tv The David Rubenstein Show Peer to Peer Conversations Bloomberg April 15, 2022 1:00am-1:30am EDT
♪ david: this is my 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 him how much he wanted. he said $250,000. i said fine. i did not negotiate with him 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 being only the second wealthiest man in the world, is that right?
[laughter] one of the most impressive people i have ever met in the business world is mellody hobson. she is the co-ceo of ariel you investments, a minority-owned investment firm in chicago, and she is also chairman of the board of starbucks and jp morgan. you i had a chance to talk to her about her incredible business career and now, her incredible philanthropic career as well. right now, you are the chairman you of starbucks. you are, i think, the only black female who is a chairman of a one you major fortune 500 company. is that right? mellody: correct. david: is that a surprise to you in this day and age that not another black female is a chair one you of the public company? mellody: yes. absolutely. i think it is quite disappointing. david: do you see any progress in this area? mellody: i don't know. no there may be other people headed out for the chairmanship, but the idea that i'm the only one today, the second only in history.
ursula burns was the executive chair of xerox. that is a poor statement about our society and where we are when it comes to race in the country and gender. david: you have been active in trying to get more african-americans on corporate boards. in fact, you have a conference that you host -- mellody: i interviewed you. david: you interviewed me. i would say grilled me, about my own situation. mellody: i wasn't that tough, was i? david: i got through it. and your husband said i did better than most. [laughter] in any event, why are you so interested in this area and what progress have you made getting african-americans on corporate 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. i think it also has a lot to do with the fact we recognize the board room is where the power is. and at the end of the day, 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 certainly need to understand all of the potential preferences of the customers you have, all of the buyers that you have, what have you. so at the end of the day, we think a diverse boardroom is essential to the well-being of the company and its stewardship. and i say this all the time, that 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 make our purchase, but you better believe we are going to be pushing and saying, you know, what is your plan to have a diverse boardroom? at the end of the day, in the last 39 years almost, we can point to as many as 50 companies where we have added diversity to the board. david: let's talk about a company, ariel, that you started as a person right out of princeton. mellody: i was an intern. david: 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: no. [laughs] just the opposite. i grew up as the youngest of six kids. my mom was a single mom. i was really late in my family, so my siblings are 20 plus years older than me. they always joke i was found on the doorstep. and my mom worked extraordinarily hard. she was in the real estate business, and i don't even call it feast or famine for food, not feast. she struggled a lot. we used to get evicted. i'd tell these stories all the time because they were foundational to who i am. we used to get our car repossessed. david: because your mother was you supporting the family. mellody: yes. david: and the business was not wonderful. mellody: she was a black woman trying to do something on her own, it was very, very hard during those times. there was a lot of obstacles for someone like her. she didn't have my education, you but she was very, 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 all this by doing well in school. you did pretty well in high school, i guess? mellody: i was very good in school, yes. david: you applied to harvard and princeton and you got in. right? mellody: yes. david: harvard is a great place, i am on the board. why did you choose to go to princeton, which is 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 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 only 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. and 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 ultimately i said, any school where people will be this fanatical about the school and having someone go there must be a really great place. so, against my mother's wishes, i chose princeton. david: and you never regretted it, right? mellody: i loved princeton. princetonians are hard-core, we bleed orange and black. david: so you graduated in what year? mellody: 1991. david: and then you decided to go back to chicago. i would assume you could have gotten a job in new york or the east coast, but you went to your hometown, chicago. it was a small firm? mellody: it was tiny. maybe $1 billion in assets at the time. and 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 called john rogers, he then had the title of president, and i said, i want to come to ariel because i could see what i could
learn working with him up close versus the layers down i would be in some of the other firms. i think 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 -- and i know 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. in fact, i think you are the only person in your class of princeton who has the same telephone number you had after you graduated, right? mellody: that's right. out of 1100 people. loyalty means a lot to me, as well as stability and consistency which is the opposite of what my childhood experience was. david: ariel, for those who don't know, i guess it is the oldest minority-owned investment firm of its type and it is a value-oriented firm. right? you buy stocks that are value-oriented, and cheap, in other words. 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 a new york 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 but it is the hottest right now. we are trying to do it differently. david: your firm specializes in cheap stocks, 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. so, when we look at this past decade, where large-cap and growth have dominated in a way we have never seen before, filling 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 line, "math has no opinion." when you look at the math, the differences in returns over long periods of time between growth and value, and 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 often does. you pick stocks. what do you say to warren about that? mellody: first of all, he has outperformed by not owning an index, so he's proved positive it is possible you can outperform the broad market. but more importantly, in our world, we believe in the efficient market theory, and the inefficiency is in areas that are overlooked, misunderstood, people don't follow it very well. and so, that smaller company tend to be less widely followed.
♪ ♪ david: let me talk about starbucks for a moment. you have been on the board how long? mellody: wow. a long time. since 2006. david: when you got on the board did you stop to go to starbucks every day? mellody: i go to starbucks a lot. david: when you check in do you have to wait in line like everybody else? mellody: yes. i wait in line like everybody else. that is an important part of the
process to see how everything is working, how long it takes, what is happening in the store. david: but now that you are the chair, when you walk into any starbucks in the world, they must know who you are. mellody: no, it is kind of like being a secret shopper. 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 when i go in now. 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 of sorts. is that correct? he is the founder of starbucks. mellody: very important. for sure, for sure. david: there are other coffee chains around the world. it isn't like he invented coffee chains. what did he do that made it the biggest in the world? mellody: he started off from the very beginning saying he wanted to create a different kind of company, and he had a point of leading through the lens of humanity. it sounds like it could be a cliche, but it is not at all. it is very much in the dna of the company, how we look at
things, how we do things, it is always through this point of view of people. so, at the end of the day, i think he put people first, not only in terms of the partners of the company but also in terms of the customer. and at the end of the day, that is what has made the company so great. david: today, you are coming to new york for a board meeting of jp morgan, which i think is the biggest bank in the world i think by market capitalization. mellody: eighth 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 to you as well? mellody: start off with any board role, you are a fiduciary for the shareholders. howard taught me that. he told me, every time he sat in a room he pictured two chairs and they were empty. one chair is a partner and the other chair 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 from jp morgan, and there is 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 up close. with jamie, i haven't been there as long. but what i can say to you is i have learned, without a question, how he has put a without world-class team around how him to run an extraordinarily 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 what i have learned from jamie. david: another initiative you have been involved with is will getting jp morgan and all others to invest in minority-owned businesses. how is that going?
mellody: the initiative is really targeted at the growing sustainable minority businesses by bringing two things together, capital and customers. you we think people when they talk about growing minority businesses, they often over rotate on this idea of access to capital. we think access to customers are just as important. this became clear to me. john rogers used to talk about that all the time, saying customers, mellody, customers grow minority businesses. and then, i sat in the boardroom at jp morgan and i realized very 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? and we think you can do that by becoming tier one suppliers to fortune 500 companies. because those companies are looking to diversify their vendor lists, both literally and figuratively, especially after covid. david: so how is that going? are you raising the money or you
started investing in that fund yet? mellody: it's going very well, we are just off to the races. we announced february 17 we feel good about our progress. very we cannot say a ton because we had 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, but 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: first and foremost, i'm an example of the american dream being possible and i can't in any way say that is not the case. i did not come from anything. i i did not know anyone. i had no relationships i could leverage in terms of what i have 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 to me is alive and well. but that said, i am a capitalist with a capital c, but i think capitalists should be working 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, the 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 everyone 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
♪ david: now some people would say, mellody, you are on a lot of corporate boards, you are on a lot of nonprofits. you have also married a wealthy, famous person named george lucas, the creator of "star wars," among other things. so why do you need to be the co-ceo of ariel? why don't you do nonprofit boards, corporate boards and other things? why do you want to do this? 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. it was the thing i did that i thought about everyday 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, but maybe i love it more. i don't think that is true. i don't think we compete for the
love of ariel, but it became part of my dna. leaving it was never a consideration. i always wanted to be there. david: let's talk about the nonprofit things you are doing. one that i want to talk about first is the one you are doing with your husband. you are building a museum in los angeles for narrative arts, i guess it would be, 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 dedicated to the art of storytelling and narrative. one way to think about it is, a story that is told in one frame many directors can see this very clearly. when you look at, for example, a norman rockwell painting, you can understand the story just in one frame, one shot. and that is what the whole museum is about. we have dedicated this work to building this building. it will be the first of its kind. it is in los angeles.
it is seeded with the collection george started collecting for a very long time. it also has a component of it dedicated to "star wars" but the bigger issue is to create an environment where anyone can walk in from any walk of life, from a scholar to six-year-old, and feel not only like they belong there, but also that they understand what is on the wall. david: you are, in effect, self funding this, putting up most of the money for this. mellody: all. [laughs] not most, all. david: that is more than $1 billion, let's say. i don't know anybody that ever put up that much money for a museum. did you ever think about the cost, or are you not worried about that so much? mellody: what we have said, and we really do believe this, is that we are holding society's money. this money is not for us. we have great lives. please don't think we are struggling here. but it really was the wealth that was created from "star wars" and "indiana jones" and all these things was really
quite significant and we think it belongs back in society. david: so what is it like to be mellody hobson? everybody knows you pretty much and you can see anybody in the world you want to see. you have the most famous friends in the united states. do you ever say, i want to chill out, relax, and get away from all of this? how do you relax? mellody: first of all, i just want to put in context i get to spend time with people who i admire and respect and are world-class people. many are not famous at all, that you would know, 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 that my life has exceeded my own expectations. and i think that is why it is very important not to put expectations around what is possible for you or anyone. and so, in doing that, i have a great sense of gratitude about all that i have been able to experience and all the people i have been able to interact with and most importantly, learn from.
in terms of what i do when i am relaxing, we are really basic in my house. we do things like binge watch television and we usually 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 likes to experience the crowd experiencing a film, not on his own. david: does your husband say this is not a good movie? let me tell you what they did wrong? or does he not do that? 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 why the foundation is good, he will tell you what is missing. he will give you ideas of how the movie could be better. i mean, i have watched a lot of films with george where he has broken them down for me in ways that are just so enlightening. david: have you ever thought of running for office? you obviously have an outgoing personality, you are very successful, you obviously could get elected in your own state of illinois or running for president or anything like that, serving in 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'm doing what i meant to do and what i love. i am not one of those 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 can i trade up? that is just not how i think about life. and if i had that calling, i would do it, but i don't feel that in my heart or soul. i feel i am better off contributing to organizations like ariel, starbucks, and jp morgan. david: so, if somebody says i want to bundle the optimism and enthusiasm for life that mellody hobson has, what is the secret? how do you get to be so optimistic and energetic? and what do you think is the key to that for people who want that? mellody: gratitude. so, when you have had the life i have had, every day feels like a
gift. every day seems like a blessing. every day feels beyond anything i would have ever expected. and so, if that is the way, you know, 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 mean, i have had some really 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 where you're going to eat, nothing is that bad, nothing. and it also gives me a great amount of empathy for people who have those struggles. and so, because i never forget, i am always very grateful. and because i'm grateful, i think i am supposed to work hard, i am supposed to do better, i am supposed to be optimistic because the contrary just doesn't seem right given the opportunity i have had. what do i have to complain
♪ david: this is my kitchen table and also my filing system. over much of the past three decades, i've been an investor. [applause] the highest calling of mankind, i've often thought, is private equity. [laughter] and then i started interviewing. i've learned from doing my interviews how leaders make it to the top. >> i asked him how much he wanted, he said 250. i said, fine. i didn't negotiate with him. and i did no due diligence. david: i have something i'd like to sell. they
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