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David Falk is the most successful agent in the game of basketball. He has represented more NBA first-round draft selections, lottery picks, Rookies-of-the-Year, and All-Stars than anyone else in the business. He changed the NBA's entire salary structure with a unique approach to ...
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David Falk is the most successful agent in the game of basketball. He has represented more NBA first-round draft selections, lottery picks, Rookies-of-the-Year, and All-Stars than anyone else in the business. He changed the NBA's entire salary structure with a unique approach to negotiations that garnered some of the biggest contracts in league history, including Alonzo Mourning's $100-plus million contract with the Miami Heat — the first ever in professional sports. His groundbreaking Nike deal for Michael Jordan, the most successful endorsement relationship in history, revolutionized basketball by creating the game's first commercial superstar.
Basketball Digest called Falk one of the sport's most influential people, second only to NBA commissioner David Stern. In The Bald Truth, Falk, respected throughout the industry as an innovator, candidly unveils the business secrets that have fueled his extraordinary success. For the first time, he shares the fascinating insider details of how he negotiated lucrative contracts, learned from his mistakes, and branded and marketed not only the greatest basketball stars in history but also other elite athletes and coaches.
Falk is blunt, he's fair, and he looks at the long run rather than the short-term gains. To make a great deal, he believes, both sides have to win. He adheres to steadfast principles, some of which he learned from the celebrated champion athletes and revered coachinglegends — like Georgetown's John Thompson and Duke's Mike Krzyzewski — who have been long-standing clients and lifelongfriends.
Since Falk began representing athletes more than thirty-five years ago, basketball has grown from a fledgling team sport to a multibilliondollar business with celebrity players, powerful endorsement deals, salary caps, and ever-evolving free agency rules. He has made millions of dollars for himself and his clients, but today he remains in the business for one reason: love of the game — on and off the court.
In many ways, my career started when I met John Thompson, Jr.
Having grown up in a very modest background, I could never have imagined that I would meet and deal with high-profile individuals as diverse as senators and congressmen, even a president or two, not to mention superstar athletes, entertainers, and chairmen of many of the most influential corporations in America. But without question, the most influential person in my life — other than my mother, who passed away when I was twenty-seven — has been John Thompson.
The fact that John played such an influential role proves that hard work and commitment to excellence can be matched, if not trumped, by circumstance and good fortune. The twists and turns that brought us together were certainly not in the game plans either of us had crafted for our careers. That John became my first and, for many years, only coaching client is ironic, given the wisdom and guidance he has provided me over the years.
I had aspired to be an attorney since the age of ten. In fifth grade, a friend named Greg Mallow wrote in my autograph book that I should become a lawyer because I was "a good arguer." Joseph Weber, my maternal grandfather, was an immigrant who frequently served on grand juries in New York. Pearl Weber, my mother, dreamed that I would one day become a Supreme Court justice. Despite these strong influences, my only role model for being a lawyer was Owen Marshall of the eponymous television series in the 1970s. I had absolutely no idea what being a lawyer was all about when Igraduated from Syracuse University in 1972 and not much clearer of an idea when I graduated from George Washington University Law School in 1975.
During my first two years of law school, I worked part-time for the Bureau of Land Management at the Department of the Interior and at the Washington, D.C., office of Sidley & Austin, a prestigious Chicago-based law firm. In Washington, the joke is that one out of every twenty-five males over the age of twenty-five is a lawyer. It seemed to me that most of them had an Ivy League background that I clearly lacked. At Sidley I was determined to overcome my lack of pedigree by sheer determination. Initially it seemed to be working as many of the younger partners entrusted me with legal research projects. But when the summer came, I was relegated to being a messenger when two "summer clerks" who were recruited from the University of Virginia and the University of Pennsylvania arrived. If I had a chip on my shoulder about my lack of Ivy League pedigree when I interviewed for clerkships in law school, after the snub at Sidley it grew into a block. When Donald Dell finally allowed me to work — for free — at Dell, Craighill, Fentress & Benton, which was the law firm part of the sports agency ProServ, in the summer of 1974, I was committed to overcoming my lack of nurture with my compulsive nature.
At the end of that summer, Donald hired me as a part-time clerk. As a full-time law student, I was permitted to work twenty hours a week. My lack of personal pedigree and ProServ's surroundings better informed my approach. Donald Dell was a Yale man with a University of Virginia law degree; Lee Fentress went to Tulane and Virginia Law; Frank Craighill attended North Carolina and Virginia Law; and Michael Cardozo, the associate, was the grand-nephew of Supreme Court justice Benjamin Cardozo and a Dartmouth and Virginia Law School grad. I probably worked an average of sixty hours a week and went to school just enough to graduate. Later on, when I attained some success, I probably developed a reverse exclusionary discrimination against Ivy League types. Obviously it takes all types, but one of the questions you might ask about a player who grew up wealthy is whether that player is hungry enough to do what it takes. The need to achieve doesn't always come from pure economics. With the background I had, I knew I never wanted to make a living with my hands.
After I graduated, Donald finally hired me as a full-time associate for the princely sum of thirteen thousand dollars a year to work eighty to one hundred hours a week. I eventually became Donald's assistant, or chief of staff. I read his mail, attended many of his meetings, and received great exposure to the various parts of the business, from marketing to legal. But we were very different people. Donald operated by seat-of-the-pants instinct and intuition. I am extremely logical. I wanted to have a well thought out argument when I presented my position. Donald preferred to leverage his power. He would read and think for five minutes on the plane flight to a negotiation. From my perspective, he would wing it while I was always a nut about preparation. I loved the intellectual stimulation that came from trying to change an existing model, or making an impact on that model by analyzing the research and applying a measure of creativity to the results. That approach eventually defined groundbreaking deals for Michael Jordan, Patrick Ewing, Juwan Howard, Danny Ferry, Alonzo Mourning, and dozens of others in the 1980s and 1990s.
John Thompson had been an all-American at Providence College in 1964. He ended up playing two seasons for the Boston Celtics, backing up Bill Russell in one of the more racially divided cities in America at the time. When John became Georgetown's coach in 1972, I was finishing my first year of law school.
Because salaries were so modest, even for the world champion Celtics, John lived in the home of a Boston couple named Harold and Mary Furash. They had no children and John became the closest thing they had to a son. I had met Harold a few times through Leon Frank, my future father-in-law, and Harold had told John about me.
John and I met for the first time in 1980 when John Duren was going to be his first player selected in the NBA draft. We made a presentation for ProServ to represent Duren and his teammate Craig Shelton. Both of them selected us, and we got the next big Hoya star, Sleepy Floyd, who became the No. 13 pick in the 1982 draft.
The Georgetown connection became a cornerstone of our basketball practice. Donald Dell and Frank Craighill had a longstanding relationship with Dean Smith at North Carolina, but I was never going to have a power position in that dynamic. Smith wanted to talk "CEO to CEO" and he insisted on Donald doing the deals for North Carolina's rookie players. For me, Georgetown represented an opportunity. Not only had John turned the program into a major college power, but the connection allowed me to move away from tennis. While I liked working with tennis players like Arthur Ashe and Stan Smith, I loved basketball. It also felt more comfortable because I grew up in an environment much closer socially and economically to basketball players than to tennis stars.
John boosted my career at ProServ by viewing me and promoting me, even to my boss Donald Dell, as an asset and talent independent of the company. But he also challenged my assumptions about people, race, success, and just about every other aspect of life. You always know exactly where you stand with John. He is wont to say "I'd rather have a good enemy than a neutral friend." This is one of the many lessons I have taken from our friendship. Only the depth of compassion and loyalty he extends to friends matches John's unshakable integrity.
Our personal histories no doubt helped John and I connect. My mother was the youngest daughter of immigrant parents and she became a teacher. She constantly urged me never to settle for second best: "Always shoot for the stars."
John's father was hardworking but uneducated, and his mother, though educated, could only find work cleaning houses in their segregated Washington, D.C., neighborhood. In his book Big Man on Campus, Len Shapiro writes that John's mother had a similar message for her son: "You can do anything you think you can. It's all in the way you view it. It's all in the start you make, young man. You must feel that you are going to do it."
The fact that we were both outsiders may be what drew us together — John, a black man in the very white fraternity of major college coaches, and me, a Jewish kid with a mutt's pedigree. In any case, unlike Coach Smith at North Carolina, John Thompson preferred dealing with the underdog. At the time, we had a policy at ProServ that we would not represent coaches. I effectively created the rule because I was uncomfortable when coaches came to Donald asking him advice on their shoe deals or coaching contracts. Donald, either out of friendship or ego, really wanted to help them, but I was concerned it could adversely affect our ability to recruit players. My emphatic position was that if we helped the coach at Maryland, then the coach at Virginia might get upset. I thought we had to be neutral. Donald reluctantly heeded my advice and it became corporate policy.
That all changed in 1982 during a lunch with John. Like other coaches, he would ask me questions about business matters. While I was happy to provide some insight, I told him, "John, I would love to help you with these things, but you know we have a policy against representing coaches." Typical of him, John said, "I don't give a damn about your policy. I'd love you to represent me." He said this with such vehemence that I was floored. For one of the first times in my life, I had nothing to say. I was tongue-tied and all I could get out was "Well, okay. I'd love to do it." After my impassioned argument to Donald against representing coaches, I broke the policy.
The arrangement also allowed John to break from the rest of the Big East coaching fraternity. Dave Gavett, then the Big East commissioner, negotiated group deals for the coaches for product endorsements. A coach might get $3,000 to $4,000 as part of supporting a Big East official basketball deal, or something similar. I signed John with Wilson for $25,000 a year, which infuriated the other coaches and in turn delighted John. He wanted to be his own person and felt it was no different than competing against other coaches for wins. One of his lines was "Why do you want to live in the same apartment complex with people you're competing with? You don't want them to know what you're doing."
The relationship worked on every level. John loved the idea of turning his success into business opportunities apart from the rest of the fraternity. I enjoyed the process because I thought we were not only doing a good job, but helping John to become a unique brand. It all worked to help John recruit great players. Mostly, however, the relationship provided me with insight into the human spirit. I learned about relationships, human nature, and how the nature of race affects both of them.
While John came to represent one of the closest relationships of my life, he was also part of some of my most memorably stressful moments. John is a wise and devoted mentor, but he is also blunt, demanding, and unapologetic about what he understands to be right and wrong. For example, on an otherwise uneventful day in May 1983, I stopped by Georgetown to see John on my way home from the office. We discussed a few business issues, nothing unusual. Then, out of left field, John asked, "What do you think about this guy Bill Strickland?" I had met Bill following a speech I delivered in Houston at the American Bar Association Committee Forum on Entertainment and Sports. Bill was an African American lawyer interested in getting into the agent business. At the time, I knew we needed another lawyer to help me with the basketball business. Craighill and Fentress had just bolted Pro-Serv to form Advantage International and a lot of ProServ's staff had followed them. Though we had retained twenty-three of the twenty-seven basketball players we represented, we were thinly staffed. What I didn't know at the time was that Strickland had gone to John Thompson to see if John could put in a good word for him at ProServ, hence the question.
"I really like the guy," I told John. "He's got an MBA from UCLA and a law degree from Georgetown. He played college basketball and baseball. He's pretty sharp."
"Well, are you going to hire him?"
"I really don't know, John."
"Well, David. You just gave me a eulogy about the guy. Why wouldn't you hire him?"
"You know, John, it's a very interesting time," I said. "At Pro-Serv, we've had African American people in marketing. We've had African American people in accounting. But we've never had a lawyer who's African American and for some reason, unbeknownst to me, it seems to be very important to clients that we have one. Because of that, I think whoever we hire first will be under a spotlight. I want to make sure that the person we hire — that first African American lawyer — will be able to stand up to the scrutiny."
That's exactly how I felt. And to me, that's how the landscape looked. It seemed to me that it was the hand we had been dealt and I thought I had provided a very reasoned, unemotional response.
John thought otherwise.
"Really? That's how you feel?"
"Yes," I said.
"You know, people have used that excuse for a hundred years to keep black people from jobs."
"Well, John, I understand that. I don't make the rules. I'm not the one who's going to put a spotlight on him. But because he would be the first, he'd be like a pioneer and subject to a different level of scrutiny than the person who comes after him."
We proceeded into a long conversation, with John surgically carving me into small pieces, to say the least. As we continued to debate the issue, I quickly realized that a relationship that had taken three and a half years to build was being destroyed in thirty very emotional minutes. After an hour with John, I had gone from considering myself broad-minded and inclusive, with very few biases, to feeling like a leading candidate for the Klan.
At the climax of this emotional debate, I was about to cry. The realization that our relationship could crumble on this subject was nearly too much to contemplate. At that moment, John put his hands on my shoulders just as a priest might.
"David," he said, "I'm not trying to be difficult with you. But you're Jewish, and you should be used to people discriminating against you because you're Jewish. But a lot of people who meet you don't know you're Jewish. I'm black. Every person I have ever met or ever will meet knows that I am black. I just want you to be sensitive to how a black person feels about the potential for being discriminated against."
That was the end of the conversation. We didn't say another word except "Good-bye." I walked to the parking lot, got into my Volkswagen Rabbit, and drove home.
I did hire Bill Strickland, who turned out to be great. More importantly, that day changed my life. The conversation and John's passion touched me in a way I have never forgotten. It made me question my values and my most fundamental beliefs. The way John presented his argument, together with the power of his conviction, made me feel as if I had been touched by God. It was a bit like an out-of-body experience. He made a profound impact on me because he cared enough to want me to understand.
John made me see what many of us in America do not: that there are very strong cultural differences between black and white America, and that many of them turn on nuances and experiences often foreign to one side or the other. He helped me understand the true nature of exclusion and the idea of needing to be twice as good as the next guy just to be equal.
For more than twenty-five years, John and I have had dozens of intensely personal discussions like that one. He's looked me in the eye and told me things, taught me things that wouldn't have been the same coming from anyone else. That's why I've always found it ironic that he hired me to be his advisor when, in so many ways, he has been mine. Among his insights I've adopted as my own:
¥ Don't be a prisoner of your reputation.
¥ Don't try to be a spiritual advisor.
¥ Don't try to run a democracy.
¥ It's better to have a good enemy than a neutral friend.
It's a good thing I've followed these principles; while dealing with John made me a stronger person and helped me with other people and situations, I never had to be stronger than when I dealt with him.
In the spring of 1984, we had another one of our "heart-to-heart" talks. Two things had happened to Patrick Ewing that spring while he was at Georgetown. His mother had died and Patrick had led the Hoyas to the national championship against Houston's Hakeem Olajuwon. Ewing and Olajuwon were juniors and within hours of the title game there was speculation that both would leave college early and enter the NBA draft.
John called and wanted to know my opinion about Patrick passing up his senior season at Georgetown. I told him I thought it was a terrible idea. To start with, I had read in the Washington Post that Patrick promised his mother he would finish his education and graduate. I thought it was important that he honor that commitment.
"Really?" John said. "Well, I can see why you feel that way, but let me tell you how I feel. For a million dollars a year, he can get plenty of education."
"I respect that, John, but there aren't a lot of Patrick Ewings coming out of college every year. The fact that he and Olajuwon are both juniors is a fluke. He is a very rare commodity, and for those kinds of players, the salaries will never go down. I mean never, no matter how long he stays in school."
"Well, that's interesting," John said, "but what if he gets hurt?"
"You could buy an insurance policy to protect that," I responded.
We went back and forth on the issues surrounding the decision: the nuances of the draft and why I firmly believed Patrick should stay another year. I held my ground while John cursed me out like a truck driver. That's John, God love him. I've had Georgetown players tell me they thought their first name was "Motherf — er" because that's what John always called them. Even with that knowledge and being well aware of John's style, the verbal abuse was distressing. I started thinking, just as I had a year earlier, that in thirty short minutes our relationship was quickly deteriorating. I remember thinking, How could this be happening?
"I thought you were my friend and I'm asking you for your best advice," he said, "but it's obvious to me you're just telling me what you think I want to hear. But you are wrong. I don't want him to stay in school. I want him to leave. I don't want the responsibility on my shoulders if he gets hurt. His mother is dead. His family is depending on him. What if he does get hurt?"
John's voice was booming. Finally, after enduring his abuse, I had had enough.
"John, look, do whatever the hell you think is right," I told him. "But if you're asking my advice I'll tell you three things. Number one, Patrick will not even go number one in the draft. If Houston has the first pick, they're going to take Olajuwon. Number two, the money will never go down for franchise centers. And number three, in your system, you're going to protect him from injury. Even if something happens, Patrick's not going to get amnesia and forget how to play basketball. His value will be much higher a year from now than it would be today. That's how I feel, but do whatever the hell you want."
I was upset because the conversation had devolved from a conversation between two friends into a very emotional and abusive personal attack. I thought it was important for my integrity, for my relationship with John, and for my desire to eventually work for Patrick, that I be brutally frank and not cave in to the intensity. I had to make a very clear statement that if he was going to hire me to deal at the highest levels of the NBA, I couldn't let a college coach, even one as forceful as John Thompson intimidate me. As it turned out, John discussed the matter with Patrick, who never wanted to leave school in the first place.
While I was striving to develop a relationship with John, Pro-Serv's most important college-coach relationship was with Dean Smith. During the 1970s and into the 1980s, Dean was instrumental in recommending players to ProServ. And we had done very well by all those players. We represented high first-round draft picks like Phil Ford and James Worthy, but part of the deal with Dean was that we also took care of the lesser players such as Rich Yonakor, Cecil Exum, and Tom Zaliagaris. For those players, we created opportunities in Europe and generally got them above-market deals.
The problem with Dean was that there was very little equity in the relationship. Every year we would start at square one despite the long-term relationship that existed between Donald Dell, Dean, and North Carolina.
In 1984, we found out just how vulnerable we were to the whims of a major college coach, particularly Dean Smith. Michael Jordan was the marquee player coming out of North Carolina heading into the 1984 NBA draft. Obviously he was a player ProServ coveted as a client. But we were also competing for the right to represent another North Carolina player and potential star, Sam Perkins, who went on to play seventeen years in the league. Dean screened agents and made "recommendations" to his players as to whom they should select. He broke the process into three categories: contract negotiation, marketing, and financial management. ProServ won all three components for Jordan, and two of the three for Perkins; Advantage International was selected to manage money for Sam. Less than a week after making his recommendations, Coach Smith called Donald and said Perkins had "changed his mind." The player had fired us, according to Dean, because Donald hadn't spent enough time with him on the phone during our six days of officially representing him.
Sam is a very laid-back guy and it is unlikely he would have made that kind of decision on his own in such a short amount of time. Moreover, Sam was sequestered in Bobby Knight's Olympic training camp, in which players' calls were screened. Donald told Dean he had tried to reach Sam but that there was no way to do so during those six days. Donald was not only distraught at Dean's news but also shocked at the way it happened. Donald challenged Dean about the real issue for the change. Dean challenged Donald to produce telephone records that would verify that Donald had in fact tried to reach Sam. Donald was furious.
"Look, after all we've been through together, can't you trust me?" said Donald. "I left a message for Sam, but I'm not on trial here. I'm not going to produce my phone records."
Perkins went to Advantage and the relationship between Dean and Donald, and eventually between Dean and ProServ, began to deteriorate. Michael Jordan was the last player ProServ ever got from North Carolina.
Coach Thompson's approach was in stark contrast to Coach Smith's. With John, your relationship was the sum total of all that had happened previously. He didn't demand that people continue to prove what they had already proven. Those things were a given. There was less quibbling over little things and therefore an increased focus on the larger and more meaningful decisions. That ultimately made me more effective for his players.
The net result of me standing my ground on Patrick staying in school was that everyone came out ahead. My relationship with John became stronger, Patrick's bargaining position turned out to be unprecedented, and I was able to negotiate not only my first contract for the No. 1 pick in the draft but also a groundbreaking deal with the New York Knicks. Thanks to John, I had primacy on representing Patrick. I made ProServ's presentation (Donald was in Japan at the time) and I was the one John lauded in strongly recommending our services to Patrick.
Until that point, Donald had been the firm's lead contract negotiator. I serviced players and handled their marketing, but Donald was the deal maker. I hadn't even been in the room when Donald negotiated Michael Jordan's rookie contract with the Chicago Bulls. But this time, John made it clear to everyone just who would be handling the negotiations. He even became furious when I told him Donald would be attending the first meeting with Gulf+Western, the conglomerate that owned the Knicks in 1985.
"What do you mean?" John demanded. "I didn't pick Donald to represent Patrick. I want you to go to New York and pitch Patrick."
I explained that while I appreciated his support, the Knicks were a unique team because a large corporation, Gulf+Western, owned it. There was an understood corporate protocol that chairmen, vice chairmen, and senior vice presidents expected to deal with people at their same level. But John exploded.
"I don't give a f — k how it works in corporate America," he boomed. "This is basketball. I didn't pick Donald. I don't like Donald. I want you to do it."
I finally had to say, "Look, John, if you picked me to be the coach, let me freaking coach the game. I really appreciate your support, more than I could ever express to you. Dean Smith never would do what you have done. He would have gone with the top dog. But as much as I'd like to do it alone, this is the best way for Patrick. Donald and I have to go together."
There was no question in my mind that I would take the lead, and I felt the stars had lined up in a way for us to break the existing NBA salary model. For one thing, the NBA draft lottery system debuted in 1985. Prior to 1985, a coin flip between the league's two worst teams decided the first and second picks in the draft. One of the most famous of these was the 1979 flip between Chicago and the Los Angeles Lakers. Chicago lost and took David Greenwood with the second pick while the Lakers selected Magic Johnson as No. 1. Now, however, all seven teams that had failed to make the playoffs had a shot at the No. 1 pick through a drawing held forty-five days before the actual draft. As an economics major, I understood how the new system dramatically increased the leverage and thus the value of the first pick. When a team goes from having a 50 percent chance of acquiring the No. 1 pick via a coin flip to having just a 1-in-7 chance through the lottery, the asset has become significantly more scarce and therefore more valuable. Eventually the odds dropped to 1-in-14 as the lottery expanded.
Still, we couldn't have created a better scenario than the one that emerged for Patrick. The New York Knicks had won a total of forty-six games the previous two seasons in the league's largest market. The team had passionate fans, a history of success, and owners with deep pockets. Fans demanded a better team and the local media drove those demands. Gulf+Western not only knew what it had to do, it also had the financial means to get it done. Our asset, Patrick Ewing, arguably became more valuable than any player in the history of team sports to that point.
As a result, I couldn't benchmark our contractual demands to past rookie contracts or even to the existing wage scale for the league's highest-paid players. That was the traditional approach, as expressed earlier that year by Bob Woolf, a highly respected player agent, in an article in Sports Illustrated. Asked what Patrick could command, Woolf said, "I'd start with Olajuwon (whose 1983 rookie contract paid him $1.2 million per year) and I'd go up."
I had no intention of starting with anybody. Circumstance and my own analysis demanded we create a new market for Patrick, framing his value against his future and that of the franchise. As a point of reference to support my position, I looked at Kareem Abdul-Jabbar, who was making $2 million a year in the twilight of his career, and decided Patrick was worth $3 million a year. I put together a ten-year proposal worth $30 million with a unique protection against the usual hazard of a long-term contract. Patrick would have the right to terminate the deal after six years if the salary structure changed to the point where four players were more highly paid.
I had spent more than a month working out the terms of the proposal when Donald asked me what I thought Patrick was worth.
"Here's what I'm thinking about," I said. I handed Donald a three-page memo I had prepared for the Knicks, outlining the offer. When Donald finished, he said, "David, I would love to be the Knicks when you walk in there and ask for thirty million dollars for a rookie."
"Really?" I replied. "What would you say?"
"I would tell you that you must be smoking pot, and when you get serious, come back and we'll talk."
"You would say that?" I asked.
"Yes," said Donald. "And how would you reply?"
"I'd say, 'Hey, no problem. I'll come back. In fact, I think I'll have Patrick enroll in graduate school at Georgetown. Since you've won a grand total of forty-six games over two years, having the number one pick, and a franchise center that has played in three Final Fours probably isn't important to you. Not in a small market like New York where you have all these fans. So we'll just go to grad school for a year and go back into the lottery next year and you can explain to the fans of New York why Gulf and Western didn't have enough money to sign Patrick Ewing."
I was making a point as much as testing the argument on Donald. At the same time I was sensing a shift. I was about to take the game to another level and Donald was still in the Bob Woolf mode. After eleven years of working for Donald, for the first time I felt I'd moved beyond him. He just didn't see what I saw. He couldn't comprehend the paradigm shift the lottery presented and the unique combination of circumstances that had come together. He simply didn't understand how any player, much less Patrick, could be worth $1 million more than the highest-paid player in the league and nearly three times as much as the previous year's No. 1 pick, who also happened to be a franchise center.
That said, Donald was dead-on with regard to the Knicks reaction. When I presented the proposal in New York inside the highly styled corporate conference room of Gulf+Western, they said verbatim what Donald had predicted: "When you get serious, come back."
I asked them how season ticket sales had gone since the lottery. They told me the team had sold $6 million in new tickets.
I said, "If you think his value is roughly $1 million to $1.2 million as a basketball player, and you sold $6 million of additional tickets, then maybe we are asking for half as much as he's worth. Maybe he's really worth $6 million because this is a unique set of circumstances. There are very few players who can sell $6 million worth of tickets, particularly before they play a single game."
We could have asked for $6 million a year based on ticket sales alone and had a cogent economic argument to make. I knew my demands did not reflect the salary structure at the time, but I was beginning to believe my job wasn't to interpret the salary structure and negotiate accordingly. I believed that when you had unique players combined with unique circumstances, players like Patrick and Michael, my job was to understand their economic impact independent of the existing marketplace. For those players, comparisons to Olajuwon, Ralph Sampson, or just about anyone else were irrelevant. And I think Magic Johnson proved that point in a way he no doubt regrets.
Magic was never paid his true value because no one around him understood the breadth of his value. Magic signed a five-year contract for $460,000 per year with the Lakers as the No. 1 pick in 1979. But because Jerry Buss, the team's owner, was an expert at deferred compensation, the deal paid Magic in even monthly installments over thirteen years so the contract had a present value in the low $300,000s. In 1982, Magic renegotiated his contract, but the salary cap made its debut that season for the six teams with the highest salary structure, the Lakers being one of them. The cap went into effect for the rest of the league a year later, in 1983.
Because they were over the salary cap, the Lakers couldn't change the two remaining years on Magic's rookie contract, so they agreed to pay him $25 million over twenty-five years starting at the end of the first contract. Thus Magic, who had led the Lakers to a championship as a rookie and was clearly one of the game's greatest players, had to wait two more years before the deal even kicked in. Buss was a financial genius who had predicted the increase in mortgage rates and he had bought millions of dollars in mortgages. He bought a $3.5 million mortgage with a 20 percent interest rate that effectively paid Magic's entire contract for twenty-five years.
CNN interviewed me in 1982 and asked if I thought the deal would set a new trend for player contracts. Based on the same philosophy I would apply to Patrick, I told the interviewer that while it sounded amazing, within three years Magic was going to be crying for locking himself into a long-term deal while the salary structure escalated around him. Three short years later, Patrick was headed toward signing for $3 million a year while Magic was making a third of that. He never made the kind of money he deserved because the people around him didn't have the foresight to see where the market was heading. They were looking backward instead of into the future. That, as well as competing with Buss's genius, meant Magic never came close to making what he deserved. The league believed the contract was designed to circumvent the spirit of the cap. Accordingly, the $25 million, twenty-five-year deal was interpreted as a ten-year contract paying him $1 million in cash and $1.5 million in deferred money annually. The Lakers were never allowed to change the total contract value ($25 million), though they did pay the deferred earlier. So all told, Magic never made more than $2.5 million a year despite being one of the most talented and unique athletes in the history of team sports.
We had experienced a similar fate with Buck Williams in 1981. We negotiated what appeared to be a huge contract that ended up making Buck underpaid by the third year. So my experience heading into Patrick's negotiations was that the league was growing so quickly and the salary structure was changing so fast that it was difficult to create a long-term contract that didn't have potentially significant downside risk for the player. I was not going to repeat the mistake Magic's people made in 1979 even on a tenyear deal, so I created a new device: an early termination option.
I told the Knicks I was serious about getting Patrick $3 million a year and that I wasn't trying to shock them: "This is really what I believe based on the development of the salary structure. If you don't feel he's worth three million dollars a year, then maybe you should consider trading his rights, or he'll probably go back to Georgetown for a year. We have a very unique relationship at Georgetown where John Thompson is the coach, the teacher, the father figure, and his players believe in him completely."
I knew John respected me and what we were trying to do for Patrick, and I understood that the Knicks ownership could not withstand losing the asset value represented by the first lottery pick, a franchise center no less, and coming away with nothing. There was literally no chance the Knicks weren't going to sign Patrick. A tremendous amount of season tickets had been sold and Patrick's picture had been on the cover of the season ticket brochure. What were they going to do, call up all the fans that had already laid out money relying on "Saint Patrick" and tell them they couldn't afford to sign him? They had effectively paid for the contract with the increase in season ticket revenue.
The summer passed and we remained in a stalemate, a state I've often faced. Though familiar, the situation can test the relationship between the player and agent. I worked for Patrick and he wanted to be updated on the progress of the negotiations. But I knew it was better for him to be unaware of the Knicks position. When the team has made an offer in the neighborhood of $1.2 million a year and I was asking for $3 million, we were more than a tad apart. In fact, we were so far apart that the distance between the two offers was nearly as large as the biggest contract in league history. There are at least two bad outcomes if the client comes to understand the distance between the two sides. One, the client can get extremely nervous that no deal will ever be made. In the player's mind there are only two reasons for such an impasse: either I didn't know what I was doing, or the team didn't believe in the player's value. Two, if the team finally does agree to $3 million and the player knows it really wanted to pay a third of that amount, he's naturally going to think the team was out to cheat him. In that case, the player might get what he wants but the entire relationship starts off on shaky ground.
This is where the integrity and trust of John Thompson became invaluable. I asked John for his permission, as the parental patriarch, to defer informing Patrick of the details of his own negotiations until we were at least "in the ballpark." I was afraid of the potential ill will implicit in the chasm between our demand for a deal unprecedented in size and scope and the Knicks' desire to "slot" him relative to Olajuwon. For all of John's reputation as a tough guy, he is extremely smart. John understood the wisdom in keeping quiet on the particulars. Without John, I doubt I would have been able to withhold status reports to Patrick, not because he was so demanding but because he was so damn nice.
I remember the first time Patrick called me at home, soon after I had signed him. He left a message on my answering machine that went something like this: "Good evening Mr. Falk. This is Patrick. I really hate to bother you at home. But I wondered if it was possible for you to give me a buzz back. I just wanted to ask you a question."
I looked at my wife and said, "Was that a joke? Could that possibly have been Patrick Ewing leaving that message? Could the guy in a hundred years possibly be that polite and that considerate to think he's imposing on my time when he just let me represent the best player in the country?"
As I came to find out, that was Patrick. To this day he is respectful, thoughtful, considerate, charming, and warm. His personality was at odds with the intensity and power he displayed on the court. It always drove me crazy hearing how fans or writers would refer so negatively to Patrick, and how badly they misunderstood him as a human being. He was more like a big teddy bear, which was exactly how my children and family felt about him.
True to his kindness, Patrick never pressed me for information on the negotiations. It was John, who finally knew it was time to lay out the cards for Patrick. I told John that we had made some progress and that I was more comfortable briefing Patrick on both parties' position.
After all of my analysis of Patrick's negotiating position, I got an unexpected but incredibly fortuitous break. And, as it would turn out, the Knicks had virtually handed me the key to the vault within hours of learning they had won the first lottery. Jim Trecker, the Knicks' vice president of promotions, called to ask me for permission to use Patrick's picture on the team's season ticket brochure. I thought he was kidding. Why would anyone want to put themselves in that position before the contract was completed? So I said, "Sure."
By the middle of the summer the Knicks had started to digest the reality of the situation. They reluctantly came to recognize the unprecedented leverage Patrick had and understood the unique circumstances that demanded they sign him. I had told the Knicks that if they attempted to "wait Patrick out," instead of my demands going down, they would go up. I didn't want to be unfair, but we had all the leverage and the longer the deal dragged on the stronger our position became.
At that point, in mid-August, New York had gotten into the $2.5 million a year range and I passionately believed that if I waited, Patrick would get exactly what we wanted. Naturally Patrick was nervous, but John understood all the pressure was on the team. John is a very intelligent man who clearly understood and completely supported my position. It was one of those truly rare times when the franchise literally could not afford not to pay just about whatever it took to sign the player. The Philadelphia Eagles could afford to cut loose Terrell Owens with nothing in return. The Knicks could not do the same with Patrick.
The head of Gulf+Western Entertainment, Arthur Barron, called Donald and told him that if we wanted to make a deal it had to be done immediately. However, I had taken Coach Thompson, Mary Fenlon, who was Georgetown's academic advisor, and Patrick to Nike in Portland, Oregon, so I couldn't physically make the last-minute meeting in New York. (Patrick ended up signing with Adidas, which was ironic because that's who Michael had his heart set on before he finally agreed to a deal with Nike.)
Donald met with Barron and, to my great disappointment, essentially conceded the remaining open issues so he could close the deal. Patrick ended up making more than $30 million for ten years with a unique twist. They gave him a $5 million signing bonus collateralized against salary in the last four years, which created some interesting tax situations. Thankfully, we had retained the option of voiding the deal after six years. The early termination clause provided that if four players passed Patrick in annual salary, Patrick could terminate the deal and become a free agent. The Knicks didn't understand why I would want that kind of protection when they were paying Patrick a 50 percent premium over the current market rate. I explained that while I understood it sounded crazy, I truly didn't believe the contract would stand the test of time. Based on the prevailing salary structure, they didn't believe that was possible so they finally agreed to the clause.
On August 20, 1985, Patrick signed the contract and Dave DeBusschere, the Knicks' general manager, presented him with a $5 million check. Ralph Sampson's entire four-year contract as the No. 1 pick in 1983 paid him a total of less than $4 million. Olajuwon's contract in 1984 had a total value of $7.2 million. Patrick got $5 million before he played a single game.
I made him endorse the check "for deposit only," and then I brought it back to Washington, D.C., took it to a photo engraver, and had three bronze plaques made of it. I gave one to John accompanied by a note: "Dear John, I told you so. Love and kisses, David." The plaque made it onto John's office wall, but not the note.
The entire process taught me more about business and negotiation than I had learned to that point. It validated my approach to negotiations and it confirmed the value of preparation combined with creativity. Most negotiators are concerned with precedent. I realized you had to look into the future, not back into the past. That approach is more difficult because it requires a vision of the future. It's not unlike playing music by ear rather than by reading notes. You might not know what notes are called and maybe you don't even know exactly how the song is supposed to sound, but you have a feel for how you want it to sound.
John Thompson's integrity, which informed his confidence, provided me with the room to create. It also confirmed what I knew to be true of the greatest players, two of whom I represented in Michael and Patrick: money never drives those who want to be the best. Although Patrick's deal put me over the top professionally and established me as a force in my own right, the money I made at ProServ, which was minuscule compared to the deals I was making, never drove me. And it's a good thing. I still wasn't making much more than $100,000 a year.
That element of my character or personality came from my mother, who believed that the reward for trying to be the best was in the process itself. And it was cemented by my relationship with John, and the examples of people like Arthur Ashe, Michael Jordan, and Patrick Ewing. Beyond the business applications of John's lessons, I had also learned what it means to be a true friend.
A year later, John lifted me onto his shoulders again, this time in front of Donald Dell, Duke coach Mike Krzyzewski, and Johnny Dawkins, who had been the college player of the year. Coach K had prevailed upon Johnny to allow ProServ to make a presentation in our offices to represent him, and so the two of them flew up to Washington to meet with us.
The meeting took place in Donald's office, and in the middle of our presentation John called me. I had standing orders that there were four or five people that I always wanted to be interrupted for when they called. Of course, John was one of them. So when John called that morning to see if I wanted to have lunch, my secretary got very nervous. "Well, coach, please hold on. Let me go get David. He's making a presentation to Johnny Dawkins."
John said, "No, no. It's not necessary."
Moments later, John barged straight into Donald's office with Georgetown's academic advisor, Mary Fenlon, a former nun whom John called his "academic conscience." He walked over to Johnny Dawkins, put a hand on his shoulder, and asked, "How are you doing?" Then he said hello to Mike. Finally, he came over to me and said to Johnny, "This is my man. I really like him. I love him. And, I trust him." He pointed to Donald and said, "This guy I don't like. Screw him."
With that, John and Mary walked out of the room. I didn't know what to say. Donald chose to believe John was fooling around, joking. I wasn't so sure. But I was embarrassed because it all looked so staged.
I looked at Coach K and said, "Mike, I apologize. I had no idea John was coming over." He looked at me incredulously and said, "David, there's not a human being on earth who could have made John Thompson do what he just did if he didn't want to do it."
Johnny signed on as a client and stayed one throughout his tenyear career and is still a great friend twenty years later. Coach K became a client of mine, too, as well as a very special friend.
Seeing the world on the shoulders of giants like John Thompson provides a view like no other.
Copyright © 2009 by David Falk
Posted January 30, 2010
The Bald Truth makes you feel like you are finding things out that not everyone is suppossed to know. The lessons that you learn are backed up by real-life situations - and the fact that the stories are about so many famous athletes makes it even more real. David Falk tells it like it is!!!
I loved it - my husband loved it and we want our teenage son to read it for the life lessons you learn!!
Posted August 19, 2009
Michael calls Falk arrogant in the book, as does Falk himself. And they're clearly right. But the inside stories of certain negotiations are compelling if you're into sports. Too bad he didn't call out Ewing on his famous ridiculous comment during the work stoppage about "sure we make a lot of money, but we spend a lot too".
If you enjoy the business end of sports, you'll enjoy the book. The MJ negotiations are quite interesting.