Transcripts For BLOOMBERG The David Rubenstein Show Peer To

Journalist. Nobody else would consider myself a journalist. I began to take on the life of being an interviewer even though i have a day job of running a private equity firm. How do you define leadership . What is it that makes somebody tick . Youve have been doing Value Investing for 36 years. What is a Value Investor . John a Value Investor is someone who is looking for bargains. Were trying to find stocks that are selling at a 40 discount to what we think their private market value is. We want to make sure its got a low p ratio, a strong Balance Sheet and has the ability to really withstand the inevitable storms that happen in the stock market. David Warren Buffett, is he a Value Investor . John he is the greatest Value Investor of all time. Sometimes people talk about whether Michael Jordan is better than lebron james. There is no question when it comes to investing that warren is the best ever. David but Value Investing, as i understand it, is easier done when the markets are down. When the markets are high, there are not as many bargains. What have you been doing the last 10 years because markets have been very high . John its been interesting. We were able to buy terrific bargains right around march of 2009 when the market was bottoming. We got some great brands, Companies Like cvs, royal caribbean, cb richard ellis, true bargains. But as the markets recovered, some sectors have stayed really, really cheap, in particular media. We love Companies Like viacom and Madison Square Garden Network. Those stocks are still really cheap. Financial services companies, some that you know well, Companies Like lazard or kkr. There are some sectors of the market that just seemed to be totally neglected even as the markets recovered. David lets talk about the economy. The United States economy was in a recession that ended june, 2009. So now for about 10 years we have been in a growth cycle, and it is one of the longest growth cycles in our countrys history. But therefore, there have not been a lot of depressed stock prices for this period of time. So are you hoping at some point there is a recession so we can get lower stock prices and you can buy more things at value prices . John we like to buy bargains, we like seeing sectors that are cheap, but we do not want to see a recession. All of the turmoil that happens, the impact on our society and our citizens. Recessions are not great for america. David so suppose i say i watched you, and you are a good Value Investor. Ill give you some money. What kind of rate of return can i expect from your products . John over the 36 years we have been able to compound money at roughly 11 a year, and that is something we are really proud of. Our ariel fund has been around since 1986, so it is 33 years old and its actually number one in its category going back to that period of time. The neat thing is that we are one of those rare firms that has that 36 year record with the same Portfolio Manager in charge. I have been fishing in the same fishing pond of not only value stocks but small and midsize value stocks the entire timeframe. We have a great team of people that i work with who have been with me. Some have been with me close to 30 years, some 20 years, some 15 years. So we are a team of grizzled veterans. We think we can replicate our performance in the future. David what is your best single deal that you can talk about . John i think, over time, one of our best companies we have ever bought was royal caribbean. We were able to buy that at the height of the financial crisis when everyone thought that people would never cruise again, and that stock has gone up close to 15 times itself from the bottom. We still think it is an extraordinary bargain here today. A favorite of ours today, we find, we think, as i said earlier, some of the media stocks are really, really cheap. We are optimistic that the Madison Square Garden Network will do really, really well when the knicks finally come back and start to win championships again. Its going to be great for new york city and great for that stock. David lets talk about how you got started. You grew up in chicago. Both of your parents were fairly prominent people, as i understand it. Your father was in the tuskegee air corps. What is the tuskegee air corps, for those who may not know . John that was the group of Fighter Pilots that were part of world war ii, the first group of africanamerican Fighter Pilots that had a chance to really participate fully in the war. Before then, people did not think that africanamericans were qualified to fly aircraft in major wars. So my dad was in the first group of the 99th fighter pursuit squadron that went overseas and fought in world war ii. David when your father came back after world war ii, what did he do . John he showed up at the university of chicago law school. He wanted to go to the best law school, and he thought the university of chicago was the best. At first, they did not accept him because he had not taken all the appropriate tests and there were not many africanamerican students at the law school at the time. But he asked them if he could take a test. They allowed him to take the test. He showed up in his captains uniform, and i think the two things together, showing what a patriot he was and how good he did and what a great result he had on those tests, he was able to talk his way into the law school. David ok. And your mother . John he met my mom there the first day. David she was the first female africanamerican at the university of chicago law school. John she was. She graduated 1946, and my dad, in 1948. David he built a law practice and she built a law practice . John they both had their own independent law practices, because back then you could not work in a big downtown law practice. My mom worked on divorces, and my dad did mostly real estate and bankruptcies. David you were the only child . John i was. David like myself, an only child. So the advantage of being an only child is your parents put a lot of time and attention into you. Was that a good thing for you . John it was. They focused everything on me. They got divorced when i was three years old so i had two different lifestyles. My dad lived in a studio apartment not far from downtown. My mom lived in more of a large house in hyde park. They were different political persuasions. My mom was republican. My dad was a democrat. So i learned to sort of navigate two different worlds each and every week. David and you went to the university of chicagos famous lab school, which is a school that is wellknown for i guess its k12 . John its a k12 school. I got there in ninth grade. Terrific place. David and in addition to your academic pursuits, you were a basketball player . John i was. David and you went to princeton and you played basketball at princeton . John i was very fortunate to play basketball at princeton for the hall of fame coach pete carril. He was a legend and someone who really transformed my life. David you were the captain your senior year . John i did get to be a captain, against all odds. David did you think you were going to be an nba player . John coach carril made it very clear that i had no hope to be an nba player. He told me when i was a sophomore and i made the team i was the last person on the team, the 15th person on the team. He said, john, you are legally blind, and i cannot teach vision. You cannot dribble, but you work so hard we will keep you around for a few more days. David so you graduated in 1980 . What did you want to do . John i had two role models that were stockbrokers, one across the street from campus on nassau street, a guy named mike perkins at laidlaw, adams peck. He helped me, showed me at Firestone Library where to go and research companies, how to find newsletters on the stock market. And then i had a broker at home in chicago named stacy adams, who was the first africanamerican stockbroker on lasalle street, and i would go and sit with him and watch the tickertape go by. So i thought, if you loved the stock market like i did, you would become a stockbroker. I was forced to be hired by William Blair and company in chicago. The managing partner at the time, ned jannotta, was a princeton grad, played football at princeton, and very close to don rumsfeld. Ned helped recruit me there and gave me a great opportunity to start my career at a great firm. David you stayed there 10 years or so before you were ready to do Something Else . John no, i stayed about 2. 5 years. David thats enough time to learn the business . John i thought so. I had confidence in my strategy of investing in small and midsized undervalued securities, and as i said earlier there were not many people doing that. So we felt we were kind of pioneers in the small value place. There were a few firms like chuck royces firm, ralph wanger at acorn funds, a couple of others, but not many people like to focus on that area of the market. David you started your own company at what age . John i was 24. David and where did you get the money to capitalize it . John well, i went to, of course, friends and family. I tell people my mom gave me everything she had that was liquid. My dad gave me what he thought he could afford to lose. After that, i went to some of my former clients, my High School Buddies from the lab school, anyone that could give me 10,000 to help me start the company. David how much capital did it take to start it . John roughly a little over 200,000. David ok, and that was what year . John that was in 1983. David and where did you get the name ariel from . John i love the way the name sounded. It was a character on a favorite tv show of mine. I always said, if i have a daughter, im going to name my daughter ariel. But i had the company first. David to keep up with what is going on the world, do you use computers . John i actually dont use a computer. David do you ever go on the internet . John i do have the internet on my phone, but im one of these folks that ive never actually had a computer. Ive never turned a computer on. David do you use emails . John i do not email. David so how do people get messages to you . Do they send a pigeon with a message . David how much are you managing now . John about 13. 5 billion. David you managed more at one point before the great recession. It came down, as was the case with many companies. In fact, how much money did you actually go down to . How low did you go . John we got under 3 billion. David do you think you maybe should fold up shop when you are under 3 billion after having 20 billion or so . John no, not at all. We had learned one of the lessons i learned from my father and melanie hobson, our president , agreed completely was we should always keep money saved for a rainy day. Sure enough, we had a hurricane in the financial crisis, but we had saved enough capital in our company so we could continue to pay our salaries and keep our key people in place during that tough, tough period. So that was really, really an important part of our approach, and then we bought our best stocks at really bargain prices during that period. I think people like that, that we stuck to our guns and believed in what we were doing. David some people say it is impossible to beat the markets so therefore one should just buy index funds. In your case, you do not have index funds necessarily. You pick stocks. Why should somebody give money to a stock picker rather than to somebody whos just going to reflect whatever the s p 500 is or whatever the index might be . John i think the reason to do that is there are talented Money Managers out there who can add value, and it has been proven over time that there are people who have that gift and that creativity and that vision to buy securities and outperform the markets. It is hard to find them, they are few and far between, but i think it is worth the effort. And i think often i say it is like sports. You root for your local teams, even though you know that half the teams are going to lose and half the teams are going to win. Everyone cannot be the World Champion every year, but you still like to be engaged and involved in the competitive pursuit of trying to find a championship or support a champion. I think it is the same with Money Managers. David to keep up with what is going on in the world, do you use computers . John i actually dont use a computer. David do you ever go on the internet . John i do have the internet on my phone, but im one of these folks that i have never actually had a computer, ive never turned a computer on. David do you use emails . John i do not email. David so how do people get messages to you . Do they send the pigeon with a message . How do they get a message to you . John they can just call me. David you are on a number of corporate boards, and you are legendarily very loyal to your corporate boards. One of the boards you are on is mcdonalds. It is said, i do not know if it is possibly true, that you eat mcdonalds every day somewhere in the world. Wherever you are, you eat one meal a day at some mcdonalds. Is that true . John it is just about every day. I mean, there are exceptional times when you are traveling where i cannot actually get that done, but i love being in mcdonalds. It is sort of my home away from home. David did you do that before you were on the mcdonalds board . John i have been doing that since i got home from college. I just love it there. David and you think its healthy for you . John it seems like it has worked out ok so far for me. David when you were interviewing to be on the board, i presume they interview to be on the board, did you mention this . Did they think this was unusual . John i still remember having breakfast with andy mckenna, who became the nonexecutive chairman of mcdonalds, and jim cantalupo, the ceo, and it went marvelously well. They could tell how much i loved the brand. David you used to play a lot of three on three basketball . John yes. David in chicago, did you ever play basketball with barack obama . John several times. David is he that good a player . John he is a very good player. He knows what he is doing. He is a little bit of an in between size. Hes sort of 62. 5 or so. David he cannot dunk the ball, right . John i do not know about that. David you think he could dunk the ball. John i think he probably could. He is a little lefthanded, but hes a very good player and makes clutch shots all the time under pressure. David there was another player in chicago maybe better than even barack obama named Michael Jordan. Did you ever play against Michael Jordan . John i did get to play against michael around chicago a lot. He would be at different clubs, and youd get to be on the court with him. David do you think he was overrated . John no. He is, i think, the greatest player of all time. David at one time i understand you played against him and you beat him, the only person who ever beat him in a oneonone game. John it was a very fortunate circumstance. I used to go to his senior flight school, which is a fantasy camp for people 35 years and older. Every summer at the camp, he would challenge any camper to a short game of oneonone, first of three wins. Since no one had beaten him in the first seven years of the camp, i think he was kind of a little overconfident. He would let people make a basket or two before he would clamp down and shut people down. I also had the advantage when i played him, i think he had played 15 campers before he got to me. So he was kind of tired. So i snuck up on him, and coach carril always said that, even though i was not a good passer, i was a good oneonone player. And so i had a couple of tricky shots. In the last tricky shot, right as it was about to go in, you can hear michael say on the video oh no and that was really fun. David when one of the people you were playing basketball against, barack obama, told you he was going to run for president of the United States, what did you say . John i told him i thought it was a terrific idea. I remember he came over to the office to tell me his plans. I know sometimes that people sometimes wait a little bit more to get a little more seasoned, but i felt that he was really ready. I was totally confident in his ability to be the commanderinchief, and so i encouraged him strongly to run. David and did you get involved in the campaign . John i did. I got to be cochairman of the Illinois Finance Committee with a friend of yours, jim crown. We worked for penny pritzker, and that was a magical thing to be able to be involved with on the ground floor. Once he was elected president , i got to be cochairman of the inauguration, and that was special. And what was really special, when he first got elected, we were the temporary transition headquarters at ariel. So for three days he was there helping to form the government. That i will never forget. David you helped him in his campaign, he is using your offices for the transition. Did he offer you a job and if so why did you not take it . John we never really had that conversation. I love investing, and i love our business and i have a great team, as i mentioned earlier, at ariel, so there was never a thought i would go to washington. David are you worried about a recession in the near future . John i am not worried about a recession. Warren buffett always says that last century the dow started 66 and ended at over 11,000. And we had two world wars, a great depression, and president s assassinated it was an extraordinary 100 years, but the market always marches back. David now, in the philanthropic area you are a philanthropic leader in chicago what are the areas of interest you have . John we have been working hard on the idea of how to solve the wealth gap in our country between minority communities and the majority communities. There is all of this data that shows how the wealth gap has got larger, particularly between africanamericans and white americans. We started a Small Public School over 22 years ago to teach Value Investing<\/a> for 36 years. What is a Value Investor<\/a> . John a Value Investor<\/a> is someone who is looking for bargains. Were trying to find stocks that are selling at a 40 discount to what we think their private market value is. We want to make sure its got a low p ratio, a strong Balance Sheet<\/a> and has the ability to really withstand the inevitable storms that happen in the stock market. David Warren Buffett<\/a>, is he a Value Investor<\/a> . John he is the greatest Value Investor<\/a> of all time. Sometimes people talk about whether Michael Jordan<\/a> is better than lebron james. There is no question when it comes to investing that warren is the best ever. David but Value Investing<\/a>, as i understand it, is easier done when the markets are down. When the markets are high, there are not as many bargains. What have you been doing the last 10 years because markets have been very high . John its been interesting. We were able to buy terrific bargains right around march of 2009 when the market was bottoming. We got some great brands, Companies Like<\/a> cvs, royal caribbean, cb richard ellis, true bargains. But as the markets recovered, some sectors have stayed really, really cheap, in particular media. We love Companies Like<\/a> viacom and Madison Square<\/a> Garden Network<\/a>. Those stocks are still really cheap. Financial services companies, some that you know well, Companies Like<\/a> lazard or kkr. There are some sectors of the market that just seemed to be totally neglected even as the markets recovered. David lets talk about the economy. The United States<\/a> economy was in a recession that ended june, 2009. So now for about 10 years we have been in a growth cycle, and it is one of the longest growth cycles in our countrys history. But therefore, there have not been a lot of depressed stock prices for this period of time. So are you hoping at some point there is a recession so we can get lower stock prices and you can buy more things at value prices . John we like to buy bargains, we like seeing sectors that are cheap, but we do not want to see a recession. All of the turmoil that happens, the impact on our society and our citizens. Recessions are not great for america. David so suppose i say i watched you, and you are a good Value Investor<\/a>. Ill give you some money. What kind of rate of return can i expect from your products . John over the 36 years we have been able to compound money at roughly 11 a year, and that is something we are really proud of. Our ariel fund has been around since 1986, so it is 33 years old and its actually number one in its category going back to that period of time. The neat thing is that we are one of those rare firms that has that 36 year record with the same Portfolio Manager<\/a> in charge. I have been fishing in the same fishing pond of not only value stocks but small and midsize value stocks the entire timeframe. We have a great team of people that i work with who have been with me. Some have been with me close to 30 years, some 20 years, some 15 years. So we are a team of grizzled veterans. We think we can replicate our performance in the future. David what is your best single deal that you can talk about . John i think, over time, one of our best companies we have ever bought was royal caribbean. We were able to buy that at the height of the financial crisis when everyone thought that people would never cruise again, and that stock has gone up close to 15 times itself from the bottom. We still think it is an extraordinary bargain here today. A favorite of ours today, we find, we think, as i said earlier, some of the media stocks are really, really cheap. We are optimistic that the Madison Square<\/a> Garden Network<\/a> will do really, really well when the knicks finally come back and start to win championships again. Its going to be great for new york city and great for that stock. David lets talk about how you got started. You grew up in chicago. Both of your parents were fairly prominent people, as i understand it. Your father was in the tuskegee air corps. What is the tuskegee air corps, for those who may not know . John that was the group of Fighter Pilots<\/a> that were part of world war ii, the first group of africanamerican Fighter Pilots<\/a> that had a chance to really participate fully in the war. Before then, people did not think that africanamericans were qualified to fly aircraft in major wars. So my dad was in the first group of the 99th fighter pursuit squadron that went overseas and fought in world war ii. David when your father came back after world war ii, what did he do . John he showed up at the university of chicago law school. He wanted to go to the best law school, and he thought the university of chicago was the best. At first, they did not accept him because he had not taken all the appropriate tests and there were not many africanamerican students at the law school at the time. But he asked them if he could take a test. They allowed him to take the test. He showed up in his captains uniform, and i think the two things together, showing what a patriot he was and how good he did and what a great result he had on those tests, he was able to talk his way into the law school. David ok. And your mother . John he met my mom there the first day. David she was the first female africanamerican at the university of chicago law school. John she was. She graduated 1946, and my dad, in 1948. David he built a law practice and she built a law practice . John they both had their own independent law practices, because back then you could not work in a big downtown law practice. My mom worked on divorces, and my dad did mostly real estate and bankruptcies. David you were the only child . John i was. David like myself, an only child. So the advantage of being an only child is your parents put a lot of time and attention into you. Was that a good thing for you . John it was. They focused everything on me. They got divorced when i was three years old so i had two different lifestyles. My dad lived in a studio apartment not far from downtown. My mom lived in more of a large house in hyde park. They were different political persuasions. My mom was republican. My dad was a democrat. So i learned to sort of navigate two different worlds each and every week. David and you went to the university of chicagos famous lab school, which is a school that is wellknown for i guess its k12 . John its a k12 school. I got there in ninth grade. Terrific place. David and in addition to your academic pursuits, you were a basketball player . John i was. David and you went to princeton and you played basketball at princeton . John i was very fortunate to play basketball at princeton for the hall of fame coach pete carril. He was a legend and someone who really transformed my life. David you were the captain your senior year . John i did get to be a captain, against all odds. David did you think you were going to be an nba player . John coach carril made it very clear that i had no hope to be an nba player. He told me when i was a sophomore and i made the team i was the last person on the team, the 15th person on the team. He said, john, you are legally blind, and i cannot teach vision. You cannot dribble, but you work so hard we will keep you around for a few more days. David so you graduated in 1980 . What did you want to do . John i had two role models that were stockbrokers, one across the street from campus on nassau street, a guy named mike perkins at laidlaw, adams peck. He helped me, showed me at Firestone Library<\/a> where to go and research companies, how to find newsletters on the stock market. And then i had a broker at home in chicago named stacy adams, who was the first africanamerican stockbroker on lasalle street, and i would go and sit with him and watch the tickertape go by. So i thought, if you loved the stock market like i did, you would become a stockbroker. I was forced to be hired by William Blair<\/a> and company in chicago. The managing partner at the time, ned jannotta, was a princeton grad, played football at princeton, and very close to don rumsfeld. Ned helped recruit me there and gave me a great opportunity to start my career at a great firm. David you stayed there 10 years or so before you were ready to do Something Else<\/a> . John no, i stayed about 2. 5 years. David thats enough time to learn the business . John i thought so. I had confidence in my strategy of investing in small and midsized undervalued securities, and as i said earlier there were not many people doing that. So we felt we were kind of pioneers in the small value place. There were a few firms like chuck royces firm, ralph wanger at acorn funds, a couple of others, but not many people like to focus on that area of the market. David you started your own company at what age . John i was 24. David and where did you get the money to capitalize it . John well, i went to, of course, friends and family. I tell people my mom gave me everything she had that was liquid. My dad gave me what he thought he could afford to lose. After that, i went to some of my former clients, my High School Buddies<\/a> from the lab school, anyone that could give me 10,000 to help me start the company. David how much capital did it take to start it . John roughly a little over 200,000. David ok, and that was what year . John that was in 1983. David and where did you get the name ariel from . John i love the way the name sounded. It was a character on a favorite tv show of mine. I always said, if i have a daughter, im going to name my daughter ariel. But i had the company first. David to keep up with what is going on the world, do you use computers . John i actually dont use a computer. David do you ever go on the internet . John i do have the internet on my phone, but im one of these folks that ive never actually had a computer. Ive never turned a computer on. David do you use emails . John i do not email. David so how do people get messages to you . Do they send a pigeon with a message . David how much are you managing now . John about 13. 5 billion. David you managed more at one point before the great recession. It came down, as was the case with many companies. In fact, how much money did you actually go down to . How low did you go . John we got under 3 billion. David do you think you maybe should fold up shop when you are under 3 billion after having 20 billion or so . John no, not at all. We had learned one of the lessons i learned from my father and melanie hobson, our president , agreed completely was we should always keep money saved for a rainy day. Sure enough, we had a hurricane in the financial crisis, but we had saved enough capital in our company so we could continue to pay our salaries and keep our key people in place during that tough, tough period. So that was really, really an important part of our approach, and then we bought our best stocks at really bargain prices during that period. I think people like that, that we stuck to our guns and believed in what we were doing. David some people say it is impossible to beat the markets so therefore one should just buy index funds. In your case, you do not have index funds necessarily. You pick stocks. Why should somebody give money to a stock picker rather than to somebody whos just going to reflect whatever the s p 500 is or whatever the index might be . John i think the reason to do that is there are talented Money Managers<\/a> out there who can add value, and it has been proven over time that there are people who have that gift and that creativity and that vision to buy securities and outperform the markets. It is hard to find them, they are few and far between, but i think it is worth the effort. And i think often i say it is like sports. You root for your local teams, even though you know that half the teams are going to lose and half the teams are going to win. Everyone cannot be the World Champion<\/a> every year, but you still like to be engaged and involved in the competitive pursuit of trying to find a championship or support a champion. I think it is the same with Money Managers<\/a>. David to keep up with what is going on in the world, do you use computers . John i actually dont use a computer. David do you ever go on the internet . John i do have the internet on my phone, but im one of these folks that i have never actually had a computer, ive never turned a computer on. David do you use emails . John i do not email. David so how do people get messages to you . Do they send the pigeon with a message . How do they get a message to you . John they can just call me. David you are on a number of corporate boards, and you are legendarily very loyal to your corporate boards. One of the boards you are on is mcdonalds. It is said, i do not know if it is possibly true, that you eat mcdonalds every day somewhere in the world. Wherever you are, you eat one meal a day at some mcdonalds. Is that true . John it is just about every day. I mean, there are exceptional times when you are traveling where i cannot actually get that done, but i love being in mcdonalds. It is sort of my home away from home. David did you do that before you were on the mcdonalds board . John i have been doing that since i got home from college. I just love it there. David and you think its healthy for you . John it seems like it has worked out ok so far for me. David when you were interviewing to be on the board, i presume they interview to be on the board, did you mention this . Did they think this was unusual . John i still remember having breakfast with andy mckenna, who became the nonexecutive chairman of mcdonalds, and jim cantalupo, the ceo, and it went marvelously well. They could tell how much i loved the brand. David you used to play a lot of three on three basketball . John yes. David in chicago, did you ever play basketball with barack obama . John several times. David is he that good a player . John he is a very good player. He knows what he is doing. He is a little bit of an in between size. Hes sort of 62. 5 or so. David he cannot dunk the ball, right . John i do not know about that. David you think he could dunk the ball. John i think he probably could. He is a little lefthanded, but hes a very good player and makes clutch shots all the time under pressure. David there was another player in chicago maybe better than even barack obama named Michael Jordan<\/a>. Did you ever play against Michael Jordan<\/a> . John i did get to play against michael around chicago a lot. He would be at different clubs, and youd get to be on the court with him. David do you think he was overrated . John no. He is, i think, the greatest player of all time. David at one time i understand you played against him and you beat him, the only person who ever beat him in a oneonone game. John it was a very fortunate circumstance. I used to go to his senior flight school, which is a fantasy camp for people 35 years and older. Every summer at the camp, he would challenge any camper to a short game of oneonone, first of three wins. Since no one had beaten him in the first seven years of the camp, i think he was kind of a little overconfident. He would let people make a basket or two before he would clamp down and shut people down. I also had the advantage when i played him, i think he had played 15 campers before he got to me. So he was kind of tired. So i snuck up on him, and coach carril always said that, even though i was not a good passer, i was a good oneonone player. And so i had a couple of tricky shots. In the last tricky shot, right as it was about to go in, you can hear michael say on the video oh no and that was really fun. David when one of the people you were playing basketball against, barack obama, told you he was going to run for president of the United States<\/a>, what did you say . John i told him i thought it was a terrific idea. I remember he came over to the office to tell me his plans. I know sometimes that people sometimes wait a little bit more to get a little more seasoned, but i felt that he was really ready. I was totally confident in his ability to be the commanderinchief, and so i encouraged him strongly to run. David and did you get involved in the campaign . John i did. I got to be cochairman of the Illinois Finance Committee<\/a> with a friend of yours, jim crown. We worked for penny pritzker, and that was a magical thing to be able to be involved with on the ground floor. Once he was elected president , i got to be cochairman of the inauguration, and that was special. And what was really special, when he first got elected, we were the temporary transition headquarters at ariel. So for three days he was there helping to form the government. That i will never forget. David you helped him in his campaign, he is using your offices for the transition. Did he offer you a job and if so why did you not take it . John we never really had that conversation. I love investing, and i love our business and i have a great team, as i mentioned earlier, at ariel, so there was never a thought i would go to washington. David are you worried about a recession in the near future . John i am not worried about a recession. Warren buffett always says that last century the dow started 66 and ended at over 11,000. And we had two world wars, a great depression, and president s assassinated it was an extraordinary 100 years, but the market always marches back. David now, in the philanthropic area you are a philanthropic leader in chicago what are the areas of interest you have . John we have been working hard on the idea of how to solve the wealth gap in our country between minority communities and the majority communities. There is all of this data that shows how the wealth gap has got larger, particularly between africanamericans and white americans. We started a Small Public School<\/a> over 22 years ago to teach Financial Literacy<\/a> in the public school. We get young people to be prepared to pick their own stocks and make their own 401 k plan and all the things we need to do. We created a program with the university of chicago for minority students to work in the investment offices of major endowments. David your parents were prominent leaders in the Africanamerican Community<\/a> in chicago and prominent leaders in the chicago community. When you were growing up, and now that you live in chicago, do you feel discrimination or have you bypassed it . John i have to say, when people think about minority business it is typically around what they call supplier diversity. Construction, catering, things that are about procurement. My mom had this challenge when she was building her law practice. My dad did too. People did not think about hiring a minority lawyer to do their transactions. The same thing when it comes to Money Management<\/a>. We are the first africanamerican Money Management<\/a> and mutual fund to start in the countrys history. When we went to see people they never thought to hire someone who was africanamerican to manage their money or have our mutual funds in their 401 k plan. David you mentioned melody hobson. You are the ceo of the company, she is the president. John yes. David she also went to princeton, you hire people who do not go to princeton . John we do. David melody came from a challenged background, you would say, but she has become very well known. Tell us about her. John i met her when she was a prospective princeton student, 17 years old. We were trying to make sure that all of the local alumni were interviewing all the prospective students. And we had a special event for all the admitted students, and melody came. I sat her at the head table because we could tell throughout the process she was something really special. She sat next to a person who convinced her not to go to harvard and to go to princeton instead. She became a summer intern with us at ariel and she spent a summer interning in baltimore and had a great time. She joined us when she graduated. She says she is the only person who has the same phone number 29 years later, and she is taking on more and more leadership in the Company Every<\/a> year. She will be my successor. It is so wonderful to have a partner who is as tough and smart as she is. David you have your finger on the pulse of the economy since you have your eye on stocks. Are you worried about a recession in the near future . John i am not worried about a recession. We think longterm at ariel our logo is a turtle. We believe that patience wins. I always remind myself, Warren Buffett<\/a> always says that last century the dow started at 66 and ended at over 11000 and we had two world wars, a great depression, president s assassinated it was an extraordinary 100 years, but the market marches back. David are you not worried, for example, that the u. S. Government has 220 trillion dollars of indebtedness, or not so much . John not so much. Right now, as you know, inflation is staying very much under control. Interest rates are staying low which means that stocks are still undervalued in that environment. So we think that we have a way of adapting to whatever challenge this country faces. My confidence is really high that we will get through the problems in front of us. David in recent years, the income inequality in the United States<\/a> has become very evident. Is there anything policymakers can do to diminish the large income inequality that we now have . John i think that one, government needs to do a better job of making sure we have Financial Literacy<\/a> in public schools, in particular urban public schools, where we can get people exposed to markets and coming out ready to make the right investment choices, and be more effective entrepreneurs so because they are exposed to the markets at an early age. I think that is critical. David what do you think your legacy will be, and what would you like it to be . John i think our legacy will be that we were able to build the most diverse Money Management<\/a> firm in the countrys history with an extraordinary talented extraordinarily talented and diverse board of directors, and deliver performance at the same time. And, be role models for others to get into the sector. As you know, this is such a lucrative part of our economy, but has not been a diverse part. So we want to show people that it will be done and hopefully it will inspire others who want to follow in our footsteps and melodys footsteps and be successful in the Financial Services<\/a> industry. David no regrets about not going into private equity. John it never came up. And so we think about it from time to time, but we love picking stocks. David thank you very much for an interesting conversation. Thank you, john. John thank you very much. The following is a paid program. The opinions and views expressed do not reflect those of bloomberg lp, its affiliates, or its employees. This program is a paid advertisement from u. S. Money reserve. A company not affiliated with the u. S. Government or mint. Markets for coins and bullion are unregulated. Prices can rise or fall so buying these items carry some risk. 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