In Search Of Excellence - Rick Caruso: Why Billionaire Rick Caruso Gives His Personal Cell to Strangers and Neighbors | E177

Starting point is 00:00:00 Why doesn't a billionaire take a billion dollars, go buy a ton of land out and build a community to help homeless people? The issue isn't how much money can you spend. The issue is, are you spending it the right way? Should we be listening to our parents by they giving us advice? Well, I think you should always listen. You should always listen. That doesn't mean you should do what they want you to do. Sometimes not knowing what you're doing is a real gift because you're not locked into the rules of the road.

Starting point is 00:00:27 If it grows or it flows, it goes. How important is resilience to our success? Oh, I think it's incredibly important because, as you know, you have to fail. You have to take a chance and fail, and you're going to fail. The success comes because you're willing to stand back up and keep going. Welcome to In Search of Excellence. My guest today is Rick Caruso, the most influential real estate developer in Los Angeles, who has reinvented the retail shopping experience by turning shopping malls into lifestyle destinations. His company Caruso owns 10 major retail and lifestyle destinations, including Palisage Village, including the Grove, which has over 20 million visitors a year, which is more than Disneyland. Rick ran for mayor in Los Angeles in 2022, lost by a very narrow margin, and we're going to talk about today. what his political aspirations are. Rick?

Starting point is 00:01:30 Thanks for having me. Welcome to In Search of Excellence. I always start with family. I want to start with your paternal grandparents. And I'd like you to tell us about the rubber band that goes around your money club. Oh, my God. He did the good research. My grandfather was a gardener.

Starting point is 00:01:45 He was an immigrant. Started out in Uniontown, Pennsylvania, in the coal mines, and then moved to Boyle Heights with his family. And I remember as a young man, he had his money and had a money club. not a money clip, but it had a rubber band on it. And so I don't have a money clip. I use a rubber band because it reminds me of where I began, where the family began, that we had very humble roots. And I think that's an important thing to remember. And your grandmother, Josephine, was a baker, worked in a bakery. Well, no, she was a homemaker. She was a homemaker. She was a great baker. She was a great cook. She was sort of this quintessential Italian mom, grandmother. But she was a

Starting point is 00:02:24 homemaker. My grandfather was the gardener. Let's move to your parents, and I want to start with your dad, and we're going to take it in a couple different sections. Okay. So a lot of us, when we're younger, we sort of know what we want to do. But at five years old, you're living in Trusdale Estates, and you're looking over the city, and you tell your dad, I'm going to own this one day. I want to be a builder. I want to be a developer. I want to own those buildings, yeah. I don't know. It was just the way I was wired. Isn't that crazy? It really was a blessing because it is what I've always wanted to do.

Starting point is 00:02:56 was able to eventually start a company and do that. But what, I mean, you're five years old. I have a five-year-old right now, and she wants to paint nails. You know, she's her nine-year-old sister, definitely into the nails. But, you know, five is pretty young. Pretty young. Yeah, I don't know. I can't, I can't explain it other than that's just the way I felt when I drove around.

Starting point is 00:03:17 You know, I spent a lot of time with my grandfather in his gardening truck doing rounds on the weekends, and I saw a lot of Los Angeles. And I became enamored with Los Angeles and with architecture, with buildings, with plants, you know, and all those kind of things. So it just was the way I grew up. And it's the way my DNA was. All right. Now we're going to talk about your dad, Rick. We're going to take it in two parts.

Starting point is 00:03:38 Okay. We're going to take it in the first part, his legal trouble. And then we're going to talk about his comeback, which is amazing. So when you were in the first grade, you had kids making fun of you for your dad who was indicted. He owned car dealerships. Right. There were seven people indicted from his company. He was a leading car dealer in Los Angeles.

Starting point is 00:03:59 He was a well-known. He was a leading car dealer in the world at the time. Yeah, he was a number one Dodge dealer in the country. Yep. He was a local ad personality. People knew him. Yep. And then someone made fun of you and a nun had to interfere.

Starting point is 00:04:14 How did that affect your confidence at that age? And how do you translate today into you're dealing with public criticism when you are a very public figure these days? days and people have a lot to say about public figures. Well, let me tell you, that nun, who I remember like yesterday. What's her name? Give her a shout out. Yeah, well, there was Sister Stella, who was the principal and Sister Elizabeth. And she was Sister Elizabeth, and she was this very large, beautiful lady. And, of course, back in the day, they had the full habits and whatnot.

Starting point is 00:04:45 And when that incident happened and I started crying, she literally just sort of folded me into her habit, you know, and comforted me. Listen, it was something I didn't really understand. My dad and I never talked about it until very much later in his life. He was very much ashamed of that what happened. He ultimately was vindicated, but many years later was vindicated. And the charges were dropped, but he had spent time in jail when I was either before I was born or just born. So it has always stayed with me, a great sign of resilience, a great sign of humility, a great sign of what you can do if you work hard and come back. he worked very hard to come back, so I really learned a lot watching him. But it was tough, yeah. Of course it's tough. And I still carry it with me, but I carry it with me in a good way because I'm very accepting of everybody, no matter sort of how they've gotten there or where they come from, because growing up with immigrant grandparents who were very poor, growing up in a household where your father did go to jail and lost everything and had to rebuild it back and watching him do that, it certainly changed the way he lived his life. And it certainly

Starting point is 00:05:52 influenced the way I live my life because my dad really wanted me to go to law school in order to protect myself. And he really wanted me to stay out of public service. So that was never on his list of things for me to do. I hope you're enjoying this video so far. But before we jump back in, I want to know if you've ever thought about what you need to do to reach a nice level of success in your life. Over the last 25 years, I've been an advisor to more than 50 companies. I've invested nearly 100, including Google Lift and Seagate, and I also co-founded a company that today is worth more than $15 billion. I've been incredibly blessed in my journey, and at this stage of my life, I want to give back. I want to share the lessons I've learned so you can reach incredible

Starting point is 00:06:30 success way faster than I did. In my own journey, I've learned that having the right mentor is a massive advantage to achieving our goals. I'm hugely passionate about mentoring others, and I'm looking for a few hungry entrepreneurs who are excited to take action on their journey to incredible future success. So if that's you, I've got an opportunity. In the description of this video, there's a link where you can apply to work with me. All you need to do is answer a few simple questions. And if you're a good fit, my team will reach out so we can build a game plan together. All right, now let's get back to the video.

Starting point is 00:06:57 So we'll hit the law school in a little while. We're going to talk about USC. We're going to talk about Pepperdine Law. But I want to go back to second chances. So he ended up starting dollar a day rent a car with 18 Volkswagen Beatles, a dollar a day plus gas, and built a very successful company. company over 35 years that he sold to Chrysler years later for $70 million, which in today's dollars, $183 million. Yeah, it was actually sold for a little bit more than that, but that was close to it.

Starting point is 00:07:27 It was close to it. But he built a hell of a company. He built a global company. What's the lesson there? How important is resilience to our success? Oh, I think it's incredibly important because, as you know, you have to fail. You have to take a chance and fail, and you're going to fail. The success comes because you're willing to stand back up and keep going.

Starting point is 00:07:44 In spite of failing, you're going to fail multiple times. But every time that you do that, you get stronger, you get smarter, you get better, you have some wisdom, you get some calluses. It doesn't bother you as much. You take a little bit more risk. You know, I've always told people you have to live over your skis. You have to feel a little bit uncomfortable, a little bit out of control. It has to be managed. But unless you do that, you're not going to accomplish a lot. And dad could have certainly just quit at that point and done something else or whatnot, but he didn't. He worked very hard to come back. So I'm also a believer that more is caught than taught, especially in a relationship between a mom and dad and kids,

Starting point is 00:08:23 your parents can tell you a lot of things, but you really learn more by watching. And I watch my dad just work immensely hard, and I watched my mom being very supportive of them. And that gave me a lot of confidence in life. We're going to talk about some political issues later, but I want to start with one here. It's a story about giving people second chances. Okay. So you have a stance to be hard on crime. All misdemeanors in Los Angeles, you want prosecuted. That would include trespass, things that today the DA is not prosecuting, doesn't believe it's worth the effort. What's your view on people who are, if you were the mayor, are you going to give people second chances? Sure. Well, let me, my position is that we should be enforcing the law. Whatever the law is, we should be

Starting point is 00:09:14 enforcing the law. If we don't, if the city, if the residents of people don't believe the law is right, and we should go change the law, but we shouldn't ignore the law. The law is there for a reason, and I think we need to be a society of laws, and at the same time, we need to be compassionate, and we do need to give second chances. So I'm a big believer in second chances. Absolutely that. And I think people can redeem themselves, work hard, come back, and do a better job. That's why I'm a big proponent in the homeless sector of giving people a path to rebuild their lives. We shouldn't be leaving people on the streets. But I do want to say that what's happened in Los Angeles, we've chosen not to enforce a lot of laws. And I think it's hurt our city tremendously. And, you know,

Starting point is 00:10:00 there's just not a good ending in that in that regard. But I also do believe that you've got to be compassionate on how you enforce the laws. I've been enjoying this video so far, but before we jump back in, I want to know if you've ever thought about what you need to do to reach a nice level of success in your life. Over the last 25 years, I've been an advisor to more than 50 companies. I've invested nearly 100, including Google Lift and Seagate, and I also co-founded a company that today is worth more than $15 billion. I've been incredibly blessed in my journey, and at this stage of my life, I want to give back. I want to share the lessons I've learned so you can reach incredible success way faster than I did. In my own journey, I've learned that having the right mentor is a massive advantage to achieving our goals.

Starting point is 00:10:43 I'm hugely passionate about mentoring others. I'm looking for a few hungry entrepreneurs who are excited to take action on their journey to incredible future success. So if that's you, I've got an opportunity. In the description of this video, there's a link where you can apply to work with me. All you need to do is answer a few simple questions, and if you're a good fit, my team will reach out so we can build a game plan together. All right, now let's get back to the video. You mentioned homelessness, huge issue in Los Angeles, homeless capital of the United States, depending on what numbers you look at.

Starting point is 00:11:14 It's the capital no matter what. Here's a question for you, and I've always thought about this, right? There's billionaires out there. According to Forbes, they're the 255th wealthiest person in the United States. $5.9 billion. So why doesn't a billionaire take a billion dollars, go buy a, a ton of land out in Palmdale or wherever it's, you know, you can buy a lot of property there and build a community to help homeless people. You could get 30,000, 40,000 people off the streets,

Starting point is 00:11:45 probably build housing, hospital, mental health issues. Have you ever thought about doing that? Well, I donate a lot of money to the homeless situation. I donate a lot of money and very active in organizations that support families that are at or below the poverty line to prevent people going homeless and very involved in education, very involved in Parlos Nenos, which is down on Skid Row, educating kids and helping families. So Tina and I are very generous. More importantly, we're very active. You know, we're down there working. And so we do a lot. Can we do more? We're always working hard to do more. But I don't, as an individual doesn't have the power that government has. And in order to solve the homeless problem, you not only

Starting point is 00:12:30 need to build housing, you need to wrap services around the housing. And where we have failed in the city is we've wasted billions of dollars. The numbers that are coming out now are roughly $900,000. The city is spent for every person they've gotten off the street, which is a ridiculous amount of money, and it isn't working because the homeless population continues to grow. So you have to be smarter about it. So the issue isn't how much money can you spend. The issue is, are you spending it the right way and is it being productive and effective and it is giving people a path forward and there's ways to do it and if i was mayor i would be doing it very differently than they're doing it today what are the first three things you would do that are different than what karen bass i think is

Starting point is 00:13:14 an absolute disaster okay well i'll let you say that um listen one is you want to have a plan that is that you can execute on and you've got metrics around it but just let's take a look at organizations that do a really good job. Let's look at the downtown women's center. Let's look at common concern. Union rescue mission. They take people in as they are. They give them housing. They give them services that they need. And they have a 90% effective rate, meaning 90% of the people walking in the door do not go back to homelessness. They've got mental health care. They've got drug addiction care. We should be funding and empowering those organizations that are already up and scale them so that they can take more people in. Downtown Women's Center just built new housing down on Skid Row. It took

Starting point is 00:14:03 them six years to do it because of the permitting problems, the funding problems. We can solve all of that. So that's what I would be doing. I would be taking the funds that we have, putting it behind organizations that have actual metrics that have worked, that have a story of success, and scaling them up. And we'd be doing it for a fraction of the cost, because on average, their building units, about 400,000. You take Hope the Mission, they're spending $100 a day housing people and giving them services. So we've got all these incredible organizations out there doing it. And what are we doing as a city? We're spending billions of dollars in getting nowhere. And there's no accountability. And now they're looking for the money that they lost because there's billions of dollars

Starting point is 00:14:47 unaccounted for. So I would handle it and manage it very differently. All right. Let's go back to Rick Caruso growing up. Okay. We're all made of what jobs we had when we were younger, and you wash cars at the dollar rent a lot for your father as a teenager. We're around the same age. You're a few years younger than I am. And what I've noticed in today's generation is that those students, young adults coming out of school, are more entitled today than they were when we were coming out of school. They don't want to do the hard work, what I call the shit work. So what's your advice? We have a lot of people in the 18 to 20 25-year-old category, men and women, listening to the show who are thinking, you know, I really

Starting point is 00:15:33 don't want those menial jobs. Are those jobs necessary to our success? And how are they critical to the immense success that you've had? If I could just answer the question by addressing what does it take, in my opinion, to be successful? Yes. In my opinion, what it takes is discovering and spending a lot of time on figuring out what you're good at and then continuing to work hard at what you're good at. lot of people talk about go do what you're passionate about and i think that's interesting and great but what you're passionate about may not be what you're good at i may be passionate about singing in the shower in the morning but if i wanted that as my career i'd be broke right so

Starting point is 00:16:13 now if the two things intersect and you're good at something and then you're passionate about it also that's when magic happens because hard work never feels like hard work but the reality is to your point, you can't escape hard work if you want to be successful. You have to go through that cycle. And I went through it. Everybody that's been successful goes through it. And having a small job, maybe it's a job that you don't like for a while, I think it's actually really healthy. I think it's character building. I think you learn discipline. You develop good habits because of that. And then you build off of that. And you're going to look back in your later years on it, I think with great fondness. And you're going to realize everything,

Starting point is 00:16:55 thing is about taking a step and building a platform to take the next step. And unless you pay your dues and you work really hard and you work really smart, you're probably not going to get to where you want to be. But you can. I think everybody's got the ability to do whatever they want to do. I mean, when I was a teenager, I was knock on doors. Can I pull weeds? That's good. Coal climbing was great. I'd come back. My nails were filthy, dirty. I was dirty. College of Michigan stuffed envelopes for three cents each. We did AP, uh, AMP bagging groceries. These shaped who I am today, young people will come to me and they'll, I said, you know, 90% on my day is shit work. 10% is where you create the value, but you still have to do it to be

Starting point is 00:17:35 successful. Yeah, yeah. Are you still doing the nitty-gritty running your company? Yeah, absolutely. So what's... I've got a great, listen, I got a great team. You know, I can't touch everything like I used to touch. The scale of the company is too big, but I have an incredible team. And I'm able to lean in on things that I want to lean into, or I think they need to be sort of moved along, but setting strategies, setting goals, encouraging people, thanking people for what they're doing and working hard. We have a really incredible team of Caruso. I'm very proud of them. Let's talk about college. Okay. If that went to USC, you went to USC. You were on the, you ran the USC board for, for years. You took over after a scandal, major sex scandal.

Starting point is 00:18:18 There's a lot of conversation today that college isn't what it used to be and that a college isn't necessary today. You may have a very biased view because of your very strong USC ties. You've given over $40 million to the school. Is college necessary today? And what do you think of the three main lessons students learn in college if they do go to college? I don't think it's necessary. I think it's a really great option. It's not the right option for everybody. I think trade schools are great. I think any place you go where you can build a skill that you can then be employed, raise a family, hopefully buy a home, you know, build a good life, whatever. that definition is for you. It's a very personal definition. I think it's great. Do I think colleges

Starting point is 00:18:59 are wonderful? I do. I think they're great. But they're not for everybody. And listen, USC is a wonderful university. My experience there was terrific. I loved it. It did a lot for me. I wasn't particularly a great student. I didn't have the discipline I should have had. And I think one of the important things, the most important thing about going to college is learning about yourself, you know, what you're good at, what you're not good at, what you enjoy, how you can excel, build, building that discipline, you know, building those hard edges around you that you can rely on and that you could build your business, build your career, whatever that may be. And it's also fun, you know, from a social standpoint, you get great social skills. You meet people from around the world, around town, around the country that you would not otherwise meet. And you expose yourself to things that maybe also are a little bit complicated, difficult, uncomfortable. And you learn how to get through them because that's life. So I think the whole system is great, but it's not the only way to be successful or fulfill your dreams, whatever those dreams may be. I think people get too caught up in, this is the only way you're going

Starting point is 00:20:05 to be able to get to what you want to do. There's never only one way. There's multiple ways to get to where you want to be. You went to the Marshall School, and then you want to go to business school, graduate business school, and your dad said, you're not doing that. You're going to law school. He threw it on the hammer. And ultimately, you said it was the best decision, one of the best In your lifetime, I went to law school. I went to Michigan. I wanted to go to business school. I don't test well. I got into Northwestern Law School, and I was grateful to go, but I hated every minute of it. Okay. Do you think graduate school is important today, and would you recommend that parents force their kids to go to go to? I wouldn't recommend parents force. I would recommend that parents encourage and give a good reason why. Younger people should make a decision on their own at the end of the day. And you can always pivot. You know, you can always go back to school. You know, there's not a rule that the many you get out of college, you got to go right into graduate school or whatever the case is. People go back to school. One of my sons did that. It went back and got a master's and went back and got basically the equivalent of a PhD a few years after that. Those were all his choices. One son did go to law school. That was his choice. I was glad they did, you know. But it also depends on the individual. So I think, you know, I know, I know And then I, our rule of parenting is, you know, there's a lot of unconditional love.

Starting point is 00:21:28 We obviously want to give a lot of good guidance. But as kids grow up, you know, they make their own decisions. And we're fortunate. We've got four kids that have made really great decisions. They're not perfect. Nobody is. But they're really good human beings. I'm very proud of them.

Starting point is 00:21:42 You graduate law school. Then you went to work at a firm called Finley Cumble, one of the biggest firms doing real estate law. Then it cratered. It went bankrupt. That's right. And you said at some point. that if you listen to everybody else, you wouldn't be doing what you are doing today. I worked in San America.

Starting point is 00:22:00 Eli Broad was my boss. I was the assistant to the chairman. I think you guys knew each other and crossed paths at some point. And when I left, to start a technology company, everyone thought I was absolutely nuts. Okay. You know, my mom said no. My dad said, what are you doing? You have a managing director title.

Starting point is 00:22:16 Look at what you're doing. Should we be listening to our parents by giving us advice? Well, I think you should always listen. You should always listen. That doesn't mean you should do what they want you to do, you know, unless it's something dangerous. But in terms of career, you know, my dad was my best friend when my dad was alive. And we talked every day. The greatest gift he gave me, one of the greatest gifts he gave me, was not making me feel guilty about not going into his business.

Starting point is 00:22:41 I know he wanted me to. It wasn't something that I felt passionate about. Nor did I feel like I would be good at it in the car rental business. And I really wanted to be in the real estate business. Really informed me, one, it was a great gift. And two, it informed me in raising my own kids. you know, they've got to make their own decisions and what's best for them.

Starting point is 00:23:00 I don't, I think it's tough to be truly happy if all you're doing is trying to accommodate your parents' wishes. At some point, that's going to catch up to you. We always remember our first deal. When I came to L.A. in 1993 after graduating law school, with $3,000 in the bank, I lived on Midvale. In your duplex,

Starting point is 00:23:17 the first one you bought was on Midvale and Massachusetts. Yeah, we're a small world. That's right. Tell us what that was like when you saw that building and then tell everyone out there that of the care and love, you have to give that thing while you're, have a full-time job as a lawyer, you're doing the gardening, the painting, everything else. Yeah, it was great experience. You know, I wanted to invest in real estate. I was practicing law and there was this duplex on the

Starting point is 00:23:41 corner of Midvale of Massachusetts. It's still there today. Do you still own it? No, I still don't own it. I wish I did. You should buy it. I know. I got convinced to say, make it as a museum, the Caruso Museum. No, I wish I would, I wish I still had it. But it was a great property. I learned so much because I was the painter, I was the gardener, I was the leasing agent, I was everything and did it on the weekends and all those kind of things. It really helped me fashion the company I have today on how you can create value, how if you make something nice and attractive, you can enhance value, all of those kind of things, and how to do the leasing and convince somebody to lease the place. So it was a great experience, a really great experience. And I kept it for many,

Starting point is 00:24:23 many years. And then as my company grew, some members of the company really convinced me to sell it because they felt it was taking more time than it should take, whatnot. I shouldn't have listened to that and kept it. There's a price for everything. It's the only, I've never sold a property we've built to date. Right. We never well. I didn't build that property, but I still shouldn't have sold it. Good real estate. You just keep it. Let's talk about the parking lots and how those deals work. So you bought parking lots, and then you got your dad at dollar rental car with a credit tenant to lease them, and then you could get bank financing as well. So walk us through in simple terms for those people who don't have a math background, a finance background,

Starting point is 00:25:05 how all that worked. I was eager to get out of the law business. And I was an okay lawyer, but not particularly great. And I didn't want to be a lawyer my whole life. And so I went to my dad with an idea because they needed land to park cars. And I said, would you allow me to buy the land, lease it back to you? And then I can go to the bank with that lease and finance off of that lease. And basically, I got 100% financing.

Starting point is 00:25:28 I didn't have the money. No money down. No money down because of the credit of dollar, but also it was just land, asphalt, paint, the stripes, and lighting. So there wasn't a lot of improvements. So the banks were comfortable with that. I did about 13 of those deals with dollar. And then I did it with enterprise rent a car. We did a few with budget run a car, and I kept expanding that.

Starting point is 00:25:50 It became a great business. And then what happened was is all of these properties were adjacent to airports. Airports started expanding. They needed the land. An IRS code that basically says, if a government entity buys your property, you have the ability to reinvest within three years and not pay any taxes. So as the airport authorities were buying these properties, then I use those to build a over to build the commons. I reinvested and I turned it into a development company. When I was in

Starting point is 00:26:21 college, I worked for the Taubman company one summer. Okay. And I was technically in the property management group. Nothing was on computers those days. So we were, I would look at all the rents and look at the last month's rents. It was very fascinating in me. They owned and built the Beverly Center, which you know, which is a major thing for Los Angeles when that came. Today, it's kind of a third tier mall, for lack of a better word. I know you would never. use those words but I'm going to use those words. And you bought your first retail center called the Burton Place in 1992, which is right around the corner from that. So that was, as we build our career, we're always looking to do kind of the next biggest thing. So what was the process by which

Starting point is 00:27:01 you were going around L.A. to look at, it was a derelict disco. When you bought it, you raised it, but what were you looking at when you were looking at that building? Yeah, we tore down the original building. There was an old nightclub on it. It was in an area that was a very strong retail area, right? You'd had the Beverly Center. You had a lot of retail around it. So I didn't know what I was doing. I mean, I was learning as I went. I had no background in development. I had no background in retail. I had no background in building. But I just felt strongly that I could figure this thing out. And, you know, we had to vacate some land and we had to get the entitlements. It was trial by error. I mean, it was a great learning

Starting point is 00:27:42 experience, but was able to get it approved, able to get it built, able to get at least. And the building is there today. We're going to probably take that building down now and redevelop the property. But it was a great experience and it was very successful. But I literally didn't know what I was doing. But I think it's important for people to understand sometimes not knowing what you're doing is a real gift because you're not locked into the rules of the road. Like you have to build a mall that's got a roof on it and there's no sunlight, right? I didn't know the rules about building malls. So for me, I wanted to build what I enjoyed, being outside, having landscaping, having a fountain, having areas to sit and have dinner outside and lunch, and to people

Starting point is 00:28:23 watch. And so if you look at my projects, there's this evolution as they were built more outdoor space, more common space, more landscaping, more fountains. At the time, people thought I was crazy because the mall industry maximized building and there was no, you know, there was an old saying If it grows or it flows, it goes. You know, malls didn't like that stuff. It was an expense. But my view was you want people to come and enjoy themselves and stay longer and have dwell time. We're in the business of enriching lives.

Starting point is 00:28:56 And when you're in the business of enriching lives, you're not building a big box with no windows. You're building something that actually makes people happy. The goal of my show is to inspire, motivate people to be the best they can be. Most people who listen to the show are business. or they're working in jobs where they want to succeed, they want to make more money. And I haven't done a former poll on this work, but I'm guessing more than 50% of the people want to have their own business one day. Okay.

Starting point is 00:29:22 And so I've heard people like you who say, I'm going to go into something, even though I have no idea what I'm doing. Yeah. Is that what you're going to recommend to people who want to start their own business? Just go do it if you have no idea what you're doing? Well, no, but the rule is you need to be smart. You need to do your homework. You need to do your due diligence, of course.

Starting point is 00:29:40 but you also need to believe in yourself. And that's where I think it gets down to, what are you good at doing? You know, what are those core competencies that you have? And then build off of those core competencies. I just felt strongly that I had a vision of what I could achieve. And so I kept being very disciplined and worked at that vision. If I would have said, I'm going to start by building the grove, that would have been a pretty tall order. I probably would have failed doing that.

Starting point is 00:30:08 And so where I started was in real estate was this duplex. It was making sure that the lights worked. The lawn was nice. The flowers looked pretty. That it was the nicest little duplex along the street, that I could add value to it, that I could lease it for more. There was a guy, I'll give you a quick story. There was my duplex and there was a duplex across the street.

Starting point is 00:30:29 We were both having open houses. And there was a guy named Kenny Leventhal. And Kenny Leventhal was the son of the famous accountant. And I didn't know him at the time. He was looking at the duplex across the street. Came out, then he looked at mine. And he said to me, he said, why would I pay you more than living right across the street? I said because every morning when you wake up and open your door and you look at this

Starting point is 00:30:52 and you see the flowers and the lawn and the paint and everything's pristine, you're going to be upset that you don't live here. And he ended up living in that unit for about eight years. What validated my belief was if you make things a little bit nicer, you can. can incrementally move the needle on value. You can move the needle on rent. You can charge higher rents because there's going to be better performance. I started there and I built off of that knowledge to get to building Burt in 1992 and then moving on to Encino Marketplace. But I learned as I went, made mistakes as I went, and I would pivot quickly. I think one of the most

Starting point is 00:31:32 important rules in businesses make a mistake pivot quickly. Change it up. You know, don't dwell on the mistake, just change it up, try something else, and see what works. But it has to start with this inner confidence that I can figure this out. I'm a big believer, and my poor kids, their whole lives have heard this. There was a solution to every problem. It may not be the solution you want, but there's a solution out there. And if you keep working towards finding a solution, you'll figure it out. All right, so bird in place 1992. Yeah. Then you got 10 years. Encinano marketplace and all these properties. Right. Right. Calabas, you at a center, and then here comes the Grove in 2002, 10 years later,

Starting point is 00:32:13 640,000 square foot, 25 acre site, 50 high-end stores. You revolutionized outdoor shopping by making it a community attraction. 20 million people go to the Grove every year, more than Disneyland, which is 17.5 million. What was the vision there? What was the first day you drove by and said, this is the old farmer's market. It's been here 100 years, same family. I think I'm going to call out the owner and say, I want to redevelop this whole thing.

Starting point is 00:32:40 What was the moment? I co-called. What was the moment? The moment wasn't a moment. The moment was what I was just saying. It was building things, and it continued to be an evolution. Not a revolution. An evolution. I saw what worked really well in Encino.

Starting point is 00:32:58 And then we go did the prominent at Westlake, and we did more of what worked really well. Then we did Calabasasas, and we did a little bit more worked really well. When I got to the grove, that area everybody told me was long dead. Don't touch it. You know, there was methane gas problems. The farmer's market was in financial trouble, all this kind of stuff. I looked at it and I said, I've got this incredible piece of real estate here. I got Beverly Hills on one side, Hancock Park on the other side. That's where local knowledge in real estate really matters. I think local knowledge is one of the most important things if you want to be

Starting point is 00:33:28 in the development business in real estate. And I said, I'm going to just build upon what's worked. and we're going to create our own environment now, which was very controversial. We're not going to open up to the street. We're going to create our own environment because I want to transport people to a better time and place. I want to enrich people's lives. And we want to celebrate a little bit of history in Los Angeles. L.A. had a trolley. So why don't we do a trolley?

Starting point is 00:33:53 And I'm flying back from New York on United Airlines and I'm going through their in-flight magazine. And there was this picture of a trolley, a double-decker trolley in Hong Kong. And when I landed, I called my lead architect, who we still work together. He's the head of design for the company. What's his name? Shout out to Dave Williams. Brilliant. I could never have done what I've done without Dave Williams.

Starting point is 00:34:15 He is the genius of the design of all of this because I can explain to him what I want. I can't draw it. He gets into my head and together these things happen. But he is a brilliant architect. And I said, I got this idea. Let's build a trolley. Let's have the trolley go through and connect it to the, the farmer's market. And it will be this physical and psychological connection between the grove

Starting point is 00:34:38 and the market. And of course, the Gilmore family that own the market, love the idea. But if I'm in the business of building a mall, you're never going to build a trolley. It's an expense. You make no money. It costs you a lot of money. And what do you get for it? If I'm in the business of enriching lives, a trolley makes sense. And I would say this to people in business. Define your business in a way that gives you permission to do things that your competitors don't do. Because every mall company was building malls. They all look alike. They all operate the same way. The business model is all the same. And when I'm in the business of building something that enriches lies, all of a sudden a fountain that dances makes sense. Music makes sense. A park

Starting point is 00:35:17 makes sense. Nice trees make sense. A trolley makes sense. And what it does is it changes your business model and it bends the curve and puts a moat around your business where others have a tough time to compete. That's where you want to be in business. You want to be in business. You want to be be in business that has high barriers of entry that make it difficult to duplicate. I don't want to build a mall in the middle of the desert where if you took an aerial shot, it looks like the face of the moon, because it's easy to get the entitlements to do that. If you look at every one of our properties, they're in jurisdictions that are incredibly difficult to get entitlements. Go build a five-star resort on the beach in California. It's like an impossibility. And then by the way, have a train

Starting point is 00:36:00 running through the middle of it. Right. Right. Those are the things that excite us is how we do things so differently because we look at it through the lens of the guest experience, the customer experience. You know, it's, it's given us an ability to be competitive where other people just can't compete with us. You mentioned something really critical and it's been one of the hallmarks of my own successful career, coal calling. So you're driving around. You figure out who owns this property. It's a huge piece of property. How many times do you think they had been cold called before you got on the phone with them or you want to go see them? I don't know. But I'm a big believer in cold calling. It's, it's, tell everybody out there. I mean, people are afraid to do it,

Starting point is 00:36:47 right? And why? How important is cold calling to our success? I think it's one of the most important things. And I do it today. I call people I don't know. I reach out to them with no agenda and just say, I'd like to get to know you and learn how you did something. You've got to do that. You can't be in a silo. You've got to get out of your office, get on the street, meet people, do different things. I got to tell you something. It saved us during COVID. Nobody had a playbook in COVID. I started calling other CEOs around the country saying, what are you doing? And how are you doing it? How are you protecting your employees? You know, how are you protecting your guests? How are you protecting your business? All these kind of things. I think being curious and asking a lot of questions, being humble, saying, I don't know how to do that. Tell me how you do. did it, incredibly valuable. So you have a calling card today, right? You're a recruits, so everyone knows who you are. If they don't, they're going to Google you in a millisecond. He's a 400 guy worth $6 billion.

Starting point is 00:37:41 I have a calling card. I'm a co-founder of very successful $12 billion, publicly traded technology company. I can make those calls as well. But what if people, 99% of people, don't have that ability to do it today? You network. Networking is really important. If you're in the real estate business, join a real estate club, join YPO, join

Starting point is 00:38:03 organizations that provide networking. That's how I got started. There was a guy named Carl Terzian years and years ago that sort of took me under his wing. His business was networking. And he would put me into different groups and organizations and I went on a hospital board and I got to know a lot of people. I was, you know, 25 years old. I had no idea what I was doing.

Starting point is 00:38:22 But I started meeting a lot of people and learning from a lot of people and creating great friendships with a lot of people. And it was a huge help in my career. That's interesting. I mean, I met Carl Turzian as well when I was 26 years old that I came out here. Okay. I forget the club that was on top of the Regency Club. The Regency Club. That's where he yelled court. Eli Brod took over that office to make it his family office at the end of the day. Okay. So let's talk about the performance of the Grove. I always wondered what happened to the old Regency Club. That was a great place. It's sales per square foot are three times a national average. Three, of your 15 properties are within the top 15 of all properties. I think the only retail space that

Starting point is 00:39:05 beats yours is the Bell Harbor shops in Florida. I think we're pretty close. Maybe we're beating them now. Close by. So what are the three main secrets to your success? Why is your performance three times better than everybody else? I have a lot of really smart, good people that operate the company. Okay, so team, team is number one. The team, the passion of the team, the expertise of the team, and the commitment of the team. We build great properties, but most and most importantly, we are completely focused on the consumer. And we have two things that we take a look at every single day. We look at the guest experience, you're walking onto the property, and we look at the customer experience. The customer experience is Nordstrom, Tiffany, Allo Yoga, whatever. That's our customer. They're paying

Starting point is 00:39:49 our bills. We have to service them well. We have to make sure that we are doing everything we can that when their customer shows up, they have a great experience. And they come back over and over and over again. And then there's the guest experience. You walk on the property. It's clean. You feel safe. It's happy. The music is right. It's frictionless to get in and out of the garage. All of those things we think about every day when we open up these properties. You have to have both of those things. People have infinite choices. They don't have to go to the grill. They can go a million other places to go shop or to go hang out. I've got to give you a reason every day to show up there and to come back. And when you leave to say that was a great experience, it's critical to do that.

Starting point is 00:40:31 We do that in our hotel. We do that in our apartments. And we do it in our retail centers. Architectural critics pan the grove. They said you were creating a Disneyland. It was ugly. They got people to complain about it. How important is it to tune out the naysayers? because if we all listen to people who criticized us, we would never be where we are today. Right. And then how good did it feel when at the end of the day at work and everybody loves it?

Starting point is 00:40:59 Yeah, listen, architectural critics are architectural critics. Okay, great. I'm sure there was critics of St. Peter's Cathedral and of the Coliseum. I don't spend any time listening to that. I really don't. What I spent a lot of time doing is going around the country and going around the world with the team

Starting point is 00:41:15 and studying what works and what doesn't work. What streets are great. And why is that street great? the height of the curb, the spacing of the trees, the rhythm of the lights, the energy on it, the scale. We go around and we look at what doesn't work, but people built it for whatever reason it's been failing. You want to learn from other people's failures, too, and other people's success. So, you know, a critic is a critic. I don't spend any time on that. So let's talk about the Rosewood Miramar Beach, one of my favorite properties. Thank you. Me too. It is a,

Starting point is 00:41:44 it is a spectacular 25-acre site on the beach in Montecito. Yeah, 162 rooms. That's right. Ty Warner bought it from Ian Schrager. That's right. For $50 million, then you paid $57 million a few years later. $50 million. Right, it was $47 and then $50 million.

Starting point is 00:42:04 Rumored to cost $200 million, roughly, to build a property. No one really wanted that property. And one of the things that you did, I mean, the local residents didn't. I mean, there was a railroad going right through the property, you know, before you get down to that amazing restaurant, you get down to the beach. and for those people who haven't been there, it really is very expensive, but it's an incredible piece of property, great hotel. One of the things that you did to overcome opposition, there was a ton of opposition, right? This was an 11-year project. And so...

Starting point is 00:42:34 Well, we got our entitlements within a couple of years, and there was a lot of opposition, a lot of concern, a lot of legitimate concern from the locals. But then we had the great recession, and we put everything on hold. Okay, but one of the amazing things that you did that almost nobody does. And I always say this to people, by the way. I mean, I get criticized all the way. No one does that. And then I come back with, well, that's exactly why you should.

Starting point is 00:42:56 Well, it's true. So what did I do? And what do you do is you gave your cell number out to local residents and said, call me if you have any concerns. Sure. But it's all about the community. You know, I've done that since the day I built my first project. You give your cell number out to people?

Starting point is 00:43:11 Yeah. Today? Yeah. And so many people have my cell number. It's going to blow up after today. You're never going to be able to use your phone again. I'm walking into a community. Our company is walking into a community.

Starting point is 00:43:22 And we used to just be me and one other person when I built Burt in Place. I'm asking permission to build something in your community, in your neighborhood. I need to listen to you. I need to hear what your concerns are. And what I need to do is I need to make the project represent what that community really wants. And make sure what they really don't want, we don't do. because I want them to advocate for me. I want them to be their project.

Starting point is 00:43:50 I would have never been able to get the Grove approved, Palisades Village approved, Maramore approved. These are areas that are so tough on new developments if the community wasn't alongside with me to build these things. So we take a lot of time and I go to every community meeting myself and we have all these hearings with people. And we start out by saying, tell us what you want, tell us what you don't want. What are you worried about? And, you know, we were able to get that project approved. We were just able to get an expansion of it approved, you know, which is very unusual. And even with the Costa Commission, a 50 vote, we're a good neighbor. We pride ourselves in being a good neighbor from the beginning to the end. We remain a good neighbor in the community.

Starting point is 00:44:43 I don't know. You know, I'm sorry. I don't know. You know, Thank you.

In Search Of Excellence - Rick Caruso: Why Billionaire Rick Caruso Gives His Personal Cell to Strangers and Neighbors | E177

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