Magic Johnson has surfaced in the news recently. His name has come up in the context of the "Donald Sterling" affair. As I write this it is unclear how things there are ultimately going to turn out. But that will have no effect on what I want to talk about.
On the theory that the Sterling affair has dropped from consciousness, let me briefly review it. Sterling has been the owner of the Los Angeles Clippers NBA franchise for 30 years. It has been an open secret for many years that he was a raciest. But things only blew up when he and his girlfriend/mistress V. Stiviano had a fight. (BTW, Sterling also has an "estranged" wife, Rochelle.) The fight was recorded and the media got hold of the recording. This brought everything out into the open. As of now Sterling has been fined 2 1/2 million dollars and banned for life from the NBA. He has also been told to sell the franchise. At this point it is unclear whether any of this will stick as Sterling says he is going to fight. I am going to leave it at that because the Sterling affair is just background.
Johnson is a famous basketball star who has stayed active and maintained a high public profile. As such he has been one of the people who the media has contacted for comment. So we have seen Johnson commenting on the Sterling affair. But Johnson is now also well known as a business man. So the other thing that people have weighed in on has to do with Johnson's prospects for being part of a syndicate that would eventually buy the team. And that's my segue into what I want to actually talk about. But first another digression.
The civil rights movement dates back to before the U.S. existed as a country. It has consistently been a fiercely contested battle. I want to review some of the history of this battle but I don't want to write volumes on the subject so I am going to start with the end of World War II and I am going to massively simplify things. A lot of black men ended up in the military during WWII. WWII was a "fight for freedom". They were not treated as free men while in the service and went home to an environment where a lot of people wanted to go "back to the good old days" of high levels of oppression. But, a line of thinking goes, this group of ex-soldiers decided they "weren't going to take it any more". However much or little truth there is to this idea, it is definitely true that the civil rights movement was pursued with a greatly increased amount of vigor after the war and this generated a great deal of pushback.
One thing that had changed was the advent of TV and with it TV news. Now the technology was very primitive in the '50s. Pictures were captured using hand held 16 millimeter film cameras. But even so, the ability to capture moving pictures far surpassed what had been possible previously. And movies of black people and their white supporters being set upon by vicious dogs, fire hoses, truncheons, and other forms of violence, made for compelling TV. So the national TV news programs devoted a lot of coverage to the struggle and many second string TV reporters became stars as a result. This resulted in even more coverage. And the coverage gave black people hope that real change was possible. So they raised their expectations.
The path of anything as big as the civil rights movement is never smooth. The combination of raised expectations and laggard delivery (and the heightened TV coverage didn't hurt) resulted in a series of race riots. Black people rioted and went on a rampage of destruction. This happened not once but several times so that a pattern was established. Rioters moved through the business districts of their communities. There they burned businesses and looted stores. One of the biggest of these happened in the Watts district of Los Angeles in 1965. The "Watts Riot" was perhaps the biggest but it was by no means the only one. There was a round of rioting in 1968 associated with the assassination of Dr. Martin Luther King, for instance.
I thought these riots were a bad idea because they did more harm than good. People doing business in black communities were only the tip of the iceberg. And that's if you assumed that they were bad people. Most of the people who "were part of the problem" lived and worked elsewhere. And a lot of the business people in black communities were not bad people. They were just people trying to get along. In fact many of them were Koreans who were subject to the same kinds of discrimination as blacks. But the result of this extended cycle of destruction was that a lot of legitimate business people decided that setting up in black communities was too risky. So they stayed away. And the people who stayed often felt that they had to jack prices up or reduce service in order to cover the "risk premium" of doing business in the black community. This resulted in what is what business school classes call an "underserved market".
So that's the general background. Now let me spend some time on the specific background of Magic Johnson. His legal name is Earvin Johnson Jr. With a mouthful like that it's no surprise that he acquired a nickname. Magic was born in 1959 and first came to prominence as a basketball player. He was a standout in college and went on to become a standout in the NBA playing for the Los Angeles Lakers. He was in his early '30s and at the height of his carrier when he was diagnosed with HIV in 9991. When he announced that he was HIV positive in November of 1991 he was one of the first high profile people to voluntarily make that kind of announcement.
At that time the AIDS epidemic had gone through several phases. The first phase was "what's this mystery ailment that is killing a lot of people in strange ways?" The second phase was "it's AIDS and it is inevitably fatal." The third phase was "well there are some drugs that seem to help." The fourth phase was "we actually have treatments that can keep you alive for long periods of time". AIDS has gone through a number of additional phases. It is now considered treatable and there are techniques that work well to limit its spread. Johnson made his announcement when things were transitioning from phase three to phase four. AIDS was then considered a very scary disease that had a high mortality rate and was easily transmitted by incidental contact. Besides the reduced mortality rate we now know a lot about how it is transmitted. And we know specifically that if an HIV positive person is taking his medications then he doesn't infect people through incidental contact.
AIDS at the time was also considered a "gay disease". It's not. It was just easiest to detect in the early days in the gay community. And it eventually came out that Johnson was not gay. He had contracted the disease by engaging in casual sex. Then and now, high profile athletes have a lot of opportunity to engage in casual sex. So Johnson was not unusual in this respect. He was unusual in his willingness to disclose his condition and in how he comported himself in the aftermath.
The "fear factor" then surrounding HIV drove Johnson to cut his NBA carrier short and to move on with the rest of his life sooner than he otherwise would have. And it is his business activities that I want to focus on. Professional athletes like Johnson make a lot of money. They are paid a lot. And on top of that they can earn even more in endorsements and appearance fees. Michael Jordon is a spectacular example of this. His "Air Jordon" shoe deal with Nike has made Nike and Jordon spectacular amounts of money. But athletes usually turn out to be poor business men. A certain percentage of them end up moderately successful as front men for car dealerships and the like. But more often than not they are broke a decade or so after their carrier ends. Johnson set out to go down a different path and he has succeeded.
He tried a number of ventures with more or less success before he got to the first one I want to talk about in more detail. What I am talking about is the Magic Johnson Theater chain. Starting out in 1994 Johnson approached the Lowe's chain of movie theaters. He wanted to open a movie theater in the Crenshaw district of Los Angeles. Crenshaw is a predominantly black neighborhood. And this is where Johnson and the civil rights movement converge. After the riots of the '60s businesses like Lowe's (after a series of mergers they are now part of the AMC movie theater chain) frankly did not want to do business in black neighborhoods. Even if the theater itself was not burned down they were concerned about vandalism and about getting and keeping good employees. The movie theater business is a "thin margin" business. Most of the ticket price goes back to the studios. If your facility required a high amount of maintenance (e.g. to fix vandalism) or has high insurance costs (e.g. a "riot" premium) or has high employee turnover (high labor costs) it is hard to turn a profit. All of these are legitimate concerns.
From the customer perspective, they were concerned about being treated poorly, about being ripped off (higher ticket prices to cover higher expenses), or getting a low quality product (letting the facility deteriorate due to high overhead costs). This made them reluctant to patronize such a facility. Thus fear and distrust on both sides resulted in a reluctance on the one side to do business in black neighborhoods and a reluctance to patronize non-black owned businesses on the other side.
This was the opportunity Johnson saw. At its most basic level Johnson could "front" for a white owned business. But Johnson wanted to put more on the table. He wanted to actually manage the business. He found the location. He wanted to put up what was an essentially standard multiplex movie theater. But he would provide the management and hire the staff. He also wanted to put his stamp on things. He did this in a small way. He changed the menu in the concession stand. He added some "black" offerings. This allowed him to go to the black community and say "this is being run by one of your own". I think it was probably a hard sell to Lowe's management. Could a basketball player put together a team to run a multiplex? I don't know if it was part of the original pitch but Johnson may have indicated that he wanted to franchise the idea if he could make the initial theater successful. In any case, Lowe's eventually bit and the theater opened and was a big success.
Johnson eventually did franchise the operation. He went on to open a number of Magic Johnson Theaters around the country. They, along with the rest of the multiplex business, have been hit hard by the crash of 2008 and by technology changes like Netflix. But Johnson succeeded in what he set out to do. Patrons treated the facilities with respect because they were treated with respect. The company was able to do business successfully in black communities along lines essentially similar to the way they did business elsewhere. It was a classic case of "win - win".
Johnson then leveraged his initial success. He started talking to Starbucks. He was able to convince Starbucks that there was a market for the high end coffee experience that Starbucks represents in minority communities in spite of the fact that the average income is lower there than it is in the areas Starbucks usually sets up shop in. The partnership has turned out to be quite successful on both sides. Starbucks just wants to sell high end coffee everywhere. Johnson turned out to be right that there was a profitable market in black and minority communities for what Starbucks was selling. It turns out that if black people believe they will be treated respectfully, as people "whose money spends just like every one else's money", then they are very happy to pony up the cash to participate in the Starbucks experience.
Johnson has since moved onward and upward to even more business success. And he is to be congratulated. But what I most want to celebrate is the fact that more than anyone else Johnson has been responsible for repairing the rift between mainstream businesses and the black community that was the result of the riots of the '60s. Black people now know that there are a large number of businesses that are happy to treat them just like everyone else. It turns out that's all they every wanted. And businesses now know that that they can be given a fair chance to win the loyalty of black consumers. And this is a good thing all around.
Is everything fine now? No! One of the things that has come out in the coverage of the Sterling affair is how racist the business practices he has long been engaged in are. But Sterling has benefited from them to such a great extent that he is now a billionaire. And, to make things even worse, he stands to profit to the tune of an additional half a billion dollars should he ultimately be forced to sell the Clippers. Sterling is not alone in profiting in a major way from bigotry. He is just the poster child of the moment for such behavior. And we don't know how long his moment in the spotlight will last.
And this brings me to my final observation. Magic Johnson is now a very wealthy man. He is now solidly ensconced on the rolls of the "one percenters". But I do not resent his wealth and hope he continues to be successful. The media likes to divide everyone into opposite extreme camps. In this case the camps would be the "good 99%-ers" and the "evil 1%-ers". But the situation here, like in most cases, is more complex. I think something needs to be done about the concentration of wealth and the fact that currently the U.S. resembles an oligarchy more than it does a democracy. But I wish Magic Johnson nothing but continued success. And I wish the same to Bill Gates and Warren Buffett, the two richest men in the country and, therefore, presumably the most oligarchic of the oligarchs. Why? Because all three of them have demonstrated a consistent commitment to the civic good, to working toward the goal of ensuring that everyone does well, not just the fortunate few. Unfortunately, many, perhaps most of the wealthiest among us are content with a situation where they and a few of their friends do well. As for the rest, they have nothing but contempt. They fall into the Sterling camp rather than the Johnson camp.
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