Mellody Hobson Is Investing in a Big Sports Opportunity | The Deal

Key Concepts

• Co-leadership: Shared leadership roles, exemplified by Mellody Hobson and John Rogers at Ariel Investments.
• Value Investing: Investing in undervalued assets with strong growth potential, applied to women's sports.
• Small Caps of Sports: Viewing women's sports as smaller, faster-growing entities compared to established men's sports.
• Contrarian Investing: Identifying opportunities where others see less value or potential.
• Expansion Fees: Fees paid by new teams joining a sports league, which can appreciate over time.
• Media Rights: Revenue generated from broadcasting or streaming sports games.
• Operational Excellence: Applying expertise in running sports teams and related businesses.
• Blank Calendar: Warren Buffett's concept of real wealth, emphasizing the value of time.
• Ball Hog: A term used by Bill Bradley to describe someone who dominates conversations and doesn't prioritize others.

Ariel Investments and Co-Leadership

• Mellody Hobson has worked at Ariel Investments since graduating from Princeton, highlighting her loyalty and passion for the firm.
• Ariel Investments is one of the oldest minority-owned firms in the country, specializing in small-cap value investing.
• Hobson emphasizes the unique co-leadership structure with John Rogers, citing their complementary skills, mutual respect, and genuine affection for each other.
• Their partnership works because they are deferential, hold their ground, and prioritize the best interests of Ariel.
• Hobson recounts a story where John Rogers reminded her that their shared goal for Ariel's success should guide them through disagreements.

Entry into Sports and Investment Philosophy

• Ariel Investments has a history of investing in sports-related businesses, including Madison Square Garden and Manchester United, viewing them as media businesses.
• Hobson personally invested in the Chicago White Sox years ago, keeping it secret to avoid confusion with Ariel.
• The decision to invest in the Denver Broncos and NWSL team stemmed from recognizing the unique value of sports assets, including fandom, sponsorships, and media rights.
• Hobson was influenced by the potential of women's sports, citing increasing attendance, sponsorships, media rights, and participation rates among girls.
• She views women's sports as the "small caps of sports," with significant growth potential compared to the more established and expensive men's sports.
• Hobson applies a contrarian investment philosophy to sports, seeking undervalued opportunities in women's sports.

Denver NWSL Expansion Deal

• The opportunity to invest in the Denver NWSL team arose unexpectedly after Hobson gave a speech in Florida.
• Research on Denver revealed favorable demographics, socioeconomic factors, and potential stadium locations.
• The decision to invest heavily was driven by the belief in the long-term value of the team and the potential for stadium rights.
• The lead investor, Rob Cohen, was seen as a successful business builder.
• The math supported the investment, with strong early season ticket sales and sponsorships.
• Hobson highlights the importance of long-term thinking and the potential for future expansion fees to increase valuation.
• Women's leagues often negotiate media rights deals that allow for renegotiation based on viewership milestones.

Ariel's Women's Sports Fund

• The fund focuses on three areas: major league sports (team ownership), emerging leagues and junior sports, and related ancillary businesses.
• Ariel aims to expand its sports investments to Europe.
• Hobson emphasizes the leagues' desire for gender and racial diversity in ownership.
• Ariel brings operating expertise to the table, helping teams with leadership recruitment and stadium development.
• The firm's brand and reputation attract opportunities and partnerships.

Jason Wright's Role

• Jason Wright, former NFL player and McKinsey partner, leads Ariel's sports investments.
• Hobson recruited Wright after hearing him speak on a panel, recognizing his expertise and potential.
• Wright's experience running the Washington Commanders provides valuable operational knowledge.
• Hobson describes herself as the "chief cheerleader and fundraiser," while Wright is the "quarterback."

Denver Broncos Investment

• Hobson initially declined the opportunity to invest in the Denver Broncos due to capacity concerns.
• Casey Wasserman and Jeffrey Katzenberg convinced her by highlighting the potential for financial literacy initiatives for athletes.
• The Penner-Walton family made it clear they were committed to buying the team.
• Hobson emphasizes the importance of working with people of high integrity.
• Lewis Hamilton and Condoleezza Rice were brought in as part of the ownership group.

Lewis Hamilton and Lessons in Discipline

• Hobson has a close relationship with Lewis Hamilton, whom she met during his rookie season.
• She recounts attending the Abu Dhabi race where Hamilton lost the championship, emphasizing his grace in defeat.
• Hamilton's influence on Hobson includes lessons on never giving up, speaking positively, and maintaining unwavering discipline.
• Hamilton's discipline extends to his diet, workouts, and overall commitment to being his best self.

Growth of F1 and Potential for Women's Sports

• Hobson notes the explosion of Formula 1's popularity in America, driven by the "Drive to Survive" Netflix series.
• She believes that personalizing athletes and showcasing their stories is key to growing women's sports.
• Women's sports benefit from athletes' engagement on social media.

Board Membership and Effective Directorship

• Hobson emphasizes the importance of asking original, thoughtful questions in board meetings.
• She believes that follow-up questions are more important than initial questions.
• Hobson sat next to Howard Schultz at Starbucks board meetings for 20 years to learn from his reactions and insights.
• She wanted to be close to the "power" and "vision" to learn in every way possible.

Saying No and Valuing Time

• Hobson has learned to say no to opportunities to protect her time and avoid overcommitment.
• She values time more than money, citing Warren Buffett's concept of a "blank calendar."
• If she hesitates about an opportunity, she considers it a "no."

Bill Bradley's Advice and Avoiding "Ball Hogging"

• Bill Bradley, a mentor to Hobson, advised her not to be a "ball hog," meaning she should avoid dominating conversations and prioritize others.
• Hobson learned to take an interest in others and ask questions to shift the focus away from herself.
• This approach has become authentic and helps her connect with people.

Rapid Fire Questions

• Deal-making style: Long term
• More important: Gut
• Dream deal-making partner: Jason Wright
• Best advice: Don't make important decisions based on money
• Worst advice: Make yourself seen or heard
• Hype song: I Will Survive
• Most important trait in a board member: Ethics, smarts, and team player
• One sport to watch for life: F1
• Team to see win a championship: Mine

Synthesis/Conclusion

Mellody Hobson's interview reveals a multifaceted approach to investing and leadership, grounded in value investing principles, a commitment to diversity and inclusion, and a deep appreciation for human connection. Her success stems from a combination of strategic thinking, operational expertise, and a genuine desire to empower others. From her unique co-leadership model at Ariel Investments to her pioneering investments in women's sports, Hobson consistently demonstrates a willingness to challenge conventional wisdom and pursue opportunities with significant long-term potential. Her insights on board membership, mentorship, and the importance of valuing time offer valuable lessons for aspiring leaders and investors alike.