The Organisation for Economic Cooperation and Development (OECD) has recently published the 2009 edition of its international study, “Measuring Entrepreneurship.” According to the OECD website, this study is an attempt to better understand “the drivers of entrepreneurship” and “the links between entrepreneurship and its potential impacts.” The study explores such issues as the birth and death rates of enterprises, the number of innovative products created by small and large firms, and how easily entrepreneurs can access start up capital.
Archive for November, 2009
Jeff Cornwall of the Center for Entrepreneurship at Belmont University looks at the latest Global Entrepreneurship Monitor study to get a snapshot of the current face of entrepreneurship. One interesting, counterintuitive finding: the typical entrepreneur is getting older.
Dr. Devi Shetty brings an innovative approach to heart surgery in India by using economies of scale to drive the price per surgery down. His flagship heart hospital, Narayana Hrudayalaya, has about 10 times the number of beds as its typical American counterpart, and the cost of surgery averages at about $2,000, versus the $20,000-$100,000 Americans pay. But does handling such a large volume of patients affect the quality of care they receive?
The boy who harnessed the wind — a 14-year old who decides to design and build a windmill to bring electricity to his remote village in Malawi. A deeply human story of initiative, ingenuity, and independence.
Also watch his appearance on the Daily Show:
|The Daily Show With Jon Stewart||Mon – Thurs 11p / 10c|
Anja Hartleb-Parson, CEE’s Research & Publications Manager, talks with Fall 2009 guest speaker Joshua Hall about his presentation on “The Dilemma of School Finance Reform.” Professor Hall explains why we are spending more on public education over time but may not be getting our money’s worth. Watch the video below.
Dr. Stephen Hicks, CEE’s Executive Director, talks with Dr. Jerry Kirkpatrick, a Fall 2009 CEE guest speaker, about his book, In Defense of Advertising. Dr. Kirkpatrick addresses several typical criticisms of advertising and explains why advertising is important to a healthy, productive capitalist society.
Watch Parts I & II of the interview below.
David Checketts is Chairman of SCP Worldwide, a sports, media and entertainment company that owns the St. Louis Blues of the National Hockey League, the Scottrade Center, the Major League Soccer team Real Salt Lake, and a number of other sports-related enterprises. Prior to founding SCP, Mr. Checketts was president and CEO of Madison Square Garden, overseeing its operations and its three sports franchises, the New York Knickerbockers of the NBA, the New York Rangers of the NHL, and the New York Liberty of the WNBA. We met with Mr. Checketts in St. Louis, Missouri to explore his thoughts on sports, the business of sports, and success in life.
Kaizen: You grew up in the small town of Bountiful, Utah. Were you athletic or a sports fan as a youth?
Checketts: I have been for as long as I can remember. The earliest moments of my life that I remember are all around sports. I had two brothers—one older, one younger. We were constantly playing something, and if we weren’t playing something we were listening to or watching something. I would sneak out of bed, actually, at 11:30 at night and crawl down the hallway into the living room and turn on the television to watch the NBA playoffs, which, at that time, were tape-delayed. They were late at night.
In my world, for some reason, I was a New York Knicks fan, clear off in Bountiful, Utah. My friends and neighbors were all L.A. Lakers fans, and when you think about the playoffs in those days, it was either the Lakers and Celtics or the Lakers and Knicks. I just was fascinated with that Knicks team, especially the team that won it in the late 60s and again in the early 70s. That was my team.
Then, Utah was a college basketball hotbed—BYU, Utah—good teams. And when I was a child we had our first pro team, which was an ABA team—The Utah Stars—which won the championship in their first year of existence, which was about 1969 or 1970. Those are my memories—watching those things happen.
Kaizen: You majored in business at the University of Utah and received your MBA from Brigham Young University in 1981, graduating in the top three in your class. Looking back, what was the most valuable business skill or knowledge you acquired while a student?
Checketts: Well it was funny, because we had an Organizational Behavior professor at BYU who was somewhat controversial. He was controversial because he taught kind of “out of the box” concepts of dealing with and motivating people. Most of my business school classmates thought he was a quack. They just thought he really didn’t have much to add. They wanted to get into operations. They wanted to run models. They were very analytical. But for some reason I just became enthralled with this man’s concepts, and I have to say now, years later, I was right and they were wrong. The man is Stephen R. Covey, who wrote The Seven Habits of Highly-Effective People, which was on the New York Times bestseller list for about fifteen years.
So actually in my second year of business school I became his teaching assistant, and a real follower of his concepts. He’s given people a lot of real solid truths about motivating and dealing with people. And sports is the ultimate people business—I call it the ultimate human capital business. It’s all about the performance of live individuals. Arena stadiums help, but you can’t fill them unless you have the performance of a team on the field, or on the ice, or on the court. So I learned more from him in business school than anyone else about motivating and dealing with people.
Kaizen: Your first job out of university was with Bain and Company, an east coast management consulting firm. What was your job with Bain?
Checketts: In those days the practice was about competitive strategy and getting corporations to formulate strategy to win competitions. So I was working with companies like Dunn & Bradstreet and Firestone and Baxter Travenol and Chrysler Corporation—all of these companies that were competing in the early 80s—and really working right with the CEO and developing a competitive strategy for the company.
Kaizen: While at Bain, you met David Stern, the future NBA Commissioner, who was then an executive with the NBA, and in 1983 you were named President and General Manager of the Utah Jazz. How did that come about?
Checketts: First of all, David was a big help because your life just has a way of changing so quickly. Here I was, working for Firestone, trying to take cost out of tires, and Bill Bain, the president and chairman of the firm, came walking down the hall one day, turned into my cubicle and detailed to me that he had a client who wanted to buy the Boston Celtics. He knew I played basketball in college. He also knew that I had a relationship with a player on the Celtics, who I’d played in college with—Danny Ainge. And he said, “Maybe you should be the one to lead the case team here to figure out: Can we buy the Celtics? How much is it going to cost us? Does that make any business sense? How do you accomplish it?”
So I was given an assignment for the next three months to look at the NBA, to understand the salary cap, to understand what makes great franchises and what makes lousy ones—what’s the difference between the two. And in that process I got to know David Stern, who has, in the years since, really been my mentor. It was after our bid for the Celtics fell short that David asked me to meet the owner of the Jazz, who subsequently offered me the job as president.
Kaizen: You were only twenty-eight years old at the time, making you the youngest chief executive in the history of the NBA. What did David Stern see in you that led him to recommend you for the position?
Checketts: He’s unique. He’s the mentor to many different people. I think what he saw in me was a certain stubbornness that he thought might succeed. In our first meeting together we ended up having this heated debate. I had never met him before. And suddenly we were in a conference room about the size of this room, and he was pacing along one side of the table and I was pacing alongside the other and we were engaged in a heated debate about the value of teams, the NBA, where it was all headed.
Kaizen: Did you have any doubts about your ability to do the job, given your age?
Checketts: I think you’re just so young and naive at that point that you really don’t understand what you’ve signed up for. But it became a sobering reality a couple of months into the job, the team deeply in debt, no interest on the part of people, 1,500 season tickets sold—1,500. So it became sobering after a while but at that point I knew that I could fail because Bain had offered to take me back after this experiment. But it was not an option to fail in my home town. All of those kids that had gone to high school with me or to college with me suddenly said, “How is it possible that this guy is the president of an NBA team?”
But we got really lucky in drafting John Stockton and Karl Malone—two Hall-of-Famers. We didn’t know that at the time. That created the foundation of a great franchise.
Kaizen: And over the next six years the Jazz enjoyed a multi-million-dollar turnaround financially. How did that come about?
Checketts: We did a number of business things, but the team started to win on a regular basis and be very exciting to watch.
Kaizen: And during that same time period the Jazz were successful on the court, winning two Midwest Division titles. Was there a connection between the financial turnaround and the success on the court?
Checketts: There are years where your business acumen and the judgments that you make on the business side of running a team prove to kind of carry the sports side of things. And then there are years when the sports side is so good that it almost doesn’t matter what you do on the business side—it just goes. And I’ve experienced all of those cycles.
Kaizen: But even so, you left the Jazz in 1989 after a power struggle. What happened there?
Checketts: There was no power struggle, even though that’s what people thought had happened. The owner of the team and I did not really get along very well at the end. He was a very hands-on owner. He was involved in player negotiations. He was in the locker room at half-time, pregame, postgame. The reason I say there was no power struggle—I’m the president of the team, I’ve been running it for eight years, and I have a way of doing things that is succeeding. To me, I couldn’t understand why he suddenly was so involved. But an owner has every right to be involved, and an owner can do whatever he wants. It’s just that I ran out of gas in trying to fight with him about what it was he wanted to do, versus having had eight years, really, of success. I didn’t understand why he wanted to change direction. So, it wasn’t a power struggle—I had to leave.
Kaizen: You next had shorter stays as president of the Denver Nuggets organization and with the NBA organization in New York before becoming president of the New York Knickerbockers in March 1991. How did your position with the Knicks come about?
Checketts: There’s a transition in there. The Denver show was brief. The owners who were trying to buy Denver couldn’t buy it. They had offered me the job there to run the team. They failed in their bid to buy the team, so I ended up going to New York and working for David Stern at NBA International. I was vice-president and general manager of NBA International. And it was while I was there, much to Stern’s dismay, the Knicks asked me to come over there and become president, and I dismissed the competition. And remember, that was my childhood team, so that was like a dream.
Kaizen: Over the next four years, the Knicks became very successful both financially and on the court—the team won the conference finals twice and the conference championship once, set records for attendance and revenues, and Forbes magazine named the Knicks the most valuable franchise in the NBA. What was your contribution to making that happen?
Checketts: This was in 1991, so I was 35. That was my dream job. And literally everything there reported to me, so I went and brought the old coach back, Red Holzman, who I had seen on the television many years ago, and started to give the franchise some meaning, I think. I hired Pat Riley to become the head coach. He was a very successful coach in his own right. I solved a very serious contract dispute with Patrick Ewing. I dramatically changed the marketing and customer service and in-game entertainment. I tried to build it into one of the great franchises in the league. And people in New York really responded to that. First of all, the team became really good. We were in the NBA Finals in 1994. We had a team that won sixty games in ‘93. And Patrick Ewing was just playing amazingly well. Riley was a great coach. We made some trades and put some talent around him. And New York just loved the whole attitude of the Knicks—a very aggressive, defensive style. And the Garden just became alive. It was really just a tremendous time.
Kaizen: By this point in your career you had led successful turnarounds at both the Jazz and the Knicks organizations. Where there common elements to both successes?
Checketts: Very much. Good character players. Great coaches. Back to the Steven Covey comment—I feel like one of my roles in whatever I do is to create an environment where people with talent can really do their best work, where they can just flourish in their best work. And that’s what I try to do.
Kaizen: Building on your success with the Knicks, in 1994 you became president and CEO of the Madison Square Garden Corporation. Did you need to develop additional or supplemental skills in order to make the transition from being a team president to being CEO of a half-dozen major enterprises?
Checketts: Yes. It was very different. I had seven or eight years there and four different owners. I had to learn to manage from 50,000 feet, instead of being so close to operations. And so looking back I was too patient with some people, not patient enough with other people. It was my first real CEO job of a huge corporation—$6 billion in value, huge financial stakes, in a city where the media and everyone hold you in such a spotlight. Enormous pressure all the time. And yet we had some success.
Kaizen: What did you learn about how to make managerial judgments better?
Checketts: I live by a standard that Steve Covey taught me, which is that a person will do more with their bad idea than they will with your good idea. So I try to hire real capable, competent people, put them in place, make sure that they have the right incentives and motivation, and then give them the freedom to do the job. The skill that I had to learn was to hold them accountable, regardless of my personal feelings about them. Because I am somebody who builds friendships and relationships quickly and who really wants people to succeed. So it makes it hard. I stuck with some people too long in some instances.
But you know, every year we were building cash flow there. We started out in 1994. The whole enterprise was only generating $12 million in cash flow on $400 or $500 million dollars in revenues. So we went to $1.1 billion in revenues and then we were generating $211 million in cash flow. So, financially, our performance was superb.
The Knicks had a waiting list for season tickets of 10,000 accounts. The Rangers, you couldn’t even get into a game. The television networks had the Yankees, the Mets. We had every team in New York—enormously profitable.
Kaizen: By this point in your career you have had some big successes, but you had also seen from the inside a lot of nastiness: the infighting that led to the separation of Bain Consulting and Bain Capital; you’d been in a struggle over the Jazz; you had a difficult encounter with New York mayor Rudy Giuliani in dealing with the aftermath of a brawl at a boxing match at MSG in 1996; you’d had to intervene in 1999 when the coach and general manager of the Knicks couldn’t get along; and another struggle within MSG led to your leaving in 2001. Is your experience standard for the sports business world, or have you been especially unlucky?
Checketts: Giuliani today is one of my good friends. I had to fire the general manager of the Knicks. I don’t think I’ve been unlucky. I think that this is the case in sports for the most part, and yet I want to take appropriate responsibility for my role here. You may set out not to make any enemies but you probably will. Firing a coach is very hard. It’s high-profile. It’s not like firing the president of Westin Hotels. That may make it as a blurb in the Wall Street Journal, but firing a coach in New York, firing Don Nelson in New York, as I did, was on the back page of every tabloid, was on the front page of the New York Times. The Knicks were 34 and 27 when I fired him, so we were 7 games over.
Kaizen: You once said, “I exist in a world that’s pretty gruesome.” That’s a strong statement—was it in the heat of the moment or is it generally true?
Checketts: I think I was tired. I’d been in New York, at that point, eight or nine years. If you look at the history of executives who run sports teams in New York, they very often don’t last that long. And remember, it wasn’t just the Knicks by then—it was the Rangers, it was our relationships with the Yankees and the Mets. It’s like running a small country. When I said that it was gruesome back then, I just remember I was really tired.
And I had been there long enough. I needed to put a frame around it and move on. And the day that I walked out of that office, I was so relieved. It wasn’t like I was sad. By then—this is true of anybody—over a long period of time in a very public enterprise, people will get tired of you, even if you’re successful. They will think it’s time for a change or a fresh face. I needed to go. I’d done what I could. The teams had been competitive and good, the enterprise was successful, but I had done what I could. And I probably overstayed my bounds, just from a public standpoint. So I think I was tired, but I’d also seen how coworkers, people that you’ve done great things for and with, how quickly they’ll turn on you, how they will undermine you. There is something about our culture, our environment, that loves to see people fall. And I felt very undermined by a number of people.
Kaizen: Is it that sports are competitive and business is competitive, so if you combine the two the competitiveness is intensified?
Checketts: You’ve said it perfectly. That’s exactly right.
Kaizen: Could your business-school education have done more to better prepare you for the toughness of the sports business world—being able to make judgment calls about how much slack to cut a person, how to fire someone, how to deal with public scrutiny?
Checketts: Yes, on one hand it prepared me. But, on the other hand, the lesson to be learned is … For instance, you mentioned firing people. There is no good way to fire a person, just no good way. It is always going to be bad news, it’s always going to be difficult, it’s always going to be a shock. So I wish I had learned that. One of the things about an environment like BYU is everybody’s enormously cooperative and respectful, and you learn those skills.
I had an experience where I had to fire somebody. You mentioned the battle that was brewing between the general manager and the coach. And the owner, the majority shareholder of the Garden, decided that the general manager should go. Now this is a person that is a long way from the operation. Why he would have any opinion on the matter is craziness. But I’m the CEO and now I’m being ordered by the shareholder to fire the general manager, even though the general manager was not the problem, didn’t need to be fired. But his representative came to me and made it clear to me that, unless I fired him, I was going to be fired. And so you have to make a decision—do I lay down on the tracks in defense of this guy, or does he get fired for the mistakes that he’s made, because he made mistakes. He had made enough mistakes that, probably, it could be justified, but it wasn’t at the heart of the issue.
So I decided I had to fire him. And here’s a situation where I’d worked with this guy for eight or nine years, we’d had an enormous amount of success together, he was a good friend, our families were friends. It was painful and I tried to do it in a respectful way. It just so happened that, when I was ordered to fire him, I was having dinner with him that night. So this is a guy I knew extremely well. I went to dinner and I said, “Here’s what happened.” I explained the whole thing to him. I said, “My hands are tied, we have to make a change.” I tried to do it respectfully. In two-and-a-half hours over dinner, we talked about all the good times we had. He openly wept because this was his dream job. And then he promptly went and told the press that I took him to dinner and told him over dessert, almost to try to make me look like some sort of shark, cold-hearted, who would do that over dinner. I was trying to show him respect. I was trying to give it to him in the best way, rather than, at 9 a.m. the next morning, call him down and say, “While you’re here, your office is being packed. Go home.” He would have been able to say, “You could have told me last night.” So he didn’t need to be fired but it wasn’t my choice.
And when I left the Garden, the thanks that I owe to Jim Dolan, who’s the chairman of the Garden currently, is that he absolutely convinced me that I never wanted to work for anyone ever again. He turned me into an entrepreneur.
Kaizen: In 2001 you started your own company, SCP Worldwide [Sports Capital Partners]. Is it different being one of the principal owners yourself?
Checketts: Yes, there are a lot of differences. But I would say that it’s really been helpful for me to be in a CEO job, because what I’m trying to do now is be the owner that I always wanted to work for. And I did have some of them.
There was a man who was running Paramount Communications in the early 1990s—his name was Stanley Jaffe, and I worked for him. He was “the owner”—even though he was the CEO of a public company, he represented the ownership interest in MSG. He was a clear boss for me. I just loved working for him. I think I could have worked with him for ten years because he debated with me decisions, he asked great questions, he’s really bright, and then at the end of the day he let me live with my own decisions.
And that’s what I try to do with the CEOs now that I hire to run the companies that we’ve purchased. I hold them accountable. I conduct business reviews. I just conducted a business review this morning over at Scottrade Center for the arena and the teams over there. But they’re not going to have me second-guessing them; they’re not going to have me going around their back to negotiate with important publics that they have to deal with. All of the things that I had trouble with, I’m trying to create an environment where they do their best work. Because that’s the thing I never understood. I didn’t understand it in Utah; I didn’t understand it in New York. If we have created something for the shareholders that is successful and financially rewarding, why do you then feel an obligation to have your hands around management’s neck? I will never understand that.
Kaizen: Is the problem that some owners see the team as a hobby, and so they can do whatever they want, or is it that they’re acting on partial information or think they know more than they do?
Checketts: Well it’s all of the above, but it starts with the fact that they’ve grown up in a business or they’ve been successful in a business. Whatever it is, they suddenly become the owner of this team and they’re fascinated with it, they fall in love with it, it’s a trophy asset. They have money that they can lose on it, and they want to be involved. So they most often do things that are really bad for the business, and that makes being the CEO for those kinds of companies very difficult.
In the movie Field of Dreams, there’s a scene where Kevin Costner is talking to Shoeless Joe Jackson about the lights on the field, because they’re walking around the baseball field that’s just been built. And Joe Jackson says, “What’s with these lights?” And Kevin Costner says, “Oh, the owners thought that they could make more money if they played at night”; because the 1919 Chicago team didn’t play in lights. Joe Jackson says, “Owners!” And that’s all you need to know because that’s how everyone feels. “Owners! Oh gosh! They’re the guys who raise ticket prices, who run players out of town that I love and make silly, ego-driven decisions.”
Kaizen: So there’s a division of labor, but it’s not always that people on both sides understand the value that the other side is bringing and where the lines are drawn.
Checketts: That’s exactly right.
Kaizen: SCP owns the St. Louis Blues NHL team and its arena, the Scottrade Center, the Real Salt Lake Major League Soccer team and its new stadium, and a number of other media and entertainment units. What is the current value of SCP’s combined assets, if I may ask?
Checketts: Well, I’ll give you a different answer than I would have in September of last year, because we’ve been through a meltdown; but I think this is turning into a very respectable NHL team now, two-and-a-half years into our ownership. We own the real estate and the building, we’re renewing an opera house—we’re going to do great things over there. So I think those assets are in the $300-million range.
In Salt Lake we bought a major league soccer team and then we built a beautiful stadium. I’m very proud of it. I think our assets out there are worth $150 million or so. And then the balance of our media and live entertainment assets are somewhere between $30 and $50 million. You know, I think all in it’s probably close to half of a billion dollars in assets.
Kaizen: SCP bought the St. Louis Blues in 2006 in partnership with TowerBrook Capital Partners, a spin-off of Soros Private Equity.
Checketts: They were connected with Soros; they were a spin-off.
Kaizen: How did SCP and Towerbrook come to know of each other and to work together on this project?
Checketts: While it was still Soros we did a number of things together. The first thing I did with them was help found an airline called JetBlue. So I became one of the founding members of JetBlue. Soros was represented by a couple of really outstanding private equity executives. So we did JetBlue and then we did College Sports TV together; I became co-chairman of CSTV. We sold that to CBS Sports. And then they asked me to help them with a cable company in Switzerland called CableCom, which I did. Then we sold that to Liberty. And then they spun off and started Towerbrook, which is based in New York and London. We’d just done a number of good things together and have a high level of trust.
Kaizen: Before buying the Blues, you looked into a number of possibilities—Anaheim’s Mighty Ducks, New Jersey Nets, Atlanta’s Braves, Hawks, and Thrashers. What conditions were you looking for? Population size? Media outlets? Real estate valuations? Other sports teams to make synergy?
Checketts: There’s a number of things that we look for. We don’t like to buy into any opportunities, unless they allow us both a real estate venture and a media venture. Sports on its own, as a business, is really not very attractive. But sports as a content play that puts a team in a building and then allows you to attract four or five million people to that building and thus create real estate opportunities around it for parking, food and beverage, office—whatever the real estate opportunity is. We always look for real estate play and then we look for a team where there’s a media play.
When we bought the Blues, the Blues were coming to the end of their television deal, so we actually had discussions with the Cardinals about starting a regional sports network, which we would have liked to do. But the Cardinals re-upped their deal with Fox and kind of took that opportunity away. So we look to exploit real estate, media, and then it’s pretty simple—it is driving all of the revenue streams through building an incredible sports organization, coaches, players, getting the human capital to work really well together, so that people want to be a part of it.
Kaizen: The Blues have a solid forty-year history in the NHL but they have struggled financially—losing about $220 million dollars in the ten years before you bought them. What are the challenges for a major sports franchise in a medium-sized city like St. Louis?
Checketts: There are special challenges, although we feel very good about where we are. If we were in a decent economy, we’d be much further ahead. The Blues were spending $65 or $70 million on players. When we looked at the Blues transaction, we said, “Look, if we only get attendance to what it has been in St. Louis, if that’s all we can do—and we hope we’re better than that—but if that’s all we can do, and we have the salary cap move into the NHL, then that would mean we could only spend $39 million, two years ago. So we’ve got to get attendance to what it has been and then take payroll to what it can be under the salary cap, and actually you’ll be cash flow positive.” And teams that are cash flow positive then have time to work toward competitiveness, and it’s competitiveness that leads to real profitability and value creation, along with those other things I’ve talked about.
Kaizen: Part of the strategy is your 2008 purchase of the Peoria Rivermen of the AHL for $3.5 million?
Checketts: That was within the last several months. It’s really more about the strategy of developing players, because in the new NHL labor world, it’s very hard to buy team success. You really have to grow it. So the reason for us to buy the Rivermen was to control our pipeline of young players. Now we have a place, only three or four hours away, where we can send all of our young guys to develop. But it’s more than that. We now send ticket salespeople there. We send suite salespeople. We send sponsorship salespeople to be trained in a place where total revenues are $2 or $3 million—it’s not going to kill us at all. We can put good coaches there and good executives there, and then we have a pipeline of young talent—both players and executive—coming up to the big club.
Kaizen: And possibly taking the Blues to Sweden to play the 2009-2010 season opener against the Detroit Red Wings?
Checketts: We are taking them, yes, for two games against the Detroit Red Wings.
Kaizen: Another part is supporting Jeff Cooper’s St. Louis Soccer United group to bring an MLS expansion team to the St. Louis region?
Checketts: I think it is still a possibility. St. Louis happens to be a great soccer market and, because we’re in the soccer league through Real Salt Lake, we have a voice to try to help make that happen. But it’s no more than that.
Kaizen: How does St. Louis compare with New York? You were very successful overall in New York City, the world’s largest sports and media city, and now you are focusing on St. Louis, a mid-sized city. Are you applying the same general methods that worked in New York, or does St. Louis pose different challenges?
Checketts: There’s only one newspaper here, so there’s really no competition to scoop each other or to be more exaggerated than each other. When in New York you had nine newspapers, and every press conference we did we’d have twelve cameras, sometimes twenty cameras. Here, we’ll have three or four cameras. So there isn’t the same level of competition to scoop each other or to get something out of you that leads you to have some big story. It’s much more relaxed and much more fair, frankly.
With the media in New York, I got to the point where it was a game with me. I would say to everyone, “If you don’t feed the wolves, they will kill you.” I really believe that most writers, most journalists—if you are straightforward with them and you kind of give them a story, they will accept it. So I got treated very well in New York because I was pretty open with people. But it’s much easier here.
Kaizen: You have also invested strongly in soccer, spending about $15.5 million to establish a Major League Soccer franchise, Real Salt Lake. Soccer has not traditionally had a strong following in the U.S. How do you see that changing, and what potential do you see in soccer?
Checketts: Well, I’ll challenge you on one thing you said. I think soccer has had a strong following in the U.S., it’s just that they follow the European teams or they follow the World Cup. The finals of the World Cup in 2006 were watched by more people in the U.S. than the NBA finals or the World Series. Now that’s the first time that’s ever happened. And the reason is that there’s a changing population—many more Latinos, Hispanics, many more Europeans and Eastern Europeans—who have an appreciation of good soccer. There is no question in my mind that there is going to be a very established, successful soccer league in the U.S.
The question is: How do we get in a position to have the best talent here? Because one thing Americans think they deserve, frankly, is the ability to watch the best talent. They get to watch that in the NFL—there’s no other football league like that in the world. The NBA has all of the best players in the world; they play in the U.S. Now, there might be some in China, there might be a few in Europe, but far and away, if you’re LeBron James, you’re going to play in the NBA. In major league hockey, even though there’s a Russian league, in the National Hockey League, those are the best players. But in major league soccer in the U.S. we don’t yet have the best talent. There is a chicken-and-egg problem, because until you can build the revenues up, how do you afford to pay Ronaldo and Ronaldinho and Kaká and David Beckham? We brought Beckham here, but he’s so far and away the biggest name that we’ve ever had in that league, and until we can have one of those in every town, it’s going to be tough.
Kaizen: You mentioned the changing demographics, which is one factor. Another issue is the attention span. And we already have a number of major sports. Setting aside the European and Latino demographics, is there a chance to make headway with the more traditional viewing audiences?
Checketts: This is why the league has to have twenty or twenty-five years of experience. People say to me, “I’m not that into soccer.” And I say, “Well, you’re not who we’re after, frankly. It’s your child or your grandchild who grows up playing soccer and then, to this point, hasn’t had anywhere to go with it.” When you start high school, you drop away from it. But that’s changing now. High school programs are better; college programs are better.
Kaizen: The super-talented individuals at the high-school level make their decision, and part of it is a money decision.
Checketts: Which means that Terrell Owens is not going to play soccer, even though he’s 6’9” and can run like the wind. He’s going to choose the NFL because he can make $7 or $8 million a year. But that will change. It’s not a great television sport yet either, but high-def is making it a better television sport.
Kaizen: So you’re looking at a generation?
Checketts: I think so. And the U.S. World Cup has got to get to the point where it can compete. If we really want soccer to make it here, we’ve got to get enough of our best athletes to play soccer that the U.S. team can go to the World Cup and get to the final four.
Kaizen: Real Salt Lake now plays in the gorgeous new Rio Tinto Stadium, which opened late in 2008. How big an investment was the stadium?
Checketts: It was $110 million with land and infrastructure—$45 million in public money; the rest was private investment.
Kaizen: This takes us into the controversies over the funding of sports venues. The most common practice has been for major sports complexes to be developed with a combination of private and public funds. Is that how it is with Rio Tinto?
Checketts: Yes, it was very controversial.
Kaizen: One part of the controversy is ethical, asking whether it is proper to use the tax dollars of people who are not sports fans to pay for the enjoyment of sports fans. What do you think of that issue?
Checketts: Well, I think we solved it, but what we couldn’t communicate to people was that we solved it. Because even today, most people in Utah believe that we took money right out of their pockets that was supposed to go to schools or highways, when in fact what we took was a hotel tax which was being paid by tourists. And that hotel tax had already been set aside. It could only be used for one thing and that was to promote tourism in Utah. If that’s the case, you have to decide: do you want to go buy some more “Ski Utah” ads in New York or Chicago, or do you want to divert what I think was a small amount of money, $45 million, to create a soccer team?
And this is what we did: we created a stadium that’s going to host the MLS All-Star game this year on July 29th. It will be broadcast in 144 countries, and when that broadcast opens, you will see a fly-in and you’ll see the snow-capped mountains, and they’ll remind people this is where the Winter Olympics were held in 2002. To me that is a much better advertisement for Utah than what you can buy on the screen. But believe me, I haven’t been able to get people to understand that those are the taxes that we used.
Kaizen: Are there other factors that make it worthwhile for the government officials who have to make that decision?
Checketts: One argument that I made was: How many jobs do you actually create by spending money on advertising in New York or Miami on “Ski Utah”? One might argue that you create jobs in the ski industry. I don’t think so. But what I do know is we created 600 full-time jobs by building a stadium. And the taxes the stadium will throw off, in terms of sales tax and property taxes, will far outweigh what the government invested in hotel taxes. Any public-private partnership—especially now, but even a few years ago—is going to be controversial, is going to get fought about.
Look where we are today, where we’re bailing out banks. That seems like such a miniscule argument back then, now, compared to the trillions of dollars that are going to be spent to save the economy.
I tell this to students that I get a chance to talk to all the time: If you’re going to be in a public enterprise—an enterprise that has a high profile—you’re going to get criticized. You better have a very thick skin to be in sports, because if you’re not getting beat up for trying to build a new stadium with public money, you’re getting beat up for not signing the star center soon enough and losing him to free agency.
Kaizen: So your argument has three legs: the tax money used was dedicated for that purpose; the job creation argument—the 600 jobs as opposed to spending it other ways; and then spin-off benefits that come from tax valuation, real estate valuation, etc.
Another line of argument is economic—that sports facilities have to be so expensive these days that only governments can raise that kind of money. Is that true? Would Rio Tinto have been viable without the government funds?
Checketts: No. We wouldn’t have built it. It couldn’t get done, and most projects in sports can’t get done today without government funding. I don’t know many that we could go back and find that have been totally privately funded.
Kaizen: Another argument concerns spin-off economic benefits and increased tax revenues. Will SCP or the State of Utah be actively analyzing the Rio Tinto Stadium’s economics to measure whether those benefits exceed the costs?
Checketts: It won’t be the State of Utah, but there’s definitely a plan in place that goes with public relations, where we will keep the public informed. We’re not ready to blow the horn yet because we just opened the stadium, but after two to three years of operating history and taxes paid and jobs created, we will clearly tell that story.
Kaizen: You have been greatly successful in sports business. Would you be as happy now if you were equally successful in business but not in the sports world?
Checketts: Boy, that’s a great question. I don’t know. I get a big thrill out of winning. I really do. I love to put together a team of people and see them succeed. That’s the biggest adrenaline rush for me, is to get to the NBA finals with the Knicks in three years after taking over, and being in Houston, playing in game 6 and game 7 for a world championship. That’s an experience that I can’t begin to describe.
When we opened our stadium in Salt Lake after all of the controversy and all of the criticism, and then our team that we put together made it to the Western Conference finals—so we were playing a game at home with a chance to go to the Superbowl of MLS, as we would have been in Los Angeles the following week playing in the championship—that was a great night. That’s hard to describe. The stadium absolutely packed with people, the whole second half all of them on their feet. It sounded like a video game to hear them “ooh” and “aah” every post that was hit and every corner kick that almost went in, all standing and using these clackers. It was a beautiful night out there.
So there are many rewards but there are lots of sleepless nights and there’s a lot of stress that goes with it. It’s like anything else—nothing comes easy here and it takes a solid, iron will, but it’s very rewarding.
Kaizen: One hears comparisons of sports to other parts of life —“Sport is like business,” “Sport is like politics,” “Sport is like war,” or since some sports plays seem beautiful and we can be carried away watching a game the way a good book or movie can carry us away—so “Sport is like art.” Do any of those ring most true to you?
Checketts: I really do think it’s like life. This sounds way too dramatic: “They agony of defeat,” “The thrill of victory,” all those lines that get thrown out there, which are a great description. The clichés work and the stories are great. The stories of human performance and sacrifice and faith and belief and integrity—they’re all here. It’s a great business.
Kaizen: Playing sports as a youth can teach many life lessons—about the connection between effort and success, temptations to cheat, facing competition, coming back from a big loss, leadership, taking pride in your accomplishments.
Checketts: Teamwork, hard work, preparation. It’s very powerful.
Kaizen: Do you think sports could or should play a bigger role in the education of children for adult life?
Checketts: I think most parents would say it plays too big of a role. Kids start to feel stresses early in life, particularly if they don’t have natural talents or gifts, it might be something that makes them feel inferior to others. We’re not all blessed with the same gifts and talents.
But I think overall, even though you hear horror stories about parents out of control and people who end up pushing their children too hard, I think the net benefits far outweigh the costs. And I’m not sure I would be an advocate for it to play a bigger role, but I would be an advocate if I thought it was going to take a lesser role. I think it’s about where it ought to be in our lives these days. I love to coach kids and I think that there will come a time in my life and career where I will be anxious to slow down, and one of the things I would love to do is coach.
Kaizen: About leadership in particular you have said, “As a leader, it becomes your challenge to be able to identify people who at a certain point in time rise to the occasion.” What traits do you look for when hiring or promoting key people?
Checketts: It’s almost impossible to identify that in interviews but you can learn a lot about people based on their past performance.
We have this problem with the St. Louis Blues right now. And as I gave them my annual State of the Franchise Address just before the start of training camp, I said to them, “The thing that this team needs to learn to do is to win, and to grab hold of a game in the last five minutes when you have a one goal lead, on the road.” It’s actually that simple. You’re up three to two, seven minutes left in the game last night in Nashville, you should win that game. The right kind of toughness, mental toughness, just takes the other team and puts it away. And we have not done that enough this year. And it’s more about our inexperience than our talent. The guys that we have now will learn to do that.
That was the biggest change we made in the New York Knicks. We took that collection of talent and we taught them to win. And we had one of the most winning coaches of all time, Pat Riley, who schooled the players in that, who had a certain mental toughness that he could instill that kind of will in them.
I always looked at coaches in the NBA and I said, “What is their record in games that are decided by three points or less?” That, to me, separates a great coach from a not-so-great coach, because that’s where coaching really has an impact—in games decided by three points or less.
Kaizen: Can we break “mental toughness” down a bit? Is it a matter of saying, “I am going to win?” Or being able to handle your emotions or being cool-headed when the pressure is on? What makes someone have mental toughness?
Checketts: It is instilled by a coaching staff who understands that concept. It is a wise coach who can tell immediately on the faces on his players when he needs to take a timeout, when he needs to do something differently, when he needs to disrupt the flow. Then he learns to trust a certain group of players that he’s going to put on the ice or on the court in the last three to five minutes of the game to get the right things done.
Kaizen: Is there an analogue to that on the business side of things, when you as the owner or CEO are picking talent for various positions?
Checketts: For instance, can you as head of Sponsorship Sales sit down with Scottrade and negotiate a fifteen-year naming rights deal for $40 million? Can he, at the end of the day, close? And Peter McLoughlin, whom I hired as CEO here, had had 23 years with Anheuser-Bush and had negotiated the Budweiser deal at Madison Square Garden with me. So I already knew he could close. He’d been sitting on the other side of the table many times and I knew he was a closer, and that’s how he’s proved out to have that skill.
Kaizen: At all stages of your career you have been simultaneously running several operations and planning future ones. Where does all your energy come from?
Checketts: I think it comes from anxiety, I guess. I don’t have anything, necessarily, I’m trying to prove anymore. If I set out to be in this business for 40 or 50 years as my career, I wanted to look back and say, “I did the very best I could,” and, “I learned enough and developed enough skills and created enough value that I could be considered one of the best in the field for a long time.”
So that’s what drives me now—as I started out saying—is to create environments where really extraordinary people can do their best work. That’s my value. Create an environment where John Davidsons, the Bill Mannings, the Jason Kreis, the Pat Rileys, whoever it is, can step into a situation where they can do their best work. If that’s what I accomplished, then I’ll feel like I accomplished a lot.
I put a high value on results—I want to win titles and Stanley Cups and all of those things. But it starts with identifying and hiring extraordinary people and then supplying them with all the resources and the environment to do their very best work, to flourish in what they do.
Kaizen: Do you have time-management recommendations for young people who want to learn how to get a lot done, without going crazy?
Checketts: Well, “without going crazy” is the key phrase. I’ve always had great assistants. I can’t tell you how much value I put on a great assistant, and I’ve always been blessed with great ones or I’ve been able to identify and find ones.
In the 1980s I remember I had the time-management system put out by Benjamin Franklin, where every day started with a prioritizing, so I did that. And now I’m afraid I’m a Blackberry addict.
But the real key to that is constant communication with an outstanding assistant, who I’m constantly prioritizing with. She really runs the show. After I lay out what we’re trying to achieve, she really plans everything else, and all I have to do is follow it.
Kaizen: When leaving Madison Square Garden in 2001, you bought your employees a gift—a table-top scale—the scale being symbolic of the need to balance one’s life. How have you managed to balance your ambitious career goals with your other important life goals, such as your family and other relationships?
Checketts: I think about it all the time, and I think if you’re not thinking about it, then you’re probably not getting the kind of joy and fulfillment out of your life that you should. If you become extreme in any of those cases—either an extreme work addict, which is easy to do in this business, or extreme family/personal—neither one works. So that was why the scale was meant to say, “We have to have a balance in our life.”
In my view, the best people are people who have outside interests, they have hobbies, they have people who are meaningful in their lives, so they have a certain stability about all that which allows them to perform well at work. And if you neglect that personal side, that relationship with your children, your family, your partner, you will probably be less effective at work. People need vacations, they need time off, they need personal days, they need to take care of themselves. And as a manager-owner, if you allow that and encourage it, then I think you always get better performance.
Kaizen: If you had to pick just one, which of your accomplishments has given you the most pride?
Checketts: I guess I would say that my proudest one is probably the creation of a charitable enterprise at Madison Square Garden to take care of after school kids. When I say “after school kids,” these are kids who get out at 2:30 in the afternoon and return to an apartment where there is no parent there. Seventy percent of kids born in inner-city New York were born to a single parent. So what has happened is that this after school issue has become a huge issue. So we started something called the Cheering for Children Foundation at Madison Square Garden. It’s now called the Garden of Dreams Foundation. And it was meant to create after school programs for New York City kids. And it involved our teams, our players, our coaches. Every time I signed a player I’d get right to the point where I could set the contract in front of him, and I’d say, “Now look, before you sign this, I want $100,000 a year for our charity to take care of after school kids. Don’t sign this if you’re not willing to do that.” For some player who’s going to make $3 or $4 million, it seems like a small price to pay—a tax deductible $100,000 gift. But then we took that money and we created after school programs all over the city, where kids could leave school, go and play an organized game of street hockey, basketball, get on a laptop, do their homework, get a tutor. They had a place to go until mom or dad or grandma or grandpa or whoever it was would come home at 6 p.m. So we had them from 2:30 to 6, at a place where they were safe and well-protected.
Kaizen: And, looking back, which of your projects was the most fun?
Checketts: There’s a lot of those. I loved renovating Radio City Music Hall. That was really thrilling for me because, first of all, it took me two years to buy it, two years of negotiating with one of the toughest real estate guys in New York—just over the top. We finally made a deal at 4 a.m. one morning in his apartment, only because I said, “I’m not leaving until I make a deal here.” So we went to dinner, we closed that restaurant. We went to a club; that finally closed at 2. I said, “I’m not leaving.” We finally went to his apartment, and at 4 a.m. we shook hands.
And then I set out to renovate the whole place—nine months, $70 million, to make it exactly what it was in 1932 again, because it was really tired and run down. But we started peeling paint and replacing chandeliers with exact replicas of what was there before. We even replaced the carpet with the same carpet that was there in 1932. We had to have it made. But all these little touches were so important to me and it was like I was bringing back early 20th century New York again. I’m going to do that again here with St. Louis’s Kiel Opera House.
Kaizen: The last two years especially look to have been a whirlwind of activities for you. What’s next for you and SCP? Are you working on new plans, or are you focused primarily on solidifying your already-large number of big projects?
Checketts: Operationally, we’re pretty sound now. The company works. So we’re ready for at least one and maybe two new projects in 2009. The only question is, “Will the economy cooperate with us?” So, will the credit markets open up, because I’d really like to buy a team in Europe, I’d like to buy a soccer club in Europe—one of the big soccer clubs. So we’ve been pursuing that. And then there are opportunities in both the NBA and the NFL that we like, and maybe even a baseball opportunity.
What SCP does is scalable and I think it’s very possible that, in the next two or three years, we will own three to four other facilities—stadiums, three to four other teams, and perhaps the sports networks that go along with that because our business is really based on sports, entertainment, and media.
Kaizen: Given the huge expansion of professional sports over the past twenty years, where do you see the biggest opportunities for the next generation of sports entrepreneurs?
Checketts: Well, I always tell young people who are interested in doing this that I think they need to get a solid education in business, communications, finance, some vocation. And then they need to spend a couple of years out and about, working in all of the areas that involve this industry. It could be sponsorship, it could be operations, it could be the contract side—there’s so many places for them to spend time.
And then I think they need to go to graduate school. I really think that made all the difference for me. I like an MBA, but I also like a JD. If you look at all of the successful commissioners, they’re all lawyers. They’re not businesspeople per se, they’re all lawyers: David Stern, Gary Bettman, Paul Tagliabue. Professional sports has become so contractual in the important relationships and labor becomes such a big deal, that a legal background, for someone who wants to be in this industry, is very valuable.
Kaizen: What is the best advice you’ve ever been given?
Checketts: The most influential person in my life was my father. Even though Covey was very powerful, Stern has been a great mentor, and there are others along the way that I’ve certainly learned from, I would say it was my father. My father was a marine in World War II and a tremendous man—just a great, great person. But he was also a lover of poetry, and he made us memorize poetry when we were growing up. He actually paid us money. That’s how we earned money from him sometimes if we needed to go to the movies or a date or something—we needed to memorize a poem.
Dad loved Tennyson but his favorite was Kipling and so that very simple, powerful poem “If” has played a big role for me. There are more times than not, especially in the early days in New York when I was under pressure and thinking maybe the job was too big for me, those lines, in my father’s voice,
If you can keep your head when all about you
Are losing theirs and blaming it on you,
If you can trust yourself when all men doubt you,
But make allowance for their doubting too;
If you can wait and not be tired by waiting,
And it goes on:
Or being hated, don’t give way to hating …
And risk it on one turn of pitch-and-toss,
And lose, and start again at your beginnings
And never breathe a word about your loss.
I mean, you would have thought that Rudyard Kipling had been running sports teams because it’s the perfect description of what it’s like and how you feel, and it has been a real inspiration to me. And it’s always in my father’s voice because I took over the Knicks in 1991 and he died in 1988, so I was really missing him. I thought that he would’ve gotten such a big kick out of my suddenly being in New York, but I didn’t have that chance. Maybe he did.
This interview was conducted for Kaizen by Stephen Hicks. To learn more about David Checketts and SCP Worldwide, please visit www.scpworldwide.net.
© 2013 Stephen R. C. Hicks. All rights reserved.
TEN9EIGHT, an inspiring documentary that follows several young entrepreneurs (a few are graduates of Kaizen interviewee Steve Mariotti’s NFTE program), opens in several major U.S. cities this Friday, November 13th.
Quoted from the New York Times article about the film: “I hope millions of kids see it,” said Steve Mariotti. For some youngster out there, he said. “it will be life-changing.”
See the TEN9EIGHT website for more information, including clips and showtimes. Watch the trailer below.
Dr. Stephen Hicks, CEE’s Executive Director, talks with Fall 2009 guest speaker Dr. Jerry Kirkpatrick about his recent book, “Montessori, Dewey, and Capitalism”. Dr. Kirkpatrick compares and contrasts the educational philosophies and methods of John Dewey and Maria Montessori, and discusses the potential benefits of such methods in a capitalist society.