The American Dream Is Built, Not Promised | David Rubenstein

You know, you go to the grocery store, and what used to cost $200 now costs $250, and then in six months you're worried it's gonna cost $300. Mm-hmm. And we're, like, operating the same exact life on thinner and thinner margins every day. If you just look at the wealthiest people in the country, they're doing fine. But the people in the middle class and the lower income classes, they are not in good shape.

The wealth that people have made in recent years by buying and selling sports franchises has made people think that sports is now an investment class. It's a way you can make a fair amount of money. If you don't have a thick skin, you shouldn't own a sports team. Where I wanted to start, um, and, and we can take this any direction that you wanna go, but I guess what enamored me to... I was watching Instagram, and then I reached out to, to your rep at Simon & Schuster- Okay ... and, um, you know, just said, "Hey, I'd, I'd love to have David on the show."

I'm very interested as to this amnesia that... So I'm 45 years old. I feel like a- at my, my generation, or the people within maybe a standard deviation of my age, have some feel for the history of this country. But, uh- Right ... I was just in Italy, and I had a tour guide in, um, the Vatican, and she kept, she kept bringing up, "Do you know?"

And then she'd insert someone who was, like, famous beyond belief, Julius Caesar, Geo- You know what I mean? She was just bringing up these names, and then she'd say, "Well, have you heard of them?" And I, if I... After about 10 minutes, I stopped her and I said, "You know, I, I mean this with no disrespect. You don't have to keep prefacing it, do you know this person?"

Right. Like, I'm, I know, you know, at least- Okay ... a decent amount about history. I said, "Are there really people that don't know some of these famous individuals?" And she's like, "Oh, yeah, my, my g- my tour that I had yesterday." And I said, "Please tell me they weren't from America."

And she was like, "Yeah, they were, they were Americans." And I was kinda taken, and she said Americans tend to have the least, her perception, doesn't, doesn't mean it's true- Right ... the least understanding or at least caring about, about history in some regard, is what she had to say. And I, I guess my question for you is just why do you believe, do you believe, and if so, why do you believe there seemingly is a amnesia of the history of this country- Okay ... that it's very tough to deal with? Let me try to explain. When I was an undergraduate about 50 years ago, about 9% of undergraduates in the United States were history majors.

That percentage is now down to about 1%, and that's because today people are afraid if you're not a STEM major in college, you won't get a job at Google or Facebook or Goldman Sachs. So parents have obsessed about getting their kids to be STEM majors. The result is people know less about history. Um, it turns out that Americans, um, know less about our history than people overseas. Uh, for example, if you wanna be a citizen in this country, and you're not born here, and you become a, a naturalized citizen, you have to take a, in effect, a history test, a citizenship test, and 91% of the people that take it pass.

The same test was given to people born in this country not long ago, and in 49 out of 50 states, a majority failed the history test. So the result is we, we don't have people that know history very much. And why is that a problem? Because the theory of history is that those people that don't remember the past are condemned to relive it in the future. The theory behind studying history is you figure out what was done wrong and don't do it again in the future.

But we don't have that, uh, love of history so much in our country. In Europe, for example, which is much older than the United States, people, uh, uh, teach history much more. It's considered a part of their DNA, a, part of their fabric. In this country, even though we're celebrating the semiquincentennial, many people might know Thomas Jefferson or the Declaration of Independence. Beyond that, they don't really know very much about our history, sadly.

It's very difficult to have conversations about what's happening today if we don't have an understanding of the past. And do you see that? Is it... Do you, do you think that this is part of why we have... I mean, obviously discourse has always been polarized, but seemingly today it feels exceptionally polarized.

Um, do you think this is, this plays a big role in why we can't have, like, logical, honest conversations with each other? Well, there are many reasons for it. I think, uh, one of the principal phenomenon right now is the money in, that is involved in politics. Uh, it... You are allowed to raise unlimited amount of money.

And in politics, you raise money by appealing to the far left or the far right. And nobody appe- raises money by saying, "I'm gonna be right down the middle. I'm gonna go to Washington and, and do what's right for the country, no matter it's left or right." No, you either raise money on the left or the, or on the right, and generally the far left or far right. And so money has taken over our political situation.

Therefore, something called bipartisanship is frowned upon today. When I was young and I worked on Capitol Hill, if you were a great legislator, you were thought to be bipartisan. Today, if somebody calls you bipartisan, it's a curse word, because Democrats and Republicans don't want bipartisan people, they want people that will be part of their, their own church pew. So it's a sad situation. It's not gonna change overnight.

Uh, the semiquincentennial was designed, among other things, to r- help Americans celebrate their history and remember it. But, you know, as I make talks around the country about the Declaration of Independence or American Revolution, very few people really seem to be that interested in it or really beyond a, a surface, uh, knowledge. They don't really don't know much about it. So it's-- I, I try to do what I can. I, I put copies of the Declaration of Independence all over the place.

I've had re-reproductions of my rare copies of the declaration given to every governor to put in the state house, every Major League Baseball stadium, every NBA stadium, uh, and many other establishes around the country, and every American embassy, so the people that w- go into these stadiums or embassies or, or, or state houses can see and maybe reflect upon the Declaration of Independence. But I'm just a drop in the bucket, and we have a long way to go before people really understand history as much as I think they should. I actually have the declaration, a copy of the Declaration of Independence. Um, by copy I mean obviously it's a copy, I don't have one of the originals. Um, but just a framed version- Right ... of the Declaration of Independence that sits right next to my door.

So every day when my kids have to leave or come in the house, it literally sits right there and then I have... Like, I have a little corner and then Teddy Roosevelt's, the portion of his speech- Right ... that really is known as the man in the arena kinda sits kitty-corner there as a reminder, um, of kinda how lucky we are to live and have been born in this country, and then how much we have to keep working for it. And- Yeah. I agree. Now look, think about this.

This country, when we had the Declaration of Independence, had three million people in the country. Two and a half million white people, five hundred thousand slaves. When we won the Revolutionary War, in factly it ended in 1783, nobody thought we would necessarily survive to be that big a country because we're only three million people, uh, and without a lot of wealth. However, over the next 250 years became the wealthiest, most successful, most powerful country on the face of the earth. How did we do that?

We did it by one thing, among other things, we had immigration. Large numbers of people who were very talented left their own country. So we have today fifty-five million immigrants in this country. Some of them are the most talented business or cultural leaders. We're now squeezing that down a bit, so I don't think we're gonna have as much immigration in the future, and that's gonna be a, a problem for our country because we're not reproducing enough, and therefore our population's going down, not up.

And historically, when populations go down in a country, their GDP goes down, and the country's civilization is not as vibrant as it once was. The reproduction thing is, is very interesting to me 'cause it s- seems derivative of upstream problems. And when I talk to some of the, the younger, uh, professionals in the businesses that I work for, um, even, even as old as, like, 35, it's like this, this... They don't always know how to articulate it, but it's this idea of feeling stuck. They're still in an apartment.

They're still- Right ... you know, they've been maybe fiancé or, or engaged for, for years. You know what I mean? I mean- Well, you're right. Well, look- You know, they're-- It seems like we're extending these things, and they're just stuck And, and for any population anywhere in the world to stay the same in terms of its size, just the same, women of childbearing age need to have two point one children on average. Two point one on average.

The United States number now is one point six. So our women of childbearing age are reproducing one point six children on average. So that would mean that our population's going down. Uh, we don't-- we're not reproducing ourselves. Um, and, uh, unless we have immigration, we won't grow the population.

That, that's a big challenge. Another challenge is that we have an older and older population. And as you have an older and older population, the younger people have to work to support the older population through con- contribution to Social Security and other kinds of s- uh, social and safety net programs. So it's a problem, but it's not only here. In some countries in the world, the reproduction rate is not one point six, it's point six.

In Japan and Korea, for example- Yeah ... women are not even reproducing at the level of one point, on average, one, one child per, per woman of, of, of childbearing age. So we, we have a problem, but it's not as bad as other, uh, as other countries. What I really want to get to is, like, so living in Albany, I'm staring down the river at, um, New York City and, you know, just this-- it's shocking me. Shocking's the wrong word because logically I understand how these cycles work, but it's making me very nervous, the communist rhetoric and the way that we are attacking it from multiple angles, Democratic socialists, socialists, you know, d- all these kinds of things. You know, now you-- I, I've heard people starting to use the word co-op as a way of seemingly shielding these ideas.

And as someone who's forty-five, has a twelve and ten-year-old kid who, who's trying to set them up and, and do whatever he can through this podcast, through talking to people, through being a capitalist myself and trying to engage in the society, like how worried should I be about the-- what they're gonna launch into, um, in ten years? Every generation throughout history is always worried that the next generation won't be as good as the current generation. Um, that's one phenomenon. Uh, another phenomenon is that our current generation, your age, my age, think that maybe the world is going further south away from the United States. The values the United States has are not gonna be the values that our, our children have, uh, ten or twenty or thirty years from now.

So every parent should always worry. Um, you know, the best thing to do is to try to educate your parents, uh, your, your children, give them the best values you can, but there's sometimes there's social factors that are beyond what you can do. And in the case of the Democratic socialists, it's a now a growing part of the Democratic Party, which if it ke- continues to grow, I think will keep the Democratic-- Democrats from getting elected because I don't think it's, uh, strong enough to overcome the Republicans i-in many ways if the Republicans are united. Um, but you know, we've had Democratic socialist movements before. They've often frittered out.

But this time, there seemed to be some real electoral success. You saw what happened in New York City. Uh, you see what's happened in the Michigan Democratic primary for Senate. So I, I, I, I do think it's something to think seriously about. But in the end, um, the most important thing you can do is give the children your own values and, um, you know, and hopefully, uh, you know, they'll, they'll stick.

You know, raising children is among the most complicated things i- in human existence. Uh, you know, you, you spend a lot of time with your children, and then you never know what they're gonna turn out to be. Some, you know, parents who have four or five children sometimes, some turns out to be a lib- liberal, some turn out to be conservatives, some turn out to be, uh, actors, some turn out to be businesspeople. You just never know what you're gonna get, and the best thing you can do is just give them as much time and attention as you can when they're younger because once they get to the teenage years, they're not gonna listen very much. I use my mom as a bellwether for, like, what's starting to hit the zeitgeist.

You know, what's starting to hit- Right ... people who kinda-- I classify her, and I mean this with no disrespect, she kinda just lives her life, and it's not like she's seeking out this information. She's not on X, you know, trying to figure out what the latest political thing that's happening or, or economic thing. And she actually brought up, I mean, she, she knew about Mondragon or whatever, but she, she brought up recently that... She's like, "T- tell me about what's going on with this Democratic socialist thing." And my question is more, i- is this-- Do you think if, if, if you're trying to run a small business, you're trying to live your life, you're trying to, to, to kind of manifest the, uh, American dream and whatever that is today, um, how concerned should you be?

Like, is this something that you should be thinking about? Is it something you need to be protecting yourself for? Or i- is, for most people, is this seemingly gonna flare up and flare away over a period of time and it's not something we need to waste brain cycles on? Well, the country's very bitterly divided. It's not as bitterly divided as it was during the Civil War, but clearly there's real schisms in the country, and sometimes politicians have helped foment that.

But at, at the moment, there's clearly an interest by some people in the Democratic Party of supporting the Democratic socialists because they're not happy with what's going on in Washington or not happy what's going on in their state, uh, governments, and it's clearly excites younger people. Younger people traditionally are not conservative. Younger people wanna try new things, wanna experiment, and therefore you find the Democratic socialists appealing very often to younger people, younger voters, because they're the ones w- more willing to experiment, more willing to try different things. I don't think in, in this country the communist and socialist movements have been tried over many, many decades and never really gotten anywhere, so I don't think they're gonna take over our country. But I do think that, uh, more and more people will pay attention to them if they win these elections as they seem to be doing.

I get questions all the time just from doing this show, and I, and I don't know how to answer them. I'm a marketing guy. I'm a podcast guy. I like to ask questions and I'm curious. Um, there are things I know about, but I certainly don't know about, like, here in, in the greater Albany area where I live, um, not a lot of houses for sale.

The houses that are seemingly are well overpriced. They're struggling from the standpoint of every day it seems like, you know, you go to the grocery store and what used to cost $200 now costs $250, and then in six months you're worried it's gonna cost $300. Yeah. And we're, like, operating the same exact life on thinner and thinner margins every day. Yeah.

Obviously, uh, look, in the end, uh, the economy in the United States is growing very well for people who are in the upper income categories. Uh, if you're a, uh, an investor in Anthropic or, or SpaceX, you're probably a pretty happy person. But the average person, uh, is not doing as well, um, and therefore, you know, you see statistics that show that the, the cost of living is not, uh, i- is not keeping up. I mean, the cost of living is going up higher than the average wage is going up, and as a result, people feel squeezed. Now, if you just look at the wealthiest people in the country, they're doing fine.

But your, the people in the middle class and the, and the lower income classes, they are not in good shape. We still have a very large homeless, very large pov- poverty, um, uh, section in our country, and it's not going away. If anything, it's increasing. So this would, that would be called, uh, K-shaped economy, right? Just for the audience- Yeah, correct ... if they've heard that term.

Okay. And, you know, I was, I was listening to a podcast the other day, uh, the All-In podcast. I don't know if you're familiar with that podcast. Um, a few different investors, um, and they were talking about... Here's four guys who are, I think one of which is worth eight figures, the other three are worth nine figures, and they're talking about what we can do.

And I'm listening to them talk as a seemingly regular, everyday American facing problems that someone who isn't worth eight or nine figures has, and it was shocking to me how disconnected their argument was for why people are frustrated and scared and nervous and, and don't know how to reposition their lives to be successful like they saw their parents were and, you know, kind of- Yeah ... what, what's promised to you when you're growing up in the '80s, '90s, and early 2000s. So how does someone not feel frustrated? If they're listening to this and they own a small business- Right ... a lot of small business owners listen to this show, and they're grinding every day. They're making enough money to put food on the table, have a house. Their kids aren't, you know, don't, have clothes on their back.

But, you know, you, you hear the people who seemingly are dictating the conversation or making the decisions, and it just seems like there's nobody advocating for what they're actually experiencing. How do they work through that? How do you posit- start to position your life to get rid of some of that, or at least feel like you can get back on that road- Right ... and start climbing the mountain again? Well, it's difficult. Um, obviously, the Democratic socialists are appealing to those people who feel frustrated, feel that the people in Washington are not listening to them, and feel that in the end, uh, the income distribution in this country is not fair.

Now, capitalism is said to be the greatest economic system ever developed, and it has great wonders and, and virtues, but it does sometimes have income inequality. And right now, the income inequality in our United States is growing quite high. And we also have a very high A s-lack of social mobility. It's, you know, the lack of social mobility means people in the bottom think they can get to the top, and they actually, um, do get to the top. Right now, there's a d-large perception in people at the bottom of the socioeconomic structure that they can't get to the top, and, uh, therefore, therefore something called the American Dream is dissipating.

More people believe in the American Dream who come to this country from, uh, uh, overseas because they believe in the American Dream than people born in this country believe in the American Dream. Increasingly, people in lower socioeconomic classes don't believe in the American Dream anymore, that if you work hard, you can get to the top. That's a sad situation. Do you spend any time on X? Do you ever go on X and- I am not a big social media person, so, um- Which is perfectly fine ...

I, I'm sure, I, I'm sure it's great, but, uh, nope, my- ... I really, uh, I, I don't really do it, but, uh, I assume you do. Which is probably better for your mental health and your daily work output. Right. Um, but, uh- Saves time ... that's it.

It does. My... If you bear with 30 seconds of context, I, I wanted to support what you said about people who come to this country believing in the American Dream and capitalism more than people who are born here, and there's an account of a Japanese man who brought his family here, and he's kinda just telling stories as he learns about the country. And I was shocked, like, reading a lot of the other... You know, you see a lot of people who wanna tear the country down and, and, and talk about b- highlight every negative thing.

Not like there's not negative things everywhere in the world, and this guy, um, he just so... He articulates what I believe the American Dream is in a way that I, I don't know that I've heard Americans talk about. Yeah. And I was like, this i- it was so refreshing to me to hear him talk about- Right ... how, like, the unspoken economy of, of doing favors for your neighbors, how, um, you know, th-th-the waitress at the, uh, you know, comes and the, the tip culture and how it, it, uh, makes this, you know, dynamic that you just don't get in Japan, and it, it was, like, eye-opening to me, and it made me kind of so happy that people who come in see it, and it seems like when the World Cup was here, there was a lot of that as well, people who came to America and saw what we have here. Right, right.

Uh, so- How do we start to change the conversation for Americans? The phrase American Dream was really developed or invented by a writer in the 1930s, and it was designed to illustrate the kind of Horatio Alger stories that you come from nothing and you work your way to the top. Sadly, people don't believe in it so much anymore, and therefore you often see more immigrants coming here believing in it than people born here. Uh, I think in the end, um, you know, the country's pretty stable and not likely to have revolutionary kind of, uh, actions, but I do think that we are, um, probably losing a lot of the American entrepreneurial spirit and a lot of the, uh, uh, feeling that we can conquer any problem, um, and we're also increasingly having a c- a country of haves and have-nots. The people at the bottom have less than they used to have, and the people at the top have more than they used to have, and that's not a prescription for, for success in the end of our country.

Well, I'm-- I, I wanna switch the conversation over to your new book, Inside the Owner's Box. Um, my understanding of owning sports franchises for most of my life, uh, has been that they were, like, a vanity purchase for someone who had made it in their life, but it seems very much like in the last five or 10 years, that has really-- that's changed. The value of sports franchises has gone up. The, the, uh, level of investment in sports franchises has gone up. And w-w-why, why own a sports franchise in the first place of, of all businesses?

Right. I mean, I know it's not the only business you've had, but, like, w-why? And then- Well, okay ... what makes them unique? Well, historically, people who bought sports franchises were interested in the sport, and they liked the sport. So in the 1920s or '30s or '40s, people might buy these teams, but they weren't really wealthy people in the traditional sense.

The wealthiest people in the United States were not buying sports teams because they were not at all that profitable. It was aggravating. People criticize you, all of those kind of things. As ill-illustrative of this, in 1972 with the New York Yankees, the greatest baseball franchise of them all perhaps, when they were sold, nobody really wanted to buy them. Uh, a young businessman in Cleveland na- or in, yeah, in Cleveland, um, named, um, George Steinbrenner bought it, but he only had $250,000 of the $8.8 billion purchase price, so he syndicated it.

But the wealthiest people in the United States in 1972 didn't say, "I wanna buy a baseball team. I wanna buy the Yankees." Today, that's changed because the wealth that people have made in recent years by buying and selling sports franchises has made people think that it, it, it, that sports is now an investment class. It's not just a vanity thing, or it's not a thing for people that just like sports or like their hometown. It's a way you can make a fair amount of money, and as we've seen some of the prices recently of the Los Angeles Lakers, the Seattle Super Hawks, uh, Seahawks, the, um, Boston Celtics, prices are staggering, uh, compared to what people used to think.

You used to be able to buy... And, uh, and when the NFL started, the franchiser probably cost a couple hundred thousand dollars. Now they cost 10, $10 billion. Uh, when I-- When the Baltimore Orioles, a team I bought, uh, when it came to Baltimore in 1954, the purchase price was 2.2 million. I paid 1.7 billion.

So the prices have gone up a fair bit. People are buying them because they do like sports, but they also think it's an investment category now, and they'll make money on it, so I, I suspect they're common, you know, occurrences. In my own case, I bought the Baltimore Orioles 'cause I'm from Baltimore, and I saw it as a philanthropic gesture to help revive Baltimore. Baltimore is a city that has a lot of challenges, and I've tried to, to think that if I could revive the Orioles and make them more successful, the downtown area of Baltimore might get revived, revitalized, and it would be good for Baltimore. That, that was my main, main motivation.Are you seeing that start to manifest?

Takes a long time. Um, so first of all, the team hasn't done as well on the field as I would have liked, and that therefore makes people, uh, less interested in going to games than, than they might otherwise be. Secondly, re- redeveloping downtown Baltimore is not easy. When Camden Yards was built in the early, uh, 1980s, uh, people thought then, or 1990, 19, uh, 90s, uh, people thought then that it would, uh, revitalize the downtown area, but it really hasn't. And, um, so we've gotta put more effort into it, and with the cooperation of the governor and the, and the mayor, we're working now, the Orioles are, to kinda help revitalize downtown Baltimore physically, but it takes time.

Yeah. I was there about a month ago with my son. He played in a, a baseball tournament at, um, uh, Ripken Park. Um- Yes ... yep. Right.

And, uh, as part of the experience, we brought the team down to the game, and oh, we had a great time. To me, and, and I actually used to live in DC for, uh- Yeah ... yeah, for about five years and would go to games in Baltimore all the time 'cause they still played, the Nationals still played in RFK, which was- Right ... not a great place to watch a game , so I used to love going up to- Right ... Camden Yards to watch games. But it has, it has been interesting how this... I mean, I think it's one of the beaut- most beautiful parks in all of baseball, and it has become, in my mind, like a, like a Fenway or, or a Wrigley in terms of- Right ... you know, just- Right ... having this unique structure and feel and experience.

When you think about, uh, a sports franchise as a business, it's different than an investment firm or a, you know, you're pumping out, you know, widgets out of a manufacturing- Right ... plant or something. What are some of the core drivers of how you actually grow a business like that? Like, what are the metrics that you have to focus on in a sports franchise that are different from some of the other more, maybe- Right ... traditional businesses that people are used to? Well, I've been in the private equity business for almost 40 years, and there, when you buy companies, you're looking to increase earnings, and you wanna typically increase them fairly regularly. And when your companies go public, you wanna have increased earnings every quarter, um, because you're measured on whether you're increasing every quarter.

In the sports world, you don't tend to re- reveal your numbers every year, or if at all, and you don't have to reveal quarterly numbers. And so the focus on increasing quarterly earnings is not really there. What you're trying to do in the business world, or in the baseball world, is basically build a team on the field that will draw people into the stadiums. If people come to the stadiums, you're gonna have higher TV ratings. Ultimately, you're gonna get, uh, uh, more, sell more food.

You'll sell more merchandise, more parking. Uh, ticket prices will probably, uh, you know, go up a bit as well if the team is very popular and so forth. So you're looking to put a better team on the field and, you know, it's not easy to do so. You've got 26 players on a team at any given time, as the Orioles have seen. You can have a lot of them injured.

So only one team is gonna win the World Series every year, but there are 20, th- there, there are 29 others who are trying desperately to do so. It's not easy, uh, and it's much more competitive than, than, than in, uh, the private equity world. In the private equity world, you might buy a company, but you might have two or three or four competitors. In, in baseball, you have 29 other competitors, or, and the same is true in NFL or NBA. A lot of competitors who are trying to, to beat you every day, whereas you don't have, have that as much in the business world.

So how do you develop a better team? Like, is it, do you feel like you need to get hands in? Do you need to have, like, say, or is it trust the general manager, trust the, trust the, the manager on the field- Yeah ... and, and let them kinda run the op? Well, there are different approaches. Uh, when George Steinbrenner owned the, uh, Yankees, he would sign players that he didn't even tell his general manager about, or he would negotiate contracts that the, the general manager might not have known.

Today, that doesn't usually happen. Usually, you have owners who are pretty, um, skilled business people, and they generally, generally tend to delegate the baseball, um, operations to two people. One does the business side. One does the baseball side. The business side does, uh, sells, uh, corporate suites, uh, season tickets, does advertising, promotions, those kind of things, and ultimately try to get as much revenue in as possible.

The baseball side really figures out who to, who to draft, who to trade for, um, who the manager should be and, and so forth. So there are different sides, and most of the owners, and again, there, there are 30 Major League Baseball teams, most of them are not, uh, going into the clubhouse and giving people lectures on how to hit better. Uh, they generally don't do that. They leave that to the managers. Uh, in my own case, um, you know, I go into the clubhouse from time to time to, to s- cheer the, the team when they've won a game or something.

But I, I think that generally the owners stay out of the clubhouses 'cause that's the players' kinda private sanctuary. And most of the owners are not all that personally close to the players because they realize they're negotiating with these guys for contracts. Very often it can produce a problem if you're too close to them. And secondly, you might trade them. So, um, I think owners know some of their players pretty well, but generally, uh, most of the owners are not spending a lot of time socializing with the players.

Let's say a general manager wants to make a trade. Do they-- Is there a l- um, a le- a level at which they can make that trade a, a certain type of player where you say, "Hey, maybe it's the 26th guy on the roster, it's a left-handed, you know, middle reliever," and "Hey, we wanna move this guy, and we need a piece here," or is, is everything pitched to, to you and the, and like- Yes ... maybe a board? Like, how does that work? Right. Okay.

So when I bought the team, I brought in a partner, um, named Mike Arrighetti, who's a businessperson like me, and he has a large private equity firm. He knows baseball extremely well. He and I are in regular communication with our, um, president of business operation, or ba- baseball operations, Mike Elias, who we inherited, and, uh, we think he's very good. He was rated, uh, voted the, um, Major League, uh, Executive of the Year a number of years ago. He, uh Has a call with us once a week, and we have emails almost every day about players' injuries or possible trades or draft picks.

So he would not trade a player or, uh, draft a major player without telling us what he was gonna do. Now, if we didn't support what he wanted to do, generally he might say, "Well, if you're never gonna support me, maybe I'll go do something else." So generally, we, we support what he wants to do. He does explain it to us. We ask questions.

But that's true of most, you know, most baseball organizations. The general manager or the head of business, uh, baseball operations is really making the day-to-day decisions on players. Very few owners have that kind of expertise. Is it almost a good thing that you kinda separate, uh, church and state in that regard? Like, if you had your hands in all his decisions, does it...

It would probably muddy the waters. I mean, you saw that with Steinbrenner and, you know- Right ... and the mess. I mean, as much as the Yankees had success occasionally, I mean, for, for in large part, most of his tenure was a mess. I would say he had some successes, he had some failures, but, uh, in the end he did win some World Series. Yeah.

But he had a lot of controversies and fired managers and fired players and, and did all the things. But, you know, in the end, um, I think he, uh, probably was a plus for the sport. Uh, today, the owners are probably less colorful, um, and they tend to be more restrained in their public statements, and they tend to be unwilling to, you know, criticize their people in public. I don't think you see that anymore. It had to be a wild feeling to be on that team.

I mean, you think, you know, you said you go down, so you know the guys at least a little bit, but you, you, you head down, you, you're get out of the shower, you sit down, and now you gotta answer a question from a reporter about your- the owner in the owner's box, you know- Right ... tearing you apart or belittling you, and, you know, then you're supposed to go out and hit a baseball the next day. It does not seem like a good relationship. It, it has its challenges. Today, the owners, um, I think are generally of a, of the mindset that the players really are, are best judged by the, the experts, and therefore very few, uh, owners are really, uh, doing actively, uh, involved in, in the trades. They, they will certainly be informed, and they'll no doubt give their consent, and they will be informed about the major players being drafted.

But they rarely are gonna second-guess the general manager because the general manager just lives and breathes baseball and knows it much better than the owners do. Can you maybe explain for the audience the relationship of, uh, your minor league teams and how, how involved do you get in the cultivation of the players? Because baseball in particular is unique in its farm system and, and- Right ... how many players are involved there. So, I'll put it this way. Um, in c- in college basketball and college football, if you're drafted to play in the NFL or the NBA, uh, you're almost certainly gonna make the team if you're one of the early drafts.

Remember, the NBA, I think, only has two rounds of drafts now. It used to be 30 or 40. Now it's only two rounds. And so if you're drafted in the- as number one or number two first round, you're almost certainly gonna make the NFL or the NBA. In baseball, it's not quite that way.

First of all, you don't go erect- directly into the Major league. Uh, you typically go into the minor leagues for two years. So even the best h- college or high school prospects are not coming into the major leagues right away, and the ability to, to guess who's gonna be a superstar is, is more complicated in baseball. There are many people who are the first draft picks of the Major League Baseball who never made it to the Major League Baseball, never made it into the major leagues. Uh, that wouldn't happen in football or, or basketball.

Somebody that's the number one pick every year in the NFL or the number one pick in the NBA is gonna be almost certainly a star in that league. It's not the case in baseball. It's more complicated. Um, so, you know, you do the best you can. You pick a, a lot of players, and you try to sign 'em up, but you, you send 'em into the minor leagues for two years to see if they really can hit Major League Baseball pitching or if they're pitchers, whether they can really strike people out or get people out.

It's a more challenging endeavor, and it's harder to predict who's gonna be a superstar. How much of your time or how, how involved do you get in that process? Because it, 64 rounds? Am I correct? In 64 or 62?

Um, I don't know if it's that many, but, uh, but there's a fair number of rounds. And, um, you know, uh, obviously owners in all of the, uh, teams are probably informed by their general manager of the first five or six or seven people they wanna draft. Beyond that, it's, it's, uh, probably most owners are not that involved because if you're drafting 20 by- somebody in the 20th round, the chance that person's really gonna help the major league is modest. It might happen, but it, it's, it's less frequent. And so I think the owners are, on all the teams, are informed about who their top draft picks are likely to be, and then you just, you know, wait and see.

We, we drafted our first draft pick this year. Was somebody we had decided we really wanted, and he b- we had the seventh overall draft pick, and we, and we took him. His name is Eric Booth, um, from, um, from Alabama. How do you handle, um, like, player negotiations for salary? Uh, 'cause I know- Right ... like I said, there's a lot of small business owners that listen to the show, and they have to deal with similar but different conversations with their own team members.

And I think just being that these individuals, we watch them on TV, we have- my kids got their sports cards upstairs on the table. Um, you know, how, how do these things go? Everybody knows what everybody's salary is pretty much these days. There's no secrets 'cause everything is pretty much publicly available. Um, if you have a major contract, which, uh, you know, could be these days a, a 10-year contract or a five-year contract, that's a large amount of money, and therefore the owner is always gonna be involved and deeply involved in saying, "Yes, I'll spend the money," or, "No, I won't."

If you're just, uh, signing a one-year contract or you're signing a minor league contract with somebody, the owner probably not that deeply involved. Uh, but if you're, you know, if you're Steve Cohen and you're gonna try to get, uh, Juan Soto in your team and you're gonna pay him over $700 million, obviously, uh, Steve made the final decision on that Uh, the same is true when, when they signed, uh, uh, O- Otani at the Dodgers. Obviously, the ownership there was deeply involved. Um, I am informed about what our guy is gonna do. We talk to him all the time in terms of w- how much we wanna offer and what we think is realistic or not.

But, you know, in the end, um, you know, the, the, the general manager or the head of base- ba- business oper- baseball operations will ultimately, you know, have to negotiate out the details of the contract. But generally, you're spending a lot of money in these ki- kind of situations, and when you're doing long-term contracts, you have to recognize that very often you're gonna be signing a player who might not be playing for many of the years that you sign him up for. So for example, if somebody gets a 10-year contract, and he is, you know, 28 years old, that means he's gonna have to play till he's 38. Um, very few players at the age of 38 are, are as good as they were at 28. I think for baseball, it is said by some, I haven't really, uh, you know, studied it deeply, but something like the age of 27, 28, maybe 29 is the peak, uh, for most players.

Now, some players are doing better in their 30s than they did in their 20s, but as a general rule of thumb, the late 20s probably is the peak of athletic performance for most athletes. Do you get to set philosophy on how you, how we bring in players c- or how you bring in players? Like the, like the Soto deal, right? Like, obviously the Yankees were trying to get him, too. They were unwilling to pay the same amount.

Uh, there's different reasons for that. But, I mean, that deal was fairly highly criticized just for bringing him in, and is it the right park for him? And there's like... I guess, I guess my question is, you know, j- this is more just as a sports fan when you're watching. Like, sometimes you, you look at a situation and you're like, are they just buying jerseys?

Like, is that, it's just buying jersey sales? Like, doesn't seem like the right player for the ballpark, for the team. It's an incredible- Well- ... amount of money, and you're like- Well, I- As a fan, I don't understand ... I wasn't involved in that. We weren't trying to, uh, to sign him up, so I can't speak to that particular one.

But I would say- Yeah ... as a general rule of thumb, um, what owners wanna do is, um, put the best team on the field. And if they can make a profit doing that, they'd be happy to do that. Um, most baseball teams are not profitable. I think that's not a secret. Uh, most on a operating basis don't make money.

They make money when they sell the team perhaps, but not on the operating basis. That's probably true of some other sports as well, though the NFL is in a league by itself in terms of profitability. Um, you know, I think if somebody is gonna sign Juan, Juan Soto, the owner is gonna be deeply involved. In that case, uh, uh, Steve Cohen, uh, said that he was involved and, and met with, uh, Juan Soto and his family, and I think, uh, it was probably helpful. You know, generally what happens in the case of the Orioles is when we- we've signed a number of players to longer term contracts.

Um, the ownership has agreed to the price, but ultimately we have the general manager work out, or not the general manager, he's not that, that's not his title. The president of business, of baseball operations is the person who works out the, the details of it with the agent, uh, for the player. Yeah. That, that makes a lot of sense. So y- you're, you're informed, you're understanding, you're buying into the, to the concept- Right, it- ... and the idea, but it's not like you're hands, it's not like you're, uh, redlining contracts, uh, in between- Not, not really ... podcast episodes.

I, I would say not, not so. Um, I don't think any owner is doing that anyway. But the owners are deeply involved. And look, in the old days, 30 years ago, 40 years ago, 50 years ago, uh, it may have been harder to communicate with people across the country or around the world. But today, uh, through the internet, you can communicate with people on cell phones instantly, and so there's no need to not inform people.

Everybody knows what's going on. The question is, is it worth the money or not? And people, you know, have their debates on it. Uh, you know, it- when, when Alex Rodriguez was signed, I think it was a $250 million contract for 10 years- Yeah ... he had been on the Seattle Mariners and went to the, um, to the Texas Rangers. People were, were really critical of, of, of, of the Texas Rangers spending that much money. $25 million a year then was like equivalent of, like, you know, $100 million a year today.

So, um, you know, you're always gonna get some criticism. And if you don't have a thick skin, you shouldn't own a sports team because while the Orioles, for example, are, are, are, are a nice team, uh, their revenue is far less than the revenue of, you know, probably, uh, five or six dozen firms that Carlyle, my private equity firm, owns. You know, we might own a t- a, a company that has 3 billion of revenue. It's a large chemical company. Nobody ever asks me about it.

Uh, the Orioles might be a, you know, a couple hundred million, uh, in, in terms of revenue, but people are talking about it all the time. It's just a different phenomenon. Um, you know, when I buy a, a team for Carlyle, or not a team, a, uh, company for Carlyle, no eight-year-old boy comes up and asks for my autograph because I now own, uh, a, a, a chemical company. But with baseball, you know, I've got eight-year-old boys and girls coming up and saying, "Can I have your autograph?" And I keep saying, "Look, I'm not really a player," and I don't know why their parents are telling them they should get my autograph, but it's easier to just sign it than to explain that it's not really that useful.

Is it fun, though? Is it fun getting to talk sports and being around- Well- ... people? It's, the fun part for me has been that I reconnected with Baltimore. I moved out of Baltimore when I went to college. Haven't really spent much time there, though I, you know, my parents grew up there and married there.

They're buried there. I'll be buried there. So I, I have a real connection with Baltimore, but I hadn't spent as much time there as I did in the nation's capital. I've lived in Washington for the last 40-plus years. But I've reconnected with my friends from high school.

In fact, this weekend I'll be spending, uh, time with, uh, about 10 of my friends from high school, um, together for the weekend. I've seen people that I hadn't seen in 60 years. One time, I'll go to a baseball game, one time somebody said, "David, David." I hadn't seen this guy in 60 years. He was a neighbor of mine, and I didn't know what happened to him.

And then I have people even from, uh, as I wrote about in my book, a young girl in my sixth grade class, w- and I hadn't seen her since the sixth grade. She wrote me a letter saying, "Hey, guess who I am, and, uh, I'd like to meet with you now, and here's what happened I, in the last 60 years of my life." And so I did have lunch with her and, um, you know, so it's, it's a good way to reconnect with people, and I've reconnected with the city of Baltimore. Um, so it's, it's, it's fun. But you know, it's more fun when you win than when you lose.

Yeah, I get that. Uh, a big basket of blue crabs and a picnic table, is that the- Right. Well, that's Baltimore for sure. Um, and um, look, I grew up eating crabs and, uh, you know, I know how to, uh, open them pretty quickly. Well, David, I, I appreciate your time, um- Well, thank you very much and congratulations on your success.

Oh, thank you. And hopefully your success as a father, right? Yes. Well, thank you, and, uh, and I appreciate it, and I, and I'll, you probably don't need to hear this, but man, my, the kids on my son's baseball team just had a phenomenal time, and the people in your park, um- Okay ... and just the general atmosphere- Well, come again ... and culture was phenomenal. So, uh- If you wanna come again- I certainly will ... just let, let, let me know if you wanna come again.

Just email me and we'll make sure it happens again, okay? I appreciate it so much. All the best, uh, success on the book, and just thank you for being out here- Thanks a lot ... telling this story, man. Thank you. And n- next time- Have fun ...

I'll make sure to get on the field. Okay.