Magic Johnson, five-time NBA champion turned billion-dollar entrepreneur, sits down with Chris Lyons from Andreessen Horowitz to discuss his journey from basketball legend to business mogul. Johnson's empire now includes ownership stakes in the Los Angeles Dodgers, Washington Commanders, LAFC, and the Los Angeles Sparks, alongside investments across real estate, insurance, and venture capital.

The conversation explores Johnson's business education under Michael Ovitz at CAA, his early partnerships with Starbucks and other major brands, and his evolution into Silicon Valley investing through his relationship with A16Z. They discuss the transformation of athlete business models from endorsements to equity ownership, the explosive growth of sports team valuations, and Johnson's investment philosophy across traditional businesses and emerging technologies.

Johnson reflects on missed opportunities like the 1979 Nike deal that would be worth over a billion today, while emphasizing his forward-looking approach to partnerships, team building, and the importance of equity-based deals in today's market. The discussion covers his recent investments in AI and healthcare companies, his methodology for evaluating founders, and his advice for the next generation of athlete-entrepreneurs.

Michael Ovitz's Masterclass in Deal-Making and Relationships

Magic's business journey began when Lakers owner Dr. Jerry Buss connected him with Michael Ovitz, the most powerful agent in Hollywood at the time.

Ovitz initially rejected Magic, saying "I don't know about representing you. Athletes, they spend more money than they make" and threw him out of the first meeting.

After Dr. Buss vouched for Magic's seriousness, Ovitz gave him a stack of magazines to read and administered a test before agreeing to represent him.

Ovitz taught Magic the power of strategic positioning, taking him to Morton's restaurant where "he had the one table" and everyone would come to pay respects.

"Get people who are smarter than yourself, get the right people, and always pay them and then let them do their thing" became Magic's core business philosophy from Ovitz.

The Billion-Dollar Nike Deal That Got Away

Phil Knight offered Magic stock instead of cash in 1979, but Magic chose the guaranteed money from other endorsement deals.

"If I had did that deal in 1979, it'd be over a billion dollars. So that's the one that got away" - Magic reflects on his biggest missed opportunity.

Despite the regret, Magic maintains his forward-looking philosophy: "I'm not a guy who goes backwards a lot. I move forward. What I have is what I'm supposed to have."

The experience taught Magic the power of equity over endorsements, a lesson he now passes on to current athletes and entertainers.

Building Strategic Partnerships Across Industries

Magic built relationships over decades before doing deals, citing his 10-year relationship with Ron Burkle before their private equity partnership.

The Starbucks partnership taught Magic about customer service and high-margin businesses where "a cup only cost less than 10 cents or 15 cents" but sold for much more.

"Don't be afraid to partner. We got to get rid of that myth that you got to be the only one. It's okay to collaborate" - Magic's philosophy on business partnerships.

Magic emphasizes playing specific roles in partnerships: "Tell me what you need. Now I'm playing a role player in business with these men. And it's okay."

Sports Team Valuations and the Fan Experience Revolution

The Dodgers purchase for $2.2 billion in 2012 was criticized as overpaying, but the team is now valued at $8 billion according to Forbes.

Dr. Jerry Buss bought the Lakers for $65 million and they recently sold for $10 billion, while the Commanders went from $6 billion to nearly $8 billion in two years.

Magic invested heavily in fan experience at Dodgers: "We put a couple hundred million into the fan experience, into the stadium" which drove record revenues.

The WNBA Sparks investment paid off dramatically as the team went from losing money to being worth around $300 million after paying "a few million for the team."

Analytics revolutionized sports management: "Baseball actually started analytics really in sports" and now every team needs "a whole staff" for data-driven decisions.

Silicon Valley Entry Through Skydio and A16Z Partnership

Magic's first Silicon Valley investment was Skydio's Series A through A16Z, when "the product wasn't even, it was still in prototype."

The Skydio deal "provided me with 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."

Magic was "way ahead of the curve" with drone technology, as now "every sports league, every fire department, every police department" uses drones.

His investment philosophy focuses on "good ideas that look like bad ideas" and founders who "have skin in the game" and are "experts at what they do."

AI and Healthcare Investment Strategy

Magic recently invested in Alchemy Health, which builds pharmacies "in places that they don't have pharmacies" targeting rural America and inner cities.

"AI now is going to blow people's mind. It's already blowing our mind where we are today with it, but it's only going to get better."

AI will transform business efficiency: "Lower your cost. You're going to be more efficient. You're going to be faster" with "the world's information just right there on your fingertips."

Magic looks for "heavy demand" sectors where "it's almost you can't miss" - similar to his successful inner-city business model targeting underserved markets.

Building Teams and Scaling for the Next Generation

Magic advises athletes and entertainers to "get a team of people who can help you that while you're on the stage singing, they're conducting business."

Team members must be able to say no: "They're not used to somebody telling them no" but need people who can reject bad deals and overspending.

"You're great at what you do - basketball player, football player, singing, being an entertainer, but you're not great at business" - emphasizing the need for business expertise.

Magic saved money throughout his career so "every deal that came that I had to write a check, I was ready to do that" - emphasizing financial preparedness for opportunities.