Magic Johnson was in the seventh year of his Hall of Fame career when thoughts of his basketball afterlife led him to the office of uber-executive Michael Ovitz, co-founder of Creative Artists Agency, Hollywood's most powerful agency. Johnson had watched many former athletes attempt entry into the world of business only to fail, and he was hoping for advice that would allow him to chart a different course.
“Michael dropped the newspaper in front of me,” Johnson tells SUCCESS. “He asked, ‘When the paper arrives, what do you read first?’ I told him I opened the sports section.
He looked at me and said, ‘Wrong answer. From here on, if you want to be involved in business, you have to read business.’ I walked in his office 6-foot-9 and proud. I left feeling 5-foot-tall and stunned.”
And thus began the business career of a man who, just 22 years later, in 2009, was hailed by Ebony magazine as one of the most influential black business leaders in America. Built over the past 23 years, Beverly Hills, Calif.-based Magic Johnson Enterprises now owns or operates gyms, movie theaters and other businesses in 89 cities across 21 states.
“I learned a couple of great lessons there with Michael Ovitz,” Johnson says. “The first is that if you want to be successful, you have to be willing to use every connection you’ve got. It is a funny story how that meeting came about. During a Lakers game the season before, I was standing on the sidelines getting ready to pass the ball inbounds. There were two businessmen I respect—[studio executive and Tell to Win author] Peter Guber and [recording industry executive] Joe Smith—who were sitting there courtside and were huge fans. I looked over and asked, ‘How do I get into business?’ It probably wasn’t the best place to ask, but they could tell I was honestly looking for help, so later they arranged for me to meet Michael Ovitz.
‘Be Ready to Listen’
“The second thing I learned is that if you want someone to be your mentor, you better be ready to listen and be humbled,” Johnson says. “Michael wasn’t sure about working with me because so many athletes think they can move right into business and never take anyone’s advice. I had to prove to him I was serious and that I would listen.”
That meant changing his reading habits, Johnson says, and he immediately started grabbing business magazines, newspapers and books to take with him on the road. But reading was just the beginning of Magic’s business education. His next big lesson was “listening.”
Johnson says his first foray into the world of business taught him what happens to entrepreneurs who aren’t listening to their customers. In 1990, he decided to begin a chain of retail sporting goods stores called Magic 32 that he intended to take nationwide.
To get the business off the ground, he decided to attend a major sporting goods convention and negotiate for products he’d sell at the stores.
“I didn’t ask a single customer what they’d be interested in,” Johnson says. “I went there looking for products I’d be interested in buying. I had to learn that I was not my customer. Actually, I was taught that lesson by what happened after we opened.”
Among the line of products Johnson chose to carry was a series of $1,500 leather jackets. They fit Johnson’s taste, but not the taste of his customers, as evidenced by the fact they were still hanging on the racks when the initial store closed just a year later.
“I’m sure I’ve made bigger business mistakes,” Johnson says, breaking into his trademark grin, “but I can’t think of one.”
Johnson’s earliest entrepreneurial influences came from his parents in his hometown of Lansing, Mich. “I grew up in the kind of black family that people today worry is disappearing. Even though there were nine of us, we had what we needed— two great parents, food on the table and time for the whole family to be together,” he writes in his 1993 memoir, My Life.
Both parents worked hard; his dad on the night shift at a GM factory as well as second jobs that included pumping gas and running his own trash-hauling business, and his mother in janitorial and cafeteria work. “My parents believed in work—not only for themselves, but for their children, too,” Johnson writes. The kids had assigned chores around the house and had to earn their spending money. “By the time I was 10, I had my own little neighborhood business. I raked leaves, cleaned yards and shoveled snow. With the money I earned, I could go to the movies and buy an occasional record.”
Johnson’s dad, Earvin Johnson Sr., provided other life lessons, too. Through one-on-one basketball games, his father played tough and not always fair. “But that was the point. Dad was teaching me that I wouldn’t always get the calls, that I had to play above the contact,” Johnson writes. “He taught me to win against the odds, and never to quit.”
Johnson’s basketball career included a national championship at Michigan State, five NBA championships with the Los Angeles Lakers and a gold medal with the “Dream Team” at the 1992 Olympics. He played alongside and against some of the NBA’s best players, including Michael Jordan, Larry Bird, Kareem Abdul-Jabbar and John Stockton.
His new teammates are business partners who include Sodexo, T.G.I. Friday’s, Aetna, AMC Theatres, 24 Hour Fitness and Starbucks. He has carved out a niche, becoming the go-to player for companies hoping to expand into the urban marketplace, using the power of his brand in that space to increase the credibility of businesses desiring a part of the pie in what Johnson calls “underserved and ethnically diverse urban communities.”
Something to Prove
The Magic 32 retail store failure also taught Johnson another important business lesson: Have a vision for your company, or prepare for failure.
“A lot of athletes go out and want to start sports bars or restaurants, and they do it without vision of what they’re going to add to their customers,” Johnson says. “I can say that because I did it. But now I know what my vision is, and everything we consider has to fit that vision. Lots of opportunities come our way, and we ask ourselves as we look at every one whether it will bring something of value to the communities we serve.
“And as we make our way around those communities, my team now is always asking, ‘What’s missing?’ We learned that African-Americans are the No. 1 group of moviegoers in America, yet we didn’t have theaters in our neighborhoods. That’s when we started building Magic Johnson Theatres. If your vision is strong enough, focus isn’t as much of a challenge. Things make sense or they don’t.”
Johnson’s company’s estimated net worth is in excess of $700 million, according to Forbes magazine, making him among the most successful former professional athletes ever to have transitioned into the world of business.
“It is interesting to me that so few athletes make a successful move into business,” Johnson says. “There are so many things about being an athlete that should prepare you for this world. Discipline, practice, outworking your opponent… all of that is just as important to me today as it was in the NBA. I think the problem is that for some athletes, our ego has been fed our whole life and we’re not used to people treating us as peers. Michael Ovitz treated me like a man who had something to prove, and by that stage of my career, not many people treated me like that. I think I handled it right, and it made a great difference.”
The truth, Johnson says, is that many entrepreneurs are successful at something, and that gives them the confidence to strike out in new directions. Most, like the athletes who have failed at business, aren’t ready to take instruction from others on what to do next.
“Sports got me in the door—I know that,” Johnson says. “But that door doesn’t stay open forever. You have to do something with that access. In this world, just like in sports, nothing is handed to you. I had to learn that. Lucky for me, I started learning from my mentors while I was playing so that I could get a jump on life after basketball.” Johnson says his passion to prepare for life as an entrepreneur changed even the way he traveled when his Lakers team was on the road. While in cities like Atlanta, he met with executives from Coke. “I looked everywhere for mentors and used every opportunity to ask questions,” he says. “One thing I tell people who ask me for advice is that you don’t have to be a star to find a mentor, but you do have to show enthusiasm. I always showed enthusiasm.”
Johnson says there are many parts of life as an athlete that he can relate to his postbasketball career. The most important link, he says, is in the power of research. “While playing, I always studied my opponents, I studied their tendencies so that I could predict where they’d go when they came down the court,” he says. “That is just as true now. I want to know my customers, want to know their tendencies. And I don’t just read reports. I get out and ask them.”
Disproving the Naysayers
Compiling and sharing that information has contributed to Johnson’s success. The greatest example might be his partnership with Starbucks, which hadn’t previously established partnerships with other companies. While traveling, Johnson often noticed that the premium coffee company didn’t have stores in the communities where other Magic Johnson Enterprises partners were growing. Visiting Starbucks stores near these communities, Johnson talked to customers and found that many were from more urban communities and had driven several miles to spend their money at Starbucks.
Armed with that anecdotal information as well as statistics about the demographic he believed he could open for Starbucks, Johnson requested a meeting with Starbucks CEO Howard Schultz. He showed Schultz that the minority population in America is growing at a rate seven times as fast as the majority population and that African-Americans now spend almost $1 trillion annually. Latinos, America’s largest minority at 15.1 percent of the population, have a spending power in excess of $980 million.
“I asked him if he wanted to leave all that on the table or if he wanted to reach those populations with a partner who understood them,” Johnson recalls. “He went to his board and we joined forces.”
Now Johnson’s company owns 125 Starbucks franchises, “and our per capita spending at our stores is outstanding. We proved everyone who said that minorities wouldn’t spend $3 for a cup of coffee wrong.”
But his research didn’t stop with opening the door. “Once we opened, we started looking at ways to tweak the Starbucks model to meet our customers. We were going to bring them what they wanted,” Johnson says. “The results speak for themselves.”