NATIONAL PRESS CLUB LUNCHEON WITH TED LEONSIS SUBJECT: LEONSIS WILL TALK ABOUT HIS NEW ACQUISITION OF THE WASHINGTON WIZARDS AND THE VERIZON CENTER AND THE BUSINESS OF SPORTS. MODERATOR: ALAN BJERGA, PRESIDENT, NATIONAL PRESS CLUB LOCATION: NATIONAL PRESS CLUB BALLROOM, WASHINGTON, D.C. TIME: 12:30 P.M. EDT DATE: FRIDAY, MAY 21, 2010 (C) COPYRIGHT 2008, NATIONAL PRESS CLUB, 529 14TH STREET, WASHINGTON, DC - 20045, USA. ALL RIGHTS RESERVED. ANY REPRODUCTION, REDISTRIBUTION OR RETRANSMISSION IS EXPRESSLY PROHIBITED. UNAUTHORIZED REPRODUCTION, REDISTRIBUTION OR RETRANSMISSION CONSTITUTES A MISAPPROPRIATION UNDER APPLICABLE UNFAIR COMPETITION LAW, AND THE NATIONAL PRESS CLUB RESERVES THE RIGHT TO PURSUE ALL REMEDIES AVAILABLE TO IT IN RESPECT TO SUCH MISAPPROPRIATION. FOR INFORMATION ON BECOMING A MEMBER OF THE NATIONAL PRESS CLUB, PLEASE CALL 202-662-7505. ALAN BJERGA: (Sounds gavel.) Good afternoon, and welcome to the National Press Club. My name is Alan Bjerga. I'm a reporter with Bloomberg News, and the President of the National Press Club. We're the world’s leading professional organization for journalists and are committed to our profession’s future through our programming and through fostering a free press worldwide. For more information about the Press Club, please visit our website at www.press.org. To donate to our programs, please visit www.press.org/library. On behalf of our members worldwide, I'd like to welcome our speaker and our attendees at today’s event, which includes guests of our speaker as well as working journalists. I'd also like to welcome our C-SPAN and Public Radio audiences. After the speech concludes, I will ask as many audience questions as time permits. First, I’d now like to introduce our head table guests. From your right: Eric Moriath, reporter at Dow Jones; Pat Host, reporter for Inside the Fence; Drake Lundell of Kiplinger; Lori Russo of Stanton Communications; Denise Li, Associate Dean at Georgetown University; John Buckley, a guest of our speaker; Andrew Schneider, Associate Editor for Kiplinger and Chairman of the Club Speakers Committee. Skipping, for the moment, over our speaker, we have Bob Carden, of Carden Communications and a Speakers Committee member who organized today’s luncheon; Mark Hamrick of AP Broadcast. He’s the Vice-President of the National Press Club; and 1 Jerry Zremski, of the Buffalo News, a former President of the National Press Club; and Vic Sesteed, Morgan Stanley’s Senior Vice-President. [applause] Earlier this week, the Washington Wizards were awarded the number one pick in the NBA draft. Hopeful Wizards fans see this as a sign of changing fortunes for the long- suffering franchise. Others might point to the seemingly magic touch that the soon-to-be Wizards’ new majority-owner, Ted Leonsis, brings to business dealings. He turned the Washington Capitals into a National Hockey League powerhouse, with the team routinely selling out the Verizon Center just a few blocks down the road. Through his sports and entertainment company, Lincoln Holdings, Mr. Leonsis also owns the Verizon Sports Center and the WNBA’s Washington Mystics. Our speaker made his fortune as one of the pioneers of the Internet industry, spending 15 years at America Online, where he was Vice-Chairman and President. In addition to his sports holdings, he also chairs Clearspring Technologies, Revolution Money, and recently launched SnagFilms, which brings nonfiction films to a live audience. He also produced the award-winning documentary Nanking, which dealt with atrocities committed in China during World War Two. And, he also just published a new book, The Business of Happiness. Our speaker is also a committed philanthropist and is involved with numerous charities, including Best Buddies, Hoop Dreams, the See Forever Foundation, Venture Philanthropy Partners, YouthAIDS and others through the work of the Leonsis Foundation. A self-made man, he is the son of a Greek immigrant, born in Brooklyn, New York. He is an alumnus of Georgetown University and splits his time between Northern Virginia and Florida. Please welcome Ted Leonsis to the National Press Club. [applause] TED LEONSIS: Thank you very much. Good afternoon, everyone. It’s an honor to be here. And, thank you for John Buckley attending. John was the coauthor of my book and has been a close friend and confidant for a number of years. And, hello to everyone who is watching on C-SPAN. I was honored last Sunday to be on Q & A on C- SPAN with Brian Lamb. I thought I would be the only one watching. I can tell you that lots of people watch. It’s interesting to know the interactive medium works. At one point, the interview started to talk about some documentary films and put up SnagFilms.com. And, I got an email a couple of minutes later that it went from 180 people live on the site to almost 2,000 people. So, it really does show how this traditional media world and new media world are coming together. And, people will react very, very positively. And so, thank you to Brian and all the people at C-SPAN. 2 This is called a Newsmakers Luncheon. My goal is not to make news. [laughter] I have had a busy week. Monday, we announced, for the Washington Capitals, that we had resigned Nicklas Bäckström to a ten-year deal. [applause] And, for those of you who were here the last time I was here with Commissioner Betman(?), and we articulated what our strategy and plan in a very transparent fashion about building a team and a system and a culture around great young players, developing them within a culture that we believed was appropriate. And, we could play in a style and a format that the city would be proud of. And that, if those players were good, we would retain them for a long time. And, we’ve certainly been living up to that commitment with Alex Ovetchkin and the long-term deal he signed. And, Nicklas was another touchstone to that strategy. Then, on Tuesday, I went up to Secaucus, New Jersey. And, I never had been to Secaucus. [laughter] And now, Secaucus is one of my favorite cities in America. [laughter] I started the day earlier. And, I will tell you, I will make news today in telling you this story. I don’t really believe so much in luck. And, lots of people were bringing up lucky charms and rabbits’ foots, and the like with them. And, I refuse to do that. And, on game seven when we lost to Montreal, I got dressed. And, I went downstairs. And, the phone rang. And, I leaned to pick up my phone. And, when I walked away, I somehow got a stain across my shirt and tie. And, my wife said to me, “Well, you can't go to the game like that. You need to change. And so, I ran upstairs. And, I changed my shirt. And, I put on a different tie. And, I had never changed clothes so close to the game. And, we lost two to one. [laughter] And, I just had to wonder if I contributed to the loss. [laughter] So now, it’s I’m going to be interviewed by NBA owners. And so, I bought a couple of suits, new suits. One was a blue pinstripe, one was a black pinstripe. And, they came. And, someone steamed them and put them away. And, I got dressed. And, I ran downstairs. I said, “Sweetie, I got to go. I'm late.” And, she said, “You're getting interviewed by NBA owners, right?” And I said, “Yes.” And she goes, “And then, you're going to be on national TV?” And I said, “Yep.” And she said, “Well, you have on a black pinstripe suit top and blue pants.” [laughter] “Go up and change.” And so, I said, “Yes dear.” And I turn around, and I go, “No.” And so, I went to New Jersey-- [laughter]-- And we got the number one pick. [applause] So, there’s, I guess, I made my news today, because no one knows that story. I will say it’s been an amazing couple of days since that bit of luck happened. And, the one that I find most ironic is I honestly do work hard. You plan. You buy the team. You have to look at basketball operations. I have a women’s basketball team, WNBA. Our first game is this evening at Verizon Center, busy, busy time. And, I’m really working hard. And, no one ever says anything. 3 And, I go to this TV game show, which is what the draft is, and we win the lottery. We had a 10% chance. And, all week, people were walking up to me, going, “Great job!” [laughter] I had nothing to do with it. But, it does start to get to a point which my book The Business of Happiness talks about. You know, maybe I was lucky. And, maybe there was good fortune. But, maybe there is a higher calling associated with what we’re trying to do. And, I firmly believe that no team deserved more good fortune and good luck than the Washington Wizards. Mr. Pollin tragically passed away. He had an incident with one of our players. There were lots of injuries. We deserved it. And so, sometimes you deserve your own luck. I'm here just to talk for ten or 15 minutes about point of view and a belief structure that I try to communicate, in my book. And frankly, since the book was published in February, I've come to believe it even more. So, I’m starting to border on being an evangelist. But, I promised my wife you wouldn’t see me on, like, a cable network late at night with the Six Secrets to Extraordinary Success Can Be Yours! [laughter] I had a reckoning. You will all have reckonings. That is one of the basics of the journey that we’re all on. There will be good times and there will be bad times. A noted Stanford economist talked about “A crisis is a terrible thing to waste” about our economic situation. Well, I’ve learned that a crisis is a terrible thing to waste in your personal journey. And, at a young age, I had grown up and been programmed that it was expected of me to work really hard and good things would happen. I came to Georgetown University. I was competing with very, very qualified students, certainly with backgrounds that were much more privileged than mine were, growing up in Brooklyn, to a dad who was a waiter and my mom was a secretary. No one had gone to college. And, I was very fortunate. And, I got a mentor. He was a Jesuit priest. And, he really set me on a very, very good path. And, it showed me the power of mentoring and how small bits of time, especially with young adults in times of development, really can go a long way in creating a very positive point of view. And, I thank Father Durkin for much of what I’ve been able to achieve. And, I pay appropriate homage to him in my book. I was blessed to be introduced to computer technology, 1976. The iPhone that I’m carrying with me today has more computing power than the one IBM 360 Mainframe that was on campus, that I was able to use to write a thesis. And, I don’t want to sound like Al Bundy reliving, like, the glory years, but I got introduced to computers while I was an American studies, kind of an English major. It’s ironic because a couple of months ago, I was in a meeting where Steve Jobs gave a speech. And, they asked him, “Why is Apple so successful?” And he said, “Great 4 companies are now at the intersection where technology and liberal arts connect.” And, that’s basically what I was able to do in 1976. I then went on and started my first company at a very young age. It was called LIST, the Leonsis Index to Software Technology. And, I was blessed. It was a publishing company, based on a metaphor of the number one selling magazine at its time, which was TV Guide. I was at a checkout line. I bought a TV Guide. Front of the book was “Interviews with Directors and Television Stars.” The back of the book was the directory, which programs work on which networks or what time. I remember thinking, “I can't believe this is the number one best selling magazine in America,” threw it away. And then, later that night, went in front of my Apple II computer. This was 1979. And, it had two software programs. I had just come back from a west coast computer fair. I had heard Dr. Bob Metcalf talking about protocols for an Ethernet network. And, I looked at this Apple II and really was struck that it looked like a television. And, these were programs, and these were networks. And, during my lifetime, there would be this switch. And that you wouldn’t be able to distinguish between computers and televisions and telephones. And, it would be businesses to disrupt other industries, and that I was an entrepreneur at Spirit. And so, I quit my job and raised some money and started this company, which was like a TV Guide. It was a database of all of the hardware and software and programs that worked on which computer platforms. And, it was very, very successful out of the gate. And, I was blessed and fortunate to sell that company for about $65 million dollars. And, I made a lot of money. And, I declared victory. I had been programmed that was the American dream. I bought my parents a new house. I bought my father, for the first time in his life, a brand new car. I bought houses. I became very popular with girls. [laughter] I had lots of friends. And, I started losing my way a little bit. I had great empathy for a lot of our players who were equally as young and coming to a windfall, because there isn't a how- to-handle-early-life-success-for-dummies book. And, I hoped to be able to provide mentoring, because I lived it and understand how daunting that new level of responsibility can be. And so, I was running this company. I sold it and made a lot of money. And then, I got on the wrong airplane. And, as you’ll read in my book, I had a reckoning. Reckonings come in all sizes. Everyone here will have one, guarantee your heart will be broken. You’ll have a financial setback. You’ll lose a job. You’ll have a health scare. Someone will pass on who’s very close to you. 5 And, my reckoning changed me. I was on an airplane that developed all sorts of mechanical issues. And, we had 35 minutes to prepare. It’s very humbling to be on a plane that’s going to make an emergency landing. And, they take all the luggage out. And, they recast the plane. And then, their advice to you is, “Brace.” That’s it. Brace. And, you always hear that you want to die with a smile on your face. But, everyone on the plane was weeping, crying, terrorized. Some people were praying. And, I honestly started to pray. And, when I was younger, I was more involved in organized religion, altar boy, in Sunday schools, and I stopped. And, I started praying, and it was very inauthentic. So, I started, I said, “If there is a God, He’s probably saying, ‘Oh sure. Now you need me.’” [laughter] So, I reverted, honestly, to type(?). I said, “I’m going to cut a deal with you. It’ll be a better deal if I live. [laughter] And, I honestly promise I will figure out how to leave more than I take. And, I certainly won't live a life without regret because I understand there’s so much that I lost my way on. I’ll do good.” And so, obviously, I made it through, and I didn’t know what to do. How do you live up to this? So, I made this very feeble attempt to make a life list. And, the back of my book is my life list. I published it on my blog. I’m not very proud of the list 30-plus years later, because it was the ramblings of a young person who didn’t have a defined point of view. And then, my life takes different turns. My next company gets acquired by AOL. I’m here in D.C. and I take my son on a field trip. And, I go to the Library of Congress. What a wonderful resource. And, the Library of Congress has the Declaration of Independence, the original draft, which I thought was really cool. It was like, “Geez, Thomas Jefferson wrote it, and he gave it to Ben Franklin. And, Ben Franklin said, ‘I wouldn’t say it like that. What were you thinking, man? Edit it.’” And, if you go, they have an every black line version. And, the only line that was never edited was “Life, liberty, and the pursuit of happiness.” I went, “Wow. Our founding fathers, the smartest guys we know, they said our job was happiness.” John ...(inaudible), Forbes Magazine’s founding-- MR. BJERGA: Bernie(?) Forbes, who said that the purpose of business is to create happiness. TED LEONSIS: -- To go back to Father Durkin, who always talked about your work here would provide the platform for your next level of happiness. I said, “You know what? I have permission to be happy.” Well, what makes people happy? I know it wasn’t my house or my cars or my newfound friends, because I wasn’t thinking about them when the plane was going down. That wasn’t what I was going to miss. So, I became a student of happiness. And, that’s what the book-- front of the book is about. I said, “I’ll use all my resources and talents and business acumen to try and 6 figure out is there a science? Is there a best practice around happiness?” And, I’ll give you the cliff notes. Number one, that you're an active participant in multiple communities of interest. Seems simple. We’re social animals. Whenever there is like a serial murderer, they always say, “He was a quiet man. He stayed by himself.” [laughter] If you do something really, really bad, what’s your punishment? Solitary confinement. So, I manage my communities of interest in a very formal way. Most successful product I ever worked on was the launch of AIM, AOL’s instant messaging product. What’s the number one product and service for young adults today? FaceBook. What are they all about? Communities of interest. Have you ever heard the founder and CEO of Starbucks? He doesn’t talk about making coffee. He talks about local micro-communities of interest. Number two. High levels of self expression. Maybe that’s why I started to make movies and wrote a book and do a blog every day. I have already published four or five blog postings early this morning. What’s the number one rated show on television? American Idol. We all can sing in the shower. And so, personally, I’ve been married almost 25 years, love my wife very much. The only time we ever fight, the core scene that’s repeated is my wife says to me, “You're not listening to me.” So, the higher levels of self-expression, the better. The third, you get out of the eye. You get into the collectively. And, you tune up your empathy. Empathy is really the human trait that’s under-sold. Empathy needs a good PR firm working for it, because it keeps everything working. But, people who tune up their empathy become great leaders. And, people who have inordinately high levels of empathy are looked at heroes and historic figures. And so, being able to get out of that eye and understand your role and listening to the wisdom of crowds, and being able to connect as a leader with multiple people, that’s why I answer all of my emails. It’s why I mingle with our fans. I believe in it. I want to be empathetic and try to understand what our constituencies are thinking. The show that is most offensive to me on television is Undercover Boss. I watched a version, I said, “Oh my God, what have we come to?” Here is a CEO of a company who goes to meet his employees and actually understands that customers use his products, and then cries at the end of the show, “I have good people working for me. And people use my products.” That connection out of the eye, I showed up today. I don’t have anyone with me. I don’t have a PR person. I don’t have staff. I have no entourage. I don’t want to be managed. I don’t want to be told what to say. I don’t want to be in the eye. I want to be a part of you, a part of collective friends in my community of interest. 7 A fourth, that you turn that empathy into volunteering and giving back. The acts of giving back, vital. The ability to exercise empathy, vital. And fifth, that you are in pursuit of the higher calling. When I was a senior exec at AOL, and take some credit for helping to build it as a big company, I honestly never wanted us to be worth $150 billion dollars, in terms of market cap, or to get to $10 billion dollars in revenue, which it did in less than ten years. Those were byproducts of a higher calling, a higher calling being we can level the playing field and bring education to everyone, introduce the magic of interactivity to consumers, to even bring democracy around the world. I don’t want to make the playoffs. I don’t even want to win a Stanley Cup. I want to bring our city closer together. I want to create millions and millions of lifelong, positive memories, between fathers and sons and mothers and daughters and friends. I want immortality for our players. I want to etch their name on a Stanley Cup so it can be in the Hall of Fame and be there forever. So, as I went on this journey and started to break the code, in terms of my personal life journey, I realized I’m founding all these companies. I’m running all these companies. They're just like people. They get started. They go through adolescence. They make mistakes. They have a reckoning. Our whole economy and way of life just had a reckoning. And, what do you do when your company has a reckoning? You make a list. Here are all the things that we have to do and change. And, that list is important. It allows you to envision. I wrote down, 30 years ago, “Make a movie. Win an Emmy Award.” I made a movie. I won an Emmy Award. I wrote down, “Buy a team. Win a championship.” Well, at least I got the team. [laughter] I'm at 81 of the 101 things to do before I die. And so, I counsel young adults, especially MBAs, who I can say, “I need a business plan and a model, and a sample balance sheet in three days.” And, I get the deck. And then, I sit with them a little one-on- one. I say, “Okay, metric, for me, your success in life and what’s important to you, and how you’ll be happy.” And, they stare at me, blankly. We lost our way. We start to manage just by numbers, which is what happened at AOL. When we merged in our first meeting with Time Warner-- not merged, we acquired Time Warner. I went into the meeting, and I said, “How will we know we’re successful? What is our higher calling of the combined company?” And, I was told “$11 billion dollars or IBIDA and $1 billion dollars of cash flow, increased cash flow through synergy.” And I said, “You're kidding. You think like a dad gets up early in the morning and, like, sees his wife and daughter at the breakfast table. And, the little girl says, ‘Daddy, what are you going to do today?’ And he says, ‘I’m going to go work 12 hours to generate my division’s cash flow.’” We lost our way. And, enterprises that lose their 8 higher calling and lose their belief that they're in the business of happiness, tend to lose their way. I’m working, now, on creating a bushel of happy companies, companies that follow and ring high on every one of these concepts of self-expression, and getting out of the I and into the we. And, you can just go through the winning companies today on why they're being successful. And, that brought me to my final conclusion, which is that the best businesses are managed to a double bottom line. I don’t invest in any company, now. I don’t do anything to spend my time, effort and money that I don’t see a plan that says, “I’m going to make a movie. It’s going to get critical review. It’s going to go into a film festival. It’s going to go into movie theatres and sell a lot of tickets. HBO is going to buy it. But, it’s got to right a wrong. It has to activate charitable giving. It has to activate volunteerism.” I've done that with the Caps. Yes, I want to get the most points in the NHL. Yes, I want to sell out every game. Yes, I’d like our team to really become a new spirit for this community and the greater Washington area. Yes, I’d like to lead the league in revenue growth. But, I’d like to give back to the community. And, I want to see equally as formal plans on what we’re going to do to give back, and how many charities we’re going to help. And, I want to mentor the players to see what they're going to do, individually, because we’re in this together. And, the more I’ve tuned and got in balance, both double lines, the more successful I’ve been. I’m disproving this “nice guys finish last.” I don’t believe a lot of what we’ve learned in business, Nuclear Jack Welsh, the greatest businessman in history, “Lay ‘em off! Cut back! You're only here for return on investors.” Anybody seen GE stock of late? Is NBC doing well? And, my core belief is that we’re in it together. And, if you manage double line businesses, and your communities of interest are allowed to self-express, and you activate volunteerism, and you pursue a higher calling, your movies will win awards. Your teams will do well and sell out. Your businesses, like Revolution Money, in the worst economy ever, sold to American Express for more than $300 million dollars. A double bottom line business. Your book will become a bestseller. And so, I’ve gone from being a theorist. I’m on a personal journey. I’m an evangelist and mentor to people to now saying, “It's fact-based.” And that, if you can internalize that you're in the business of happiness, your business, your family life, your productivity will increase dramatically. Okay, I thank you for letting me do my little speech. And now, it comes to the fun part, where all these smart people in the audience get to ask me questions. 9 [applause] MR. BJERGA: Well, thank you for your address today. And, this is, indeed, the fun part that we’re all looking forward to. And, please keep the questions coming on up. It seems that the wise people of our audience are basically asking their questions in three areas. One is the local sports teams in which you have your interest. Another set of questions are coming about sports in general. And then, there are the questions about life and all there is to it. And so, we’ll be getting to that right now. First question, starting on the local sports interest, how do you plan to use your knowledge of running a successful hockey franchise to improve an NBA franchise that is currently in a bit of a state of disarray? TED LEONSIS: Well, it’d be presumptuous of me to say I know. I think it’s good to start out as an “idiot savant.” And, I will talk to every single person in the company. I believe that there are really, really smart people everywhere. I’ll talk to every owner in the NBA. I have some work going on, on best practices and what has worked. And then, I’ll come to my own point of view. I intend to pay homage to the poll and legacy. But, I have to be my own person and do what I think is right. What I do believe is that leagues that are going through major upheavals, the NHL had a reckoning, basic-- Its basic economic model wasn’t working. We had to lock our players out for a year. And, we used that time of chaos to articulate a plan, which has turned out pretty well, to be honest. The Washington Capitals plan is one, now, that is being best practiced by lots of other teams. And, I believe that young players, that you can mold and teach. And they’ll know that, if they play well, they’ll be the ones who are rewarded with your loyalty and money. Not strangers who have been productive for another team, free agents. And, if you just think on this business of happiness, it’s anathema to reach out into the industry and bring someone in that no one knows, and overpay them and not show your love and respect to your existing community of interest. So, getting the first pick in the draft I viewed as a harbinger or an omen that my instinct of what we need to do in the NBA was correct. And, I believe we can get a franchise player with that pick and help us to rebuild the Wizards. MR. BJERGA: But you won't tell us who that franchise player might be? TED LEONSIS: You know, one of the things that I’ve learned, everyone’s an expert. I know there’s bloggers in here. I’m reading all of the reports, you know, the mock drafts. And, one guy, with passion, a blogger, was emailing me over the last two days. And, he’s really articulate. And I said, “Have you ever seen one of these players you're talking about play live? Have you ever met these young men and talked to them, or their parents? Do you 10