Marc Lasry - Making Bucks in Credit and Sports - [Invest Like the Best, EP.371]

My guest this week is Marc Lasry. Marc is a pioneer of distressed debt investing and the CEO of Avenue Capital Group, which he co-founded with his sister in 1995. Avenue manages $13 billion today. More recently, Marc and Avenue have become active investors in sport. He owned the Milwaukee Bucks when they won the NBA championship in 2021, and has since made investments in sports as diverse as sailing and bull-riding. In our discussion, we talk about his journey building a big investing firm, the evolution of distressed investing, and the opportunities in sport today. Marc shares some great stories throughout about travelling with President Clinton, winning the NBA championship, and raising his first fund. Please enjoy this great conversation with Marc Lasry. Listen to Founders Podcast For the full show notes, transcript, and links to mentioned content, check out the episode page here. ----- This episode is brought to you by Tegus, the only investment research platform built for fundamental investors. Whether you’re trying to get up to speed on a new market or keep tabs on a portfolio company, Tegus is the end-to-end investment research platform you need. With Tegus, you can quickly understand a company's business model, drivers, benchmarks, and management quality. To monitor an entire market, download our pre-built financial models — or update your own with the latest data using Tegus’ new Excel Add-In. Tegus gives you all of this and more, all bundled into a single software license. Find out why 95% of the top 20 global private equity firms are Tegus customers. Learn more and get your free trial at tegus.com/patrick. ----- Invest Like the Best is a property of Colossus, LLC. For more episodes of Invest Like the Best, visit joincolossus.com/episodes. Past guests include Tobi Lutke, Kevin Systrom, Mike Krieger, John Collison, Kat Cole, Marc Andreessen, Matthew Ball, Bill Gurley, Anu Hariharan, Ben Thompson, and many more. Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here. Follow us on Twitter: @patrick_oshag | @JoinColossus Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com). Show Notes: (00:00:00) Welcome to Invest Like The Best (00:03:40) Marc Lasry's Early Confidence and Competence (00:06:03) Distressed Credit Evolution and the Allure of Sports Investing (00:08:15) The Milwaukee Bucks: A Championship and Investment Success Story (00:14:54) Exploring New Frontiers: Bull Riding and Women's NCA (00:18:33) Venturing into Sailing with Larry Ellison's League (00:22:27) The Economics of Sports Team Ownership (00:25:19) The Vast Universe of Sports-Related Investment Opportunities (00:29:36) The Evolution of Distressed Investing (00:34:05 The Common Thread Through Marc’s Business Endeavors (00:40:24) Marc’s Most Memorable Investment (Not Including The Bucks) (00:43:40) The Dynamics of Working with Family in Business (00:45:32) Finding Happiness and Perspective Amid Financial Success (00:51:03) Diving into the World of NBA Owners (00:55:19) Exploring New Ventures: Sports, Real Estate, and Beyond (00:59:03) The Art of Deal-Making and Navigating Risks (01:06:10) The Kindest Thing Anyone Has Ever Done for Marc

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Patrick O'Shaughnessy?

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• 0:35Patrick O'Shaughnessy?

  Hello and welcome, everyone. I'm Patrick O'Neal and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, stories and strategies that will help you better invest both your time and your money. Invest Like the Best is part of the Colossus family of podcasts and you can access all our podcasts, including edited transcripts, show notes and other resources to keep learning at joincolossus.com.

• 1:00Speaker 01

  Patrick O'Neal is the CEO of Positive Sum. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of Positive Sum. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of Positive Sum may maintain positions in the securities discussed in this podcast. To learn more, visit psum.vc.

• 1:29Patrick O'Shaughnessy?

  My guest this week is Mark Lazry. Mark is a pioneer of distressed debt investing and the CEO of Avenue Capital Group, which he co-founded with his sister in 1995. Avenue manages $13 billion today. More recently, Mark and Avenue have become active investors in sports. He owned the Milwaukee Bucks when they won the NBA championship in 2021 and has since made investments in sports as diverse as sailing and bull riding. In our discussion, we talk about his journey building a big investing firm, the evolution of distressed investing and the opportunities in sports today. Mark shares some great stories throughout about traveling with President Clinton, winning the NBA championship and raising his first fund. Please enjoy this great conversation with Mark Lazry.

• 2:13Patrick O'Shaughnessy?

  What's the earliest episode you can remember of feeling like a sense of confidence and competence in what you were doing?

• 2:20Speaker 02

  Oh, wow, that's a great question. That's actually fascinating. I've never really thought about that. I think part of it is I always grew up, I had a mom who always told me you could do anything. So I just grew up believing I could do anything. I don't think there was a moment when I thought, oh, wow, I could do this. I think when we left Morocco, we came to the United States, everything was about education. Everything was about learning because we didn't really have any money. So the only way you were going to go to school was by scholarship. I think it was a belief that my parents instilled in me.

• 2:56Patrick O'Shaughnessy?

  So not fueled by self doubt?

• 2:58Speaker 02

  No.

• 3:00Patrick O'Shaughnessy?

  Well, it's funny because a lot of people are in your position.

• 3:05Speaker 02

  No, I don't think so.

• 3:09Patrick O'Shaughnessy?

  Both the GSP guys and Ali Hamad told me to ask you about the story of raising your first fund.

• 3:15Speaker 02

  It all depends on an investor, Gustave Leve, who actually founded Perrier. When he came in here, he was about 75 years old and he comes in and back then he had a Kodak and Stamatic and he's taking pictures of the people who worked for me. Taking pictures of the office and I was like, oh, okay. And everybody's like modeling and we're all standing there doing whatever we're doing. And he literally took 24 pictures. And at the end I was like, okay, so why is that? He goes, oh, I just like to have pictures of my investors. I was like, okay. And he goes, but I'll come back in three or six months and that's when I'll decide if

• 4:00Speaker 02

  I'm going to invest. And he comes back and he's got the pictures with him. And he goes, I want to just make sure same people are here. I was like, okay, yeah, they all are. I go, so I don't understand. He goes, well, sometimes people just would have actors come in. And I just want to make sure it's the same. I just thought it was fascinating. I've never heard of that. This is in, I'm trying to think when this was. This was in 1995, 96. We had just gotten started and you're just meeting characters all the time.

• 4:36Patrick O'Shaughnessy?

  We'll rewind back to that time period because I want to talk about the whole evolution you've seen of distressed credit and just how it's evolved over that whole period. But I want to zoom to today. Last time we were together, we were talking about bull riding and the probably myriad of opportunities that not a lot of people are thinking about from an investing perspective in the world of sports. And obviously you're very well known for having bought the Bucks and done very well, both winning a championship, but also as an investment. I would just love you to riff on why you're so interested in sports as a category of potential investment.

• 5:09Speaker 02

  I think there's a number of reasons. First, I think it's misunderstood. I don't think people fully appreciate all the different opportunities you have in sports. How media plays a part in it, how sponsorship, ticket sales. And then the other big reason is I actually think it's a uniter. People just love sports. It doesn't make a difference who you are. If we're all wearing the same jersey, for some reason, we all love each other because we're all cheering for the same person. So you don't look at what nationality, what color somebody is. One of the things I loved about owning the Bucks, whenever I was traveling, wherever you were, whatever city, sometimes you'd find somebody wearing a Yanis jersey.

• 5:52Speaker 02

  And I'd go up to them and go, oh, are you a big Bucks fan? And they would start talking to you about why they love Yanis or why they love the team. And then they would ask me and I'd go, well, you know, shockingly, I actually own the team. And they go, no, you don't. I go, well, no, I'm pretty sure. And it was always the same thing. People would Google you and then once they found out you did, they'd want to take a picture. But all of a sudden, literally, you're going up to a total stranger. And within a few minutes, we both loved the same thing. And I just found that amazing. And I actually think it's one of the things that people don't fully appreciate about sports, how it does bring people together. And so for me, the Bucks were a unique opportunity

• 6:38Speaker 02

  and worked out extremely well. But I see that you can do the same thing, investing in other leagues in other sports.

• 6:48Patrick O'Shaughnessy?

  There's a really interesting story with the Bucks in that the price you bought it for on a multiple basis was crazy relative to how much you then earned as a return on capital basis. This does not happen usually unless it's Microsoft stock or something. And the Bucks business did not grow like Microsoft's business did. Can you tell that story, what it was like to retrain your brain, probably from distressed credit to, I think it was like 100 times or something you bought it for originally. It's like a totally new mental model.

• 7:15Speaker 02

  I think why people at times have a hard time buying a team and why people have a hard time understanding the value of a team. I was no different. I'm not going to tell you I was. I think for me, I had invested in the Brooklyn Nets and I had a minority piece. And when the Bucks became available, you understood the economics of basketball. So the Bucks were making about $5 million a year. And so you would think, in my business, I'm trying to buy a company for three to four times. Private equity is trying to buy a company seven, eight times. And everybody thinks you're crazy if you spend 20 times. We had the opportunity

• 7:57Speaker 02

  one day, not three, five, 10, 20, 50, but you know, the magical number of 100 times. You're like, well, that's fine. I'm going to buy it for 100 times. We're going to have this new media deal. I think the value will go up. And from your media deal, you were getting 30 million a year. I thought it would go up to 60 to 75 million a year. And if we got that, you'd make all this money and we could sell the team. And the team would hopefully double in price. The media deal came and it was three times. So instead of us getting 30 million, we got 90 million. And the value of the team doubled. And so now you actually can make money.

• 8:38Speaker 02

  And the dirty secret about sports is you go into it assuming you're gonna make money. And then you find out that if you want to win, you've got to spend.

• 8:50Patrick O'Shaughnessy?

  Spend all the money.

• 8:52Speaker 02

  So you quickly come to the conclusion that it is not any fun to go and try to make money because that means you're gonna lose. And why would you want to go watch a team you bought just lose? So you end up spending the money and you literally spend pretty much everything you make. And the reason for that is you actually do want to win. And the value of your team actually will increase if you win. But the problem is you should sell right when you win.

• 9:23Patrick O'Shaughnessy?

  Which you did.

• 9:23Speaker 02

  But most people don't because that's when you have the highest value is when you win. And when I looked at it, I thought we won in 2021. I thought I'd, we could win again in 22 and in 23. And you also realize how hard it is to win and you've got to get very lucky. And I think when we won, everything worked out really well. Kevin Durant's foot wasn't an inch bigger. He would have made that three, we would have lost. Giannis in Atlanta ends up having what I thought tore every ligament in his leg. If you see the video of that is.

• 10:03Patrick O'Shaughnessy?

  It's gruesome, yeah.

• 10:04Speaker 02

  It really is. And then I go running into the locker room and I remember I said, doctor, how bad is it? And doctor looks at me and goes, listen, I know you're not going to believe this. It doesn't feel like he tore anything. I go, no, that's impossible. And Giannis goes, no, I heard a pop. And so they've got to do the MRI and the MRI comes back that everything's fine. What he had heard, there's a water sack inside your knee and that's what he heard pop. And it just refills up. All right, so now Giannis is gone and somehow Trey Young ends up injuring his ankle because he's walking backwards and steps on the foot of a ref. And now he's gone. So you've got to be very good, but you've got to get lucky.

• 10:50Speaker 02

  And I think we were very lucky. And I think the following year, we got a little bit unlucky. And then, then last year, definitely unlucky because Giannis got hurt within first 10 minutes. So for me, I thought it was time to sell and I thought it was a great price. I'm not saying prices may not go higher. I think they will. But I think it'll be hard for teams to increase in value five to 10 times over 10 years. I could see teams increasing value two to three times and that would make sense. But I think you can take that capital and sort of do the same thing in that amount of time. So yeah, it was a unique experience.

• 11:32Patrick O'Shaughnessy?

  What do you think of the notion that a lot of these things are vanity assets for their owners?

• 11:37Speaker 02

  I don't think that's true. I think most people buy a team, buy it because they believe the value is going to go up. Nobody's buying something saying, oh, I can't wait for this to drop. So I don't think it's a vanity play. I think it's an economic play. And there's a belief that the value will go up. And part of that is very simply, ticket pricing goes up 5 to 20% a year. Sponsorship goes up 5, 20%. Advertising goes up 5 to 20%. So I think you will make money if you decide that you don't want to win. And I think that's what ends up happening. It's not a vanity play. What ends up happening is you quickly realize, and I know this may sound a bit hokey,

• 12:23Speaker 02

  but you actually realize you're a steward of an asset. I'd love to tell you, you feel you own the team. I think you're just the owner at that present time. And the community, the fans, everybody else, that's who owns the team. And you feel you have an obligation to them to try to win. If you think about it, there's no fan that says, are you a Knicks fan?

• 12:44Patrick O'Shaughnessy?

  I'm a Knicks fan, yeah.

• 12:45Speaker 02

  You don't go, oh, I really feel bad for Dolan if he's got to spend X. I don't think I've ever heard a Knicks fan say that, right?

• 12:53Patrick O'Shaughnessy?

  Especially about Dolan.

• 12:55Speaker 02

  But nobody worries about what an owner has to spend. They want the owner to spend as much as possible because all they care about is winning. And you actually feel that, you hear it all the time. And that's why I said you sort of become a steward of an asset. And I, hopefully, we did a really good job when I owned it.

• 13:14Patrick O'Shaughnessy?

  The NBA had been around a long time when you bought the Bucks and probably will be around for, hopefully, forever. Bull riding is something that's a little bit different. Obviously, it's been around, but not in terms of franchise value, leagues, et cetera, sports TV rights, et cetera. Tell that story because I think it's a fascinating window into the sort of thing that probably people aren't thinking about as an asset that you might look at or be interested in.

• 13:34Speaker 02

  What I'm trying to do when we're investing in sports is I don't know what people will like. I don't know what you want to watch. What I do know is what people are currently watching. And you know that from the ratings. So bull riding, it's really rodeos that have been around for 50, 100 years. People love it. And I had heard about it from a number of friends who had invested in it and said, you need to take a look at this. You're going to be shocked at how many people are actually loving to watch it on TV, loving going to the rodeos, to the bull riding events.

• 14:19Speaker 02

  So I started doing work. What I learned was at the time they did their media deal with CBS Sports, they got paid zero. And the reason they got paid zero is CBS was like, look, we have no idea if anybody's going to watch it. If they do, great, we'll make a lot of money. And if they don't, we're not going to put it on. But there's a production cost and everything. And so they do that. And within the span of three years. You have roughly the same amount of people watching a bull riding event that watch an NBA game. It really is. And what that tells you is you have 350 million Americans that some love bull riding, some love basketball, some love baseball. So we ended up doing that.

• 15:01Speaker 02

  And the teams at the time were worth about a million or two. And three years later, they were worth 25 million. For people who bought them then, they made anywhere between 10 to 20 times on their money in three years. We bought a team for 25 million. And we decided to put a team here in New York. We're going to do it out of the Barclay Center. But the reason we did that is we think the next media deal is going to be, it could be somewhere around 50 million, 100 million, 200, 500 million a year. I don't know what it'll be, but it's definitely going to be more than zero. And if you think about it, we own a percentage of the league.

• 15:43Speaker 02

  And when you end up figuring out with that percentage, which you will own of the media rights, I think the value of these teams in two to five years will be five, 10, 20 times what you paid for it. Here's an interesting statistic that's just happened. So I don't know if you watched the women's final NCAA.

• 16:03Patrick O'Shaughnessy?

  Of course. Me and everybody else.

• 16:05Speaker 02

  But think about that. So four years ago, I don't think people would have been interested or would have watched it. And you saw that from the media rights that the women's NCAA got. Well, you fast forward to today, you had 18 million Americans who watched it. By the way, that's more than I've ever watched an NBA game. It's more than I've ever watched a playoff game. It's more than I've ever watched a baseball, the World Series. It's actually more than I've ever watched a men's NCAA game. So you look at that and go, that came out of nowhere. But now that you know that people are watching it, do you think you want to pay more for a woman's media rights on the women's NCAA?

• 16:49Speaker 02

  The answer is yes. But five years ago, I would have told you, I have no idea. And so what we're trying to do is see what people are doing and invest and buy into leagues and teams where we know there's already interest. So that's what's different.

• 17:06Patrick O'Shaughnessy?

  What about sailing?

• 17:07Speaker 02

  So I don't know if you can tell, but I'm not a big sailor.

• 17:12Speaker 02

  I don't know what a big sailor looks like.

• 17:14Patrick O'Shaughnessy?

  Not you.

• 17:15Speaker 02

  It certainly isn't me because I get seasick. Put me on a boat that rocks, I just want to get off. But that's the same thing. So Larry Ellison, three years ago, starts a sailing league. And he starts it with about $250 million. If you think about that, why does he do that? Because he's a big proponent of America's Cup, believes that people love sailing, and says, I'm going to create 12 teams. I'm going to have Team USA, Team Canada, Team Australia. I'm going to do all of that. Okay. I would tell you three to five years ago, that's a venture deal. And you hope that he'll be successful, but nobody knows.

• 17:58Speaker 02

  He does a deal with CBS Sports for $40 million a year, global, because they think about 100,000 people are going to watch that. Okay. I would actually think that would be logical. Fast forward to today. So in three years, they just had a race about three or four weeks ago. So they have about 20 races a year. And in that race, they had about 2 million Americans who watched that. So you look at that and go, where did that come from? How'd you go from 100?

• 18:30Patrick O'Shaughnessy?

  That's like NBA level, yeah.

• 18:30Speaker 02

  Yeah, it's more than an NBA level. And I wouldn't have told you there's 2 million people in the United States who love sailing and who want to watch it, but there is. So what that tells you is their next media deal is going to be multiples of what the first one was. And that's how we look at things. And for right now, for whatever reason, in sports, you can actually take advantage of that.

• 18:52Patrick O'Shaughnessy?

  What's the most peculiar sports deal you've looked at in this pursuit so far?

• 18:57Speaker 02

  Oh, my God.

• 18:58Patrick O'Shaughnessy?

  Maybe the slapping one?

• 18:59Speaker 02

  Yeah, the slapping one. It really is. I don't understand.

• 19:03Patrick O'Shaughnessy?

  People watch.

• 19:04Speaker 02

  People love watching it. You gotta go back in time. Imagine somebody comes to you and goes, look, I got a great idea. Here's my idea. I'm going to film people just smacking each other and just slapping.

• 19:15Patrick O'Shaughnessy?

  Knocking each other out.

• 19:16Speaker 02

  And you're like, okay, nobody wants to watch that. What are you crazy? No, I'm not funding that. Yet that's become a really popular sport. I don't know how you train for it. The other one that's actually really weird, but it requires a tremendous amount of skill. It's on a ping pong table that's at an angle. And all you can do is you've got to hit the ball. It's got to hit your side, then the other side. But you can only do it with your feet.

• 19:42Patrick O'Shaughnessy?

  Oh, I've seen this. Yeah. It's like soccer.

• 19:44Speaker 02

  Yes.

• 19:45Patrick O'Shaughnessy?

  Style.

• 19:45Speaker 02

  And I'm looking back on, I don't know, it's not for me, but now would I invest in that? Sure. If I saw that a million Americans are watching it. It's not what I like. It's what people like. The one that I always find fascinating, and somebody explained this to me really well. There's a media executive that you would know who runs a large company. Ends up saying, look, when we have the Olympics, you ever watch that? I go, yeah. And he goes, you ever watch curling in the Olympics? I'm like, yeah, I do. And he goes, well, let me explain the sport to you. I'm going to have somebody roll a ball on ice to a circle.

• 20:26Speaker 02

  And the person in front of them is going to shave the ice to make it either go slower or faster. I would have said, that's the dumbest thing I've ever heard. Yet I'm fascinated when I watch it. And what he explained is people love watching the best in the world compete, period. And that's why people watch on TV, because they want to see the best in the world compete. And I've always remembered that so that when I'm investing, it's let's do things where it's the best people in the world compete, because that's what people want to watch.

• 21:00Patrick O'Shaughnessy?

  One explanation I heard many years ago, just to simplify things to like basic supply and demand. This was baseball was like, look, there's going to be roughly 30 teams. Like there's not going to be 70. And so the supply is fairly fixed and the sorts of people that can and want to buy a baseball team is probably going up. Therefore, I'm interested in buying a baseball team. How much do you think about the very basic supply, demand story for any one of these things? Is that one of the key models for thinking about buying one of these franchises?

• 21:29Speaker 02

  It is because ultimately you have more people who want to own a team, especially in their community than you have teams. And whether that's baseball, basketball, bull riding, sailing, golf, whatever it is. You're seeing the rise of women's soccer. You're going to see the rise of women's volleyball. There are more people who have the means and the wherewithal to own a team and want to grow it within that community. I think you will have teams. So it is a big factor. And then if those teams can make money, then you've increased the amount of people who will want to buy them.

• 22:09Patrick O'Shaughnessy?

  Does it feel like you are the only or one of the only people approaching this the way that you are with the institutional investor mindset versus just I'm a local, I'm in Detroit, I want a Detroit team or something?

• 22:22Speaker 02

  I think today, yes, but I think within three to five years, absolutely not. I mean, I think there's a number of firms out there that are getting started that want to do the same thing. So I think you're literally in the first inning of investing in sports. I think as private equity comes in, as more institutional capital comes in, you're not going to be able to do the bull riding. You're not going to be able to do the sailing. You're going to be paying much higher pricing for this because it's going to become a much more efficient market.

• 22:53Patrick O'Shaughnessy?

  What role does gambling play in this entire story?

• 22:57Speaker 02

  So the great thing about gambling, at least from the way I look at it, is what gambling does is increase the engagement that people have with whatever they're gambling on. So I'm not going to make money on the fact that people are gambling. That's going to be FanDuel, DraftKings, or whoever people are doing it with. They've already got that monopoly. But the more people who bet on a particular game means there's more people watching that. The more people who watch that means my ratings go up. The higher my ratings are, the higher media deal I'm going

• 23:36Speaker 02

  to get. So I think it's just part of the ecosystem. And the whole thing in the ecosystem is how do I make you become a Knicks fan? How do I make you become a Bucks fan? Because the more people who watch, the higher I'm going to get paid.

• 23:52Patrick O'Shaughnessy?

  How big is the universe of eligible deals in this world right now, today? If you had your whatever funnel, I'm picturing some deal funnel, at the top of that funnel, what do you think that number is?

• 24:05Speaker 02

  I would say it's hundreds of billions of dollars. I would have thought it was a lot smaller. And as we've started doing this, the amount of deals and the amount of

• 24:16Speaker 02

  I would say opportunities we see is staggering because it's in everything. It's on the real estate side. It's on, do we want to build hotels near a stadium? Do we want near arena? Do we want to build restaurants? Do we want to do food services in the arena? What are we doing? And anything that's sports related, I think is just massive opportunities.

• 24:40Patrick O'Shaughnessy?

  That's making you put your credit hat back on for just a second. It's gotten really interesting because now it seems like the opportunity costs are quite high. You could get whatever low double digits maybe in credit somewhat reliably. How do you think about hurdle rates and expected returns, desired returns? Just the brass tacks of what you want to earn on your equity capital?

• 25:00Speaker 02

  I think there's two things you're going to be doing. One, you will be doing credit. So you'll lend people money on that. You're going to be lending at 10 to 15%. It'll be the same thing we're doing on the credit side. On the equity side, you're going to want to be generating high teens to low twenties returns. I think today, because of the lack of capital, you're going to be able to do that pretty easily. But as more and more capital comes in, that's going to get harder. But that's the same in any asset class.

• 25:28Patrick O'Shaughnessy?

  What did you learn from David Bonderman?

• 25:30Speaker 02

  From David? Oh, I learned a lot. David was one of those rare individuals, in my opinion, that was exceptionally book smart and exceptionally street smart. And normally people are one or the other. And David was both. And you saw that in situations and how quickly he could figure things out, but also how he could communicate with everybody. Everybody really liked him. Whether if you were an analyst, you could talk numbers with David and not only could he keep up with you, he'd be better than you. But if you just wanted to talk about how you're going to grow a company,

• 26:14Speaker 02

  what are we going to do on the marketing side? Here's my vision. You could actually talk to David and you thought you'd be able to communicate with him and he'd understand things. He was one of the first people I ever worked for in this business that was able, in my opinion, to do both. And not only do both. At a high level, but at the top.

• 26:33Patrick O'Shaughnessy?

  How would you articulate the magic of the Bass family tree? It seems almost like the Parcells coaching tree or something like this, but in investing, like so many interesting, talented people seem to have emerged in it or from it, or can draw lineage back to it. Bonderman, you, Rainwater, lots of others. What made it such a special thing?

• 26:54Speaker 02

  I think because 30, 35 years ago, when I went to work for them in 1988, they gave me 150 million. I was the largest distressed fund in the world, in the world. And the reason why you have this lineage from them is there were about four or five families back then who had a lot of capital. So therefore, in my opinion, they attracted some of the smartest people because they would give you capital. And very few people back then had capital. I mean, imagine if I'm running 150 million, I'm the largest fund. Most people back then were running 50 million, 100 million.

• 27:39Speaker 02

  And so you could go to the Bass family, you could go to a number of other families, and they put a lot of people in business. And because of that, I think there was one of the reasons why they did exceptionally well.

• 27:53Patrick O'Shaughnessy?

  If you think about the, what I'll call like the chapter headings of the story of distressed as a style, you were the biggest fund back then. Now it's a much, much bigger asset class. You're one of the big ones. How would you chunk that up into chapters? Just thinking back that whole time, what have been the chapters of distressed investing?

• 28:10Speaker 02

  Well, I think back then you needed to understand law and you needed to understand numbers because bankruptcies were extremely complicated. And bankruptcies would take anywhere between three to six years. And it was a strict priority. So you were constantly fighting. And then the bankruptcy laws were changed and they were changed to make it better for creditors as opposed to debtors. And that one change ended up making bankruptcies instead of being five or six years, you now would have an 18 month to 24 month bankruptcy. Things became more streamlined and.

• 28:52Speaker 02

  You ended up, I think now you've still got a lot of fighting among different asset classes and different groups, but the timing element has all gotten condensed. I think that's been a big change. Also, the increase in capital has made it worth it for people now to fight. Whereas back then, because time was an asset that the debtor had, you actually settled a lot more. And even though somebody may have been junior to you, they could hold you up for two years. So it was worth it to work it out. Today, it's not. And so you're litigating more, you're fighting more. It's gotten harder.

• 29:36Patrick O'Shaughnessy?

  If I was forcing you to be in the business today of backing new credit firms, what would be the variables that you would care most about in evaluating those new firms?

• 29:46Speaker 02

  They've got to be really good, obviously, on the credit side. They've got to actually also be very good on the restructuring side so that if there's an issue, you can deal with it. And I would say you can't be small, you've got to be large. Back then, people go, well, look, I'm small, I'm nimble, I'm quick, I can do this, I can do that. Today, nimble, quick means nothing. I could destroy you if you're nimble and quick. You need to be large. That's the big difference.

• 30:11Patrick O'Shaughnessy?

  What's the funniest story that you can remember from your time with the Clintons in the 90s?

• 30:16Speaker 02

  Oh, my God. I think it's, I got to meet Putin with President Clinton. And it was at Davos. And I got to meet all these people. And I went, we're going to a meeting, and President Clinton would always introduce me as his economic advisor. He's meeting with Putin, and then I come over and I'm saying hello and so on. And I asked President Clinton, I can do his voice really well.

• 30:43Patrick O'Shaughnessy?

  Do it.

• 30:44Speaker 02

  All right. So I said to him, sir, is there any way we can get a picture? I don't think I'll ever meet Putin again. And President goes, oh, absolutely. Vladimir, you come over here now. Vladimir, we're going to take a picture. Is that all right? And Putin goes, no picture, no picture. And Clinton, without missing a beat, goes, all right, let's hurry up now. Just it's fascinating to me how people who nobody says no to, they don't really care.

• 31:13Patrick O'Shaughnessy?

  Yeah.

• 31:13Speaker 02

  They don't really care. And the fact that we're taking this picture with Putin, just because I want to have a picture. And President Clinton is like, yeah, absolutely. We'll do that. You just got to meet, I won't say which country we're in. We're in a country in the Middle East. And President Clinton goes, you see that lamp over there? I go, yes, sir. He goes, I hate that lamp. I think it's one of the ugliest lamps I've ever seen. I was like, okay, seems okay. No, Mark, I'm telling you it's ugly. I said, okay, we leave, we go to the meeting. I look at him, I'm like, what, what do you care about the lamp for? He goes, oh, I just want to see if they record everything. And then we come back and the lamp is gone.

• 31:56Speaker 02

  It's just like always, he's, he loved.

• 31:59Patrick O'Shaughnessy?

  The game.

• 31:59Speaker 02

  Yeah, he loved the game. He loved meeting everybody. It was always just fascinating being with him. I loved it. I thought for somebody who wasn't born in this country, the fact that I could be with someone who was the ex-president of the United States and travel and do all these things, for me, I just loved it. I loved meeting people. I loved learning from him. He would explain history. He's a brilliant guy. So it was fun. It was a lot of fun.

• 32:26Patrick O'Shaughnessy?

  You've had such a varied set of interests and paths and things you've done. You seem very positive and cheery about them all. What is the through line of the things that tend to get your interest the most? What do they all share in common, if anything?

• 32:38Speaker 02

  I think part of it, I'm always super curious. I just want to learn. And I think part of that, when I was a kid, my mother, we went, we didn't really have much money. So we had gone to a book fair and my mother bought Funk and Wagner's Encyclopedia, the world encyclopedias. And she said, you need to read this, the whole thing from beginning to end in one year. And you learn a ton of useless information, but it's like all of a sudden you're learning about the world. You're learning about different things, different species. And I found it fascinating. And so what I love is, I actually think in life, and we all see this, people either have the happy gene or they have the miserable gene. No matter what happens in the world, there, everything's bad or everything's good.

• 33:23Speaker 02

  To me, everything's good. It's all positive. I just want to keep learning and meeting interesting people. And. Being in interesting situations, using my mind, but trying to always learn from somebody. And so I'm always excited to be in new places and try to learn.

• 33:45Patrick O'Shaughnessy?

  I'd love to hear a little bit about what you learned of the various trade offs, building a big investing firm. And I'm curious in lots of dimensions here, like the difference between focus on returns and deals versus assets. Sometimes they go together, sometimes not. And just the trade offs that you felt coming up against as you built the business over time? And why you made the choices that you made?

• 34:07Speaker 02

  You know, it's a great question. I think when you're going through it, for all of us today, these are businesses. They really are. And if I had known what I know today, I probably would have done things differently. It's just back then, when you're getting started and you're growing, your focus is really on returns. It's not on building a firm. It's how do I make someone money? And you're just very, very focused on that. I think in 2012, we were running about 25 billion. And I didn't see a lot of distress opportunities. So I ended up returning 12 plus billion to investors. And the reason I did is I said, look, we're not seeing as much on the stress side.

• 34:52Speaker 02

  We think it'll come back in two or three years. So we're going to return this capital. We're going to sell things and then we'll come back to you in two or three years to raise money. I was only off by 10 years. Now, would you do that today? Would you return 12 billion of capital and just shrink your firm? As a business, you wouldn't do that. Back then, focus was no, I'm just, all I want to do is try to make return. I think you've seen people go down both roads where they've ended up growing their firms and trying to generate returns. And part of the ways they've done that is use more leverage. I think for us, we were always trying to do things on a lever basis. I had a lot of my capital here. In retrospect, should we have tried to grow the firm more?

• 35:37Speaker 02

  Probably. I think for us, it's fine. We're running about 12, 13 billion. I think we've done it where we were just focused on returns. But the biggest problem I would tell you is we were very focused on, we were a credit shop. We were distressed. So there wasn't a lot of that for about 10 years. There is now. So we were raising smaller funds because there was less to invest. And we didn't go into other things. Should we have done direct lending? Yes. Should we have done private equity? Yes. There's a lot of things we should have done.

• 36:09Patrick O'Shaughnessy?

  Yeah.

• 36:10Speaker 02

  At the time, you sort of looked at it and said, yeah, but that's a scale business. I don't want to focus on that. I want to try to generate higher returns. We've done really well, but at the same time, we probably should have grown those other businesses.

• 36:25Patrick O'Shaughnessy?

  In the spirit of the period guy, taking everyone's picture, say a little bit about team building and culture building in a firm like this, where the product is taking money and giving back more money.

• 36:38Speaker 02

  I take same attitude in life and with the Bucks. The biggest question you have at your firm and with a team is, do you hire talent? Or do you hire people who are team players? So here, we can hire somebody who's a huge moneymaker. But by doing that, maybe they're not the best team player and causes huge issues within a firm. So what you really want to do is you want to have team players and still, if you're the Bucks, team players who are going to win a championship. Here, you want to have team players who are going to generate good returns. And I think it's hard. I mean, it is. It's a lot easier sometimes to just hire talent and tell everybody, deal with it.

• 37:22Speaker 02

  I think for us at the firm, we've always made sure that if it's collegial, that we've got to get along, that we work together. So we've got a lot of tenure with the senior folks. If somebody creates issues, they're gone. I always marvel at pension plans and folks who say, well, we see that you've had some turnover. And you're like, yes, the reason you have turnover is sometimes you fire people who are not good. Or sometimes you fire people who are difficult. And then somebody will go, yes, but you've had turnover. Go, right. So sometimes you fire people who are not good. Sometimes you fire people who are difficult. And then next day they'll go, so we saw you had turnover. You're like, okay, I give up. It was the same thing with, I would say, the Bucks.

• 38:06Speaker 02

  The biggest question was, do we go for talent? And you can see that certain teams have tried to do that. Or do you build a team? In sports, somebody's got to be the number one option. Somebody's got to be the number two option. Somebody's number three. You can't have four people who want to be the number one option. It's sort of same thing in investing. You can't have four people who are deciding what to do. You can have one person who decides what to do. And there's a team and people recommend, but ultimately somebody's got to decide that. There's got to be a senior portfolio manager or you can have two where if you're running a lot more in assets. But I think for us, we've tried to be more of a team.

• 38:50Patrick O'Shaughnessy?

  If you think, not including the Bucks, of the most memorable investment you ever made, end to end, can you tell that story?

• 38:57Speaker 02

  For us, TXU was one of those investments where we started buying the bonds at 40, 50 cents, did a tremendous amount of work. It became a huge position for the firm. We bought a tremendous amount of it. It went all the way up to 110. And there was one issue that we didn't think was an issue. And we should have sold at 110 and we were holding out for 115. And decision came down in the courts and bonds went down from 110 to 50, 60 cents. And I learned a lot from that, which was try not to always get the last dollar. Our thesis was right in what we were doing.

• 39:40Speaker 02

  And then what ended up happening towards the end is we became an arbitrage firm. And that's not who we are. I think on that, you learn quite a bit from that. You learned quite a bit in 2008. I think 2008 was a great year to learn how to deal with stress, how to deal with things going down, how to understand. We were buying Ford Bank that we'd start buying it at 80, 90, and it went all the way down for 30 cents. And we kept buying it all the way down. And part of that, everybody goes, oh yeah, you know, when things go down, double down. It's not that easy. The reason it's not easy is the market's telling you, you're totally wrong. Remember, when you're buying something, somebody's selling it. The person who's selling it thinks it's going lower.

• 40:25Speaker 02

  As things were going down, the amount of work we kept doing to try to make sure that we were right, is the value of that asset correct? That taught me quite a bit. You had to always refresh what you were thinking and try to look at it in a different way. It's not easy making money, but it's a process. And I think as time goes on, you actually learn how to avoid a lot of mistakes.

• 40:50Patrick O'Shaughnessy?

  What do you think are the most important things about building relationships with capital, with the people that give you the money to manage, especially at the multi-billion dollar scale for the big firms out there? What have you learned about that whole part of the business?

• 41:03Speaker 02

  It's very much about trust. It's about you constantly telling people who have a lot of capital with you, what you think is good, what you think is bad, admitting mistakes when you've done something wrong or you've made a bad investment. I think it becomes really a very strong relationship that you're developing and you're building. And to keep on getting more capital, people have to trust you. People know you're smart.

• 41:29Patrick O'Shaughnessy?

  Everyone's smart in the business.

• 41:30Speaker 02

  Everybody's smart. It's not. I always love, oh, no, he's really smart. Oh, shocking.

• 41:37Speaker 02

  Let's go give money to the dumb guy. Nobody does that. I've never heard anybody go, I need the dumb guy. That's the guy. That's my guy. Have you ever seen that? No. Everybody's smart. So what separates it? It is trust. It's the fact that you're explaining things to investors. And when you've made a mistake, say, look, we thought this was going to be what it is. It wasn't. And if people trust you, they give you more capital because they believe in what you're doing. So I think that's why you've seen certain firms really grow and others not grow as much.

• 42:12Patrick O'Shaughnessy?

  You have a really interesting story in the sense that you started the business with your sister. You work with your kids. You've made investments with them and on their behalf. I think the Bucks included lots of working with family, which can be beautiful, can be fraught. What have you learned about doing that well? Because it seems like it's worked very well for you.

• 42:28Speaker 02

  My partner is my sister. I don't know if that works for everybody. For us, it works extremely well. Sonia and I started this together and there's just a huge amount of trust. And also we have different skill sets. So we don't feel like we're competing against each other. And I think when you're partners with a sibling, it's very much about trusting them to do what they do really well and them trusting you to do what you do really well and not constantly looking over your shoulder. And I think with Sonia, we've split up the firm in different ways and she's phenomenal what she does.

• 43:11Speaker 02

  And it's actually worked out very well. But I think part of that is you've got to have a pretty close relationship. We shared a room till we both went to college. I don't think it's because we wanted to. I don't think I was dying to share a room with my sisters, but you do. And you either end up really trusting, liking each other, or it goes the other way. You just don't ever want to spend time with each other because of all the difficulties you've gone through. My daughter works here, but the reason she works here is I think she's, I know I'm biased, but I think she's really talented. My son worked for us when we were with the Bucks and I think he did a phenomenal job. He now works in the Commerce Department. I think it's hard working with your kids.

• 43:56Speaker 02

  I think it's hard working with any family member, but you either are able to and there's a level of trust or you're not.

• 44:05Patrick O'Shaughnessy?

  When you ask around about you, a common thing you hear over and over is that for the category of people that have achieved the level of financial success, you're amongst the happiest, or if not the happiest, just by the way you are. And you said earlier that people are wired optimistic or pessimistic. Is it that simple? Do you think it's just that easy? Because even for optimists, it seems like with lots of financial success can come lots of other maybe problems that aren't expected. Has it always felt easy to you?

• 44:30Speaker 02

  No, it's not that it's easy.

• 44:32Patrick O'Shaughnessy?

  Anything intentional you've done?

• 44:34Speaker 02

  I think I won the lottery. People win the lottery, the first day, they're so excited. And then you start hearing about, oh, the only reason somebody wants to be my friend is because I have money. The only reason somebody wants to do this is they want me to help them. They want me to do this. I always just go back, I won the lottery. What would you rather do? Not win the lottery or win the lottery? And that's actually why I'm happy. I always think back to the fact, I won the lottery. And yes, it's complicated by winning the lottery. Yes, it's complicated by having success. And I always try to say to people, you've got a choice. You can either win the lottery or not win. And if you win, you're going to have other issues. But if you don't win the lottery, you also have

• 45:14Speaker 02

  other issues. So which one do you want? And I think what ends up happening is people forget of how hard you work to try to achieve success. And then they start focusing on the negatives of that success as opposed to the positives. To me, I started a fund at a time that it was really hard, but then we grew. And I was lucky enough to grow exponentially. And I'm always thankful for that. I think people have too many demons when they do well, and are so worried of what is somebody's ulterior motive. To me, it's like, I don't really worry about your motive. I'm happy I'm in that situation. Yes, I get it that

• 45:58Speaker 02

  at times people want to be friends because I own the basketball team.

• 46:02Patrick O'Shaughnessy?

  Better than the alternative.

• 46:03Speaker 02

  Right. No, but that's exactly it. But you don't go, ah, it's so complicated. It's not that complicated. You own a basketball team. Well, we won the championship. President Biden called me. President Obama called me. President Clinton called to congratulate. I thought that was really cool. I mean, I got to go to the White House. We got honored at the White House and we brought all the players. I thought that was a unique experience. I get excited about the fact every day I won the lottery.

• 46:32Patrick O'Shaughnessy?

  What was your favorite moment associated with that championship run? If you had to pick a moment?

• 46:36Speaker 02

  I was lifting the trophy. It's actually funny. Beforehand, the NBA takes you through and says, okay, if you win, the trophy's here. You're going to lift it up. And here's how we're going to do it. I'm like, okay, great. I don't know how heavy is it? Do you mind if I just practice?

• 46:54Patrick O'Shaughnessy?

  A little test run?

• 46:54Speaker 02

  And they go, no, no, no, you can't touch it because then you're going to get your fingerprints on it and the camera, we don't want to see fingerprints. You're going to do this live. And I'm like, okay, how heavy is it? And they're like, oh, don't worry about it. I'm like, no, no, it's on national TV. And so you win, you go out there and my whole family's there and we're so excited because all of a sudden you realize you're going to win and you've got the championship ceremony and you go out and I start lifting the trophy really slowly because I have no idea how heavy it is. And finally I'm realized, okay, yeah, I could take it. I can put it over my head. Because the last thing you ever want to do is drop it.

• 47:32Patrick O'Shaughnessy?

  Drop it.

• 47:33Speaker 02

  Yes. It's on national TV. No, look at him. He dropped the trophy. I don't know how people got my phone number. I'm being serious. I must've gotten a thousand texts of congratulations. I'm happy for you. I'm like, no, thank you. Who is this? Thank you. Who is this? I'd say a quarter of the texts was, who is this? Who is this? And you find it's a friend of yours from 10 years ago or five years ago. And oh, thank you so much. But it was actually a really cool experience to share, to be there. I remember I went up to a number of the players afterwards and I said, let's be honest, couldn't have done this without me, right?

• 48:12Speaker 02

  No, we could have. I was like, really?

• 48:17Speaker 02

  All right.

• 48:18Patrick O'Shaughnessy?

  Good job. See you later.

• 48:20Speaker 02

  And then the part that you'll find really funny, because we all see it on TV, is when everybody's popping the champagne. So you've had champagne. Nobody pours champagne on their eyes. It actually is a burning sensation. It really hurts. And that's why you see people with goggles. And I always thought, oh, what wimps, we were going in with goggles. Oh, what, they can't have a little water?

• 48:41Patrick O'Shaughnessy?

  Pepper spray.

• 48:42Speaker 02

  Yeah, but I didn't know it was because it stung. I thought it was just they didn't want to have stuff. And so in the beginning, I don't have my goggles on. I'm like, oh, my God.

• 48:52Speaker 02

  This hurts. Where are the goggles?

• 48:56Patrick O'Shaughnessy?

  What a cool thing to experience.

• 48:58Speaker 02

  And then you know the part that's funny? So in between the ceremony, they go and they put plastic all over the locker room so that you can go spray. So all of a sudden, there's some professional guy who comes in and tapes up the whole locker room with plastic. Because you walk in, you're like, what the hell just happened here? But that and then as we're going in, my daughter would go, there's somebody outside who says he wants to come in. Is he allowed? I'm like, yeah, sure. And so we had more people in the locker room than we should have had. Because people were just asking if they could come in. I was like, yeah, why not? It's a great time. It was a lot, a lot of fun.

• 49:35Patrick O'Shaughnessy?

  Where do you think, if you think about a room full of your peers, relative to that room, your views of the world would be the most divergent or different?

• 49:44Speaker 02

  I think being in a room with NBA owners, people have very, very different views. Because everybody's made money a different way. Everybody's got different political beliefs. It's fascinating to be in a room where you've got 30 folks who've done exceptionally well, but in totally different industries. So they view their industry as being the right industry. It's actually very interesting.

• 50:09Patrick O'Shaughnessy?

  What would be the most surprising about that NBA room, apart from it just being lots of different ways to make money?

• 50:16Speaker 02

  No, I think just age is a big factor. You've got three groups of owners. You've got the owners who bought the teams. 30 years ago, you've got owners who bought teams 10 years ago, and then you've got owners who bought them today. And the ones today are much younger, have made money much earlier, much quicker. And then the ones who are much older, who are in their 70s, bought the teams for like $20 million, 15, 50 million, 100 million. So their net worth is actually tied up in the team. And I would say the folks who 10 years ago, teams were expensive, but not Stratosphere. Today, a team is $3 or $4 billion. A football team

• 51:01Speaker 02

  is $6 or $7 billion. It's a different level of wealth.

• 51:05Patrick O'Shaughnessy?

  It's crazy to think about.

• 51:07Speaker 02

  No, no, it really is. I couldn't afford a team today.

• 51:09Patrick O'Shaughnessy?

  Well, he had a good timing.

• 51:10Speaker 02

  No, it was good. My kid's good.

• 51:14Patrick O'Shaughnessy?

  If you think about the pool of money that you've got, and let's say you had to have others manage it, you couldn't do it yourself anymore. As you think through that lineup, do more individual people come to mind that you would want to give it to, or firms?

• 51:25Speaker 02

  For me, it's people. But that's because...

• 51:28Patrick O'Shaughnessy?

  You think that says something interesting?

• 51:30Speaker 02

  No, it's just being in the business, what you do is you meet a number of people. So to me, someone like David Blitzer is exceptionally talented in what he's doing. Yes, he's at Blackstone. Blackstone's a great firm. But when I think of Blackstone, I think of David. To me, Josh Harris was somebody who, when he was at Apollo, I didn't think of Apollo. I'd give money to Josh. Now, would I give money to Apollo? Yes. But why? Because I think Mark Rowan is super talented. And I think Mark's doing a great job. Then you look at younger individuals, folks that I've given money to. I've given money to Matt Perlman and his partner Alex. I think they're the next generation. Folks

• 52:15Speaker 02

  like Boaz, Weinstein, Jason Mudrick, Steve Ross, on the real estate side, and then just different folks that are out there that I think are super talented. I got to meet, when we were doing Sculptor, I got to spend more time with Jeff Yass. I thought he was really smart. And would I give...

• 52:39Speaker 02

  His firm money, yes, because I came away thinking Jeff is really smart. Ross Stevens at Stonebridge, same thing. I thought he's really smart. Bill Ackman, you bump into people and it's those people that you want to give money to.

• 52:57Patrick O'Shaughnessy?

  Can you say a word or two more about Matt and Alex and what makes them special in your mind? As big up and comers?

• 53:03Speaker 02

  I think one, they have the ability to do both. And what I mean by that is they're both street smart and book smart.

• 53:10Patrick O'Shaughnessy?

  Back to your point, yeah.

• 53:12Speaker 02

  It really is. I think Matt and Alex are just really bright guys.

• 53:15Patrick O'Shaughnessy?

  Yeah, and you'll never laugh harder.

• 53:17Speaker 02

  Yeah, but you'll have a great time with Matt and Alex. So they will appeal to both groups of people. You'll be with them, you'll go, wow, really great guys. I want to give them money because I think they're great guys. Or you go, wow, those guys are really freaking smart. I want to give them money because I think they're freaking smart. The fact that you can do both is why I think they're going to build a great firm. That's why I gave them money. I don't want to just give money to people who I think are just smart. I want to give money to people who I think have both of those qualities. Because in our business, that's really rare.

• 53:52Patrick O'Shaughnessy?

  If you were forced to not be an investor and had to build some other kind of business, what would you build?

• 53:56Speaker 02

  What would I build? Wow, I'd probably try to build a sports business because I think that's unique and different. I'd like to build a real estate business. I think things that bring people together is always interesting. And try to use the fact that I can deal with people pretty easily. So I'd want to be in a business where you're constantly dealing with folks.

• 54:21Patrick O'Shaughnessy?

  Can you maybe say a click more about each of those? So starting with sports, how would you approach sports? Where do you think in the world of sports, there's interesting things to explore today in 2024?

• 54:32Speaker 02

  I think you want to try to build. Where do you think there's going to be growth? So if I was starting out today, I would tell you the biggest growth is going to be probably in women's sports. Why? Because the cost of it is much lower. And I think you're starting to see that. The next generation wants to be more involved in women's sports. So I want to try to buy a bunch of women's teams. You would try to do that in one city if you could. It's just hard to try to do it in the city. I think I love architecture, so I'd love to try to do the real estate side. And I'd love to try to build buildings that I thought are beautiful, but that people would want to either live in or work in.

• 55:15Patrick O'Shaughnessy?

  What about international? We talked a lot about the US. What do you think is the opportunity or lack thereof outside the US?

• 55:21Speaker 02

  Oh, I think it's the same thing. I think Europe is always five, 10 years behind the US. I know Europeans hate it when I say that. Look, in Europe right now, the biggest sport is soccer. The biggest thing about European sports is relegation and promotion. So I think it's just hard because there you do have to spend money. And if you don't spend money, you get relegated. So think of that. You don't have a choice of making money. You've got to constantly be spending. So I'd want to be in leagues where you're not doing that. Where actually if you spend the money and you spend the time and you create something, that you still have that, that it doesn't get relegated.

• 56:03Speaker 02

  So I think there's massive opportunities in Europe and in, I would say, in Asia in sports, because that's very much a sports culture. You tell me, here we have minor league baseball, double A, triple A. How many of those games have you ever gone to?

• 56:23Patrick O'Shaughnessy?

  One.

• 56:25Speaker 02

  No, but in Europe, I mean, in the UK, you've got Premier League, Championship League, League One, League Two. And people are as crazy about the team in League Two as they are about their Premier League team. So it's very, very different. And so because of that, that means people love sports and people are passionate about it. People who have a passion of something, I should be able to create and build something that can take advantage of that.

• 56:53Patrick O'Shaughnessy?

  What does it take to be a good mentor to younger investors?

• 56:57Speaker 02

  You just have to care. I think part of it is, to me, David Bonderman, I would tell you was my mentor, that a mentor is somebody who wants you to succeed, whether he succeeds or not. What you find most people are happy for you to succeed, as long as it's

• 57:12Patrick O'Shaughnessy?

  With them.

• 57:13Speaker 02

  Yes. That's not a mentor. That's somebody who's helping you, and that's fine. There's nothing wrong with it. A real mentor is somebody who wants you to do well and is trying to help you do well. That's hard. It's hard for all of us, especially in this business, because this is a zero sum business. And if you're lucky enough to find somebody in this business who's doing that, it's rare.

• 57:35Patrick O'Shaughnessy?

  If you think about long exposure in credit, equities, sports, what do you think the biggest risks are in the world today for each of those categories?

• 57:45Speaker 02

  I think it's just geopolitical. It's exogenous events. It's things that you and I can't control. It's bad things happening. And you and I never would have thought, we have an airline fund. And people would go, what do you think is the worst thing that happens? Like, oh, worst case, maybe it's down 1%, 2%. People are always going to be flying. Covid comes and it drops 95%. People couldn't go into stadiums. People couldn't do anything. What can happen that will change the way people act? And it's usually negative things. It's not a positive event. It's going to be a negative event. So that's what I worry about.

• 58:28Patrick O'Shaughnessy?

  What's the nature of the airline fund? I don't know much about that.

• 58:31Speaker 02

  Oh, no, we just raised a fund to buy planes.

• 58:33Patrick O'Shaughnessy?

  What was the opportunity you saw at the beginning?

• 58:35Speaker 02

  Well, no, the opportunity is you buy older planes and then you lease them out. And then you're buying a plane at a discount to what it's worth, because people really want to just fly on new planes. And we thought as the airline industry kept on growing, but as travel kept on growing, you were going to need more planes and people would lease those planes out. And we'd make money on that. And if that didn't happen, you could strip the planes out for parts. And at the very least, you were going to make your money on the asset value of the plane. And where you made real money was if you could lease them out and then strip it for parts. So it's a great model, as long as people are leasing planes.

• 59:15Speaker 02

  When all of a sudden, nobody's flying and it takes two to three years for things to come back. It had a real impact. I think we were down 75%. We're back up now, but I think that was because of the hard work of the team and what they were able to do, what Sean Foley, who runs that fund, what him and his team were able to do. I mean, it was huge.

• 59:40Patrick O'Shaughnessy?

  It's interesting that you had an airline fund, never a private equity fund. What was usually the arbiter between doing something and not doing something at Avenue? What was the framework you would usually apply for yes or no?

• 59:51Speaker 02

  Well, because in that space, we were always investing in airlines in the distress fund or in planes. So it's, hey, how cheap could you buy an equipment trust certificate? How cheap could you buy this plane? You had people who needed to sell asset and you'd buy that. So that's sort of why, and then you saw, look, we're seeing huge opportunities there, but we can't do as much in the main fund. Let's go do a specific fund for that. So that's why we do it. Private equity, you need a team. I mean, it's totally different.

• 1:00:27Patrick O'Shaughnessy?

  What's the fattest pitch that you've ever seen in your life and career in investing?

• 1:00:32Speaker 02

  Oh God, that would be when I was able to buy trade claims. So under bankruptcy, under the old bankruptcy code, there was a convenience class and a convenience class was, nobody knew what that would be, whether it was claims of 10,000 or 25,000 or 50,000 or 100,000 and below. But that convenience class, you always needed a class to vote in favor of a plan. So the way they vote in favor is you gave them 100 cents. So back then, you could buy these claims for 10 cents, 20 cents, 30 cents, 40 cents on the dollar, and you were getting 100 cents. So it was a great, great business. It wasn't scalable, but it was a phenomenal business.

• 1:01:14Patrick O'Shaughnessy?

  How big did it get?

• 1:01:14Speaker 02

  It got large. You could invest 25, 50 million dollars, 100 million dollars.

• 1:01:19Patrick O'Shaughnessy?

  And why was no one else doing it? Whenever there's that kind of opportunity, you always wonder.

• 1:01:24Speaker 02

  It's too small. It's a lot of work. You make it up in volume. Yes, I can go buy a $10,000 claim. So, okay, big deal. I bought it 5,000. I made 5,000. Nobody really cares. But if I go buy 100 of those, if I go buy 500 of those, yes, but it's a lot of work to go do that.

• 1:01:42Patrick O'Shaughnessy?

  If I could snap any sports franchise in the world into your portfolio, 100% ownership, what would you take?

• 1:01:47Speaker 02

  Any sports franchise? Wow. I guess the Knicks.

• 1:01:52Patrick O'Shaughnessy?

  Why? Do you have a fan?

• 1:01:53Speaker 02

  No, because I live here in New York.

• 1:01:56Patrick O'Shaughnessy?

  You did the Nets.

• 1:01:57Speaker 02

  Yeah, it's just, it's exhausting. It's tiring. You gotta fly two hours to Milwaukee.

• 1:02:03Patrick O'Shaughnessy?

  How much would you do that?

• 1:02:04Speaker 02

  I did it a lot. I'd go to probably half the games.

• 1:02:08Patrick O'Shaughnessy?

  Wow.

• 1:02:09Speaker 02

  You'd go to LA. I mean, that was actually one of the reasons if I lived in Milwaukee, I wouldn't have sold. But you don't. I think if you could own a franchise, I think Knicks would be great. I think Giants or Jets, football teams actually a great franchise to own. Think about it, you only have 18 games and you're getting paid $10 billion on your media right for that.

• 1:02:30Patrick O'Shaughnessy?

  Pretty good.

• 1:02:31Speaker 02

  Yeah, it's pretty good.

• 1:02:32Patrick O'Shaughnessy?

  What do you think the most misunderstood sport is? The business, the game, anything?

• 1:02:37Speaker 02

  You've got to be passionate about that. If you're a baseball team owner, there's 81 home games. You should be at those games. Part of what a fan wants to see is that you're involved, that you believe in it. For them to be excited, you need to be excited. So I think it's hard. Baseball's hard just simply because there's so many games. Football's easier because you can go twice a week. So it's easier to go to a game. I think hockey's a great sport. You either love it or you don't. I love soccer. I wish it was more scoring. But the purists will tell you, no, a beautiful game is one that's 1-0. I'm like, no, that's a boring game. But you've got all these different things.

• 1:03:19Patrick O'Shaughnessy?

  If you think across all the deals you've done, you've done a lot in lots of different categories. How would you summarize your philosophy of deal making?

• 1:03:26Speaker 02

  I would tell you it's always you want to win, but you don't want to hurt the other person. And what I mean by that is I don't think whenever we've negotiated, we've tried to get the last dollar. You want to do a deal that is good for you and ends up being fair. And the simple reason for that is what you find out over time is if you have a really good reputation, it's shocking how many deals come to you. If your reputation is you're just trying to rip somebody's lungs out. Yes, you will. You'll be able to do that, but you're not going to have a lot of those deals. It's just hard.

• 1:04:02Patrick O'Shaughnessy?

  In the world of credit, I'm sure you see a lot of lung ripping.

• 1:04:05Speaker 02

  No, you do. You do. And you see, there's people who do that. And you're like, okay, I can't do business with you. You could have made a lot of money in my business by getting control of a company, firing everybody and liquidating that company for the assets. I never, ever wanted to do that. To me, that had no interest, even though you could make more money. And the reason for that is, why do you want to try to do things that are going to hurt others? And yes, you can make more money doing that. But I think in life, if you're smart enough, you can figure out ways where you can make money.

• 1:04:42Patrick O'Shaughnessy?

  This has been such a fun romp through a very interesting and lively career of investing. I always ask the same traditional closing question of everybody. What's the kindest thing that anyone's ever done for you?

• 1:04:52Speaker 02

  Oh, that's interesting. I think probably for me, it was when I went to school, being able to get a scholarship. Cause I don't think I could be where I am today without people who helped you get there. The other ones is, I want to thank every girl who said yes to me when I was in high school for a date. They were just purely kind. I think people just felt bad.

• 1:05:24Speaker 02

  I was not a player or whatever you would describe. I was one of those geeky folks. So for all of you who I was able to take out on a date, thank you.

• 1:05:32Patrick O'Shaughnessy?

  I think that's the first time I've heard that specific answer. I love it. Thanks to all those girls.

• 1:05:36Speaker 02

  That's so true. I was so sad back then. But I think when we look at life, there are people who helped you get to where you are. And I don't even know if you got to meet them. For me to go to Clark on a full scholarship, it was academic. They were the only school who gave me a full scholarship. That's why I went and it was great. And because of that, I was able to then go to law school and I was able to do what I did. But if I hadn't, I mean, yes, I would have found a way to go to a college or something, but you needed money. I'm not saying it's right or it's fair, but the fact that others helped you do that. There are people who have huge influences on your life that you don't fully appreciate.

• 1:06:19Patrick O'Shaughnessy?

  Well, this has been so much fun. Thank you for your time.

• 1:06:21Speaker 02

  No, thank you.

• 1:06:23Patrick O'Shaughnessy?

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