tv The David Rubenstein Show Peer to Peer Conversations Bloomberg January 16, 2022 10:00am-10:30am EST
♪ 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, i said fine. i did not negotiate and i did no due diligence. david: i have something i would like to sell.
[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 ariel investments and chairman of the board of starbucks and member of the board of directors for jp morgan. i had a chance to talk to her about her incredible philanthropic career. right now, you are the chairman of starbucks, you are, i think, the only black female who is a chairman of a major fortune 500 company. correct? mellody: correct. david: is that a surprise to you that not another black female is a chair of the public company? mellody: salute lee. i think it is quite -- absolutely. i think it is quite disappointing. david: do you see any progress? mellody: i don't know.
but the idea that i'm the only one today, the second only in history, ursula burns was the executive chair of xerox, that says a lot about where we have to go with race in this country and gender. david: you have been active in trying to get more african-americans on boards. in fact, you have a conference that you host. mellody: i interviewed you. david: you interviewed me. you grilled me about my own situation. mellody: i wasn't that tough, was i? david: your husband said i did better than most. in any event, 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 as 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, and that is what we inspire 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. so 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 be pushing and saying, you know, what is your plan to have a diverse boardroom? in the last 39 years, we can point to many companies where we have added diversity to the board. david: let's talk about the company, ariel, that you started
out as a person out of winston. then you made it up to be ceo. let's talk about your background. you are from where? mellody: chicago. david: and you grew up in a very wealthy family? mellody: [laughs] no. just the opposite. i was one of six kids, my siblings are 20 plus years older than me. they always joked i was found on the doorstep. my mom worked extraordinarily hard. she was in the real estate business and i would call it feast or famine or food, not feast. she struggled a lot. 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: also she was a black woman trying to do something 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 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 by doing well through school. you did well in high school i guess? mellody: i was very good in school. david: you applied to harvard and princeton and you got in. mellody: yes. david: harvard is a great place, i am on the board. 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, that anywhere in the world that i would go including an african village if i said harvard people would know what i was talking about. and princeton was like sprite she said, we know it in america. at the end of the day after visiting both, a princeton alum named richard 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 lunch with bill bradley and between the two of them, and john rogers, 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 regretted it right? mellody: i love princeton. we are hard-core, we bleed orange and black. david: so you graduated in what year? mellody: 1991. david: you go back to chicago. you could have gone to new york or the east coast, but you went to your hometown, chicago. it was a small firm? mellody: it was tiny. i did interview on wall street. one day after making a lot of trips into new york on the train to do the interview, one day i just 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 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 the firm 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 at ariel your whole life. in fact, you are the only person in your class of princeton who has the same telephone number you had after you graduated. mellody: right. out of 1100 people. loyalty means a lot to me, as well as stability and consistency, which is the opposite of my childhood. david: ariel, for those who don't know, is the oldest minority-owned investment firm of its type and it is a value-oriented firm. you buy stocks that are you oriented and cheap. mellody: we cut our teeth in the small and mid-cap space, and in 2011 we branched into global
with a new york team and office. we do small and mid-cap investing in u.s. stocks and all cap investing in international and global, and very recently we went into your business. david: now you are in the most important business of all, private equity. mellody: [laughs] i don't know if it's the most important, it the hottest. we are trying to do it differently. david: you are not into the tech stocks and high flyers, but the high flyers have done well. mellody: crushed it. david: does it make 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. people think we are talking our book, we are not. i am just looking at data. i love that saying, 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 to put their money in stock index funds rather than people who are picking stocks as your firm does. you pick stocks. what do you say to him about that? mellody: he has outperformed by not owning an index, so he's proved positive it is possible 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. that smaller company tends to be
line like everybody else? mellody: yes, i do have to wait in line like everybody else. it's an important part of the process, seeing how everything is working, how long it takes, what is happening in the store. david: when you walk into any starbucks, they must know you. mellody: no, it is good to not be recognized. you can truly assess how things are going. i take pictures of the cases, i do all sorts of things. david: what is your favorite drink? can you say? is that a state secret? mellody: i make a joke, i like my coffee black like me. [laughter] david: howard schultz has been a mentor. he is the founder. mellody: very important. david: there are other coffee chains around the world. he did not invent coffee chains. 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 this point of view of leading through the lens of humanity. it sounds like it could be a
cliche, but it is not at all. it's in the dna of the company, how we look at things, how we do 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 which is, i think, the largest bank in the world by market capitalization. mellody: 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: i will start off with any board role you are a fiduciary for the shareholders. howard taught me that. every time he sat in a room, he pictured two chairs.
one is a partner of starbucks and one is a shareholder. he said when you are the boardroom. be proud of everything you say to those chairs and i have taken that to heart and i do the same thing when i went to jp morgan. i assume there is any employee in the room 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. obviously i have been with howard a long time and i think he 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. i think that is what i see and i have learned from jamie. david: another initiative you are involved in, getting jp
morgan and other companies to invest in minority owned businesses. how is that going? mellody: the initiative is really targeted at growing sustainable minority businesses by bringing two things together, capital and customers. we think when people talk about growing minority businesses over rotate on the idea of access to capital. we think access to customers is just as important. john rogers used to talk about that all the time, saying customers, mellody, 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 of scale? we think you can do that by becoming tier one suppliers to fortune 500 companies. because those companies are looking to diversify their vendor list literally and figuratively, especially after covid.
david: how is that going? are you raising the money or have you started investing in that fund? mellody: it's going very well, we are just off to the races. we announced february 17 we feel very good about our progress. we have not had our final close yet and there are a lot of rules around that, 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. many people who are minorities don't believe in the american dream. they don't think they can rise up. your hometown of chicago has had a lot of problems. what do you say to these people about if the country exists for the american dream? 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 effort. and along the way, i got lots of breaks and miracles did happen. but the american dream is alive and well to me. but that said, i am a capitalist with a capital c but i think capitalists should work for more people. right now the system is limited. it is not as good as it could be. it has gotten good but it could be better still. it will be better 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. when 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? why don't you just do nonprofit boards, corporate boards, and other things? mellody: anyone who knows me knows that question does not make sense to me. my heart, my love is ariel. ariel is my first child. ♪ david: today ceos are under pressure to say something about public issues. do you think that is a good thing that jamie dimon or the ceo of starbucks should say things about policy issues outside of the domain of their company? mellody: we are human beings. we have opinions. and i don't think being ceo, co-ceo, chairman means i cannot have any opinion about some. i put that in context of when i am giving any opinion, this is my opinion. it is not have to represent starbucks or arial or jp morgan. but i think i am allowed to say what i think. at arial i talk about truth.
there is truth with a capital t and there is truth with a small t. david: this country is divided between the left and the right. the government is not functional in many ways. are you optimistic about the country's future or do you think we are headed to a dark path? mellody: i'm worried about polarization and i think we have to work harder to be more willing to listen to other points of view. at the same time i take the warren buffett view. if you are born in america, you have won the lottery. i think america's promise remains very, very great because we have had a certain spirit in this country. but i think it is in our dna. and if we can realize our best selves, which is what america was founded on -- inclusion in terms of religion and all walks
of life, the melting pot, if we can realize that, our opportunities are endless. the question is will be allow ourselves to realize that? ♪ david: some people would say you are on a lot of corporate boards , you are on a lot of 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 first love is ariel. it is my first child. it was the thing i thought of when i woke up. and every night when i went to bed and all day long. it has become a labor of love
for me. john joked that he started it and then he jokes that maybe i love it more. i don't think we need to 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 are doing one 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 about it? mellody: it is the first museum that has ever been built dedicated to the art of storytelling, the narrative. the way to think about it is 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 frame, 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. it is seated 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. [laughs] not most, all. david: more than a billion dollars i would say. 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 in any way 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 significant and we think it longs in society. david: what's it like to be mellody hobson? everyone knows you, you can see anyone in the world you want to see, you have the most famous friends in the united states. do you ever say i just want to chill out and relax and get away from all of 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. so that is not how i think about any person i have a relationship with. what i would say is my life has exceeded my own expectations and that is what i would say, it is very important not to put expectations around what is possible for you or anyone. in doing that, i have a great
sense of gratitude about all the people i have been able to interact with and learn from. in terms 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 so much 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's wrong? does he say what they do wrong? mellody: i love watching a movie with george because he breaks 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 the movie could be 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 are outgoing, successful, you could get elected in your own state of illinois or running
for president or anything like that or serving the cabinet? mellody: no. david: the reason is, too busy with other stuff or government is complicated for what you want to do? mellody: i am doing what i am meant to do and what 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 mellody hobson has, 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 is a gift, every day is a blessing. every day feels beyond anything i have ever expected. if that is the way that you look at the world, it ends up being a much better life. that does not mean days are not hard. i tell 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, like, 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, i'm supposed to do better, i'm supposed to be optimistic because the contrary is -- it just doesn't seem right
kailey: this week how hydrogen can transform our energy usage. we'll look why the most abundant element can be a game changer. >> they are using it in other sectors and we use them in space, on our rockets and don't need the rules of physics to change to use hydrogen on our planes. kailey: from iron ore to green hydrogen, one of australia's richest men tells us about his pivot to sustainable energy. >> it's now. let's take action. kily
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