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A “Zoomside” Chat with Lorenzo Fertitta

Lorenzo Fertitta has done and seen it all. And yet, despite his extraordinary accomplishments, he has remained modest and kind. Not one typically for interviews or being in the spotlight, Mr. Fertitta was willing to be interviewed by The Oppy because of his love and nostalgia for Stern. In fact, he and his brother, Frank, created and funded the Fertitta Veterans Program in 2016 at Stern with a gift of $15 million. It is not often that an MBA student gets to interview a living legend – or a billionaire. While I admit I was nervous at first to interview the Lorenzo Fertitta, he immediately put me at ease. For the next hour we chatted and I soon became enthralled with his story and his introspection.

After graduating from Stern with his MBA in 1993, Lorenzo, along with his brother Frank, brought Station Casinos, a casino franchise started by their father in 1976 that catered to locals in Las Vegas, to its IPO, raising $294 million. Did I mention he was 24 at the time? Station Casinos grew to encompass 21 casinos in three states and has been named among Fortune’s “Best Companies to Work For.” Lorenzo was President of Stations Casinos until he and his brother bought the UFC in 2001 for $2 million. Lorenzo became CEO of the UFC, and under his and Frank’s leadership, the popularity of Mixed Martial Arts (MMA) grew as a sport, and the UFC became a household brand. In 2016, the Fertitta brothers sold the UFC for an unprecedented $4 billion. The UFC’s revenue that year hovered at just over $600 million, making the sale valuation a nearly seven-times-multiple of revenues. But I will let Mr. Fertitta tell you more…

Answers have been edited for length and clarity.

DK: Hello Mr. Fertitta! Thank you for taking the time to talk with me today. So, you grew up in Las Vegas and you received your bachelor’s in business administration at the University of San Diego. What made you want to go to Stern to get your MBA?

LF: When I was trying to figure out where I wanted to go, I knew I wanted my focus to be in finance and I wanted to go to a top-20 school from a ranking standpoint. It was important to me that I attended a school that had a great reputation so that narrowed things down for me. And then just having the opportunity to go to school in New York, with all the resources there. I was always kind of infatuated with New York as a kid and very interested in Wall Street, finance, and how it worked. It seemed like a perfect fit for me.

DK: Did you know you would go back to Las Vegas and work at Stations Casinos or were you hoping to work on Wall Street for a bit?

LF: I had always planned to go back and work for my family business. But I’ll add one more thing that I really liked about Stern. This was before there were websites and things like that, but as I did my research, primarily through mail, I thought what really differentiated Stern from other MBA programs in the top 20, like Wharton or Columbia, was that Stern had class offerings in really detailed areas. For instance, a different MBA program may offer just a Corporate Finance class but Stern would offer an entire semester on something that would be covered in one chapter. You could take a whole class on Derivatives or Fixed Income. I liked the detailed nature of the way they offered classes, particularly when it came to finance.

DK: I couldn’t agree more. Although, I think I will stick to just Corporate Finance. Am I correct in saying that you were the first in your family to attend Stern?

LF: Yes, I’m the first to attend Stern and the first in my family to get a graduate degree.

DK:  What an achievement! I hear we have a few more NYU students from the Fertitta family since the time of your attendance.

LF: *chuckles* Yeah, my nieces, Kelley Ann and Victoria, attended Stern for their MBAs. Now, my son, Lorenzo, is a second year MBA student, as is my nephew, Frank. My daughter is a sophomore at NYU as well. So yeah, it became a family affair after I went there.

DK: Are they attending class in person this year or is it all virtual?

LF: Early on, they tried to go to as many classes as they could in person, since they were in New York. Then, I think my daughter went to a class and there were maybe two other students in the class and the teacher was virtual…like on TV. So, she basically said “what’s the point?” Now, she’s taking them remote.

DK: Well, I suppose, if you can avoid a New York winter, why wouldn’t you?

LF: Yeah, exactly.

DK: Do you have any great memories or experiences from Stern you would like to share?

LF: Well, I think the biggest thing is the friendships that I made. And I don’t want to say the word connections, because they weren’t necessarily business connections, they were friendships. It’s almost impossible not to meet people and get to know them really well (at Stern) because we spend so much time in group meetings…what do they call the groups they put you in when you start?

DK: Blocks!

LF: Yes, blocks. You ended up relying on each other in your block, just trying to figure out how to get through everything. Three of the people I met at Stern were actually in my wedding, so I continue to be close friends with all of them today. Actually, down the road, I ended up doing some business with them. And of course, I felt some of the classes were game changing for me. I think a lot of people say this, but a professor that really sticks out is Aswath Damodaran, who taught Corporate Finance and Valuation. He has a way of teaching that is very easy to understand and follow. I really got a lot out of that.

DK: That’s incredible that you remember him by name.

LF: I got to know him decently well during my time there. And when I went back for the announcement of the Fertitta Veterans Program, he actually came up, said he remembered me, and we had a nice chat. The other professor I remember distinctly was a legendary Operations Management professor, W. Edward Deming.  I think, at the time, he was actually in his 90s when he taught my class.

DK: WHAT?

LF: Yeah. He would sit behind this desk but he was a really effective teacher.

DK: *still surprised that there was a professor teaching at Stern in his 90s* Had you been to New York before you started at Stern?

LF: I had been a few times as a tourist and like many people, fell in love with just the energy and everything New York has to offer. It was really great being able to live there for two years. Now, when I go back, I don’t really feel like a stranger so much. I still know my way around, which is nice.

DK: Last January, in 2019, I took Operations in Entertainment in Las Vegas with Professor Chernoff. We stayed at Green Valley Ranch and saw many of the other Station Casinos. How did your family come up with the novel concept of creating a casino franchise that caters to the local clientele in Vegas, and were there any barriers to implementing it?

LF: We were able to create our own niche in the gaming industry here in Las Vegas. While everybody else was focused on the obvious, we looked for the not so obvious and found opportunity. My father moved here (Las Vegas) in the 1960s. He started as a bellman, then learned how to deal cards, and worked his way up the gaming industry. He worked at almost all the properties on the strip and a few of the properties downtown, all of which really only catered to tourists. He saw there was this secular growth trend in population growth in Southern Nevada, where, starting in the 1950s, the population in Las Vegas doubled every decade. People were moving there in droves. What he also saw when he would get off work was that other people he worked with wanted to grab a dinner or drinks, or just be entertained, and the last thing on earth they wanted to do was mix in with the tourists. I think many Stern students and people from New York could relate to that. After a day of school or work, the last thing you want to do is go get dinner at Planet Hollywood in Times Square. There was a need for a neighborhood place and that’s what he felt was missing in Las Vegas. At the time the population was probably around 300,000 people and there really was nowhere for those residents to go to gamble.

He found a location that was located off the strip, on Sahara Avenue and I-15. It started with 5,000 square feet, 100 slot machines, 4 table games, and 90 team members. It was in the perfect position to cater to the locals because of its convenience to access and the pricing of the games, slot machines, food, and beverage. At the time, people thought he was going to go out of business, that he was crazy, and they just didn’t understand it. But from the day that we opened, it was a huge success.

We found an untapped market. The major barrier we faced was capital. There was no real SBA loan program back then or anything like that, so it took our family some time to grow, more so than maybe it would have in today’s environment because we literally had to build up cash on the balance sheet. Then we decided we wanted to expand. We would knock down a wall, build a little expansion and generate more cash and then knock down another wall, add a sports book, and slowly grow. It turned from a small business into a large business towards the mid to late 80s, and then the access to capital really opened up through Wall Street. It’s hard to explain how different those times were. I remember when I was at Stern, I met with one of the senior bankers at Goldman Sachs in 1993. He told me that Goldman Sachs would never bank for anyone in the gaming industry because of the taint that was associated with gambling. Ironically, now, when we decide we want to do a debt or an equity deal, Goldman Sachs is usually the first to call. So boy, have the times changed in a short period of time.

DK: Station Casinos seems to have exponentially grown under your and Frank’s leadership. They are in three states and are named among Fortune’s best companies to work for. The culture seems to be quite different and really caters to the local community. How did you, Frank, and your father help cultivate the organization’s positive culture, and therefore, its success?

LF: I think the main reason is because the company started as a family business. And we had one property and were literally there every day as an owner operator. It’s really no different than what it takes to have a successful restaurant, like a really great restaurant. It’s that owner operator that is greeting people at the door and all of the employees are long-term employees. There is not much turnover. I think one of the things that led to the success of our business was due to our employees and team members. We really value that and we try to prevent turnover as much as we can because we understand that the relationships between our team members and our guests are very important. When you think about the hospitality industry on the strip, it’s always a revolving door – kind of like a cruise ship or Disneyland. There’s a new face every night at the restaurant or at the table games or the slot machines. Our businesses are completely different. It’s very much a repeat business, where our average customer will come three or four times a month. Our team members are expected to and do know our customers’ names. They know how many kids they have, and they know what’s going on in their lives. We have tried to build and foster that mentality and to invest in training programs. We’ve got a ton of great stories of team members that have been with us for 20, 30, or 40 years, and you know, now are head of marketing. Our head of database and online marketing started as a busboy at Boulder Station. We’ve got a ton of those types of stories and really try to keep that type of environment and culture.

DK: How have things been faring during the pandemic?

LF: Along with just about every other business, there has been an incredible set of challenges that we were faced with. The governor called Frank and me in March and said, “hey, I need you to shut down.” It was a bit shocking and not something that we expected. If you look at the history of Las Vegas, since the state of Nevada legalized casinos in the 1930s, there’s only been one moment where casinos in Las Vegas had closed, and that was for a few hours when JFK’s funeral happened in the 1960s. But since that time, casinos have been opened 24/7. So when the governor called us and said we needed to close, we had a whole different set of issues we had to deal with – a range of small to big. For example, since we never close, there are no locks on the doors. The doors have never been locked. Our security guards had to go to Home Depot immediately and buy chains and padlocks so that we could actually close the casinos. Beyond that, the biggest concern for us was not knowing how long we were going to be closed, which led to a couple of issues. We have thousands of team members that we had to think about. We were one of three casino companies in Las Vegas that continued to pay all their team members throughout the closure. Wynn Resorts, Las Vegas Sands, and our company were the three casinos companies in Las Vegas that kept everybody on, plus benefits. We’re really proud about that and we know it was absolutely the right thing to do. Another issue was coming up with health and safety protocols to prevent COVID transmission in order to reopen a consumer-facing facility that has thousands of people coming through every day; to keep both our team members and our customers as safe as possible. For the most part, we made it through and we’ve been fortunate that our businesses bounced back pretty well.

DK: That’s incredible to hear. To jump back to Stern for a second, I know that you and your brother are very involved in philanthropy and you established the Fertitta Veterans Program at Stern. For our readers, the program was a $15 million endowment and it subsidizes vets’ MBA tuition. What motivated you and Frank to start that?

LF: I had been in discussions with Stern for some time. I told them that I wanted to do something impactful for the school. I had such a great experience at Stern and felt that it was important to give back. When the administration presented us with the idea of a Veterans’ scholarship, we jumped on it immediately. Frank and I always had quite a fondness for veterans’ programs. We were both on the Intrepid Fallen Heroes Board. The Intrepid sits on the West Side Highway with a museum. We had become good friends with the Fisher family, who were heavily involved with starting the organization and creating housing on different military bases, called the Fisher Houses, where families can stay when a loved one is injured in combat. The military base in San Antonio provides a place for injured soldiers’ families to stay. One of the most important things, as far as recovering from an injury or illness, is having your family or loved ones close by and not being isolated. We were very involved in that through the UFC. We did a number of events on military bases, where we raised about $12 million for the Intrepid Fallen Heroes Fund for the Fisher Houses. So when we were presented with the opportunity to start a veterans’ fund at Stern, we said, “this is right up our alley”. We thought that it would make the school even better because it brings impressive candidates to the school, and it also created a point of differentiation for the school.

DK: The veterans I have attended class with are really incredible people and they bring a completely different perspective to the table. I would be remiss, and my classmates would be very upset with me, if I didn’t discuss the UFC with you. Where to begin…? What was the motivation behind purchasing the UFC and did you have any idea it was going to snowball into the huge success and major sports category that it eventually became?

LF: You know, I wish I could tell you, yes, but I can’t. Really, the original reason for purchasing the UFC and getting involved was more out of passion. I grew up in Las Vegas, which was always the fight capital of the world. I was able to attend many of the historic boxing matches with my father here in Las Vegas. In 1996, the Governor, Bob Miller, appointed me to the Nevada State Athletic Commission, which is the regulatory body that oversees combat sports in Nevada. I was actually on the Commission when Mike Tyson bit Evander Holyfield’s ear off. I was one of the five commissioners that had to reprimand Mike Tyson and that was quite a circus. But through that period, I learned a ton about the regulatory part of that sport, health and safety issues, contract issues, and I was just a big fight fan. I was introduced to the UFC originally as somebody watching it on TV. Somebody told me about it in 1993, and I was like, “wow, that looks crazy.” But then I learned more and in the late 90s, Dana [White], Frank, and I started training in jiu jitsu. We met some of the fighters, became kind of obsessed with the sport, and really learned what a beautiful sport it is. There really is a lot of strategy involved in martial arts. I was presented with the opportunity to invest in the UFC at 50% for a million dollars by Bob Meyrowitz, the original owner. Instead, Frank and I made a decision that we wanted to buy all of it. We did simple math and said, “we’ll give you 2 million for the whole thing.” At the time, I don’t think we could have comprehended what the UFC would become. It was just an idea that we liked and a bit of a hobby. We thought it would be great if we could make it into a sustainable business, but we did not think we were going to grow it into a major media business that is in 147 countries and in a billion homes around the world.

DK: There’s definitely a huge entertainment component to it. Truthfully, I originally was a pseudo fan because Conor McGregor grew up in the same neighborhood in Dublin that my dad is from. We spent the summers down the street from Dee Devlin and were childhood friends. It was great to see someone representing our country in this major global organization. When we were in Vegas in January for Operations in Entertainment, we got to visit the UFC Performance Institute. Lawrence Epstein (COO) gave us a fantastic tour. We saw how well the training facilities were run, and it was the same week the McGregor vs. Cowboy fight was on. The atmosphere was electric. It must feel so surreal knowing that you created this. Do you have any stories you would like to tell from your time being CEO of the UFC? I remember hearing an interview about you and your brother having a contract regarding how you would settle disputes when it came to the UFC…

LF: That’s actually a true story. Early on, when we first bought the company, we created a partnership and an LLC. Frank and I were equal partners and our attorneys kept saying, “well, what are you going to do if you can’t agree?” We responded, “we don’t know. We’ll just figure it out.” They counter responded that we had to have a documented dispute resolution. We came up with this idea that if we can’t agree, we would have three five-minute-rounds of jiu jitsu, and Dana would be the referee. It would be a point system and then whoever won could vote for the other partner’s share. It never came down to that. We always agreed but there are a ton of stories…

I was just thinking about when you brought up Conor McGregor of when I was first introduced to him. Dana had gone to the UK and Ireland, and I think he was in Dublin to give a speech at a university. Afterwards, he invited the students to go out to one of the pubs and grab a beer, you know, typical Dana style, being fun and talking to everybody. He said all night people kept coming up to him saying, “you’ve got to meet Conor McGregor. You’ve got to meet Conor McGregor.” None of us had ever heard of Conor. He was a local fighter there at the time. Dana said, even in his mind, he perceived Conor as a big heavyweight fighter or something like that. He had no idea. When he met Conor, he immediately called and said, “you’ve got to meet this kid, Conor McGregor, man. He has the most electric personality, and just something about him that just seems special. I don’t know if he can fight or not, but man, he is just something.” As it turns out, I met Conor and – obviously – not only did he have a great personality, but he could definitely fight. We made a decision to headline Conor in Dublin, and that was one of the greatest memories, We had a lot of amazing fights, but when he headlined in Dublin, the whole city was completely abuzz. We had sold out the venue in almost record time, and it was going to be a very successful show. So, I went to the store and bought Conor a watch. I was going to give it to him after the fight as a thank you for being the headline or whatnot. In addition to that, I ran into the Celtic Whiskey Store and I bought him a bottle of Midleton Reserve. I said to him, “Hey, you know after the fight, we will have some whiskey together.” And at the time, I don’t think he had ever tried whiskey. I’m pretty sure that’s correct.

DK: The irony! He now owns a whiskey brand. So what happened that night?

LF: He won the fight and the crowd went crazy. It was electric. We went back to the hotel, where he and Dee Devlin met us after the press conference. We toasted, we drank Midleton Irish whiskey, and I gave him his first Rolex. It ended up being the beginning of what became an incredible relationship and an incredible run by Conor. Seeing the things that he’s achieved blows your mind. There have been a lot of great stories like that.

DK: We met and went out with Dana White in Las Vegas the night before the UFC fight. He’s one of those people that is so grounded, yet there’s something very infectious about him. You could see why he could be the figurehead for a corporation like the UFC. I know he was a childhood friend of yours. I believe you guys went to high school together? Can you tell us more about your relationship and what led to your decision to select Dana as President of the UFC?

LF: Sure! I had met Dana as a freshman going to Bishop Gorman High School in Las Vegas, and we were friendly all throughout high school. We didn’t hang out in the same friend group – we weren’t best friends by any means – but we were friendly. He was a great guy. I went off to college and he went to Boston after high school. We ended up probably not seeing each other for about eight or nine years. We always say that it’s funny how life kind of plays out and how things happen, but we ended up rekindling our friendship at a mutual friend’s wedding. We joke all the time that if we didn’t get together at that time, the UFC wouldn’t exist as it does today. Adam Corrigan, the guy who got married, is probably responsible for the UFC, and doesn’t know it. Anyway, Dana and I ended up seeing each other at this wedding and he was training boxers at the time. He was also training executives on the side. I wanted to keep in shape and try a different way of working out, so I started training with him and that’s how we kind of rekindled our relationship. The thing that I love about Dana is even though he didn’t have a formal education – barely got through high school, let alone went to college – he had this unbelievable drive that I had never seen before. He would get up at whatever time it took, like 4:30 AM to start training people, work all day to create another business on the side until around 10 PM, and then do it all again the next day. I was really impressed with his work ethic and his street smarts. He really understood the dynamics of the fight game, the kind of fights consumers would like, and how to deal with fighters, which can be a challenging process. They’re kind of a different breed. When Frank and I decided to buy the UFC, Frank asked who we should hire to run it. And I said, “I think Dana.”

It was a very non-traditional decision because, as I said before, he didn’t have a traditional educational background, but I felt very strongly that he had what it would take to make the business, run the day-to-day operations, and deal with all issues that would arise. No offense to any MBAs that read this article, but I said it early on and I’ll say it again today, if I had hired a Harvard MBA, the UFC would have gone bankrupt and ended in about six months to a year. It needed somebody like Dana, who just had the street smarts and not the book smarts to really make this thing work.

DK: So, with that being said about needing both street and book smarts, what advice would you give to MBA students trying combine the two for success in their future in different roles?

LF: I think at the end of the day, there’s some level of traditional educational background that is super important in business. Someone needs to understand the basics, and I think, maybe that’s why Dana and I have made a great team. He really understood the inner workings of the fight game and obviously, I came from a little bit more of a traditional entrepreneurial and educational background. So the combination worked very well. I think the biggest thing is you have to be completely obsessed about whatever you’re doing and really dig in, no matter what the industry is – whether it is a startup or a big corporation. The answers aren’t always black and white and they’re not always, you know, some calculation or algorithm. Sometimes, it takes a little bit of gut feel to really understand what the right decisions are. Ultimately, it requires understanding who the end user is, what they want, and what they feel is important. That is what’s going to make you successful because if your customer doesn’t want to buy your product, then it’s not going to work.

DK: I like what you said about the gut feeling. It can’t be quantified but combined with logic, that intuition is priceless. The UFC wasn’t a simple success story. Yes, you and Frank bought it for $2 million and then sold it for $4 billion, but you had to pump a lot of money into it and you put a lot of time into it. Did you always have a gut feeling that it was going to be successful? What made you continue to believe in the product?

LF: At times, I would question whether the timing was right, because sometimes it is about timing. I thought maybe we’re just early and the world’s not ready for this. We were fighting a lot of uphill battles. There was a lot of tarnish to the brand name, based on what John McCain had said about UFC being human cockfighting. We struggled to get the product on TV. We struggled in talking venues into allowing us to hold the events. We struggled talking to regulators to allow us to hold the event. There was a lot of hard work for about five or six years. We didn’t always know if we were going to make it to the next day. It was not an overnight success, there were a lot of sleepless nights. We had to work to make it a success, and thank God, it actually did end up working. At the end of the day, it was because we believed in the product.

DK: Thank you, that is some really valuable and inspiring insight. How important do you think the Las Vegas location was in the UFC’s success?

LF: I think Las Vegas gave us a lot of credibility because it really is the fight capital of the world. It is associated with some of the biggest boxing events and, really, some of the biggest sporting events with places like Caesars Palace and the MGM Grand Arena. We were able to take the UFC brand and couple it with the MGM and Mandalay Bay names. It definitely elevated the sport. One of the things we did early on, while all the other professional sports leagues are scared to death and running away from gambling and sports books, was to encourage betting on fights. Today is a whole different world, but back 20 years ago, you couldn’t even mention sports betting with the NFL or any of the other leagues. They were all lobbying in Washington DC to not allow for sports betting. We took the complete other approach. We were begging the sports books to carry our fights because we thought that gave us credibility. Starting back in 2001, we would show the odds on our broadcast. It was the first time a sporting event ever put odds on a broadcast. So the combination of gambling with Las Vegas and these great brands really helped elevate the UFC.

DK: At what point did you feel like it was time to leave?

LF: Well, I don’t know if I ever felt like there was a point in time where we wanted to leave. I felt that we had taken this business that was broken and was losing money and turned it into an international media company. It wasn’t that I was looking to exit necessarily but we kept being approached by different private equity groups. When WME-IMG came along and said they had partnered with Silver Lake Partners and made us an offer, we thought gosh, maybe it makes sense to go ahead and exit. It was bittersweet but we felt like at the time it was the right thing to do.

DK: And after you left, you didn’t retire like the majority of us would have! You and Frank started Fertitta Capital. What was the inspiration in starting this firm?

LF: Well, you know, even though I have a lot of grey hairs, I still think of myself as fairly young. I wasn’t ready to go fishing and not do anything anymore. We have Red Rock Resorts, which is a very important kind of operating business, but we wanted to continue to look for investment opportunities in companies we think we could help from our own experiences. We focus on media sports, consumer goods, leisure, and travel. We are based here in Las Vegas and it’s really just a direct investment platform. It’s fun and it’s challenging. We come to work everyday to find those little gems or opportunities that other investment firms just don’t understand, maybe passed on, or haven’t found yet.

DK: Can you ever see a future where you and Frank are not partners?

LF: No, no, that I don’t ever see happening. We both have to agree on any investment decision. We will always be 50/50 partners.

DK: That’s incredible. It sounds like you guys have a great dynamic. Looking back at all your success, is there anything you would have done differently?

LF: I think early on one of the mistakes I made, and it’s probably true for a lot of young professionals, is I felt like I was in too much of a hurry. I felt that if I worked harder or did something different, that I could really make change or make something happen. And to some degree, if you work hard 9/10 times, things are going to happen, but at the end of the day, you have to be patient. Everyone wants to get rich tomorrow and there’s not anything wrong with that, but there’s also nothing wrong with having a plan, plotting and sticking to your plan, and waking up in 10 or 15 years, looking back and saying, “Hey, you know that all worked out pretty good.”

DK: You actually answered my last question, which was to ask for parting words of wisdom. So, instead I’m going to ask whose portrait is in your background?

LF: *chuckles* That is a 1967 self-portrait of Andy Warhol. I’m a big big fan of Warhol and began a contemporary art collection around 25 years ago. I was drawn to his work for different reasons. Mainly because for the last half century I don’t know that there’s been really anybody that’s been more impactful than he has been. I think he’ll go down as a Van Gogh or someone like that when you look back in 200 or 300 years. I always felt that the best work that artists have done are self-portraits.

DK: We actually did a Stern trip to the Whitney to see the Warhol exhibit pre-pandemic.

LF: Oh yeah! I went to that as well! It was amazing.

DK: Well Lorenzo, thank you so much for taking time out of your day to have this interview with me! We are looking forward to seeing what you do next!

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