#1: Joe Ogilvie
After a 18 year career as a pro golfer, including 15 years on the PGA Tour, Joe Ogilvie became a partner at Wallace Capital. Almost 7 years after leaving pro golf, Joe joined us on the Course Record show to talk about how Tour players think about money, what makes the Masters so special, the business of pro sports and some of his favorites thing in golf and business.
Enjoy the conversation below or wherever you typically enjoy podcasts (Spotify, Apple, Google, Stitcher, Amazon).
Tour Pros and Money
Dan: Joe after your playing career, you made an unusual decision to go into investing versus a more typical path for a retiring pro golfer. Tell us why you did it. What made you confident you could succeed?
Joe: You know, I think us golfers have a certain, as Roberto can attest, you have to have a certain Moxie to be able to say, “okay, I can play golf for a living.” So you kind of have that inside of you. But I think more importantly, I remember my honeymoon, my wife and I were talking about a long-term plan.
And I kind of said, you know, at 40 years old, I think we'll probably have a couple of kids. They'll probably be roughly the age of 12 or 13 years old. And it might be nice to kind of see them. If I had girls, it'd be nice to see them as they have their first dates. And if I have boys, it'd be nice to play golf with them or whatever.
And so I kind of had that when I got married at age 27. So I had kind of had that in mind for my long-term plan. And you know, when I got on tour in ‘99, I think there were 26 or 27 foreign born players on the PGA tour. And roughly there were five guys younger than age 25. And if you look at it now, I mean, I don't know exactly how many people are under the age of 25, but it's probably 30 that are members of the PGA tour.
And so it became a math equation for me. It's like, okay, when I'm 40, this is a long term trend. And my business is going to start to go downward. And so I thought, okay, what, what business can I get into that? I'm passionate about what I would love. And Warren Buffet calls it, you're whistling to work every day.
And investing has always been something I've been passionate about. I've always loved. I think I'm a relatively honest soul, so I care about my clients. I joined Wallace Capital, where I was an investor. So it always kind of rang true to me that, if I'm invested one way, I think my clients should probably invest alongside me or at least, or, a better point, I should invest alongside them and our money should be working together. And that's kind of what we do. And I have no idea if anyone would place money with me or our firm, but I kind of had a pretty good concept that we think works pretty well. And we're going after net, after-tax returns, Warren Buffett's kind of our North star, and it's worked pretty well for him. We'll never be a Warren buffet. We'll never have his track record, but I think the way he thinks is so clear that it just resonated with me. And I think it's resonated with some of my clients and you know, so far so good. It's been successful.
Roberto: Joe, do you still play golf now? If so, what's the reason for playing now compared to why you played when you were on the PGA tour?
Joe: Yeah, I love golf. I mean, I really do. I think it's, it's one of those things that you don't get to see, or you don't get to spend five hours straight or four hours straight with someone very often and you get to know their temperament. You get to know their family life.
Assuming you ask the right questions and you get to know kind of what makes that person tick. I don't care if they're 30 handicap or a two handicap. And I play the game now for enjoyment. And I was really, it's interesting, you know, as you get to know athletes and they retire from the game, they're always trying to find that adrenaline rush.
I don't play golf to have an adrenaline rush or do anything really having an adrenaline rush. I just kind of play it to get to know someone and I like the game. I’m terrible now. And I need strokes, especially from you, Roberto, but I just, I love it. I think it's challenging. I think it's fun.
I played different shots. I don't care about my score at all, but I love to play the golf course and I loved to play with the guys or girls that I play with.
Roberto: Terrible is a very relative term, I'm sure. What do you think PGA tour players under spend on and what do they overspend on?
Joe: Well, they overspend on planes. And, you know, I think it's normal with any athlete. The major thing is, they get their lifestyle and it's called lifestyle creep and they get their lifestyle so large that it's tough to retreat from
I had a very middling tour on the PGA tour. I mean, 15 years I was, I guess I could fully say I was a journeyman, but you know, I always told people. I would rather fly private when I'm 60 and have bad knees, a bad back and be grumpy than whenI was 26 years old and was perfectly great in shape and everything else.
A private airplane is essentially a time machine basically for people, and that's the only thing you can't buy with money is time, but a private plane comes close. I think lifestyle creep and planes are probably what guys spend too much money on.
Roberto: What about from a performance standpoint, as far as spending? What, what do you think they under-invest in?
Do you think the trainer for $100,000 is a waste of money where they could be just strictly from an ROI standpoint. What do you think you've seen guys under spend?
Joe: Everybody's different, but I am honestly going to say that they under spend on their wives. That's a weird, that's a weird thing. And what I mean by that, I don't mean diamond rings and you know, all that kind of stuff.
I mean, just like going on a date night with their wife just one-on-one time with your wife because at the end of the day, I remember when a tour had me talk to the rookies and things like that. We're talking about finances. I'm like, look, guys, I can talk to you all, all about saving. I can tell them about anything you want to talk about, but
The number one most important financial decision you're going to make in your life is who you marry.
And if you get that right, a lot of things take care of it themselves, but if you get that wrong, it's a disaster. I think that spending time and quality time with your wife, and that's date night and that's one or two trips a year where it's just the two of you, is the way to go. Once you have kids, I think that that's the most valuable thing you can spend money on.
Now, if you want performance, Everything is different, but I think having a good caddy, I mean, I think if you did like a Myers-Briggs test with a caddy and really fun, really get scientific on that. Roberto, I don't know if you've had the same experience, but I think a caddy can help you, but it can also hurt you. And I think really scientifically looking at that is probably something we should spend more money on.
Dan: What's the single dumbest money move that you see players making over and over again.
Joe: Single dumbest money move. Rookies are a little bit different than veterans, but I can tell you almost without fail, most veterans you can tell when their career starts to go a little bit like this (points downward) is when they buy the big house and they typically buy a giant house and their burn rate just starts to go vertical and. No, they get swamped or maybe they buy a house and they haven't sold their previous house. They just get that little extra stress and that little extra stress causes a little bit extra stress in their marriage and then it just causes problems. So it's that lifestyle that creeps into their game and it creeps into everything else.
Roberto: When I was at my rookie orientation, the lady who did the player benefits had been handling guys retirements for at least 30 years. She retired in my tenure on the tour. I sat with her at lunch and she just looked at me and said, “don't get a $10,000 mortgage.” She was like, “just don't get a $10,000 mortgage and you'll be fine. Every phone call I get about players trying to get their money out early is because they have a $10,000 mortgage, if not more, if not more.” Okay. So she was like, “don’t do that.”
Joe: I mean, look, there's a guy who you turned 50 in the last couple of years and he bought the big house, I think like 20,000 square foot house in Orlando and, you know, he'll tell you, the name will not be mentioned, but he will tell you: “I built this house. And it was like an albatross” and his game went straight down. You know houses are just things, and I think if guys saved and, or at least spending on experiences and not had the overall cost -- We call it burn rate with our clients -- and I sit the clients down, especially if it’s an athlete I'm like, “okay, let's go over your assets and let's make sure that those assets are producing money as opposed to costing you money.”
I mean, the house. I live in Austin, Texas. We have high property taxes in Austin, Texas. Let's say 2%. So your house is going to cost you about three and a half to 4% of the assessed value.If you live in a $2 million house, 4% is $80,000 a year. That's a lot! So the house is an investment with a sunk cost and it's something you can get joy out of. But I think a lot of athletes overspend on houses.
Dan: What about on the upside? There must be some advantages to being a PGA Tour pro when it comes to finances. What are some of those things that players enjoy that perhaps the everyday man does not?
Joe: It's a blessing and a curse they benefit from. They have an advantage over most professional athletes in a sense that golf by almost by definition is you self-select by being around probably a more successful a maybe a little bit smarter demographic, I think. And also you don't have guaranteed income.
So golfers, by their nature, live in this kind of “eat what we kill” type of thing. And I think that that helps a little bit. The issue is with all athletes, most of us have gone through the stages of life where you're this college kid and maybe you're a poor college kid, maybe you've done okay. But the bottom line your parents are giving you money or you're running your own money and you're a poor college kid. You might be on a scholarship and if it's okay, then you graduate and you've got your first job. And if you're a golfer and you're not elite, like I wasn't, you're playing mini tours.
And then you kind of go through the stages where you might go on the Korn Ferry Tour or some other tour, but you're learning life, and you don't have any money. And you're staying at Fleabag hotels and things like that. And then you're starting to have some success. And then maybe you meet a girl and then maybe you buy your first house. And by this time you're 26 or 27. And so you've kind of gone through this stage of life.
Normal people go through that stage of life and it's five or six or seven years later, unless you're in tech. It kind of speeds up. But the bottom line is you learn how to live and you learn how to buy your first house. Athletes that have success on tour are getting younger and younger and younger. At 23, they're making a couple million bucks. So all of a sudden they can buy the big house. They can buy all this other stuff and they don't go through those struggles that most people in life go through and they don't learn those stages of what I call them.
But it's interesting when you go through that and have instant success and instant riches, you know, you don't have that financial grit, I call it, that other golfers do though
Collin Morikawa is going to be around the smart businessmen of the world and things like that. So golfers have an advantage like that. I mean, if you just play the AT&T Pebble Beach Pro-Am and talk to your amateur partner, hopefully he's not a celebrity, you will learn a lot. That amateur partner can teach you a heck of a lot. You can get an education on the PGA tour, even though you're not classically educated.
Dan: Zooming in on something you said in the last answer: the uncertainty of a players income and the “eat what you kill” mentality, as you called it… to me that just sounds like a lot of risk. I was always trained to think that, all things being equal, risk is a bad thing. Yet, you called it an advantage. Tell us why you think that is.
Joe: Well, I just think that it's an advantage from a budgeting standpoint and from a long-term savings standpoint, you read all of the financial books and they're like, everybody should have 3 to 9 months savings or whatever as an emergency fund. Well, golfers, I always thought need two years of an emergency fund because I could pull a back or, or an elbow, or, you know, I might go in a slump. I mean, Steve Stricker went in a slump. He was terrible for two years. And then I think three straight years, he got the Comeback Player of the Year for three straight years, or maybe it was two straight years. So you go on these slumps and you have to have dry powder to kind of get you through this thing.
I mean every PGA tour player wished they had guaranteed money, but I think to a certain extent, it makes you a little bit more antifragile and I think that that's a certain extent not having that guaranteed income makes you a little bit more antifreeze or at least it should.
Making Relationships through Golf
Roberto: Circling back to the relationships you make through golf, and the AT&T Pebble Beach Pro-Am is a perfect example of that, you meet somebody that is literally a CEO of a Fortune 500 company. It's a very unique landscape that golfers get access to. And if you're a person like you is interested in, connects with people, how do you navigate that?
Joe: You know, it's interesting. These people are human, right. They want to know a little bit about you and they, they look at athletes and they're like, “Oh my God, I could never do what this guy does.” And I think a lot of the PGA Tour players look at the CEOs and they're like, “what do I have in common with this guy or this woman?” And I always thought about it like, okay, everybody is from a hometown. I don't know where they're from, but I'm going to ask them.
Everybody is probably married. Or if they're not married, they have a girlfriend or a boyfriend or whatever. They may or may not have kids. If they're a CEO, chances are, they went to college and chances are, they have some type of interest outside of golf. They might be hunters, fishermen, art people, whatever. And if you can't find the common ground between those five questions (1) where you went to college, (2) where are you from? (3) Are you married? (4) Do you have kids? (5) What are your interests outside of golf for our business? Then you're probably not going to have a relationship with mostly anybody.
And so I always thought, if you can ask those five questions and kind of drill down your chances are you're going to know someone and it's the Kevin Bacon game. I know this person, you know, you're probably going to know this person. You start to have that type of thing.
I got credit for asking these questions and they're like, “Oh my God. He cared about me” and I'm like, “well, that's just a human person.” I wasn't reinventing the wheel, but it's amazing when you do that, you almost get like a connection with you because you're interested in them.
Everybody is interested in us. Everybody is interested in a PGA tour pro because they just can't get it all around their brains that someone can be this good at a sport that they've tried and spent thousands and thousands of dollars on and they're still terrible. But it's amazing how these guys, if you're just interested in the other person across whoever you're playing golf with, I mean, they kind of gravitate to you and I was very lucky. I mean, you look at the AT&T. I still keep in touch with probably six or seven of my partners.
And I probably had, you know, maybe 10 partners throughout the years. And there's some of these, I'd say three of them are some of my best friends to this day. And you know, that's the, that's the connection you can get in golf that you just can't. I don't think you get very many places.
Dan: I read that one of the coolest relationships you made in golf was with Warren Buffet himself. So did you ask him those same 5 questions or was there a sixth, a seventh, perhaps even an eight that you were dying to ask Warren.
Joe: Yeah, maybe in the hundreds, so it was great. I was playing the Nike Tour, now it's the Korn Ferry Tour, in Omaha and they did a story about me. I think I was leading money winner at the time. How I like investing or whatever. And I put in my bio, I put “who your heroes?”, I put Bill Gates and Warren Buffett. I figured, you know, they're pretty smart guys. And I just admired the way they thought and things like that.
So they did this story on me in Omaha and to his credit, I mean, he's Warren Buffet, his people, or his secretary, Debbie reached out, found the hotel that I was staying in through the tournament. I was staying in a Best Western, which I think he, as a value guy, I think he appreciated that, that I wasn't overspending.
And she calls me at the hotel and she goes, “Joe, this is Debbie. Can I put you on hold?” And I said sure. And I thought it was Debbie for the front desk and this guy gets on the phone and he says, “Joe, how you doing? Warren Buffet.” And I'll never, I'll never forget the same voice and everything else. And I was like, “I'm doing great.”
I just finished the Pro-Am and he goes, “Hey, you know, I read this article. I'd love to meet you. While don’t you come down to Berkshire Hathaway tomorrow at 10 o'clock.” This is Thursday, and I've got a 1230 tee time at. Champions... I think it was called
Roberto: Champions Run!
Joe: Champion's Run!
So we're at Berkshire Hathaway. Omaha is the greatest city in the world for directions because it's a 100% grid and I think Berkshire's headquarters is on 32nd street or maybe it's 40th, I don't know what it is, something like that. And so I go down there at 10 o'clock and I sit down there and thought it was going to be one of these things: Knock on the door, take a picture and shoo this young kid out the door.” But he [Buffett] shows me around Berkshire Hathaway for 10 minutes and then we sit down and we start talking and we just had a great conversation. I didn't talk to him about investments much, but he was drilling me on what life is like for a young Tour pro. He was fascinated by it. I mean, here's a guy who was worth at the time, it was 1998, so he was probably worth $20 billion and he was more interested in me. Well, that's not true. We were equally interested in one another. And that just goes to show you how wonderful of a man this guy is.
And then, you know, we really got to know each other. He has this thing called the Buffet Cup where he would invite CEOs, friends and chairman of the boards and C-suite executives. And it was a charity event. They'd pay $10,000. He would do a Q&A and play golf and some people would play tennis.
And I went the first year. The next year was 2001 and 9/11 happened. I was in Dallas, heading to Omaha, never happened. And so I never got up there, but I wrote him a note and everything else. And you know, about a month later, his daughter called and said, “Hey, dad missed seeing you. What are you and your fiance doing for Thanksgiving dinner?”
And we ended up going to Thanksgiving dinner with the Buffets for a couple of years and it was great.
Roberto was sponsored by Mutual of Omaha as well until and I would fly up to Omaha to meet the guy that ran the marketing program was a guy named John Hildenbiddle. And I would take John out for lunch or dinner, and then I would email Mr. Buffet, and just say, “Hey, I'm going to be in Omaha during these times”, John Hildenbiddle middle doesn't know this, but I would give Warren a one or two week window that like, if you could have lunch or dinner, I'm going to be an Omaha sometime this time.
And he [Buffett] would say, let's have dinner on September 6th. And so lo and behold, I would call John Hildenbiddle and say, “Hey, can you have lunch on September 6th or dinner or whatever?” And it was great. I mean, it was like getting a graduate school course on how to think, but how to live your life, how to just be a good citizen. And he is a treasure. Just for him to give someone who's just a middle of the road tour player, and that's probably generous to my career, but for him to give someone that much time, I mean, we probably had seven or eight dinners together.
When I retired, I went up to see him. The week after I finished Greensboro two weeks after I finished Greensboro and we had a two hour lunch and then I went back, he took me back to the Berkshire Hathaway headquarters. And I met Todd Combs (CEO of Geico), spent an hour with Todd and spent another 30 minutes with Warren in his office. He thinks so clearly. And I mean, if everyone thought like him, the world would be a hell of a lot better place.
Dan: Who buys dinner?
You know, it's really funny. I remember we went to this movie theater that was like 20 minutes away from the one that was closest to his house because he had this free pass and, and it was great. So we get up there and we're buying Cokes and he loves Coke and, and you know, we're at the popcorn stand and. And I go, I gotta get, I gotta get popcorn. You had a bus over for Thanksgiving dinner and he's like, “well, I know I shouldn't let you, but I'll let you this time.” So, I can always say that I bought Warren a couple of Cokes and a popcorn, but I mean, he's incredibly generous. I’m not not the only one. He's got a bunch of people that he does this for and it's great. I don't think there'll be anyone like him ever.
Roberto: Omaha is a very unique place. You mentioned that, you know, we were both with Mutual of Omaha for a number of years, and I ended up with another group out of there who became close friends, and it's a very unique city there. It's very civic minded and it's a tight group and they're all kind of 1950s, sixties, greatest generation nostalgia. Like the best of America is still in Omaha, Nebraska.
Joe: Yeah, that's exactly right. And you know, I think at one point Omaha had more Fortune 500 headquarters than Denver, Colorado. I mean, it's a, it's a, there's been a lot of interesting things going on and it's a great town. I mean, it really is. The whole Midwest in general is a special place.
Golf as a Corporate Marketing Channel
Roberto: Where do you think a corporate dollar is best spent in golf? Player endorsements, tournament sponsorship, client entertainment, television advertisement? If you had a dollar to spend in golf where would you spend it?
Joe: It probably wouldn't be on television advertisement. I think that it really depends on the company as well. I mean, you can make an argument that if you do do TV you're, you're, you're, you're blasting it out. And the old saying that “I'm spending a hundred percent of ad dollars. I know 50% of it is working, I just don't know what the 50% is” or whatever that old saying is. I think that if you really think about it and you hire the right people that are spending your ad dollars and it's, I think it's probably a combination of TV, player sponsorship, corporate entertainment and that's with the player. You know, Mutual of Omaha, I think did a pretty darn good job and they measured it. I think that really works. I do think that if you spread it out, I think that works the best.
I mean, look at Titleist. I'll never forget they were paying Tiger Woods $3 million or something. He was using the ball and maybe the glove at one point. And when Tiger left Titleist to go to Nike, Titleist’s sales went up because they used the rest of the money that they were paying Tiger to just expand their ball program to the middle of the road
From a corporate America standpoint, I do know this, that I remember TaylorMade when we were talking about their driver program, you know, they were paying everybody to use the driver. And I remember talking to Mark King about it when he was running TaylorMade at the time, I think now he's running Adidas or Adidas USA, but he was like, he goes, look, if we spend $10 million or $15 million to buy “the count,” which is the count of the most played driver in the United States or that on the PGA tour, we think that's worth a hundred, $150 million in incremental sales worldwide.
Well, if your margins on a driver are. You know, 40 to 50%. So you spend $15 million and get an incremental hundred $50 million in sales. That's the best corporate that's the best advertising you could possibly do is buying the count.
Roberto: In 2017, TaylorMade got bought by a private equity company, and it's been kind of a race to the bottom on endorsement dollars since then, but because the interesting thing is if TaylorMade calls me and they say, “we're not going to pay you to use the driver anymore.” Okay. And all the other companies kind of look at each other and they say, we're not going to pay a middle of the mall Tour player to use a driver. I still have to use a driver. I can't play without a driver. I think they finally realized that.
Joe: I think that they did, but I do think that having the count and winning the count matters. And so, assuming you can find a driver, but I think there is power in numbers. It’s funny you should say that because I always talked to [former PGA Tour commissioner Tim] Finchem about this, when I was on the Board and I was on the PAC [Player Advisory Council].
I go, “you know what makes this whole PGA tour thing go round?” And the idea, because there was always talk about, PGA tour players get paid a stipend. If they miss a cut because they do other things. I mean, if you have me meet with John Deere's salespeople during the John Deere classic and I go there and I miss the cut, well, I'm still out, whatever it costs me that week, say $3,000.
So let's just say it's 3,000 bucks. So if I miss the cut I'm out $3,000. And so there was always a pressure on the tour to say, “okay, we need to. We need to pay these guys a stipend, even if they miss a cut.” They do it majors, they don't on the PGA Tour. So, you know, I had always talked to them about like, Hey, look, as long as the Titlest and the TaylorMades and the Callaways of the world are paying us X amount of dollars to play their clubs in the tournament, we don’t need the stipend.
And there were some years where I was making $150,000 [in endorsements] some years, it went to $100,000. And when I heard my rookie year on tour in 1998, I got $1,500 in 1999, $1,500 to play an Odyssey putter and $1,500 to play a Callaway driver per week. That's $3,000 bucks per week. I didn't have to wear the hat. I didn't have to carry the bag. I didn't have to do anything. I remember a Ping came to me my rookie year and they were like, “well, I'm going to give you $75,000 to play pink clubs, to wear the hat and carry the bag.”
And I don't know if they're used to players talking to them like this, but I'm like, “do I have stupid written on my face? Because I played an Odyssey putter and a Callaway driver when I was on the Nike tour and got paid 90 grand this year and I don't have to wear a hat or a bag or anything. You want me to take a $15,000 pay cut?”
And they were like, “huh, well, no, one's really ever came back to me on that.” Obviously that's changed.
I've never thought a PGA Tour player should lose money. If I go out there and lay a bagel and lose 20 cuts, I have a hard problem with losing money. So if Titleist and TaylorMade and Callaway and the OEMs are not paying guys enough that they can't break even at least, and make, put a little bit of money in their pocket, I think then you start to look at stipends per week. But I don't know if it's like that now, but I would always, as long as that unwritten rule was followed, I always told Finchem I didn't think that we had to pay guys a stipend. But as soon as that gets broken down, you know, I think you do.
Roberto: Well it’s getting there. I think the endorsement money from the equipment companies is going down and then the cost of flights and hotels and all that stuff has gone up significantly. That’s what gets lost in like the Korn Ferry conversation. The purses stayed the same, that it used to be $750 for a caddy for a week, now it’s $1,500.
Now, there was one of the big companies, the word on the street was two or three years ago that they did all their market research. And that if you weren't a top 10 player in the world, it just didn't matter. It didn't move the needle. Right. That was what, what came back to them. Dan could speak more to that kind of marketing dollar analytics, but, and that's what you're seeing. I think the counts matter less. And I think having the eight iconic players is really the only thing that people latch on to.
The business of the Tour
Dan: Switching gears, let’s talk about the big problems in the business of golf. And I know you've thought about this before, because I read an interview that said that at one point you were interested in being the commissioner of the PGA tour. If that's right, what made you say that? Any interest in doing that again at some point in the future?
Joe: What made me say that was being extremely naive and stupid. I think that I think being a commissioner of a sport is one of the all-time great jobs. The reason I say that is because it's really hard to screw up. I mean, Mike Whan from the LPGA took the LPGA Tour from dire straits and he turned it into financially fine footing.
But if you're a commissioner of the NFL major league baseball, Gary Bettman of the NHL has a harder deal, the NBA or the PGA tour. I mean, you're the only thing on TV that is live. And that you can't fast forward. You can't watch on tape. I mean, it's what Warren Buffet calls the ultimate “ham sandwich” business. It's a business so good that a “ham sandwich” could run it. And so I always look at businesses that, you know, I'm not the smartest guy in the world, but if I ran that business, I'd look at help a lot smarter than I am. And so I think that that was, that was my main thing. And plus I thought that, you know, Dean Beaman, was just really good from a commissioner's standpoint. I mean, he understood the players. He understood a lot of different things and he was a creative guy. And I thought that, you know, having a player's perspective is probably extremely valuable, certainly a part of you and your beach. Jay Monaghan has done a great job. It has not been easy being a commissioner in this COVID world.
[As far as my interest in being commissioner], I think that train has left the station. I love the business of golf and I was a little bit more aggressive. I mean, in 2011, 2012, I thought the PGA tour should absolutely buy the Ryder Cup or force the sale of the Ryder Cup. I was probably going to break a few too many eggs. I thought we should buy the PGA Championship or maybe even merge with the PGA of America and figure that out again. But I think there's a lot of interesting things that can happen in the world of golf. And I think there's a lot of interesting things that happen in the future of golf.
They'll figure it out eventually, but unfortunately you need to make a few people mad at you.
Roberto: You served on the PGA tour policy board. What does a player who served on that board know that the rank and file PGA tour player doesn’t know.
Joe: That's a really, that's a really good point.
Let me start off by saying that when you are placed, I was a terrible board member because I didn't know what I was doing. And what happens is, you're placed on that board. The way it works is you have four independent directors and they are typically captains of industry, they're CEOs. I think now we've got Mary Meeker on there who was, who ran Morgan Stanley's research at one point and she's got her own VC fund, and you had Randall Stephenson [AT&T Board Chairman] and you've got a bunch of really smart people on there.
As a player you're going on there, you have no formal board experience. No, I think I went on there and then I was 36 years old or something and you have no formal experience in this. And so you're kind of, you're talking about the golf aspect. You're not talking about the business aspect.
So what the Tour utilizes their Player Directors for is everything that has to do with golf. But it's really hard for a PGA tour player to say “golly, how can I, if I don't agree with these captains of industry, how do I speak up?” It's a board that is good, and I encourage everyone to do it, but at the same time, it's hard. It's intimidating to a lot of guys and I wasn't as intimidated as I should have been. Probably I wish I had, I wish I had a little bit more training when I went into it, but I think that I do think that the Tour tries to have the players’ best interest at heart, but it's hard.
Dan: What is the biggest threat to the PGA Tour, in your opinion? Is it the premier golf league, a new start-up league? Where could it go wrong?
Joe: You know, it's going to be fascinating to see what happens in the next four. Well, five to 10 years.
The premier golf league, I think, was dead on arrival. It's interesting, but I think it was dead on arrival. So the PGA Tour is very US-centric and I always argued to the PGA of America that it's incredibly naive to think that you're going to have three out of the four majors be US-based 25 to 30 years from now.
I just think that that's not easy, especially when you're probably the weakest major: The PGA Championship. If there’s a weak major, that's the weak one. And so I think the PGA Tour just being us centric is probably the weakest link. And as the world globalizes, or maybe we're going through this little hiccup where everybody's for themselves at one point.
I think that trying to navigate that is interesting. The ATP Tour... I always look this up because I always thought Greg Norman's world tour or whatever, in 1989, I think the tennis tours merged and the 20th guy on the money list and the tennis tour made, like, I don't know, $800,000. And last year, the 20th player on the tennis tour made like $800,000. And it went from a US-centric tour to a basically global tour. And so now things are different because you have more eyeballs, you have more points of distribution and things like that. So you can do certain things that you couldn't do before when you have a globalized tour.
The other thing is that golf, like tennis is or imagine if the NFL, Major League Baseball, the NHL and the NBA didn't own their playoffs. And, you know, that's what the PGA Tour is. We don't own our playoffs, right? We don't own the Masters. We don't own the US open. We don't own the PGA Championship. We don't own the Open Championship and we don't own the Ryder Cup. And those are the five most highly rated tournaments in our sport. And the PGA Tour doesn't benefit from a TV standpoint. And that's interesting.
I always thought that you've got to start with a Ryder Cup and then kind of go from there. And we tried to do that at one point. The few of us that tried to buy the Ryder Cup when it was when the [former PGA of America President] Ted Bishop thing happened when we were going to kind of make it a Pebble Beach ownership type of thing and make the Ryder Cup for the betterment of golf. Because I think eventually this is a controversial subject, but I think eventually the PGA Tour just goes: “we're not going to have 23 out of the 24 players in the Ryder cup as our members and not negotiate the television rights and have that in our package.” I mean, that's just bonkers. So that's going to happen. It's just a matter of time. And it's just a matter of who wants to be the bad guy.
I think that the fifth major or what could become the fourth major is the Olympics. I watched it and I was enthralled by golf in the Olympics. I just thought it was great. Now they had the Zika thing going down there, so they didn't have everybody go there. But I just think that that's interesting. And if you take the PGA Championship and move it every four years to coincide somewhere in the geographic area of where the summer Olympics is, that gets really interesting, in my opinion. But I think the European tour, the US tour being coordinated more is great. It should help lift all boats, but we'll see, it's still early, but I think that that's probably a really good thing.
I would go after Asia. I mean, Asia is the most important piece because that's where the golf is going to grow. I mean, you've got between India, China, Southeast Asia, and you've got what, three and a half billion people. I mean, Europe's important because it's really rich, but you know, the future is in Asia.
Roberto: The tour opened an office in Tokyo a couple of years ago.
Joe: I thought they had one in Shanghai, too.
Roberto: I think just Tokyo. [It is indeed Tokyo]
Joe: I mean, I, look, I think it, I mean, look how many Koreans, I mean, there's what, 16 to 20 Koreans on the PGA tour now.
Roberto: I think that the tour really keeps the players' interests at the forefront and the players have it so cush, you literally drive between four tournaments. You go from Torrey Pines to... and you go from Orlando to Tampa to.
I remember playing the WGC in Shanghai. We're over there at dinner and Bill Haas is just bitching up a storm about being in China. Okay. And he's just absolutely “like my dad [former Tour player Jay Haas], was gone all the time, but he was in Milwaukee. He wasn't in China.” 10 minutes later, Jay Monahan walks by and Bill looks at me and we look at each other and Bill was like, “well, if he's going to make me come over here, I'm glad he came too.” And it was just a great moment.
Joe: For the biggest guys, sponsors are going to make you [travel]. I'm assuming everyone on Tiger’s contract says, look, you're going to play in Asia twice a year. Yeah. And we'll figure that out. So the PGA tour is going to accommodate that somehow. I mean, that's why there’s the Zozo Championship and things like that are in Japan. And there's just, the markets are just too huge to ignore.
The Masters
Roberto: Joe, I have a friend who says the Masters has become its own professional sports league that has a one-week season. What do you think is the main driver behind the masters elevating its stature so far above the rest of professional golf?
Joe: The other majors, if you just think about the raw economics of the Masters, they own the TV distribution rights to every country in the world. The income stream of the Masters is just enormous.
I mean, I can imagine probably for one week, I got to think the merchandise tent is the highest grossing per-square-foot store in the world for one week, I think. I bet you it’s outdone every Apple store during black Friday, if they watch an iPhone during black Friday. So you look at that. You look at what they did at Berkman’s. You look at all this income coming in.
And the greatest thing about the Masters and the most powerful force as the Masters has, is you'd think about every other sporting league is basically they pay the players in between 48% to 52% of the, of the, of the income coming in. So they reinvest in the business. And they've got this flywheel effect where they just keep putting more and more money into it. They make the journalists have the greatest area in the world. The players have the best practice facility in the world. The members have, you know, all that stuff, but it's to their credit. They keep investing and making it better and better and better.
And I think, you know, it's really interesting because the Tour is always catering to the players and things like that. They also carry it to the sponsors. But I think the other thing that you look at the best tournaments, I mean, the Masters is the best tournament in golf, and they cater to the patrons first. I mean, that's the number one priority.
Roberto, you know, you're a Georgia guy, so you may not agree with this, but if you're a PGA Tour pro you don't feel very comfortable at all, when you go on to Augusta National, I mean, you're not, it's the first place you go to that you don't feel like you're the number one person that should be there. And it's probably the only tournament you play where you feel like you're walking on eggshells as soon as you step out of your car in that parking lot.
But if you're a patron, you feel like, okay, I'm the most important person here. And it just so happens that that's the best tournament there is. Now, if you watch this year, you quickly realize, or if you watch you're near and dear to my heart, if you watch the Duke Blue Devils play this year in Cameron Indoor Stadium, you quickly realize that’s what makes these things special and what makes Cameron Indoor Stadium special and Augusta National? It's the fans.
These tournaments need to tailor to the fans. What COVID has taught me at least is that the difference between a good tournament and an elite tournament is the people around it, the fans and that energy that those fans create. And I think the Masters does it the best and they happen to care about their fans and their patrons the most. It's great. And they make it great because they make it about the fans.
Dan: Well, what's the saying? The Masters is Disneyland for adults. It checks out. The Merch Tent.. I think that thing has me one Polol away from getting divorced.
Joe: My first, my first time playing the Masters, the guy in front of me was a Japanese guy and he goes in and he had $72,000 bill, American express. Boom, UPS straight to Japan. He goes, “it'll be there before I get there.” Get that: $72,000. I'll never forget it.
Roberto: The perspective you brought up of it being fan centric or patron centric. I've never thought about it that way, but when you, when you said that it is a hundred percent correct, I've never thought of it that way.
Joe: I mean, thinking about what they'd done, they bought every house around it and they made parking better. Everything is about “how do you make the fan want to go there?”
I mean, that's every, every other tournament starts with the players and how do you make their life the best? How will you make the players want to go there? The Masters says, I want to make the fan experience the greatest experience that could ever be. And by the way, I'm taking away your cell phone. You can't tweet, you can't take pictures. You can't act like a moron. I want you to just absolutely have the greatest time and respect the game of golf.
Okay, well that's an interesting way. I mean, Charlie Munger always says invert, invert, invert. I think that the Masters inverted that whole thing and they said, okay, we want it to start with the fans.
Distance and playing on Tour
Roberto: Talking about the game more directly, your personal opinion about protecting the game and how you feel it should be played, put that aside. Do you think the big increases in distance on the tour give the product a higher or lower value in the marketplace?
Joe: From my romantic feeling about golf is that it makes it far less artistic. I think Bryson's a hell of an amazing talent or whatever, but I mean, to watch him play is really boring. If you just look at golf, I'm surprised the scores aren't lower than what they are. And the reason I say that is because people only complain about the equipment. I always say that John Deere has done more to influence this than any other equipment manufacturer because it used to be the greens were 7 on the stimpmeter or, I mean, Augusta in 1978, I think was 7 or 8 on the stimpmeter. Now it's whatever.. 13. So what's happened is we're at our limit. You can only get these greens as fast as they are right now with the slopes that are on the greens. I don't think you can put the flag sticks one pace off the edge.
So you gotta have them three paces off the edge. And so you're at the limit of what you can do to these golf courses. The greens are as fast as they're going to be. I'm sure you might be able to get them firm, but mother nature is going to dictate that, but what else are you going to do? I mean, you're at your limit and you might make an 8,000 or 9,000 or 10,000 yard golf course, but you know, if that's the limit, the equipment and the players are only going to get better and better and better.
I'm surprised there aren't more than scores in the fifties. I predicted, I think six years ago that you'd have multiple scores mid 50sper year, and it hasn't, hasn't got more, but it hasn't come out that way yet. I've been very, very surprised actually.
Roberto: I think the explanation for that is you might be six years removed from remembering how hard the golf courses are on the Tour.
I think that's the biggest misconception that... you turn on Golf Channel Thursday night and they're running the scores on the bottom and you're like, “Kevin Tway, nine under” and think “they're playing another easy golf course this week.” Like you said, they can't put the pins any closer to the edges. They [fans] don't play the golf courses and they are so, so difficult and somebody will shoot eight or nine under. I think if they went and played, like what most people consider just like a championship course, like a good course in Atlanta with the pins five off the edges. I think you get five 59s the first round. Yeah.
Joe: That's probably right. And there's an edge. I mean, you know, you've got them on the edge, but I remember when I used to look at a golf course and I'd break down a golf course, I'd look at it like, “okay, how many par fives can I get into?”
And if there was two, I'd say, “okay, par 72, that means par 70. How many wedges will I have?” And if I had seven wedges, I'm like, “okay, that's birdie on half of those. So my par is 66.5.” And that's kind of how I broke down. But you know, you get those guys now. I mean, They have a wedge, every hole... not every hole, we still have the par 3s.
But I just thought that I thought that was with that in mind. I just thought you'd see more people breaking 60. Yeah. But then I watched these guys and I'm like, there's no way I ever played against them because they're so good.
Roberto: Yeah, the Tour is funny. You can play two, three weeks to three months in a row and just be like, “I don't know how I could ever shoot a score that can get me in the top 10.” And then you just have a couple of weeks where you're in fifth place or you're in contention and all of a sudden, you're one of those guys. Meanwhile, there's 60 guys on the other side that are like, “I can't break par out here. How are guys breaking par out here?” So it’s completely mental.
Joe: It's it's amazingly hard mental game. Yeah.
The future of pro sports
Dan: Zooming way back out again, where do you see pro sports going in the next 25 years or so? Do you think we’ve peaked in the amount of money left in sports for players or can it keep growing the way it has the last several years?
Joe: Well, I think that you're just going to have more and more eyeballs that go to sports and so more and more eyeballs translates into more and more money.
Now, maybe the models have to change, you know, sports are all getting, at least in the U S worst of the world. You've more or less been able to gamble on sports. The U S is now getting into gambling on sports. There'll be a little bit more money driving available for the [00:54:00] players. But I think that, yeah, I mean, I think people's.
People's pocket book is pretty wide open for sport. And, you know, people like to root people like to root for someone, people like to be fans. People like to see greatness. So yeah, I think in 25 years, I just think that sports are going to be better than they are now. I think there's gonna be more money.
I think they're going to be, they'll probably be more global. I think the world will be a lot smaller place in 25 years and you will see purses on the PGA tour and certainly the majors that will keep on going higher.
Tap-Ins: Short questions about Golf and Business
Dan: All right, Joe, you survived the hard questions. We're going to change this up a little bit and the premium on these next few questions will be on speed over depth. So I'll tee up this next segment called tap-ins. Are you ready?
Joe: I'm ready.
Dan: Favorite course you’ve played?
Joe: Pine Valley
Roberto: Favorite course on tour?
Joe: Pebble Beach
Dan: Who's the best player in the world today?
Joe: Dustin Johnson?
Dan: Will another player ever win 10 or more majors?
Joe: Yes.
Dan: Which tour stop has the best fans?
Joe: The Open Championship
Dan: What's the one rule in golf you'd love to change?
Joe: I don't like the divots in the middle of the fairway. If they've been repaired by sand, I think that's ground under repair
Roberto: Joe, you're in finance so this last segment should be very easy for you. It's called Buy or Sell. Buy or Sell: Tesla?
Joe: They just moved to Austin. You're not allowed to ask me about Tesla. I'm rooting for Elon, but we'll leave it at that
Roberto: Buy or Sell: Tokyo Olympics, 2021?
Joe: Buying!
Roberto: Buy or sell: Berkshire Hathaway?
Joe: Buying
Roberto: Buy or Sell: Bitcoin?
Joe: Sell. Actually I'm not selling. I don't even understand it. Where are the incentives of a government allowing Bitcoin to happen? I mean, you just want to be disintermediated, everybody loves the term disintermediation. So a government wants to be disintermediated by a program. I don't understand this.
Roberto: I don't understand it either. I read an article about people down to one guess on their passcode for millions of dollars.
Joe: Millions of dollars. I mean, what happens if you hit an EMP and the whole thing gets fried? I mean, I don't understand.
Roberto: That's a whole other question... Buy or sell: Self-driving cars?
Joe: God it'd be great, but it's going to be a long time
Roberto: Buy or sell: major league baseball?
Joe: Buy
Roberto: You're bullish on sports.
All right, Joe. Thanks. Thanks a million for joining us. This has been a really enjoyable conversation and I learned a lot that's for sure.
Joe: Good luck guys. I'm honored to be on it. It's going to be fun to watch you guys.
Takeaways
Roberto: Dan, what were your takeaways? I really enjoyed that conversation. Joe has a lot of experience in golf and has a lot of passion for it. And a lot of passion for what he's doing now. Uh, you know, or what are your headlines?
Dan: First of all, for me, it's just the sheer swag around the guy. I mean, from going from golfing and investing in what seemed like a really seamless way, and then just kind of how he kind of went about his business, joining the policy board and just telling an equipment rep when he was a mini tour player to.
No, do I have stupid written on my face? Things like that just really stood out with me and I just love his ability to be, be that confident in himself. And that self-assured, that stood out.
Roberto: Yeah, no question. Definitely doesn't lack for confidence. Uh, the other thing that stood out, getting invited to.
Thanksgiving dinner with Warren buffet is cool, but did he just call his family and , Hey, I got a better offer from a billionaire. Like, how does that conversation go with your family? I, I don't, I don't know. I don't think I'll ever find out, but, uh, um, God, I mean, I, I, you know, I fought it for going
yeah. Every family has different issues they're dealing with, uh, during the holidays, but you know, Joe kicked us to the curb for Warren Buffet is not a very common one that you hear around the Thanksgiving dinner table.
Dan: No, it's not. And just to know, that all started with so interesting, right? I mean, he described sort of his five go-to questions around what's your hometown, what's your partner or spouse like, and where you go to college, et cetera. The fact that he would have codified that and get so much mileage out of that with so many relationships, including the Warren buffet. One, I thought was really smart just as a way to really find a way to, to almost program the smalltalk that was in there.
And, uh, kind of go back to the well, would that same process? I truly respect that. It was so simple, but so really simple that I really liked it. It is simple.
Roberto: It's amazing how you can create a connection with a very simple, very simple strategy like that. Yeah, I thought it was smart. I thought it was really smart to kind of play that back. So, uh, definitely, definitely some takeaways for me to put that into my professional and personal life too. Yeah. Okay. The other one that jumped off the page to me was under investing in wives and my wife gave me an immediate like eye roll, you know, told you, I don't know, it hit very close to home, obviously.
Dan: That was super, super interesting and has to apply well beyond golf. I think within five minutes I had a reservation booked for a Saturday night and was calling a nanny to come see the boys. Because when I saw that, I wasn't sure if this was a golf and business podcast or a “life” podcast, but whatever it was that really resonated; I thought it was really interesting advice.
Roberto: That was totally unexpected from what we thought we were going to get out of that question. Yeah. And you know, I think the difference with professional golf. Or professional sports is, you know, I have friends that are consultants or travel and are spending hundreds of days on the road every year pre-COVID. But the Monday to Sunday schedule when you're playing the Tour and, you know, mom was at home with kids is different, right? Even that grinding consultant life, you can count on maybe a Friday or a Saturday with the family. And, you know, you sit around and play or dining and it's like, what are you playing?
And it's like, I'm playing the next three. It's just like a casual conversation. But that means you're on the road for 21 straight days. And if you have kids at home, that's 21 straight days, uh, you know, solo parenting. And so I think a guy who's played 399 starts, if you really think of it that way, it's not shocking that he thinks that's where players underspend.
Dan: Yeah. I thought that was really insightful.
Roberto: What did you think about the PGA tour policy board and his tenure there with some of the top 50 CEOs in America? What's your take on that as a business guy?
Dan: I mean, I had no idea it was in the policy board until I saw this. I thought it was many more people who were deep in the sports game and to see that there were people who were completely from different walks of life. Total captains of industry in their own walk of life was super interesting, but it makes me wonder, like, what's, what's the meeting, like when you got Mary Meeker talking to James Hahn about something? What's the common ground and how do you move forward the agenda like that? I don't know if you have any insight on that, Roberto, but I'd love to be a fly on the wall in that meeting room.
Roberto: I ran for the policy board and didn't get elected, so I have not served, but to your specific question: the feedback I've gotten from guys who served is that the players can only vote on competitions issues. So changing the cut from 70 to 65 or making a tournament and invitational things like that, they can't vote on the business of the tour. And what they've said to me is that the independent directors really listened to the players. On competitions issues that they really feel like they're the experts on the golf side of things and that they actually have some sway in the room.
I would think that coin would flip completely when it comes to, you know, kind of business strategy and the financial side of the tour. But that's what I've heard.
Dan: Yeah. It's interesting. What's sort of the biggest decision that you've heard that goes through the policy board to get the listener a flavor of what kind of stuff goes to that forum?
Roberto: Well, you know, changing the cut from top 70 to top 65 is one that they did a couple of years ago and it's basically moving the cut line by one shot every week. So that's a pretty big change, but the potential ones let's say that are kind of always simmering below the surface or. Changing top one 25 full status to top one, 10 or top 100.
When they changed the LA Open to an invitational, you took the field from 144 to 120. There's no more Monday qualifier. It's no longer the LA Open, which was one of the oldest, most historic tournaments on Tour. It's now Tiger's invitational basically.
So that would be an example of something that the players on the policy board would have to vote on and approve.
Dan: And where does the commissioner fit in? Are there some things that are clearly delineated to the PAC (PLayers Advisory Council) to decide or does the council sometimes serve as a sounding board for the commissioner? How does that relationship work?
Roberto: The commissioner is at all the PAC meetings. So the PAC has like 20 players on it. And then there are 4 players on the policy board that actually have a vote on the policy board. So the commissioner comes to all the PAC meetings and I've, I've served on the PAC for a few years and, you know, he listens. I think Jay (Monahan) is more involved. (Tim) Finchem looked like he was getting his fingernails pulled off in some of those meetings, because I just think his patience level for diving into the details of the tour with 20 PGA tour players I think wore him out a little bit. But I think it's a good way for the commissioner to keep a beat on what the players are talking about.
I think it does serve its purpose, even though it's technically powerless. Those 20 guys have no power, no voting. You get 90 minutes of the ear of the top brass at the Tour once a quarter. And that, that has to count for something right.
Dan: Definitely, especially when the meeting is in China coming off your dinner with Bill Haas.
Roberto: There are no meetings in China, fortunately.
Overall. I just thought it was really cool to get the perspective of a guy who's made 400 starts on the tour and really spent his 15 years going a couple levels deeper, right? Like. Talking to the commissioner, talking to the C-level guys on the tour, brainstorming ideas about buying the Ryder cup.
That's not your typical tour player. So I really enjoyed getting to talk to Joe and actually have a lot more questions.
Dan: Yeah. It's nice to know that there's someone in there trying to shake things up, bringing these ideas, pushing people out of their comfort zone and thinking big. I really admired him for doing that both as a player and for keeping the engine going. I thought it was a great conversation.
Roberto: Agreed
