Eli Broad

What kind of car do you drive?
A Porsche.

What’s your favorite place to go?
Home.

What website do you like to visit?
CNBC.

What was your worst moment in business?
Oh… There have been many worst moments. There are more good moments than worst moments.

What’s your favorite drink?
Scotch and soda.

What’s your favorite food?
Italian food.

What’s your idea of fun?
Sitting in the sun reading.

And at work?
Meeting interesting people.

Who is a business hero of yours?
Andrew Carnegie.

What personal qualities do you admire in business?
Integrity. Dedication.

What is your dream?
My dream is to have a better world, a world that…at peace; an America that’s far more competitive than we are today; an America that’s loved throughout the world rather than despised.

Do you have a motto?
Hmmm. No real motto. “But the harder you work, the luckier you get.” Someone said that long before I did.

What is your present state of mind?
A lot of things to do - whether it’s education, the arts, scientific and medical research. A lot left to be done. We never finish.

CNBC:
Do you have an attitude about how to get through times like these?

ELI BROAD:
I think we are in a real crisis - probably the biggest crisis that we have had since the ‘30s. And I think it’s going to take time to work out of it.

CNBC:
Do you have any advice for people on how to handle it emotionally?

ELI BROAD:
I think the answer is, long-term, this is a great country. But we have been on a binge, and we have got to sober up. We have got to solve big problems. Education, energy and healthcare. And it’s going to require the next president - hopefully we’ll get a mandate and have the courage and communication skills to let America know it’s a new day, and we are not the sole American empire anymore.

CNBC:
Yes. I wanted, most importantly, to talk about your style plan. I think you are a great example for a lot of our viewers that are not as generous or as committed as you are. And I know there is a label “venture philanthropy…”

ELI BROAD:
Our philanthropy is not simply writing a check and giving. It’s really what I call “venture philanthropy” - whether we came up with the name or someone else, I am not sure. And the idea is we are investing, and we are investing for a return. In education, the return is improved student achievement. In scientific and medical endeavors, it’s new discoveries; coming up with ways to improve the human condition. In the arts, it’s trying to get a much bigger audience for the arts; try to educate a broad public on what the arts mean and how they fit in society. So we don’t just write checks; we work hard at it. In fact, almost all of the money - over 95 percent - does not come from people that come to us; we go around looking for opportunities - whether it’s in education reform, whether it’s in scientific and medical research, endeavors or the arts. So it, it’s really being entrepreneurial, it’s being like a venture capitalist. And not everything we do works out. But when it doesn’t work out, we just stop and regroup and do something else.

CNBC:
What business principles do you apply to your Company?

ELI BROAD:
Well, I think we try to do things… We try to meet three tests. One: “Will it happen if we don’t do it?” In other words, if it’s going to happen anyway, why do it? Two, “Will it make a difference 30 years from now?” And thirdly, “Whatever we do, are the human resources there to really make it happen? Is there a leadership there to make it happen?” So we gotta pass all three of those tests.

CNBC:
And is there actual measured results?

ELI BROAD:
Oh, absolutely. We have expectations. We have metrics. We look for results. And if we don’t get results, we regroup and talk to whoever is involved and say, “We are, we are not getting there. We are not…we are off plan. Let’s get back on plan.” And if that doesn’t happen, we part ways. But that doesn’t happen very often, thank goodness.

CNBC:
Now, this approach makes it more interesting and more challenging, doesn’t it?

ELI BROAD:
It’s far more challenging. It’s a lot of work. You know, a lot of people don’t want to change the status quo. We are change agents, especially in education. And we have got in our education foundation some 30 people. And they don’t sit around their offices; they are out there looking for opportunities in various cities across America. It’s hard work. In fact, I don’t mind telling you: Being involved in this fourth career of mine - philanthropy - is harder than work… harder work than when I ran a Fortune 500 company. But it’s more rewarding also. It’s an opportunity to give back; to get satisfaction.

CNBC:
You were talking about investing in education, about giving back in the investment… you said, “Human capital is the greatest investment”

ELI BROAD:
I do. I do believe that it’s not about money; it’s about human capital. It’s about getting the right type of governments, the right kind of management, from the superintendent or chancellor down to the principal, so you can…you can create a situation, a classroom where teachers and students could have all that they need - all the resources they need - and frankly, get it away from big central bureaucracy and put it in the classroom where the money belongs. And that takes management.

CNBC:
It’s an interesting kind of a way of thinking about investing. You are not investing in a stock; you are investing in human future.

ELI BROAD:
Exactly. You know, if, if we are going to be a competitive nation, it’s very clear, we have got to do a far better job educating our children than we have been doing. Because nations in Asia - whether China, India, Japan, Korea - European nations are doing a far better job than we are. And we have got to catch up.

CNBC:
I read a speech you gave at the Pepperdine School of Business where you went over some basic principles of your business. You talked about when you founded Take Me Home, that it was all founded on the importance of ideas. Ideas being the “currency for success.”

ELI BROAD:
You know, there is nothing more important - or nothing harder to find - than great ideas: great ideas that really work. And we have done that in my business life, and in philanthropy. Ideas - more than money - are the real currency for success. Great ideas that really work are hard to come by.

CNBC:
Did you carry this through your early years?

ELI BROAD:
You know, I have always been curious about things as a child, and thereafter in school, and so on. And was always looking for new ideas, a new way to do things. in…and in home building, in my background… you know, I started life as a CPA…and after two years, I got bored with that. I was pretty good at accounting, but it was kinda boring, so I became an entrepreneur. And we started Kaufman and Broad. and before we did, I did a lot of studying. And, and I saw in Michigan, Detroit where we started, everyone was building homes with basements. But yet, in Dayton, Ohio and in other cities several hundred miles away, they were…they were not building homes with basements; they were building homes that had carports or garages. And I scratched my head. And the conventional wisdom is “No one will buy a house without a basement.” And I said, “Why do they need a basement?” Basements were fine when you had to store coal or whatever, but those days have changed. So we went ahead and we were brave and we built a home without a basement, a carport, and it was a great success.

CNBC:
Which brings me to one of your other points, where you talked about “conventional wisdom.” And you said “Don’t believe it follow the conventional wisdom.”

ELI BROAD:
Well, you know, “conventional wisdom,” it’s something to think about, but not simply accept. I mean, “unconventional wisdom” is what really makes things happen. You know, there was a saying, “The reasonable man, you have to be unreasonable sometimes."

CNBC:
Yes.

ELI BROAD:
And you have to buck the status quo. And you have got to be willing to take hits frankly, whether it’s in education reform or elsewhere, because a lot of people do not want to change. They want to maintain the status quo, because it’s comforting.

CNBC:
You also talked a little bit about taking risks?

ELI BROAD:
You, you have got to take risks. I mean, If you want rewards, clearly you have got to take risks. Nothing is guaranteed in life - or business - or philanthropy. And it’s easy to say “We are just going to do what everyone else does and not take any risks.” But not taking risk is probably the biggest risk one could take. I think the biggest risk is not taking…not being willing to take any risks. If you want rewards, you have got to take risks. And you have got to be willing to measure the risk you are taking and see the downside, but also see the great upside by taking that risk.

CNBC:
That’s it. But people are afraid. They are afraid.

ELI BROAD:
People are afraid. You have got to have courage. You have got to measure the downside. You want to know what if… If you fail in that risk, what happens?

CNBC:
And what does happen?

ELI BROAD:
Well, you know? In business, you can’t bet the entire enterprise on one risk. You want to assume that it…that if it doesn’t work out, you could regroup and start over. The same thing in philanthropy. You can’t give all your resources to one thing, and if it doesn’t work out, you are done. So we spread the risks. We try to concentrate on where we think we are going to get the biggest return, and that’s why we chose public education reform, scientific and medical research. You know, the Broad Institute is number one in the world in genomics now. And as you know, we started…it was a risk. It was a risk. We got together and got partners. Harvard Law… Harvard Medical School, excuse me…MIT, and it was a great experiment. We had great leadership. And after four years, we decided, with such a success, we’d endow it. And now it has 1,200 people, 190 million dollar research budget. But it was a risk. We didn’t know it would work out as well as it, it did.

CNBC:
One of the other things we look for is partners going with you?

ELI BROAD:
We do. We prefer, if we could find partners - that are willing to do all the work - and we just fund them. But often we can’t do that. In education, we couldn’t do it. No one was training superintendents. So we created the Superintendents Academy, and have trained more school district superintendents than any entity in America. en we said, “You know what? We don’t see any bright MBA’s in school district management or administration.” So we created what we call the Residency. Now we have well over 100 people that we have trained…in school districts that want to change. And they are involved at what I call the Cabinet level - whether it’s finance, human resources, systems redesign and the like. Then we said, “You know what? Everyone is down on public education in urban areas. We are going to create a prize - the biggest prize in public education - to spotlight success.” And to have those districts share their best practices with others. And create competition between urban school districts. And that’s worked out very well. And we are now in our seventh year of the Broad Prize.

CNBC:
And that’s coming up soon, isn’t it?

ELI BROAD:
October 14th in New York City.

CNBC:
What are the areas that your foundation is focused on?

ELI BROAD:
Our focus is in three areas. First, K through 12 education reform, because we think it’s the biggest problem facing America. Secondly, scientific and medical research…in areas that others have not been engaged in… whether genomics or stem cell research. And thirdly, the arts.

CNBC:
“It’s not enough just to have noble goals, you have to have expectations.”

ELI BROAD:
[LAUGHS] You can have… You can have goals - you can have noble goals - but you also have to have expectations. You have to be demanding. You have to have metrics. You have to have…marked results. You want to find the right people to make things happen. Just having the ideas and the goal isn’t going to happen. Writing a check doesn’t make it happen.

CNBC:
And these are all things that you learned in your later years in business. And how to make things happen, that you are now applying to business…

ELI BROAD:
I think I am applying many of those things that I learned in the world of business. You know, philanthropy is not identical to business, but many of the practices of seeking a return - not a financial return, a measurable return - you learn. Having metrics. Finding the best people. Especially when you want a change, you need people that are change agents, rather than people that just want to maintain the status quo. So doing what we are doing is not easy work. It would be easier just to sit in the office and write checks, but we don’t do that. We look to invest. We are in the “venture philanthropy” business.

CNBC:
You have achieved so much in your life. Can you talk about that?

ELI BROAD:
Sure. You know, America has been great to me. It’s a great meritocracy. I have done very well in my first three careers - public accounting, then founding Kaufman and Broad Home Corporation, and then SunAmerica. But you know what? Ten years ago, when we merged our company, and our family’s resources went up dramatically, I said, “What do we do now? It’s time to give back.” So we said, “How do we give back?” And we said, “What are the biggest problems facing America?” And I started with public education. I felt if we wanted to be a competitive nation, we had to change public education. And then we wandered into scientific and medical research. And then the arts. 18 months ago… In April of 2007, we said, “You know what? We have got to get the American people roused, that we have got a problem in public education.” We also have to get the candidates talking about specifics, not the pabulum of simply “We need better schools and better teachers.” So our foundation, the ELI BROAD Foundation, joined the Bill and Melinda Gates Foundation, in a campaign called Strong American Schools. And we kicked it off in South Carolina. And the 18 months, we have tried to wage this campaign across America. And we have done sort of OK with the public; not as well as I would have hoped. But also we got the candidates now talking specifically about the need for stronger standards; more learning time; better teaching, including incentive compensation; and a number of other things. So it’s been an interesting campaign. And I think we have achieved something in that process. Even though we didn’t get to 100 percent of where we wanted, I think we have made some real progress.

CNBC:
You hire ex-military and retired people. And I know that those people have the skills to manage… Talk about experience…

ELI BROAD:
You know, typically in an urban school district, you would find a superintendent starts as a teacher coach. And 30 years later, that person that has political skills or personality ends up being the CEO of a large enterprise called a school district, with the budget that’s hundreds of millions of dollars - or billions of dollars - without any training in management, systems, labor relations, finance and so on. And we said, “Wait a minute. Maybe we ought to inject some additional type of leaders in this system.” So we started the Broad Academy for Superintendents. And half the people come from education, the other half come from other places. For example, the military retires 100 people of general and admiral rank a year, and these people are in their fifties, and they are looking for a second career. Then sometimes we find people from public service. For example, Mark Roosevelt was a legislator in Massachusetts. He ran for governor and lost. He is now superintendent in Pittsburgh, Pennsylvania. Went through our academy. He was ready to retire to Santa Fe. And he has found that very rewarding and he is doing a great job. Ideas - more than money - are really the currency for success.