in approaching deals?
We’re looking at business sectors that I think do three things: generate very significant cash flow, benefit from our taking them over and making them a minority-owned company, and they have to be a business we know something about.
One arena you sought was the airline industry. Why did DC Air fail to get off the ground?
DC Air was a prime example of what I call being in the deal flow and being a minority. [The airlines] United and US Airways wanted to merge. They had regulatory problems at Reagan National and wanted someone to take those slots and try to solve those problems. Who better than the first African American owner of a major airline? I can’t remember the last time I saw the Congressional Black Caucus vote to endorse a merger. All 40 members of the caucus, at that time, signed a letter endorsing the merger because they recognized the historic and political nature of an African American owning a major airline. So that’s how that came about. But the reason it failed was not because of the deal. It failed because United and US Air didn’t move fast enough, and then when the Bush administration came in, the attorney general killed the deal.
With a powerhouse partner like The Carlyle Group, why does your private equity firm have problems getting business from pension funds?
You’ve got to understand that the pension fund world is controlled by consultants. Almost all consultants are white companies with white employees. And then the pension fund people are risk-averse, as they should be. But they cater to the notion that if we have never given you any money, you are de facto unacceptable. Now, if you take that argument to its ultimate conclusion, you’ll never get any money. So the idea is you’re an emerging manager. We’ll give you a little bit of money until you show that you can manage it. Now, they’ll do that but they don’t necessarily want to, and they probably wouldn’t do it unless there was some mandate. With a significant amount of money coming from black and Hispanic government workers, state and county workers, and teachers, the entire pension industry deserves to be looked at by the political leadership of this country, black and white.
So how do you crack that barrier?
I have strong political relations. I know that I can perform. I know I’ve got talented people. So the pension funds can’t say no to me without some really good reason. And if it ain’t a good reason, I’m going to call the political leadership and say, “Explain to me why, when I’ve got a track record over here in hotels, when my partner is The Carlyle Group, one of the largest private equity funds in the world, when I’ve got a guy who worked at Carlyle, who ran millions of dollars, now because he’s working for Bob Johnson, he’s no longer acceptable.”
What lessons have you learned from your failures?
I don’t have any large failures. I