Magic Johnson on The $1B Nike Deal That Got Away | Full Conversation with a16z

There's only four billionaire people in sports. You have LeBron, you have Jordan, you have Tiger, and then we got Introducing the towering point guard from the Midwest. Number 32, Magic Johnson.

How you did it was not just sports, but majority from business. I don't just want to win in sports, which I have 18 championship rings. I also want to win in business. I'm going to do everything I can to make sure that deal or that partnership wins.

When we bought the Dodgers for 2.2 billion, everybody said we overpaid. Now it's 8 billion. The Commanders is 2 years old now, 6 billion. And now that the new stadium that's going to go even up higher.

We pour so much money into sports, and nobody's ever going to stop watching sports in America. Right now you got companies looking to buy teams. It's always been an asset class, but now people really see the long-term reality.

Most of the rich people before us took the knowledge with them. They didn't share it. This show right here today, we covered everything. There's nobody else on TV that can cover all the things you and I just covered.

Magic. Hey, Chris. Good to see you, man. Good to see you. It's a pleasure. You know, I'm glad you're able to come through today, man. Well, thank you, man. It's all the great things that you and I have been doing for these years.

Years and now we get a chance to sit down. I think this is important for a lot of people and a lot of different reasons, too. Absolutely.

Look, I think that, you know, like you said, this is a culmination, I think almost 10 years of from investments to conversations to, you know, bring having you come up to San Francisco talking about venture, expanding the portfolio and we wanted really just to take the time today to because, you know, you are one of the ultimate deal makers, businessmen, entrepreneurs, and that's also the same ecosystem that we have here at A16Z.

And I felt like there was no better way to have a conversation that bridged both worlds than to have you come on today. So, you know, so I appreciate you. Again, thank you because you brought me in though.

You know, I think a lot of times, somebody has to pull your coattail or somebody has to make sure that you can see deals or you can see opportunities. And I want to thank you for 10 years making sure that I've had a chance to see these great opportunities that I've been have a chance to invest in.

So again, you being in there, being an executive, being a dealmaker yourself and then bringing in so many different artists and athletes who now can say they're businessmen or business women because of you.

Well, it's not I might have played a big part on the investment side in terms of getting people into Silicon Valley and getting them and understanding, you know, the benefits of equity versus endorsements, but you know, you were the one that actually pioneered, you know, getting getting into business itself.

And, you know, a funny story that I've always thought that actually inspired me and I think that we have one tiein from the very beginning. Uh, and that's actually one of my first mentors when I first got into into Silicon Valley, and that was actually Michael Oitz. And so I I don't know if you know that, but the firm was actually built off of CA's model and and Oitz was on the board of Market Ben's company.

And so that's where they originally got the idea for A16Z and having a service-based model. Um, and so when I first got the got the job and started working at the firm, I got a chance to meet Mike and my position was actually it was a code word. It was called mini oit. And so like I was like I don't Ben was like we can't call you mini obit.

So we got to and this is never no one knows about this. So it's so it's like we got to figure out a very specific strategy. And the the funny story is that he told me he was like look Chris the first sitting down and and and I you know I came from the entertainment industry as well too and so I needed a gap in order to understand how to think about things and he was like you need to first order of business I need you to have a breakfast, lunch and dinner meeting every single day for a year and and then come back to me and let me know what you learned.

I was like this is the craziest idea that I've ever like why are you telling me this? And so, but then after going through that journey and understanding how to build a network and understanding how he thought about things was was really important.

Um, but I say that because that he also first, you know, talked to you and when you when you were thinking about getting into the game and and sitting down having that same conversation. So, I I I don't know if you could just just go flashback.

I told Dr. Jerry Bust, the owner of the Lakers, that I wanted to become a businessman. He became my first mentor. But then he told me, "Listen, you need to meet a guy named Michael Owens." The King Deal maker. Of course. Of course. And in in Los Angeles and in the country, right?

So I said, "Okay." So I reached out to Michael Oitz and I said, "Hey, I would like to take a meeting with you and because I want to become a businessman after my playing career is over." And he said, "All right, come on in."

So Chris, I get there and I think I the meeting was around 2 o'clock. Of course, I'm I'm early for everything. So I got there about 1 and I'm sitting in the lobby. It's 3:00. It's 4:00. And now finally it's 5. So the assistant come out and get me and I go into his office and he shakes my hand.

And the first thing he says, you know, uh, I don't know about representing you. Athletes, they spend more money than they make. I don't know if you're serious. I don't know if you have what it takes to become a businessman. I represent everybody in Hollywood. I got all the producers, the directors, the actors, actresses, the writers. He said, "Uh, you know what? Nice meeting you." And he threw me out.

You're like, "Whoa, whoa, whoa, whoa, whoa." Like, wait a minute. What? I came here for Exactly. I thought I was get something done. I had a pen in my pocket. And so, um, a couple weeks later, he calls back and he says, "Uh, I checked you out." And Dr. Bus told me that you were serious.

And he says, "Uh, okay, come back." So, I came back and he had a stack of magazines and he said, "Here, you read these." And I'm gonna give you a test. And if you pass the test after reading all these magazines, then I'll think about representing you.

So, of course, I went back and read that same day. I read them all. And then whenever he called me a couple weeks later, I went back. He did the test. I passed the test and he said, "I see you're serious about becoming a businessman."

So he he took me all around town meeting everybody. We we met for lunch a lot. He loved meeting at his favorite restaurant. And this is he taught me so much not just about business about just the art of deal making and and also making sure you have a long and big rolodex.

You know and you might not need the people today but you may need them tomorrow. And so so what he did I remember we go to his favorite restaurant. That's when Morton was the place to be. And he had the table. He had the one table the table in the middle.

So he says, "Watch what happens when I sit down." Okay. So he sits down, we we sit down and after two minutes, everybody came and kissed the ring. They came over to him. Hey, Michael.

And so as he was talking to him, he would always introduce me to him. Everybody that came over, he would always also make the introduction to me. and Chris about 6 months later I'm meeting all these CEOs of companies through Michael and so then here comes the Pepsi deal.

When I became a franchisee of Pepsi, he put Earl Graves and I together and man that took off. Uh here comes Starbucks, you know, all these things because he was right in the middle of everything. And then the last thing he did, he reworked my contract to make me one of the highest paid in the NBA.

But he did it and then I said, "Well, how much I owe you?" He said, "I don't want nothing from you." That's who Michael Oates is. And so I wouldn't be where I am today without Michael Oitz about everything that he did for me making me smarter, make me understand business, make me understand deal making.

Also, make sure that you go in and you ask questions and you really get the knowledge. He was big on making sure you had the knowledge, right? Being being an expert at not only deal making but also understanding the deal, also understanding the sector, whatever you're getting involved in.

Well, I mean because even on our business there's three different sides. First you like you have to be able to see the deal like and say and then okay the deal that comes in then after that the next stage is saying okay I actually want to make that investment. But the third stage is actually the most important stage which is winning the deal.

You know in ter and that's kind of like how you're talking about in terms of being able to identify those right opportunities and then being able to then you know execute and do a right deal on top of execution. Execution and more execution.

Yeah. I mean, that's that's that's interesting cuz I mean, when you when we look at kind of, you know, doing deals and and thinking about opportunities, a lot of it really does come down to relationships. And so, how do you put think about your network and and how that's kind of cultivated into your the relationships and the deals that you have been because often times, you know, in venture, it's a very long-term game.

You know, you're not just thinking about just doing the deal immediately. there's there's a lot of steps and process that that come into it and and you know you have to give first in order to have these things happen. So how do how has relationships and and the EQ of the business really kind of became you know it seems like that's a superpower for you that allows you to have these opportunities come your way.

Yeah, you're right because I built a fabulous relationship when you think about with Ron Burkel and you Kyper and we did the equity deal, the private equity deal we had. Um and you know, we did some amazing we bought some amazing companies and but I knew Ron for 10 years before we actually did a deal together.

When you think about customer service, that's what really it taught me everything I needed to know about customer service. you know, and so, um, having a great partner and, uh, going into Starbucks and really understanding the business side of it and and you know, a cup only cost, you know, less than 10 cents or 15 cents at that time.

And then the sugar, the beans, and then you and it all start to line up. You're like, hello. And so your margins were in incredible when it came to that, you know, and so I' I've been blessed to create not only great partnerships, but also having these people as friends as well, you know, and and so then I just carried that on to all the other things.

Mark Walters today. um uh you know, Peter Gruber, you know, all these guys who I'm in business with. Uh but Dr. Jerry Bus treated me like I was his son. And I think that when I think about our relationship and him opening up the door for all these other people, for me to meet them and them to become my partners.

So I I really look at it like when you when you come into business with these people, you have to play your role and do your part as I tell them, what role do you want me to play in this partnership? So I'mma overd deliver to you and to the company and and to this partnership. So it's like a team.

And and uh instead of me being a point guard and a leader like I'm normally Exactly. You know, a little little tell me what you need. Now I'm playing a a role player in business with these men. and it's okay, you know, and so I am happy about that and these partnerships have been huge and lucrative and but I learned so much from each individual.

And so they taught me so much and I I was like a sponge. You know, I wanted to get up under them and learn a lot. I think one of the things that you can be a sponge of is not just one specific industry but multiple different verticals.

So you said from food and beverage to hospitality to now the insurance business and and and now you know sports, media, entertainment, there's so many different variables but all kind of having that one consistent vehicle or or mindset in terms of service and and really overd delivering is is important.

I think you're right. And so sometimes people want to be in one industry and I think for me that was never my mindset and so and then there was nothing sexy about anything that I invested in.

No, but that's but that's that's where it is. Boring businesses keep that's that's a secret. You know, everybody wants to find the hottest company and sometimes that might be it might go up and then next thing you know it could be a trend. You you're absolutely right, Chris. You're absolutely right.

And it's more those that fail or like go start up and then go down. And so, but the ones that are boring and people don't know about or care about, those are the ones who are on a consistent making money or going up, you have growth. And uh so that's where I want to be. Absolutely.

And so, uh, um, you've done a great job, and I want to say this while it's on the top of my mind, of teaching these entertainers and athletes long-term investing. You know, it doesn't come immediate. You give me You invest into the fund. They're like, call you back 18 months later. Hey, I need this back. I got to go out this weekend. Like, no, no, no, no, no, no, no, no.

It doesn't happen like that. Hold on a second. But thank you for that. because they've learned a lot from you and the deal making expertise that you have and so yeah it's it's Thank you for that. I appreciate No, no, it's building your network. is is building like we talked about your rolodex and then it's going to lunches and breakfastes and dinners that you probably don't want to go to but you should be there and because those were those places are where the dealmakers are.

Absolutely. Those places are where the billionaires are, the multi multi-millionaires are. And so I learned that early on and so when I got invited I went and then I went early. over said, "Go early because all the richest people Exactly." Cuz they know about their time, right? Exactly. They they ain't trying to hang out. No, they not trying to hang out. They come early and they want to leave early. Absolutely. And you'll get that quality time with them.

See, that's a gem right there. See, you know, see early is to be on time. That's right. That's right. Absolutely. Not CP time. No. No. No. Oh, you don't get nothing for that. Exactly. Exactly. Exactly.

No, but I I think that, you know, even how we we it's a lot of the soft skills that really kind of, you know, really lead into the these real investment opportunities and being in the room and having the right time. And so, like I'm curious when I mean when when we first met, we met in Silicon Valley when we were doing the the Skyo deal. That's right. Um I think it was the the series A at the time.

Um what what was that interest in because you were that was almost 10 years ago. Um, what was the interest when you were thinking about expanding your business portfolio to to get into startups and to think about why Silicon Valley was an interesting opportunity to explore um when nobody else was really you were literally one of the first people that we that we did a co-investment with that that gave me the idea to realize, oh my goodness, like this is a huge opportunity not just for our portfolio companies to have access to someone like you and your networking and and and the relationships that you have, but also for the portfolio companies to learn from you and you know, I called it like share genius where you have the best of both worlds really just coming together and and and having and you getting a chance to talk to the CEO and and and how that's kind of conspired.

But what was your original uh interest in terms of like thinking that this was actually something that that we you should be exploring? Well, first of all, when you go back, uh, so I did the movie theaters with Peter Gruber and Mattis Johnson theaters. Howard Schultz and I did Starbucks, 125 stores and 40 different markets. And I just told you how he taught me so much about customer service.

And so I was looking for what's what's the next growth opportunity for me and my company, right? because we want to continue to evolve, grow, and think outside the box. So I said, "Wow, all the money is going towards Silicon Valley." Uh and so how do I get into that world?

And then here you come. This little old Yes. That my smart young man see. And so I just needed that foot in the door. and you provided that foot in the door for me and uh and also Ben as well knowing him. And so here comes this opportunity with Scottio and the drones and uh to be able to be a early investor.

Uh the product wasn't even it was still in prototype. That's right. That's right. That's right. And so that really excited me and I think it took me and my company to a whole another level because that brought me into Silicon Valley. I didn't have that in Silicon Valley. Now I had it everywhere else, a great track record of success, but I didn't have it there.

And so that that deal provided me with a a track record in Silicon Valley and then opened up the doors for me to see other opportunities that I didn't get a chance to see. Uh and so again I want to thank you thank Ben for you know the opportunity that I had. Uh you you two also my friends.

So, absolutely. It's sometimes it's about timing. See, some people forget about that part of it. It's it's it's about sometimes it it's just not your time to do that deal. Or or that or have that opportunity. and it just lined up perfect with the right people being you being Ben and the timing was right when Scottio was just coming out with their product and so and it was a consumer product at the time.

And then you know with you just now making a couple of the investments into the sports teams and seeing how an autonomous drone could potentially be the future for sports and in entertainment and and then when we're outside the Four Seasons. That's right. That's right. and a prototype and it was going up.

But but to that point you just made, who would ever thought now they use drones for everything. It's crazy. I mean, so we were way ahead of the curve. I know, man. That's what we do. That That's what people don't understand. We were way ahead of the curve.

And now you think about every sports league, every fire department, every police department, on and on and on. uh defense contracts are now going very crazy off of it. That's right. They all use it around the world.

Well, I think that for us, one of our investment strategies is a simple one, but it's a tough one, which is like good ideas that look like bad ideas, you know, and so sometimes you have to think outside the box and see around the corner when you're making these investments and and often times a good idea looks like a good idea. That means everybody can really do it. kind of intersection where there's like Adam for example like he grew up just you know doing RC racing and and he he eated and breathed this and used to work at at Tesla and so knew the the opportunity around autonomy and and really kind of creating that opportunity and so you know that's what we look for when we're looking at founders like what what do you see cuz now Now we opened up the box.

Everybody's, you know, hitting you and your team trying to get you to invest into the next series A, the next series B. Like when what do you look for in founders or or or the next entrepreneur um that's trying to have you become their an investor? Well, I think first of all, you're you're right. You know, it's um is it something that is not in the marketplace?

Um, can we really look at this 10 years from now that it's going to still be here? It's going to still um it has growth potential. Uh hopefully year year in and year out. And then um do we have a chance to exit or sell? You know, down the line.

Uh, and so, um, and then the partners, I I want them to make sure that, uh, these founders and these great people, they have skin in the game. They also, uh, are great and they're experts at what they do. And, uh, um, you know, we we then also look at it. Can we bring added value, right?

being Magic Johnson, uh, all the things that we have in our toolbox, can we can we bring added value to the deal or to that founder and make that company grow or take off and fly? One of the things that I always tell founders because they always, you know, whenever we might either get you into a co-investment or present the opportunity and they have the opportunity to to sit in front of you and your team, initially they always think, okay, well, we need to get magic and have him be the face of this or tweet this and you know, and I think that people are now finally starting to understand that, you know, the the the iceberg, tip of the iceberg is magic and Irvin the the the the face, but the enterprise and the networks and the and the introductions that you can make to whether it's the sports teams, whether it's to, you know, the insurance companies, whether it's, you know, strategic businesses.

Now, I think that people are really starting to understand the true value of talent and when they're thinking about um having somebody on their cap tables. Because we see we're in we're politically strong. We're we're uh CEO strong and you know we we um our rolodex is huge and long and powerful and so we know how to grow businesses.

We've been doing it for a long I've been in business over 30 30 years and I tell them all the time utilize us utilize our network our expertise. Uh, and so then once they get into partnership with us, then they say, "Oh, you didn't know." Like, "What you what did you think?" It's called Maggie Johnson Enterprise. That's right. That's right. And that's what we talk about when we say the added value.

You know, you want my check, but also too, you should want everything else that we bring to the table because I'm used to winning. I'm used to winning. I mean, you just you just got another another little chip check. That's right. That's right. I I still got a little got a little little championship on my shoulder, bro.

So So to to that point, Chris, I don't just want to win in sports, which I have 18 championship rings. I also want to win in business. So I I have a mindset of winning. And I'mma do everything I can to make sure that deal or that partnership wins. And so, uh, that's why you'll get my whole team and, uh, everything that we have to to hopefully support what you're doing.

The next generation of talent, the next generation of whether it's athletes, entertainers that are interested in business, that are looking to invest into Silicon Valley, um, you know, they often like what how should they think about structuring a team in in today's time? You just said it. You just said it. What they fail to realize is structuring a team. Just what you just said because that's so important.

See, you're great at what you do. You know, basketball player, football player, singing, being an entertainer, but you're not great at business. So you have to get a team that is great at business that you control that is a part of your entire enterprise that can help you achieve your goals in business.

And Michael always pointed that out to me. Get people who are smarter than yourself. Get the right people and always pay them and then let them do their thing. And he was absolutely right. So, I'm telling all of them out there, you got to get a a team of people who can help you. Uh that while you're on the stage singing, they're conducting business somewhere. Exactly. Right. Exactly. Uh they're making deals for you.

Um and remember, these are not people you going to hang out with. Then nor do you need them in there. That's right. Cuz if they're in the club, then who's signing that check? Exactly. So they spending your check. Exactly. They spending your money. So, so to your that point, uh I've always looked for for u when we're in the infrastructure, okay, let's get some experts in infrastructure, you know, uh on and on and on. So, that's what you got to do.

So, I would tell them that that's be the first thing I tell them. make sure you get a great team around you. And also, those can tell you no. See, they're not used to somebody telling them no. No, they don't even know that that that words don't even that's not even the vocabulary. They'd be like, "No, no, no, no, you can't do that." Or, "No, you can't write that check." Or, "Your friends are bringing you deals that make no sense."

No, that's you know, and so, uh, that's important as well. Um, I'm curious when you when you think about deals, I mean, especially, you know, when it comes to venture capital, no one bats a thousand. No. Um, you know, we have that it's called the Babe Ruth effect where I have the highest number of strikeouts, but you also have the highest number of home runs, right?

And so, you got to swing for the fences for every deal, but there's some deals that that you might miss. And, you know, all within any venture capital firm, you you've missed a deal and and and just that's just the nature of the beast in the industry. Do you have one in in your that you can remember where you like either looked at the opportunity wrong or you missed the deal or like that that one just either got away like you know just just cuz you got 30 30 32 years plus in the business you know if you were striking a thousand then then you know I'm just curious kind of if you can and what did you learn from that?

Yeah, Chris, there's always deals that you know you wish that you had wrote the check and you didn't or deals that you know um you heard about too late between the Ubers and all the deals like that that you say, "Wow, you know, uh you had an opportunity but you just uh didn't pull the plug. I mean, you didn't pull the the the string to write the check, right?

And then you have a deal like Nike when I was young and they wanted to sign me but give me stock. Why did I meet you? Why did I meet you about 40 something years ago? Hey, well, you got to call my mom and call my and I would have loved to negotiate that with Exactly. Phil Knight said, "I don't have the money they have, but I got stock."

And they and they just ran the analytics. If I had a deal did that deal in 1979, it'd be over a billion dollars. So that's the one that you talking about one that got away, man. I'm sure that's the one. Michael owes you aund billion papers. Exactly. Exactly. So, so again, you know, there's deals that uh you always will think back and say, "Man, I wish I had did that deal."

But at the same time, um I'm not a guy who goes backwards a lot. I move forward. I'm always constantly moving forward. Um what I have is what I'm supposed to have. And and so I'm not The great thing is being 66 now, I'm not the same young guy I was then. So I can see deals different today.

And better. And I have a team of people who vet those situations where I didn't before. So So things have improved. I've gotten better. And so again, uh what you don't have, you don't have. But but you learn. You learn. And you won't make that mistake again. That's right. That's right.

I think one of the things that I mean but you learned this extremely quickly was the the power of equity versus just you know writing a check and getting endorsements. And so, have you seen that continue to to change in terms of just more people outside of the industry that are now starting to look at equity based deals versus, you know, instead of just trying to get traditional endorsements or I think you're seeing it now across the board and you're seeing it.

Well, look at it from actors. You know, all these actors now are doing equity deals instead of taking the money, right? You see that creating their own brands. That's right. Creating their own brand. And uh making a lot of money. And then you see the same thing happening with the athletes uh and just everyday people too, you know.

And so, yeah, it's it's changed a lot where before you you you you were brought up and you were coming up and you supposed to say get the most money, get the check, get the check. And well, things have changed now. And I think there's a lot of people who were able to help people understand that's not the way to go.

and and so now you're seeing some of the um most high pro high-profile people, celebrities now owning, like you said, their own brands, their own companies. And I mean, we see it on our end when people are wanting are are wanting to invest into the next big companies and understanding now that, you know, it's not, hey, I'd love to work with you. You should write me a check. It's like, I'd love to work with you. here's, you know, some some money so I could get on the captain.

And I think that's what's really changed. Yeah. Before athletes said, "No, I'm not gonna write no check." You know, I know give me give me give me and you were like and they, you know, they was like, "No, but also the founder doesn't happen like that. That it's two totally different worlds. We're in Silicon Valley. People, you know, they don't we it's a series C or a series A company. They don't even have a marketing budget like that."

And so, but it's like, well, we do have stock, right? You know, and then wonder how that could play out over. No, everybody changed, right? So, so let's try to make it happen. And uh but hey celebrity, hey athlete, hey, you got to be driven by the equity now. And and sometimes the equity and you got to write a check to be a part of that as well. Absolutely.

So, but but they're willing now. They're more educated, I think, today, but because of people like yourself who are their age and can help them understand and teach them how the game is played today versus yesterday when I came around. Right. And and I think one of the reasons and you kind of talked about it when around creating that halo effect is that we can when we make these investments now and I think that you know before used to just be on one or you know Wall Street Journal or Techrunch.

Now when someone makes an investment or the new companies are being built um in in Silicon Valley, they go across mainstream media from Complex to Essence Magazine to you know uh all on social media like Boardroom um you know there there's whole entities now that are being created that are really expressing the business of of investing and I think that it's and now people are it's in their conscious mind and they're thinking about the next generation of those companies.

Yeah. And and that's what's so cool about 2025 now. Right. And so I look at Steph Curry, you look at LeBron, the companies that they have built off the court, right? uh Snoop, uh Dr. Dre, on and on and on. Uh Kevin Durant. I mean, these guys are just doing uh they owning teams now while they still playing. Crazy, crazy.

And so, so it's just uh it's just beautiful. And and you see um Tom Brady and the uh on and on and on, you know, the Manning brothers. So, you see all these former athletes and