From slam dunks to grand slams
He’s not just one of the best basketball players of all time. Magic Johnson’s business empire has secured him a place in the entrepreneurial hall of fame, too.
It was Earvin “Magic” Johnson’s rookie year with the Los Angeles Lakers and, at a mere 20 years old, his first NBA championship. Center and 10-year basketball veteran Kareem Abdul-Jabbar had a sprained ankle that was so swollen he couldn’t join his teammates on the flight to Philadelphia. Right before the sixth game in the series, it was a big blow.
Only Johnson felt inexplicably hopeful - and inexplicably in control. He decided on a bold plan.
Abdul-Jabbar always took the first seat on the plane so that, during boarding, every other player had to walk past him. Johnson thought: “I’m going to go and be the first one on that plane and sit in Kareem’s seat.”
As each player boarded the plane, Johnson flashed what has become his famous megawatt smile and unabashedly exclaimed: “Never fear, Magic is here!” Once in the air, he offered up a five-hour pep talk resembling a Sunday-morning sermon. He dug out doubt and replaced it with confidence.
On the court, Johnson went to work. He started the game against the Philadelphia 76ers as center, but by the time the last buzzer sounded, he had taken a turn in all five positions.
He ultimately scored 42 points, snatched 15 rebounds and provided seven assists. It was an historic performance - both on the court and behind the scenes - cementing Johnson’s reputation as the ultimate team player and foreshadowing his role as inspiring leader.
From court to boardroom
Over the next 32 years, Johnson would repeat this act of unabashed leadership on the court and in the boardroom. As one of the most successful athlete-businessmen in the world, Johnson makes his work look effortless. But behind the magnetic smile, big hugs and amenable personality is a man who is always prepared to do what it takes to win.
Today, he runs Magic Johnson Enterprises, a power player and well-connected partner that has invested millions in AMC movie theaters, Starbucks coffee shops, private real estate funds, websites and magazines. In line with the company’s focus on ethnically diverse urban neighborhoods and African-American families, its latest venture is a new cable channel aimed at a community few thought to consider profitable - until Johnson pointed the way.
“Here in America, you know, the minority community is growing seven times that of the general population,” he says.
Johnson’s easy manner and larger-than-life personality may give the impression that it all comes naturally, but his path has required inestimable grit and a willingness to realize that “it’s going to take more than being Magic Johnson” to achieve his goals.
And it is clear he takes nothing for granted. Throughout his career, he’s had a universe of fates riding on his fame and fortune - whether those of the starry-eyed kids who followed his basketball career, the millions of people who live in the ethnically diverse, urban communities served by his businesses or the young, black entrepreneurs watching, learning and hoping to emulate his successes.
Failure has never been an option for Johnson.
“I’ve got a whole community on my shoulders,” he says. “If I ever fail, couldn’t nobody else come behind me.”
This couldn’t have been clearer than when Johnson was diagnosed with HIV in 1991. He gathered his confidence and vowed to conquer the disease and the labels that came with it. Being open about his health and determined to move forward, he has never allowed his diagnosis to define him.
In short, Johnson knows who he is and what it takes to be a champion - in athletics, business and in his job as a role model. He also knows his brand - inside and out. And that’s a big reason he’s been trusted with so many others, from Starbucks to ESPN.
Investing in urban communities
“I’m in the people business,” he says. “I love people. I look for things that people are going to need.” With a laser focus on the neighborhoods that reflect his own upbringing in Lansing, Michigan, Johnson has made millions introducing partners to the benefits of investing in urban communities.
The dollar recycles, but in our community it wasn’t recycling.
It’s not just a personal passion; it’s a very intentional business decision.
“The dollar recycles, but in our community it wasn’t recycling,” he says. “People were saying, ‘I’ve got to go outside my community to spend my money’.”
So Johnson opened Starbucks cafes and AMC movie theaters and shopping centers with grocery stores right in the urban communities that needed them. But he did it with an eye on the people who lived there.
He replaced scones with sweet potato pie and made sure a family could get a meal while taking in the latest blockbuster.
It’s not as if Johnson hasn’t had some struggles and missteps. But by and large, his risks have been calculated, careful and successful. Early on, he refused to back down when the investors he was courting told him, “We don’t care about urban America.”
He kept coming back, as he recalls. “’OK,’ they finally said, ‘we’re going to give you a shot, but you can’t have the US$150m you want. We’re going to let you have US$50m. If you do well with that, come back and we’ll let you have the other 100.’ That’s when I learned to over-deliver,” he says.
Through a consistent mix of instinct, grit, on-the-job training and going the extra mile, Johnson has turned his brand into a multimillion-dollar business empire that includes Yucaipa Johnson, the country’s No. 1 minority-owned private equity growth fund, and Canyon-Johnson Urban Funds, a private real estate fund company dedicated to the development of projects in underserved communities.
People don’t realize I did my first deal at 19.
“God blessed me with the platform of the Lakers and he gave me some sense to know what to do with my money once I made a little bit of it,” he says. “I’ve always wanted to be a businessman. People don’t realize that I did my first deal at 19, when I first got into the NBA.”
Back then, Johnson took advantage of a Federal Communications Commission policy that offered tax credits and other incentives to minorities, convincing friends and teammates to pool their funds to purchase an AM radio station in Colorado.
“They also had about 20 acres of land that the towers were on,” he says. “We moved the two towers closer to the building, sold the 15 or 16 acres and got all of our money back. Then we converted the AM to FM. And that was my first deal.”
It takes guts as a rookie to sit in Kareem Abdul-Jabbar’s seat. And it takes guts as a novice businessman to plop down a couple million dollars on an AM radio station in the middle of Nowhere, Colorado. But confidence is not something that Magic Johnson has ever lacked.
A hands-on leader
He’s not afraid to get his hands dirty, either. In 1990, he rode with Pepsi delivery trucks in southern Maryland so that he could better understand the partnership he had with the company and Black Enterprise founder Earl Graves.
When launching his south-central Los Angeles AMC movie theater in 1993, he met with gang leaders to assure the safety of his patrons. From Starbucks CEO Howard Schultz, he learned to watch carefully before acting and to honor his customers.
He listened to community residents who were concerned that the bar at a TGI Friday’s he was inviting to his new shopping center would be a bad influence.
“I never get into anything unless I really do my homework and my research, and I’m going to be involved 100%,” he says.
He learned this lesson through a series of influential mentors, beginning with mega-manager Michael Ovitz.
In the 1980s, before taking him on as a client, Ovitz insisted that Johnson read a stack of business magazines and newspapers. Without comprehending it all, that’s exactly what Johnson did, impressing Ovitz enough that he took a risk on the basketball player. Johnson spent the next several years learning at his manager’s knee how to put it all to work.
With the Los Angeles Dodgers now his latest high-profile win, these lessons clearly paid off. In March 2012, Johnson and a group of investors bought the baseball team for a record US$2b. And when that sort of money is involved, it’s crucial to get the team right. “I never rush in,” he explains.
“I could have gone with the richest guy for the Dodgers. [But] it wasn’t a good fit for me.”
Johnson really hit it off with Mark Walter, controlling partner of the group, which is rounded out by seasoned investors Peter Guber, Todd Boehly and Bobby Patton.
Johnson and Guber were old friends, first going into business together on the AMC movie theaters. In some ways, it’s Johnson’s own dream team.
“Whoever thought that we would pay US$2b for it?” Johnson ponders. “But it’s 300 acres of land, plus the Dodger brand and a TV contract that is expiring at the end of this season - the market really drove the price up. There were 20 or 30 bidders for it. So I am so excited that we won. I’m a proud Dodger owner.”
Even with the Dodgers, there’s no sign of a slowdown for Johnson. In June 2012, he launched a new cable network, ASPiRE, designed to appeal to black families. It rounds out the numerous ways he has both invested in - and reaped rewards from - urban America, all the while considering his broader mission as role model.
“You can’t just make money,” he says. “You have to go back and give back and that’s what we’ve done. Through the Magic Johnson Foundation, we have 150 students on scholarship and we’ve built technology centers all around urban America.
“I love what I do and wouldn’t trade it for the world.”