire and respect, many of them are not famous at all. but they are equally important to me. that is not how i think about any person i have a relationship with. i would say my life has exceeded my own expectations and that is why it is very important not to put expectations around what is possible for you or anyone. i have a sense of gratitude for all the people i have been able to interact with, and in terms
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of what i do when i'm relaxing, we are basic in my house. we do things like binge watch television and we go to the movies although we don't do that during covid. george likes to watch in a movie theater with other people and he likes to experience the crowd experiencing a film, not to watch on his own. david: does your husband say this is not a good movie? let me tell you what they did wrong? mellody: i love watching him watch a movie because he likes to break it down for you. it is not about much more than that, he will tell you why the story is solid, he will tell you what is missing, he will give you ideas of how to make it better. i have watched a lot of films with george where he has broken them down for me in ways that are enlightening. david: have you ever thought of running for office? you have an outgoing personality, successful, you could get elected in your own state of illinois or running for president or anything like that,
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serving the cabinet? mellody: no. david: too busy with other stuff or government is complicated for what you want to do? mellody: i'm doing what i meant to do and i love. i'm not a grass is greener on the other side of the fence people. you can see that by the fact that i have stayed at ariel so long, that i have relationships that extend for decades. i don't think about how i trade up. that is not how i think about life. if i had that calling, i would do it, but i don't feel that in my heart or soul. i feel that i am better off contributing to organizations like ariel, starbucks, and jp morgan. david: if somebody says i want to bundle the optimism and enthusiasm for life that you have, what is the secret? what do you think is the key to being so optimistic and energetic? mellody: gratitude. when you have had the life i have had, every day feels like a
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gift, blessing, feels beyond anything i have ever expected. if that is the way that -- if you look at the world, it ends up being a much better life. that does not mean days are not hard. i told people at ariel my worst day is still awesome. i have had some bad days but in the context of what i know that can be really bad, worrying about where you are going to sleep or eat. nothing is that bad, nothing. it gives me empathy for people who have those struggles. because i never forget, i am always grateful and because i'm grateful, i think i am supposed to work hard and do better. i'm supposed to be optimistic because the contrary is -- it just doesn't seem right given the opportunity i have had.
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what do i have to complain about? it doesn't mean i don't have moments of complaint, but in the context of my life, i have perspective. and that perspective allows me to have gratitude and joy. ♪
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jon: i think it's still a pretty good time for real estate. texas and florida are well-positioned. you should stay away from buggy whip businesses. ♪ david: jon gray went from smiley aspiring journalist to become one of the top real estate investors in the world. jon: when i met my wife in english class, i showed up wearing a suit and tie. everyone else was in birkenstocks. it was clear i'd made a decision which path i was on. david: jon joined blackstone in 1992 and was the second employee in its real estate division. jon: i say to my kids all the time, luck is a core competency. david: but it wasn't all luck. chris: i've had the opportun


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