John Rogers of Ariel Investments: Taking a Contrary Vision to Overcome Markets and Prejudice

When John Rogers launched America’s first black-owned asset manager in 1983, even the people who most wanted him to succeed feared it would be difficult for the 20-year-old investor. to overcome the barriers posed by centuries of racism and segregation.

“I remember having dinner with John Johnson, an iconic entrepreneur who built the largest black-owned business in the country’s history at the time, and he told me he was worried that ‘There aren’t enough white Americans who would trust. me with their money, ”recalls the founder and CEO of Ariel Investments.

Rogers says Americans in the 1980s just got used to working with minority-owned businesses in manual-oriented industries such as construction, catering and janitorial services. But, he adds, “they had a hard time seeing African Americans managing other people’s money.”

“There were a lot of people who just said, ‘You know, we’re not comfortable with the transition to using diversity’ when it comes to managing endowments or pension plans. Rogers said. “There was obviously a lot of implicit or unconscious bias, and there is still some in our world.”

Almost four decades since he began managing around $ 500,000 from a small group of friends and family eager to make history by entrusting their savings to him, the contrarian value investor built a $ 15 billion asset manager.

This guided him early in his career, as well as today – at a time when the United States still grapples with centuries of discrimination and government policies that have contributed to the great racial wealth gap in ‘today – has been a commitment to caution and a focus on divergent thoughts.

The inspiration for being “the first in something” came from Rogers’ mother, who was the first African American woman to graduate from the University of Chicago Law School in 1946. Growing up in the The city’s diverse Hyde Park neighborhood and college attendance.The high school, where his classmates’ parents were Nobel Laureates and world-class surgeons, gave Rogers the intellectual curiosity to challenge the status quo from the start. start.

“It was just a wonderful, unique atmosphere,” Rogers says of his upbringing. “A really rich environment for people to learn to think independently, to believe in rigorous inquiry and debate.

The entrepreneurial models who convinced him early on that he wanted to build something on his own were also Chicagoans. John Johnson, who built a publishing empire from scratch that included the Ebony and Jet magazine franchises and George Johnson, who built one of the largest cosmetics companies in the United States, were living examples of people beating the odds to create large, scalable businesses.

“These were the first African-American companies to be listed on a major stock [exchange]Rogers said. “These entrepreneurs inspired me to create the first African American-owned fund and mutual fund management company in the country’s history.

The desire to pick unloved stocks was built at Princeton University through classroom lessons learned from the investor and economist Burton Malkiel, author of A Random Walk on Wall Street, and on a basketball court under coach Pete Carril – a member of the National College Basketball Hall of Fame – his “best teacher ever.”

“I was the only guy on the basketball team that had a broker right across from campus, and I loved trading stocks. And I thought at the time that you could get rich by trading fast growing companies quickly, ”Rogers recalls.

“And once I started reading Burton Malkiel’s legendary book, I started to realize how efficient the market is and how hard it is to outperform.

Rogers flirted a little longer by betting on growth stocks at William Blair, the investment bank and wealth manager, but soon realized that this was not the right house for him. His investment philosophy was much more in tune with that of Warren Buffett, John Templeton and Ben Graham.

“I was a bit of a fish out of the water [at William Blair], because, you know, being an independent thinker, my roots in Hyde Park, I was comfortable being a contrarian, ”says Rogers. “I naturally fell in love with the value-oriented approach to investing, the contrarian approach to investing.”

At 24, Rogers left William Blair, hired a friend from high school to be his assistant, and embarked on the mission of starting his own store. Although the color of his skin made it more difficult to launch a successful asset manager in 1983, Rogers recalls that there were many back then who wanted to help him. “Because we were the first, there were people willing to take a risk on us because they wanted to do some history themselves,” says Rogers.

Howard University, a historically black college, and Cecil Partee, treasurer of the city of Chicago and the first black person to serve as president of the Illinois Senate, gave Ariel small but at the time large sums to manage, which helped Rogers get by. floor.

“The Chicago city treasurer was a longtime friend, I went to school with his daughter, and I remember him saying to my dad, ‘I was expecting someone like John come to the door, you know, some African American, who I can be of use to, ”” Rogers recalls.

“There were a lot of other progressive institutions like this that wanted to be useful for this young African American trying to make history in an area that wasn’t traditional,” says Rogers.

Racial discrimination was not the only obstacle he encountered in the beginning. The lack of record played against him during the day. What helped, as is often the case with successful investors, is a crisis.

Three questions for John Rogers

Who is your leadership hero?
My parents, who have each achieved enormous success despite the powerful forces working against them. My father was a Tuskegee aviator who flew over 100 combat missions [during world war two] before becoming a judge, and my mom built a legal career at a time when black women were excluded from executive positions in big business. She became the first female Deputy Solicitor General of the United States.

What was the first leadership lesson you learned?
Think long term and stay the course – two mantras I picked up from Warren Buffett. When everyone is panicking, which often happens when investing, it’s important to keep a cool head.

If you weren’t CEO, what would you be?
I’m sure I would always do what I love: picking stocks. I fell in love with investing at the age of 12 when my dad offered me small amounts of stocks and let me keep the dividend checks to keep investing. The rest is history.

“The stock market crash of 1987 was a watershed moment for Ariel,” says Rogers. This was the moment when his opposing views were put to the test. He recalls working around the clock on phones to convince customers to send him money to buy the shares of companies he believed were unfairly affected by the crash.

“It’s a unique opportunity to do good business,” he recalls telling customers. Bets on stocks like Sanford Corp and Specialty Equipment have paid off, helping Ariel make impressive returns for her customers and proving that Rogers can handle money like her idol Buffett.

Rogers says that although Ariel survived a stock market crash and the 2008 financial crisis, and is now navigating the pandemic from a position of strength, he has yet to prove to some white Americans that he is capable of. manage their money.

“We still find people who don’t believe in working with various asset managers. And so we have to work to change our mind, ”says Rogers. “The big advantage now, of course, is that we have 38 years of experience.”

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