Give Alex Rodriguez some credit. Who else sinks from superstar to scourge of his industry and uses his time in purgatory—in this case, a record-setting yearlong ban from baseball for use of performance-enhancing drugs—to diligently build a second career?
"When I was a child, I had two dreams. One was to be a major-league baseball player. The other was to be a CEO," says Rodriguez, who, in this exclusive Fortune Q&A, talks publicly for the first time about how he turned a career crack-up into training for what's next.
In 2014, away from public view (odd for Rodriguez, who is lately back in the tabloids for his romance with Jennifer Lopez), the ejected New York Yankee served hi s time by taking college business classes, hobnobbing with CEOs like Warren Buffett and JPMorgan Chase's Jamie Dimon, and studiously building ARod Corp., the company he started 15 years ago, at age 26. The former Pinstriper founded ARod Corp. "out of fear," he admits, that he would someday need an option B. Today—a year after his retirement from the Yankees and two years after passing Willie Mays in career home runs (A-Rod, No. 4 on the all-time list, has 696)—Rodriguez is learning how to be a business All-Star. Here, his conversation with Fortune.
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FORTUNE: Alex, most CEOs who fail get fired. You got suspended—and used your penalty year to prepare for your next act.
Alex Rodriguez:I think I needed the full year to not rehab the house, but tear the house down and start again.
What did you tear down?
The lessons learned were that it wasn't just about hitting home runs and RBIs and winning games. Appreciate that it's not your birthright to wear pinstripes.
Confidence can become arrogance. Insecurity can drive us to do things we shouldn't. Did insecurity drive you to try to succeed at all costs?
A lot of times, your biggest asset is the gift and the curse.
Your father left when you were 10. Is that the root of your insecurity?
Insecurity is subjective, right? My mother worked long hours, had two jobs. The Boys & Girls Club was my second parent. My goal was to go to the University of Miami and play quarterback and shortstop. I often thought that college would have been a good place for me to season and mature. I've always been obsessed with college. I craved walking on campus with my book bag.
You went to college during your year off. You took marketing at the University of Miami and value investing at Columbia.
My Columbia professor, Bruce Greenwald, is a disciple of Warren Buffett and Ben Graham. I was a fan. At Miami, we did a group case study on Publix. Our first meeting was at Starbucks, and we got no work done because I was signing autographs. After that, our study group met at my office.
Meanwhile, you went to conferences—Milken, J.P. Morgan, the Berkshire Hathaway annual meeting.
Those conferences are curations of the best investors on the planet. It's a chance to learn a lot.
Your mentors, including [Lennar CEO] Stuart Miller, [J.P. Morgan Asset Management CEO] Mary Erdoes, and [Chicago White Sox owner] Jerry Reinsdorf, say you have "incessant curiosity." Did you initially see your suspension as an opportunity to feed that?
No. When you're in it, you're in it. You don't have time to take a step back and evaluate the situation.
Who helped you get your life and career back on track?
Friends and family. A D.C. attorney friend and adviser, Jim Sharp, said, "Alex, you're not only messing up your baseball life. You're getting ready to mess up your entire life." I realized I needed to change gears and take full accountability. That's one great thing about CEOs. They have perspective and understand turbulence.
How did you explain your failure to your daughters, Natasha and Ella?
As much as you can tell a 9-year-old and a 6-year-old: "Daddy made some poor decisions and got a yearlong detention for it. I'm fully accountable for my mistakes." I thought it was an important part of my recovery to be honest with my children because I always want them to be honest with Daddy. Kids are very smart, and they know when you're bullshitting them.
You started ARod Corp. at age 26 "out of fear," you've said. Meaning?
I kept seeing players get hurt and basically go from being in the penthouse to the outhouse very quickly. I realized that you can be in a good place on Monday, and by Thursday you can be out of luck with no formal education. The statistics show that around 80% of a Major League Baseball player's lifetime income comes from age 20 to 30. The average career is 5.5 years, and less than 5% of players have a college degree. I'm not a stockbroker, but I would probably short that stock, okay? I started saying, "How do I get on the other side of that trade?"
You started buying rental apartments. Why?
It's a sector I understood. We never owned anything growing up. We rented. We were good tenants, but I remember, as a 12-year-old boy, watching my mother with two jobs, leave at 7 a.m., come home at 11 at night, and it seemed like every third day, we had to pay the rent. I saw the stress on my mother. I remember playing ball in the yard, and I said, "Boy, if I can be the landlord and not the tenant, I would jump at that."
Today, ARod Corp. owns 8,500 apartments and manages 13,000 in 12 states.
We've deployed over $125 million of equity. We're fully integrated. We find 'em, we vet 'em, we underwrite 'em, we close 'em, we manage 'em, and then we rehab 'em. We buy in secondary markets where job growth is growing. Millennials don't want to own a house. They want to own an app. The last five or six years have been very healthy in the multifamily apartment sector.
So what got you started building fitness centers in Mexico in 2011?
I basically lived in a gym for the last 30 years, right? I like the fitness business because it's asset-light. It generates great cash flow. My partner, Mark Mastrov, is a pioneer who started 24 Hour Fitness, grew it, and then sold it for $1.7 billion.
Mark says you go "narrow and deep" in a category: "Alex isn't spreading himself out, like most professional athletes do with license deals. He's investing his own capital."
To Mark's point, we've gone deeper in fitness. We just bought the rights to build UFC Gyms in South Florida, and a big part of an incredibly interesting company called TruFusion. It's essentially hot yoga marries boot camp marries kettlebells. I love it because in one hour, you've taken down up to 800 calories. We get the heat up to 103, with up to 80% humidity. It's the best workout experience I've ever had.
How did you discover TruFusion?
Funny enough, I was spending a lot of time in Las Vegas and …
You like Las Vegas, don't you?
I was there watching Jennifer [Lopez]. She has her concert in Vegas. I kept trying all these gyms. A friend took me to TruFusion, and I fell in love. I started bringing all my friends. I brought Jennifer. I can't wait for us to have it in San Francisco, L.A., Miami, New York, the Hamptons, Chicago. This has an opportunity to be like Orangetheory or Barry's Bootcamp.
ARod Corp. owned Honda and Mercedes-Benz dealerships and sold them. Are you steering clear of the auto business?
We've looked at dozens of auto dealerships and passed. For the first time in five years, we're seeing deals that make sense. We'd like to get back in the game.
ARod Corp. is also doing deals with investors like [Avenue Capital's] Marc Lasry and [Third Point's] Dan Loeb, and you're working with Starwood Capital. What's your promise to them?
We invest in businesses that generate cash, can scale, and have good management. We've averaged 13% to 15% annual returns on invested capital. We stay out of technology. I never understood the concept of Silicon Valley—all these companies lose hundreds of millions of dollars every quarter. And they just keep skyrocketing to the moon.
Do you not invest in those companies?
In terms of personal investments, Amazon, Google, Facebook are some of my biggest holdings. I'm talking about the other thousand companies.
You invest in what you understand. How about a sports team?
I've always had the dream to lead a group to buy a team. But just finishing a 22-year career, a time-out feels good. At some point, I think it could be a possibility.
Do you miss playing baseball?
I miss playing every day. I miss the clubhouse, the camaraderie, the fans. But I'm proud of the arc: I had two of my best years at age 20 and age 40. Now I get to advise [Yankees owner] Hal Steinbrenner and mentor young Yankees.
Can building a business satisfy you as much as getting into the Hall of Fame?
It would be a dream to get into the Hall of Fame. I don't make the decisions, but I do get a chance to pivot and learn from my mistakes in baseball.
You're a Fox Sports analyst, an on-air contributor for ABC News, and you're producing and hosting an upcoming CNBC show, Back in the Game, about financially strapped former pros. What's your media business model?
I'm very surprised that my phone's been ringing because I never thought about myself as a TV person. I'm learning as I go.
You were the highest-paid player in baseball. What, besides making money, is this second act about?
I want youngsters to know you can be an entrepreneur and get the same rush that you do when you hit a home run or win a World Series. I've partnered with Cedric Bobo, a Harvard Business School graduate who was at Carlyle for a decade. We're going into Hispanic communities, selecting 15 high school kids, bringing them into Boys & Girls Clubs, and teaching three-day boot camps on buying and managing properties. They present offers to buy and can own up to 20%. We're funding it. Portions of the proceeds will pay for the kids' college educations.
How is your story instructive to businesspeople?
I've had a long career. It's included the good, the bad, and the ugly. In business, you're always going to have obstacles. You know, I'm fifth in all-time strikeouts. In baseball, I have a Ph.D. in failing. But I also have a master's in getting up.
What have you learned from Jennifer [Lopez]?
She's the hardest-working person I've ever met. I've learned from her, Surround yourself with exceptional people who have a moral compass and share your vision.