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A new New York Times profile on the Cavaliers:
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Despite Elimination, Cavaliers Remain a Model Franchise
By KATIE THOMAS
Published: June 1, 2009
Every employee who works for Dan Gilbert is required to learn his “isms,” a collection of colorful aphorisms that guide his entrepreneurial philosophy.
The rule applies to bankers and receptionists alike at Quicken Loans, the mortgage company Gilbert founded.
It also applies to LeBron James.
“There’s our philosophy, and everything else sits on top of that,” Gilbert, the majority owner of the Cleveland Cavaliers, said Friday in a telephone interview. “Who we are doesn’t change much based on the business.”
So in a meeting before the start of the Eastern Conference finals against the Orlando Magic last month, Gilbert briefed the team on how to apply his isms to basketball. James embodies two concepts in particular, Gilbert said: maintaining awareness and responding with urgency.
“He’s got a high level of awareness on and off the court,” Gilbert said. “You can hear it in his interviews and see it on his face.”
The same might be said of Gilbert, 47, who four years after taking over the Cavaliers has been credited with transforming the small-city team into one of the most coveted franchises in the league, albeit one whose promising season ended in six games against Orlando. He has accomplished this feat in no small part by maintaining a keen awareness of the needs of James, his star player. Under Gilbert’s leadership, the team has done everything from building a practice facility closer to James’s home to hiring an omelet maker to prepare brunch for players on the road.
After news broke last week that a group of Chinese investors planned to buy a minority interest in the team, the move — which could expand the Cavaliers’ marketing presence in China — was interpreted as yet another attempt to keep James in Cleveland.
James can become a free agent after next season. It remains to be seen what impact, if any, the Cavaliers’ failure to win an N.B.A. title this season might have on James’s decision.
“Everybody sort of says, why would LeBron stay in Cleveland?” said Kenneth L. Shropshire, the director of the Wharton Sports Business Initiative at the University of Pennsylvania. “And most of what you hear is that the people of Cleveland have been good to him, and the business side — the Cavaliers — have been good to him.”
Gilbert made his fortune in the mortgage business, founding Rock Financial in 1985 as a first-year law student. In 1999, his bank began selling loans online and attracted the interest of Intuit, which bought the company in 2000 and renamed it Quicken Loans. Two years later, Gilbert and a group of investors bought the company back.
At Quicken Loans, which is based outside Detroit, his hometown, Gilbert built a reputation as an innovative if sometimes quirky thinker who transformed his brick-and-mortar bank into an online pioneer. His isms, some of which read like Buddhist koans — “a penny saved is a penny,” for example — are avidly adopted by many employees, who are treated to lavish perks, including trips to Cleveland to watch Cavaliers games.
At the same time, Gilbert can be an exacting manager. In a handbook distributed to new employees, he details everything from what type of e-mail service employees can use (no AOL) to suggested scripts for out-of-office voice-mail messages. In an e-mail exchange that was reproduced in the handbook, Gilbert chided a mortgage banker who was prevented from returning a client’s call because of emergency wisdom tooth surgery. “Do you just want to be mediocre and wash your hands clean of all responsibility?” Gilbert wrote in the e-mail message. “WAKE UP.”
Gilbert invested in the Cavaliers in 2005, shortly after attending a Pistons game with David Stern, the N.B.A. commissioner. In a telephone interview, Stern said he invited Gilbert to the game after learning that he had unsuccessfully bid on the Milwaukee Brewers in 2004. “Three weeks later, he had an agreement,” Stern said.
Gilbert ran the Cavaliers with the same hands-on approach as at Quicken Loans, to mixed results. He fired the coach, Paul Silas, and the general manager, Jim Paxson. More than once, Gilbert was compared — not favorably — to Mark Cuban, the outspoken owner of the Dallas Mavericks who also made his fortune as an Internet entrepreneur. The upheaval even prompted criticism from James, who called the changes “frustrating.”
Since then, however, Gilbert has been mostly praised for his changes, including a $27 million investment in renovating Quicken Loans Arena and a new $25 million practice facility in Independence, Ohio.
Marc Ganis, a Chicago-based sports consultant who helped broker the deal with the Chinese investors, said Gilbert’s success with the Cavaliers, combined with James’s celebrity, was what persuaded the Chinese to do business with the team. “Dan Gilbert is an extraordinarily energetic and empowering team owner,” Ganis said, adding that the investors were impressed with Gilbert’s history in the mortgage industry.
Quicken Loans has weathered the global credit crisis better than many other banks because it did not sell many subprime loans, and because as a loan retailer it sold the mortgages to other banks, which then assumed the risks. The company has actually grown over the past year, writing 62 percent more loans in the first quarter of this year compared with the same period in 2008, said Guy Cecala, the publisher of Inside Mortgage Finance.
If the Chinese deal is approved by the N.B.A.’s board of governors, the group will buy a 15 percent stake in the team from the minority owner David Katzman. The deal is likely to hold resonance for James, who has sought to expand his global presence and has expressed a desire to become the world’s first billionaire athlete. James is said to be learning Mandarin and has traveled to China several times on promotional trips for Nike and Coca-Cola.
Conversely, James’s presence on the team is seen as vital to the investors’ success. If he stays with the Cavaliers, Cleveland has the potential to become a basketball mecca much as Chicago was during the era of Michael Jordan, said Steve Greenberg, an investment banker who advised Gilbert when he purchased his share of the Cavaliers. He was not involved in the Chinese deal. “If you want to be a part of that, then I think it’s a real smart move,” he said.
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