Why Wall Street Giant David Rubenstein Bought the Baltimore Orioles

Intro. (0s)

• Jason Kelly and Alex Rodriguez are in New York discussing David Rubenstein, the co-chairman of The Carlyle Group, which he founded in 1987. (0s)
• David Rubenstein is also a television host and the relatively new owner of the Baltimore Orioles, a franchise with which Alex Rodriguez is familiar. (17s)
• Rubenstein is described as a renaissance man, having built a private equity giant and donated tens of millions to philanthropy. (22s)
• The Baltimore Orioles are considered one of the iconic franchises in sports, with the number one farm system and Camden Yards being a renowned sports venue. (30s)
• Rubenstein views his ownership of the Orioles as a unique deal, combining investment with philanthropy, and emphasizes the community-building aspect of being an owner. (56s)
• David Rubenstein introduces himself as the Chairman of The Carlyle Group and mentions his recent involvement in baseball as the principal owner of the Baltimore Orioles. (1m25s)
• Rubenstein grew up in Baltimore and, after many years, is now refocusing on the city and the Orioles. (1m56s)

Owning the Orioles. (2m5s)

• The Baltimore Orioles were owned by the Angelos family for 30 years, having been purchased out of bankruptcy in the early 1990s by Peter Angelos. (2m16s)
• The team's history includes being bought by a Baltimore group in 1954 for $2 million, then by Edward Bennett Williams in 1981 for about $12 million, and later by Eli Jacobs for roughly $75 million before going bankrupt. (2m20s)
• Peter Angelos acquired the team in bankruptcy court for approximately $155 million, with notable partners like author Tom Clancy and Pam Shriver. (2m56s)
• Due to Peter Angelos's declining health, his son John Angelos began managing the team about five years ago. (3m15s)
• Interest in selling the team arose, and a potential deal was initially explored with Ted Leonsis, owner of the Washington Capitals and Wizards, but it fell through. (3m49s)
• John Angelos later approached with the idea of selling a minority interest, which evolved into discussions about a controlling stake. (3m59s)
• A partnership was formed with Mike Arougheti, CEO of Ares, to negotiate the purchase of the Orioles. (4m28s)
• Negotiations with John Angelos took six to nine months, experiencing setbacks, including a temporary breakdown during Christmas. (4m43s)
• The deal was eventually revived and completed in two parts: an initial 40% purchase at the start of the season and the remaining 60% later. (5m12s)

Why The Baseball Team. (5m17s)

• David Rubenstein attended Duke University for his undergraduate studies and obtained a law degree from the University of Chicago. He co-founded Carlyle, a prominent private equity firm managing nearly half a trillion dollars. (5m17s)
• After stepping down as co-CEO of Carlyle at age 69, Rubenstein became co-executive chair and then co-chair. He also manages investments through his family office, Declaration, and chairs seven nonprofit boards, including the Kennedy Center and the Library of Congress Board. (5m45s)
• Rubenstein engages in various activities, such as writing a book every two years and hosting TV shows on Bloomberg and PBS. (6m9s)
• Despite his busy schedule, Rubenstein decided to buy a baseball team, not for financial gain, but due to his personal connection to Baltimore, where he grew up and his family has deep roots. He felt he hadn't contributed enough to Baltimore compared to his other philanthropic efforts and saw an opportunity to energize the team if the current ownership was willing to sell. (6m28s)

Why Not Earlier. (7m11s)

• David Rubenstein observed many of his friends and peers, such as Tony Ressler, Steve Pagliuca, and Marc Lasry, getting involved in sports ownership. (7m11s)
• He had opportunities to buy sports teams, including the Wizards and the Caps, from his friend Abe Pollin, but initially declined due to his responsibilities at a large private equity firm. (7m32s)
• Rubenstein was concerned that his investors would criticize him for not focusing on their investments if he spent time on a sports team. (7m47s)
• He noticed that his colleagues in private equity who bought sports teams did not see a decline in their investment returns and even profited from the sports teams, leading him to reconsider his stance. (8m1s)
• Rubenstein regretted not participating in earlier deals when NBA and baseball teams were more affordable. (8m12s)
• With his reduced day-to-day involvement at Carlyle, he felt he could now afford the time to invest in a sports team. (8m22s)
• He learned from others that owning a sports team requires significant energy and time, more than he initially anticipated, and found himself attending more Orioles games as a symbol of the ownership group he assembled. (8m26s)

Good Deal?. (8m53s)

• The acquisition of the Baltimore Orioles was considered a good deal because the Angelos family preferred selling to someone who would keep the team in Baltimore, rather than auctioning it to the highest bidder who might relocate the team. (8m53s)
• The team has a 15-year lease, which could extend to 30 years, and there was concern in Baltimore about potential buyers moving the team to a larger city. (9m21s)
• The Orioles had not been in the World Series for 40 years, and despite recent improvements, the team faced challenges, making the purchase not an obvious success. (9m46s)
• A consortium of investors was assembled, including individuals with ties to Baltimore, such as former Mayor Kurt Schmoke and Cal Ripken, to emphasize the local connection. (10m29s)
• Wealthy Baltimoreans who previously couldn't invest in the team were now given the opportunity, and some investors from outside Baltimore retained strong ties to the city. (10m51s)
• One investor, with a long-standing obsession with the Orioles, contributed over $50 million and has not missed a game in 20 years, either attending in person or watching online. (11m9s)
• The owner's suite at Camden Yards is filled with a diverse group of people, including Baltimore residents, season ticket holders, and Little Leaguers, to ensure inclusivity. (11m40s)
• The new ownership aims to contribute to the revitalization of Baltimore, acknowledging the complex situation faced by previous owners. (12m30s)

Baltimore. (12m36s)

• Baltimore faces significant challenges, including a reduced population, crime, STD issues, and illiteracy. (12m36s)
• The city's population has decreased from approximately 930,000 to a little more than half that size due to factors like white flight to Baltimore County. (12m43s)
• Baltimore City is unique in that it is not part of a county, which means taxes from those who move to Baltimore County do not benefit the city. (12m54s)
• Efforts are being made to revitalize Baltimore by attracting corporate headquarters back to the city and infusing energy into the community to encourage people to stay or relocate there. (13m15s)
• Mike Bloomberg is mentioned as part of the ownership group involved in these efforts. (13m38s)

What Kind of Owner Are You?. (13m43s)

• The Baltimore Orioles are considered one of the most iconic franchises in sports, with a rich history and a beloved stadium, Camden Yards. (13m45s)
• The current owner admits to not having extensive knowledge of baseball, having only played Little League, and is learning the game. (14m13s)
• The team's general manager, Mike Elias, is highly knowledgeable in sabermetrics and was named the American League General Manager of the Year. The owner relies on Elias's expertise for player decisions. (14m40s)
• The owner prefers to be informed and offers judgment when asked but does not interfere with the general manager's decisions due to a lack of detailed baseball knowledge. (15m22s)
• The owner contributes to the team by leveraging business connections for sponsorships and advertising rather than making player-related decisions. (15m44s)
• Owning a sports team brings a different level of public engagement and respect compared to other business ventures, with people often offering advice and seeking tickets or access to the owner's box. (16m12s)
• David Rubenstein expresses enjoyment in owning the Baltimore Orioles, noting that it is pleasurable because the team is performing well. He appreciates the respect and community impact that comes with sports ownership. (16m53s)
• Rubenstein mentions that he received advice from a senior owner who jokingly suggested he should have paid a higher price for the franchise, indicating the perceived high value of baseball franchises. (17m22s)
• Within his ownership group, Rubenstein highlights Mike Arougheti as a key figure with extensive knowledge of baseball, having played fantasy baseball for 27 years and baseball in high school. Rubenstein admits to learning from Arougheti due to his own limited background in baseball. (17m51s)
• Rubenstein shares that he followed baseball until he went to college in 1966, after which his interest waned when his mother discarded his baseball cards and books, likening his absence from the sport to a 50-year Rip Van Winkle experience. (18m22s)

Learning Baseball. (18m33s)

• There are new baseball statistics that were not known in 1966, such as WAR (wins above replacement), quality starts, and OPS, which are now important for analyzing player performance. (18m35s)
• The availability of extensive data has made statistics crucial in determining a player's value and performance in baseball. (18m58s)
• In baseball, free agency can lead to very large contracts, which can be risky as they may not always work out, especially if a player gets injured soon after signing. (19m4s)

Community Asset. (19m33s)

• The Baltimore Orioles are considered a community asset, contributing to the cultural fabric of Baltimore, similar to how philanthropic investments can benefit a country or city. (19m34s)
• Purchasing historical documents like the Declaration of Independence and the Magna Carta, which are made publicly accessible, is seen as a contribution to the nation, paralleling the idea of owning a sports team to benefit a city. (20m0s)
• The Orioles have been an integral part of Baltimore's culture, especially after the Colts left for Indianapolis, and are seen as a source of pride and happiness for the city. (20m48s)
• Sports teams foster a sense of community and pride among residents, as people feel connected to something larger than themselves, similar to national pride during international events like the Olympics. (21m36s)
• Fans often express a personal connection to their sports teams, using terms like "we" when discussing wins or losses, which affects their mood and sense of identity. (22m26s)
• The emotional impact of a team's performance is significant, with wins bringing joy and losses causing disappointment, affecting interactions with fans, such as requests for selfies or autographs. (22m38s)

Career Journey. (23m41s)

• The career journey began as a lawyer, followed by work in the White House and at law firms, before founding Carlyle, where significant success was achieved as a prominent fundraiser in the industry and on Wall Street. (23m42s)
• Hosting a TV show with Bloomberg increased public recognition, as people worldwide began to acknowledge the show, marking a new level of notoriety. (24m1s)
• Ownership of a sports team, specifically the Baltimore Orioles, has led to even greater recognition, with more people approaching to discuss the team rather than private equity deals. (24m45s)
• Owning a sports team is seen as a temporary custodianship, representing the city for a finite period, as ownership typically changes hands over time. (25m15s)
• The business of sports has evolved significantly, with more frequent sales of teams and substantial profits, a trend that extends beyond the United States to international markets. (25m35s)
• The sports industry has diversified, with women’s sports also becoming financially successful, reflecting broader changes in the sports ownership landscape. (26m14s)

Capital Raising. (26m19s)

• David Rubenstein is recognized for his exceptional ability to raise capital globally, including in regions like Saudi Arabia, London, and Paris, where he is well-known. (26m33s)
• He developed a strategy to build a private equity firm, Carlyle, in Washington, D.C., by focusing on companies heavily influenced by the federal government, differentiating from firms in New York. (27m2s)
• Rubenstein expanded Carlyle beyond traditional buyouts to include various funds such as venture capital, growth capital, and real estate, similar to the mutual fund model. (27m30s)
• He globalized Carlyle by establishing partnerships in Europe, Asia, Latin America, the Middle East, and Africa, which was a novel approach at the time. (27m44s)
• Rubenstein emphasized the importance of being polite, knowledgeable, persistent, and having a good track record in successful fundraising. (28m12s)
• He spent over 20 years traveling worldwide to raise money for Carlyle, contributing to building a strong franchise. (28m21s)
• Rubenstein identified three types of fundraising: business fundraising, which involves promising returns; philanthropic fundraising, which appeals to charitable giving; and another unspecified type. (28m53s)
• David Rubenstein discusses three types of fundraising: philanthropic, political, and investment, noting that each requires different skills and that few people excel in all three. He personally has not been involved in political fundraising. (29m21s)
• Fundraising is often undervalued in business schools and the private equity world, where deal-making is typically seen as more prestigious. Rubenstein became a full-time fundraiser because he lacked the background to be an investor, which was a novel approach at the time. (29m57s)
• Rubenstein emphasizes the importance of listening to potential investors during fundraising meetings. He suggests understanding their interests and concerns before presenting his own ideas, which helps tailor the pitch to their needs. (31m5s)
• Effective follow-up is crucial in fundraising. Rubenstein notes that the goodwill from a successful meeting lasts about two and a half weeks, so timely follow-up is essential to maintain interest and secure commitments. (31m33s)
• David Rubenstein discusses the challenges of raising funds, noting that even prominent figures like Steve Schwarzman and Pete Peterson only succeeded 3% of the time when raising money for Blackstone's first fund. (32m1s)
• Rubenstein shares that in the early years of raising money for Carlyle, most of the funds came from people he hadn't known before, as those he knew were less likely to invest. (32m40s)
• He recounts the story of recruiting Bill Conway, who became a long-term partner at Carlyle. Rubenstein initially approached a woman who was the treasurer of Gannett, but she declined his offer. However, she suggested he contact Bill Conway, leading to a successful partnership. (33m39s)

Philanthropy. (33m57s)

• David Rubenstein is highly active in philanthropy, particularly through involvement on numerous boards, and is considered more engaged and widespread in his efforts than many others. (34m9s)
• He has four standards for his philanthropic activities: initiating projects that wouldn't start otherwise, completing projects that wouldn't finish otherwise, being intellectually involved beyond just financial contributions, and witnessing progress within his lifetime. (34m21s)
• Rubenstein often joins the boards of organizations he supports financially and frequently ends up as the chairman, having chaired many nonprofit organizations, including major cultural institutions in Washington, D.C., such as the Smithsonian, the Kennedy Center, the Library of Congress Board, and the National Gallery of Art. (34m42s)
• He also chaired the boards of his alma maters, Duke University and the University of Chicago, reflecting his motivation and enjoyment in contributing to these institutions. (35m3s)

David Rubinstein Show. (35m10s)

• David Rubenstein transitioned from being a prominent figure in private equity to becoming an interviewer by chance, initially to make events at Carlyle more engaging by interviewing notable speakers instead of having them give speeches. (35m39s)
• He began interviewing prominent figures at Carlyle events, which led to his role as President of the Economic Club of Washington, where he continued this format to make business talks more interesting. (36m22s)
• Bloomberg noticed his interviewing style and proposed creating a show, which resulted in "The David Rubenstein Show: Peer-to-Peer Conversations" and another finance-oriented show, "Wealth with David Rubenstein." (36m35s)
• Rubenstein enjoys the intellectual challenge of interviewing, which involves thorough preparation and reading, especially when interviewing authors, as a way to keep his mind active and sharp. (37m0s)

Intellectual challenge of Baseball. (37m34s)

• The business of baseball is considered a small-scale operation compared to the large companies typically acquired by big buyout firms, with no team generating revenues in the billions of dollars. (37m36s)
• Baseball teams, despite their smaller revenue size, receive significant attention and scrutiny from sports writers and the public, placing team owners under a microscope. (38m32s)
• Owners must be cautious about public statements regarding their teams, as fans are highly attentive and passionate about their local teams. (38m53s)
• The experience of owning a baseball team can be enjoyable, especially when the team is successful, as winning is generally preferred over losing. (39m0s)
• The Baltimore Orioles, the team recently acquired by the speaker and their partners, were already in a strong position and on the rise at the time of purchase. (39m7s)

How Business of baseball will Evolve. (39m14s)

• Baseball, once considered the national pastime, has seen a decline in TV dollars and fan support due to the rise of the NFL and NBA. (39m36s)
• The sport has a strong base of ingrained supporters but lacks diversity, with only about 7-8% of Major League Baseball players and 4% of the fan base being African American. (39m55s)
• Efforts to increase African American participation in baseball include initiatives in youth leagues and urban areas, while Latin America remains a stronghold for baseball enthusiasm. (40m12s)
• The Baltimore Orioles, like other teams, have a training facility in the Dominican Republic to engage more players. (40m27s)
• There is a focus on attracting a younger fan base and encouraging families to introduce their children to baseball, aiming to cultivate a lifelong appreciation for the sport. (40m36s)
• Baseball faces challenges in becoming as international as basketball or the NFL, which are expanding their global presence. (41m1s)

Expansion of Baseball. (41m17s)

• David Rubenstein has a history of successfully executing big ideas by hiring great teams, a skill he is recognized for over the last 40 years. (41m17s)
• Rob Manfred is praised for implementing the time clock in baseball, which is considered a significant improvement for the game. (41m27s)
• As the newest owner in Major League Baseball, David Rubenstein is cautious about suggesting changes but acknowledges that baseball aims to appeal to a younger audience and expand its television viewership. (41m40s)
• There is an interest in expanding baseball's reach overseas, although this is expected to take time. (42m4s)
• Increasing accessibility to baseball games through streaming and other technologies is seen as a priority to bring the game into more homes. (42m11s)

Best Kind of Talent. (42m21s)

• When hiring for companies, it is important to look for individuals who are reasonably intelligent, as geniuses can be difficult to manage. (42m33s)
• Candidates should be hardworking, cooperative, and able to share credit with others. (42m38s)
• It is essential for hires to get along with others and give orders without offending people. (42m45s)
• Ethical behavior is crucial, and it is important to avoid individuals who cut ethical corners. (42m52s)
• Ideal candidates are those whom others want to be around, contributing to a positive work environment. (42m56s)
• Over the years, some hiring decisions have led to significant outcomes, such as hiring Jay Powell, who became the chairman of the Federal Reserve Board, and Glenn Youngkin, who became the Governor of Virginia. (43m4s)
• A good working relationship is vital, where both parties can communicate effectively and enjoy working together. (43m30s)

Best Sports Deal. (43m44s)

• The acquisition of the LA Dodgers by individuals associated with Guggenheim is considered one of the greatest financial deals in sports. The purchase, which was structured in a way that required minimal personal financial input, was approximately $2.1 billion. (43m49s)
• Another notable sports deal was the purchase of the New York Yankees by George Steinbrenner in 1972. CBS sold the team for about $10 million, and Steinbrenner contributed $250,000 of his own money, syndicating the rest. The franchise is now valued between $5 to $7 billion. (44m14s)

Rapid Fire. (44m43s)

• The deal-making style is described as modest. (44m52s)
• Instincts are considered more important than data when making big decisions. (44m56s)
• The hardest part of deal-making is the close. (45m1s)
• The dream deal-making partners are the people who bought the Minnesota Timberwolves. (45m5s)
• The best deal ever made was starting Carlyle and hiring the right people at the outset. (45m18s)
• The best piece of advice on deal-making is to ensure the other side also achieves a victory, avoiding one-sided deals. (45m27s)
• The worst advice received was to trust only one's own instincts. (45m36s)
• The hype song before a big meeting is "My Way" by Frank Sinatra. (45m43s)
• If only one sport could be watched for life, it would be Major League Baseball. (45m50s)
• The team most desired to win a championship is the Baltimore Orioles, followed by the Duke Blue Devils. (45m56s)
• A surprising fun fact is being a great athlete, particularly in tennis, but choosing to hide this talent. (46m3s)

Outro. (46m16s)

• David Rubenstein expresses his pleasure in participating and congratulates the host on their success. (46m17s)
• He appreciates being on the same network as the host. (46m22s)
• The conversation concludes with mutual thanks between David Rubenstein and the host. (46m24s)