The owner of the Cleveland Cavaliers reveals why he's investing over $5 billion into downtown Detroit

  • Dan Gilbert is the billionaire founder of Detroit-based Quicken Loans and the owner of the Cleveland Cavaliers NBA team.
  • Detroit has struggled financially over decades, and Gilbert has made bringing industry back to the city’s downtown his personal project.
  • He spoke with Business Insider about the philosophy of “isms” that guide his companies, what it’s been like working with LeBron James, and why he’s personally invested in revitalizing Detroit.

Dan Gilbert runs a Midwestern empire.

In Michigan he founded Quicken Loans, the largest mortgage lender in America, and that made him a billionaire. Now he’s trying to rebuild downtown Detroit.

But you may know him as the owner of the Cleveland Cavaliers, LeBron James’ NBA team.

We travelled to Detroit in early May to meet with Gilbert after getting a tour of his downtown properties. All his real estate is run under a company called Bedrock, which is part of Gilbert’s larger parent company, Rock Ventures. He estimates Rock Ventures is involved in about 100 companies to some degree, and his influence on downtown Detroit is immediately apparent when walking or driving around.

In total, Bedrock has invested $US3.5 billion into downtown Detroit and has $US2.1 billion in developments in progress. His vision is of seeing the city where he was born rise alongside his businesses.

Such a grand-scale approach isn’t easy to pull off, of course, and we talked about the challenges that he’s faced as he’s transforming not just a business hub, but a city people call home.

He told us his drive to be an entrepreneur started when he was a kid, when he, his brother, and some of their friends would make Chef Boyardee pizzas and sell them to people in their neighbourhood. In college, he became interested in the real estate industry, and it led to him founding the mortgage company that would become Quicken Loans in 1985.

Gilbert told us that as he became involved in more businesses, he began linking them together through a shared culture.

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Transcript edited for clarity.

Feloni: For all your companies, you have this 140-page book on corporate culture. When did you first start collecting the “isms,” as you call them?

Gilbert: We call them isms, which are our 19 – soon to be 20 – cutesy little statements that together combine to define who we are, not what we do, but who we are. It doesn’t matter really what we do, because that could change or additional things could be added. But it’s who we are, which guides decision-making, actions, and behaviours. The way we got those things was not a one moment; it was literally over years. They were observations of human behaviour and what we think works. And what we think will drive people to be the kind of business that we wanted it to be. What’s interesting is, if you read any of the books of any highly successful organisation or business, they refer to 80% of the same things we have. I think that a lot of people come to that. It’s a discoverable thing. Einstein didn’t make up relativity – he discovered it. I sort of view it the same way.

Feloni: What would you say is the main takeaway from all of them?

Gilbert: It’s impossible, especially in today’s world, to grow a substantial company without having guiding principles. If you want to grow, that means there have to be other people from top to bottom who are going to stand in and be who you would be, and answer questions and make decisions. How do you do that? You can’t codify every single circumstance of what you would do. But you can codify principles, so that whatever comes you’d hopefully make decisions, actions, and prioritizations in line with them.

Feloni: How many companies are within Rock Ventures at this point?

Gilbert: That’s a good question, because it’s a little bit vague. I’ll tell you why. It’s a little bit vague because sometimes we have a situation where we have anything from 100% of a company to 5% of it. We have other investments, but, overall, I’d say ones that are really in the family, where we’re sort of influencing and trying to get them to adapt our culture, are probably close to 100.

Feloni: Is this culture – with the isms – is that a way to keep them all connected?

Gilbert: Yeah, it’s one way, for sure. Let me tell you, that’s not an easy thing. It’s not even an easy thing within the flagship business. It’s not an easy thing even for people love them.

There’s like two steps. No. 1 is, you have to get people to adapt, and if they won’t then forget it. But if they do, the second step is how do you get them to look through the lens of these when they make decisions, when they choose their priorities? If more and more people do this, it gains momentum, and others will do it as well.

Feloni: At what point did you realise you wanted to have this giant portfolio of businesses and real estate?

Gilbert: You know, I’ll tell you who asks me that question all the time – in an increasingly irritated tone – and that would be my wife. And what I tell her is that I don’t necessarily go out and seek all these new things. There’s sort of a natural way these things happen. If you have some successful people who want to go out on their own and create a business that makes sense and that’s connected to your business, how do you say no to them? If you say no to them, you’re going to lose them. You’ve got to be partners with them. They’re growing up in an entrepreneurial environment that they see. Most of it, frankly, is organic. The answer to your question is, it’s not like I want to have 100 companies. It’s more just you look at each one individually. Does it makes sense, do we have the capacity, do we have the capital, do we have the right talent, and do we take a shot at it or not?

Owning an NBA team and working with LeBron James

Dan gilbert lebron jamesEzra Shaw/Getty ImagesGilbert gives LeBron James his 2016 championship ring.

Feloni: What was it like when you finally became an owner of a sports team with the Cavaliers in 2005?

Gilbert: Well, it was a shock, for a lot of reasons. It was a shock because I couldn’t believe this actually happened. You start going to games, and you forget. You think you’re a fan, and then you think, “Oh, I actually own this team.” It’s weird. It still happens to me this day. Crazy sometimes. Sometimes you know less than some of the fans. Sometimes I’ll read something in the paper, and I’ll call up our guy, Koby [Altman], our general manager, and he’ll say, “Oh yeah, I forgot to tell you.” I’ll say, “OK, thanks, just let me know.” I think the shock of the experience is some of the media, frankly. It’s all public. That’s a different thing. You’re in a fishbowl. Which is different from anything else.

Feloni: The biggest example was in 2010 when you wrote a public letter after LeBron decided to announce that he was going to Miami.

Gilbert: Right.

Feloni: He’d eventually come back to Cleveland and win a championship in 2016. How do you see that letter in retrospect?

Gilbert: First of all, the letter was to our fans of Cleveland.

Feloni: To be clear, it was saying, “We don’t need LeBron.”

Gilbert: Yeah, there were some things – stupid things – I wouldn’t say again. For my own sake, and everyone else’s sake, all right. So what was interesting at the time, it was about LeBron, but really the message was about – and I felt it – “I’m with you, Cleveland.” Because Cleveland had been beaten up, man, economically. Then they’re a losing city in sports, and they hadn’t won a championship at that time. They considered him one of their own. They still do. It was more for them about “Wow, this guy [Gilbert] came from the outside, and he feels loyalty.” Not that it was intentional to do that, but that’s how it sort of came out. There are certain things, like when you’re telling a kid today, don’t put something online, because it’s not like when I grew up – it’s there forever. I wasn’t thinking that in 2010. I’ve certainly thought that in 2011 and moving forward. You’ve got to watch what you put online, electronically. It’s there forever.

Feloni: Last question about that: Why did you use Comic Sans?

Gilbert: First of all, I had it sort of as a joke. This is a true story! As a joke, a few weeks before, I had changed, or somebody had changed, my email to Comic Sans, and it just happened to be still there. There was no intention. That was like putting lighter fluid on the fire. There was no hidden message, it just was there. Believe me, I’m not a big Comic Sans user.

Feloni: What have you learned about working with LeBron, about working with someone who is also a powerful leader and has a powerful personality?

Gilbert: When you have a unique talent – in LeBron’s case, he’s the best player in the world. That’s one out of 6 billion people, right? One out of 6 billion people possesses and has the kind of talent he has on a basketball court. In that situation, although legally, he may be working for our organisation, that’s not really the case. He’s more like your partner, really. I think it’s important, whether it’s him or anybody like that, if you’re in the entertainment business, you’d do the same thing. Let’s say you’re the tour promoter and there’s a famous singer in a rock band; it’s not like they’re working for you – you have to be partners. So I think that the more communication you have, the more you get on the same page – like what we were talking about with the isms – it just becomes so much easier. Then also, it’s important to have a trust level because you can get swayed by the “He said, she said,” “The media said,” “The agents said,” “The front-office guys said.” The more layers you have between yourselves, the more open for misinterpretation for things to go bad.

Linking his businesses with the cities they’re in

Feloni: We’re here in Detroit talking about the way that your company, Bedrock, has been leading so much development. You’ve also done a lot of development in Cleveland. Why are you so passionate about this?

Gilbert: Detroit and Cleveland are a little bit different stories. So Detroit, I mean, it’s my hometown, fourth generation. You start going around the country and talking to other people, and you realise the damage to the reputation that your own city has, the place that you’re from, that your DNA’s from. I said to myself, if we’re in a position to impact and make a difference, that would be a great thing to be able to do it. It’s the city that needs all kinds of help, and you have a big employee base, and maybe it’s great for business. Turned out to be great for business. I don’t think we could have ever turned out to be the company we are if we weren’t in an urban core like Detroit.

Feloni: When did you have this shift of thought where it was going to be, “I’m having my business in Detroit” to “I’m not only going to have my business here but I’m going to transform the city as well”?

Gilbert: Here’s my view: If we were going to go to Detroit and treat the first building we went into as we would treat a suburban building, which is, go park, go in, leave, then we might as well stayed in the suburbs. There’s no reason to do it. It was a dual mission from the start. Do we know how much we would do, or how many buildings would become available, or how fast we would move our people down, or how much more hiring we’d have to do? All those came after. That part was fortunate. I always said from the beginning, if we’re not going down to impact and help that city in every way we can, let’s just stay in the suburbs. So, that’s the reason, originally.

Feloni: Then looking at Ohio, you ended up getting a movement where the state constitution was amended, right? For a casino?

Gilbert: It was a general referendum. So it’s vote of all the citizens of Ohio over 18 years of age. Is that when you vote? Although you can’t get a drink.

Feloni: Could you explain that?

Gilbert: There’s a natural opportunistic thing that happens where one thing leads to another. So now we have the Cavaliers, things are going pretty good, and we see this opportunity where we feel like we could impact things. The way we did the casinos was, it wasn’t a licence to put up a casino anywhere. The constitutional amendment that we proposed to the citizens of Ohio was tying a specific piece of land to a casino licence. It was in the urban core, downtown. We said, “Hey, if that happens, this should be good.” We’re in the entertainment business there anyway, and Ohio needs the tax money. Clearly there could be wealth built out of this, may lead to other things. It’d create jobs, the whole thing. So we won, 54 to 46.

Feloni: I had a chance to go downtown, and it’s striking how big Bedrock’s influence is in the city. What do you feel when you’re walking or driving around?

Gilbert: First of all, I want to walk around more, drive around. But they won’t let me. Because I always say I’ve got to do stuff. I wake up every day to go to work, just like I did in 1985 when I started. Yeah, there’s just more stuff and all, but it’s rare that I think, “Wow.” Because you’re so focused on the next thing, getting things done, doing the right thing, pushing the buttons where you need to push. So, I do at times, feel like we’re on a noble mission. In fact, we use this term now that we’ve coined. You have profit-making companies and you have nonprofits. We coined this term of late: a “more-than-profit” company. What it means is that you could have a dual mission. Our belief is not only is there not a conflict between impacting things positively in the community and profits, but there’s actually a positive correlation. In other words, the more you give to the community, the more good things you make happen, and actually at the end of the day, the more profits your company will make. That’s what I believe.

The challenges of a city-wide vision

Feloni: Last year there was a relatively small incident, but it’s a good representation of something that happens with big transformation in Detroit. It was a Bedrock ad that read “See Detroit Like We Do.” It featured only young white people – and this in a city that’s 80% black and most people are working class. Critics of yours would say that the new changes just cater to an upper-middle class, which would be mostly white people. What are your thoughts?

Gilbert: I would say the ones that say that, they’re not informed. They don’t know all the facts, and information and they’re focusing on a very small – not small but a very small part of everything that happens, which is a mistake. Here’s the thing: Every organisation, and especially bigger ones, the bigger you are, the more things you’re doing; there’s just going to be something that happens. Now, what happened that day, that very few people reported on, was the contractor that was hired to put these posters across the whole thing, he started them on a Friday afternoon, put up a few of them, and then Monday morning, was going to put up the rest of them. Unfortunately, the pictures he put up were as you described. There was much more diversity in the ones that did not get put up. From Monday morning to when the thing blew up over the weekend, I believe companies blow it when they don’t come out and say you blew it. People get it. There’s nothing more to say after that point. We blew it. We said it, we took responsibility, and we fixed it. It wasn’t bad intentions, they just weren’t thinking. Because most people will take it the bad way, you could take that. We fixed that, too, over that weekend.

Bedrock dan gilbert downtown detroitRichard Feloni/Business InsiderGilbert’s company Bedrock has a scale model of downtown Detroit. A projector can highlight various aspects of the neighbourhood, as well as real estate ownership. This view shows downtown of roughly 2020, after several developments in progress are completed. Buildings in orange are Bedrock properties.

Feloni: What do you say to critics who are saying that if you look in the outer neighbourhoods, outside of downtown, that these changes aren’t affecting them?

Gilbert: That’s just completely false. The entire unemployment rate of Detroit, right before we got there, maybe the first year we got there, was 24%, 25%, and is now down to 7%. That is a massive difference. No. 2 is, when we moved downtown in 2010, there were about – we kept track of this – 42 of our employees living within the city limits. Now it’s over 4,000. We said to our human resources: “Go do me a favour. Plug in a map dots over all of our people who live in the city of Detroit. So you take a city of Detroit map. I’m expecting almost 100% or 90% to be around downtown. When you look at that map, it’s all over the city. I had them go back over it three times. That can’t be right. But it is right. So let’s put it this way: You can’t have anything good happen in neighbourhoods without economic productivity and job creation, which generally is in the central corridor. Now, there are some neighbourhoods where you can have a coffee shop and that neighbourhood-ly-like stuff. But the core of the kinds of jobs that I think that matter in a big way, that impact things, are going to typically be in a downtown. Because you’re not going to build skyscrapers in the neighbourhoods. But we’ve been involved in neighbourhoods. I’ll give you our story of something that we do.

So Detroit public schools got to a point – because of their lack of funds and, probably, management – where anybody who graduated from Detroit public schools couldn’t provide transcripts for job seekers. They got to a point where they shoved this stuff in an acre of filing cabinets, never put it on system. We took on a yearlong project – for free, of course – and we sent about 300 people a week. They rotated to scan in all the diplomas going back to, like, 1950, on a technology platform we’d built for them. Now pretty much everybody who graduated from Detroit public schools can get their transcripts. Not to mention the increasing amount of neighbourhood stuff that we’re doing. A lot of it is associated with our financing.

Quicken Loans figured out some real interesting things that we could do. We call it the Rehab and Ready Program. Property taxes are the main the culprit of what caused blight. Not just property taxes, but the method that they use to assess properties, the amount of misinformation, and lack of communication to citizens, the fact that landlords would buy homes cheap, charge the tenant all kinds of money, and then never pay the taxes.

We have a whole program for that where we actually go in and pay the taxes, we give the tenant, like, three, four, five years at zero interest, because once they pay us back, we give them the keys. There are all these creative things you can do. I don’t know if there is anybody, or any entity, governmental or nongovernmental, that is more active in the neighbourhoods than we are. I don’t like to go around bragging about it, like maybe that’s our problem, but we care deeply about the neighbourhoods, and we just think it’s all on the same side. There’s no way businesses can be successful by having really bad neighbourhoods and a successful downtown. It just doesn’t work that way.

Feloni: I guess to that point, what is your ultimate vision for Detroit? Is this a lifelong project?

Gilbert: Projects come to an end, right? So I guess I would call it a process. I say, how will you know if your family’s successful? That’s kind of a weird question, because you don’t really think of it in those terms. You say, if everybody’s healthy, and we’re all going in the right direction. We’re just getting better as people and our relationships into the future. A city’s the same thing. As long as things are headed in the right direction. I mean, maybe one day you’ll gain a little bit. One day you’ll have a breakthrough. Maybe one day you’ll do a step backward. But, you know, ultimately I think the problem with Detroit – and other places and companies and nonprofits that have deteriorated – it’s not that the outside things are happening. It’s that the DNA of their culture, their methodology – it’s broken on the inside. I’d say the current path is light-years ahead compared to where it was. I think for the vast majority of the things you would say, are we in the right direction? Absolutely. But I think, more important, the trust level, the relationships, the fact that people are having noble purposes. There’s always a handful of people here and there that don’t have them, but overall the purposes of most the people involved in bringing Detroit back are noble. So then the sky becomes the limit.

Feloni: What would you say to someone in Detroit who may be wary of you as a businessman having so much power?

Gilbert: It’s not the fact that somebody has so much power: You could have less power. It’s the “What are you going to do with it?” type of thing, right? If you have somebody who has power – me or anybody else – and they’re doing good things, that’s great. If somebody has any kind of power and they’re doing immoral, unethical, bad things, then it’s not good. I would hope that after eight years, after everything we’re doing – which, again, I don’t want to look like I’m tooting our horn – it’s unprecedented, and I’d hope there would be some kind of trust level. I have, personally, a three-pronged mantra: We’re going to positively impact as many people in our communities as possible; we’re going to have fun doing it; and we’re going to build wealth in the process. And the reason for No.3 is, the more I can make, the more of No. 1 and No. 2 we can do. Hey, everybody wins, in my opinion.

Keeping an eye on the goal

Feloni: Taking a look at the entirety of your career, how do you personally define success?

Gilbert: That’s a great question. I’ve got to think about that one.

It’s different for each person individually. There are a lot of ways people can do it. Whatever way anybody does it, as long as it’s not treading on somebody else, that’s fine, right? For me it is – and it wasn’t always this way, because I don’t think as a normal entrepreneur you think in these terms – but I think what I said to you earlier, if I can positively impact as many people as possible and have fun at the same time, and we can do well by doing good and spreading this culture and philosophy. And people understand that wealth is created by human beings, not by zebras or elephants – but by humans. And the decisions and choices they make daily.

I guess I’ll say the biggest thing we can do is put hope and belief into other human beings, because then they can do things they never really thought possible. And so the more I can do that, the more I’d feel more successful.

Feloni: What advice would you give to someone who wants to have an entrepreneurial career like yours?

Gilbert: One of our biggest isms is, “Money and numbers follow; they do not lead.”

For some reason, whether it’s the business schools, or maybe it’s just more natural, I think a lot of times entrepreneurs come out the other way. Making money is a byproduct. I’ll leave it at that.

Feloni: Well, thank you, Dan.

Gilbert: Thank you.

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