“Who is running the Milwaukee Bucks?”
It’s a question I’ve been asking myself more and more as the team embarks on a journey towards the embrace of sporting immortality. That path to nirvana has looked robust on the court, but the dirty secret is that sustained success in the NBA begins at the top — beyond even the front office.
What often separates class organizations from the also-rans over time is ownership. Get the right individuals who empower their expert employees, operate with a light touch, and are willing to spend when called-upon and you’re off to the races. On the other hand if you’re saddled with domineering tight-wads your chance to be something more than the occasional flash in the pan long-term plummet.
Since 2014 the record for Milwaukee’s owners has truthfully been mixed. The improvements in the franchise’s ancillary aspects are undeniable: Fiserv Forum is a solid arena, a top-to-bottom rebrand brought the team into the 21st Century, the pairing of GM Jon Horst and coach Mike Budenholzer continues to work wonders, and there’s always #34.
Yet no track record is perfect, and LED (Marc Lasry, Wes Edens, and Jamie Dinan) have their share of blemishes: Jason Kidd, acquiring Jason Kidd, not firing Jason Kidd earlier, failing to secure five years on Giannis’s rookie extension, the palace intrigue around Horst’s hiring, a TBD track-record on spending for a winner even with $250 million in public money and radically appreciating franchise value in their back pockets, etc.
In the balance you can argue that 2014-2019 has been a net positive. How long that burst of success lasts is directly tied to my initial question. The answer will determine whether Milwaukee goes from short-term darling to long-lived juggernaut.
Setting the Table
First, let’s do our best to understand the byzantine decision-making mechanisms that serve as ownership’s franchise-guiding tools.
How are decisions reached?
The Bucks have three primary owners. According to them having three principle partners allows for a majority to be reached on important questions. While a unanimous solution is preferred if push comes to shove decorum dictates that the losing party stands down and acquiesces to the desire of the majority motion.
How are these decisions transmitted to the league?
Per NBA guidelines, the final voice that counts when submitting a decision to the league is the team governor’s. For most NBA teams said governor is the clear-cut majority owner (i.e. Tilman Fertitta in Houston, Mark Cuban in Dallas, Gail Miller in Utah, etc.) who represents their organization at the league’s Governor Meetings where choices about the structure of the NBA are made. He who holds the governor’s seat effectively has final say on basketball-related decisions.
How has LED doled out the governor’s seat?
There was no majority owner when team control changed hands from Herb Kohl to a trio of hedge fund billionaires. Instead, Lasry and Edens decided upon a rotation of the position between the two of them every five years with Wes Edens going first. Since then, the first changing of the guard was reported to have successfully occurred earlier this year at the NBA board of governors meeting, and now Lasry is effectively in charge of the Milwaukee Bucks.
Why does any of that matter?
It matters because the Bucks currently face the challenge of sustaining success. Keeping the show on the road will be a complex undertaking that only the best-run organizations can handle. Whether the Bucks belong to that cream of the crop rests solely on the unity of purpose of the three principle owners. Their personal dynamics, their ability to agree on common principles, and their vision of how their dollars are best used are the beginning, middle, and end of this franchise’s larger story.
From Avenue Capital to Vel R. Phillips Avenue
Now that the stakes have been laid out, let’s get a brief bio on Lasry to think about what his stewardship may portend for the Bucks.
Like co-owners Wes Edens and Jamie Dinan, Lasry hails from the world of high finance centered in New York City. A hedgie by trade, Lasry got his start in the field of bankruptcy litigation as a lawyer and during a stint clerking in a NY district court. From law he jumped from firm to firm building up a wealth of experience, presumably an array of connections, and (importantly) an expertise in distressed debt (i.e. the outstanding securities of an entity experiencing operational or financial difficulty).
Alongside his sister Sonia Gardner he founded Avenue Capital Group in the late 90s and has shepherded it to an asset sheet totaling an estimated $12 billion.
Unlike Wes Edens’s Fortress Investment Group Lasry’s Avenue Capital has always remained in private hands. That makes estimating how much Lasry’s net worth is tied up in Avenue’s assets difficult, not to mention understanding where his influence on company decisions begins and ends. Given he’s listed as part of every team that makes up Avenue’s various investing arms (Europe, Asia, Performing Loans, etc.) it’s safe to say his involvement runs deep.
In addition to racking up a fortune via handling distressed debt, Lasry is also well-known for his involvement with the upper echelons of the US Democratic Party. You need look no further than former-president Bill Clinton’s budding Bucks fandom of a year ago to see this connection at work. That particular relationship previously bore fruit in Chelsea Clinton’s stint as an Avenue Capital associate from 2006-2009.
Such activities might go deeper than the interpersonal with party figures of old: While Milwaukee’s selection as the location for the 2020 Democratic National Convention makes logical sense as an opportunity to spotlight a demographic the party may target in a presidential election, it was probably made easier with well-applied greasing of the wheels by the likes of Lasry who have plenty of party clout and a shiny venue with an open schedule in mid-July 2020.
But all of the political tangling is more of an aside; until further notice it is simply an aspect of who Lasry is. The one point of direct contact would be that of his son, Alex Lasry, team senior VP. Alex performs some community outreach and presumably handles a number of responsibilities behind the scenes, but his time as a staffer in the Obama administration is the most direct link to politics within the org itself. Overall, for our purposes, Marc’s politics are important given the wider societal stakes involved, but likely beyond the direct scope of the team’s operation.
That brings us back to Lasry’s extensive past as a high-stakes flipper, a calling that he continues to pursue today.
Avenue Capital Group believes it has the unique ability to look at an outwardly difficult situation and see value for the future. The firm seeks to perform rigorous analysis of both the industry and the individual company before making an investment. Industries in transition, whether through secular or cyclical forces, often represent opportunities. The firm follows well-developed investment themes and continually reevaluates its macro views and strategies.
That philosophy hasn’t deviated much since the Bucks were passed into new management. Whether it be looking for distressed assets in Europe and acting as a lender to Asian firms or creating ever more funds to snap up venture capital bet busts, Lasry’s business ideas remain unchanged. The lesson? Marc Lasry is Avenue Capital, Avenue Capital is Marc Lasry. The two are inextricably linked as evidenced from every bit of info you find on Avenue Capital’s own site.
His whole being is tied up in this one profitably narrow worldview; to expect him to drop it completely in other fields feels like optimism with nothing more than hope to stand on. Further, as king of his own multi-billion dollar castle it’s fair to wonder how well his management style meshes with that of his equally powerful colleagues in Milwaukee.
Big Apple Hydra
Milwaukee’s owners, like nearly anyone from the rarified world of the self-made incomprehensibly wealthy, may be prone to a disease colloquially known as know-it-all-itis. “There’s a lot of my current and future money at stake and, dammit, I know best” comes easily to those who command billions of dollars and hundreds of employees at a whim. When you get multiple individuals with that personality type in a room it wouldn’t be surprising to see a grudge match of wills occur.
Such a power balance takes on a life of its own beyond the Bucks. There exists the “private” activities of these men that determine something of a relative standing between them. Right now from the outside it would seem Lasry is in ascendency: He’s the team governor, he’s got the high public profile, and his business isn’t doing half-bad.
Compared to Avenue Capital, Edens’s Fortress Investment has had a rocky 2010s after the big payday pop of an IPO in 2007. Since then Fortress saw its books look ever grimmer before being snapped up by SoftBank in 2017. Now private, we can’t be completely sure of Fortress’s main function, but reporting is clear that there is some tie-up between it and the ubiquitous Vision Fund. Where Wes Edens’s existence is linked to the success of his parent company in navigating the minefield of tech-firm bets backed by morally-questionable money, Lasry can continue to march by the beat of his own drum.
(That’s not even to mention the fact that Edens also shares ownership of English football club Aston Villa. I’m not well-versed in the financing and operation of league football, but whose to say how Edens splits his energy between the two ventures given the fact that his five year “governorship” in Milwaukee is over?)
So you’ve got not only one controlling billionaire, but two controlling billionaires from similar walks of professional life at different points in their individual success cycles. Wrap up that personality/professional duality in the competitive environment of sports team ownership and you have the Milwaukee Bucks in 2019.
What if one of these powerful individuals comes up on the losing end of a franchise-altering decision? And, God forbid, that defeated partner also holds the trump card of team governorship which invests in him the authority to override the will of others and feels either in control or under pressure thanks to the performance of the rest of his wealth stockpile? Can Milwaukee’s owners keep themselves from breaking that sacred thing we know as “norms” and forcing through their way regardless?
Palace Intrigues Galore
If history is anything to go off of, probably not.
While Jon Horst has gone on to win an Executive of the Year award and has the Bucks ripe for the winning, we’d be remiss if we (for the millionth time) didn’t dig up how broken the John Hammond succession plan ended up being. First, Justin Zanik was brought on-board as Hammond’s heir apparent with the nominal backing of each owner. Then, when push came to shove, Wes Edens got cold feet and wanted to open the search up beyond Zanik just in case. Theoretically in this case, with Lasry and Dinan still backing Zanik, Edens should’ve been overridden, yet Edens stuck to his guns and to his ultimate veto to force the issue. The result? Jon Horst, a strange two-man press conference, and a lot of uncertainty.
Then there was the Jason Kidd saga which saw Lasry bumble into ownership trading draft picks for a buddy who nearly single-handedly brought the team to ruin. Mercifully the experiment was brought to close, and one wouldn’t read into Lasry any level of spite for having been forced to retreat or later having to fire best buddy Jason Kidd, but we can’t be sure whether he’ll take the lesson of Edens’s coup and implement it himself. Nothing screams “we’re a happy family” more than bringing your teams of expensive lawyers in to hash out a dispute.
That uncertainty is at the heart of this piece’s pitch: We can hope that the powers that be keep to their self-appointed framework, we can hope choices are made in the most rational fashion possible, and we can hope that they have our best interests as fans at heart, but we Just. Can’t. Know. And so far the signs where it matters most are indecisive at best.
Who cares? Just win, baby
You’ve probably read all this and are quietly shaking your head at so much virtual ink spilt concerning something we’ve no direct control over. As long as the team is winning and avoids making a complete mess of things trying to build around Giannis Antetokounmpo then all will be well.
But, the thing is, Marc Lasry’s philosophy, his management style, his personal goals, and how he views his role will absolutely correlate to how this team does over the next five years. And I (and a lot of you) have (fleeting) personal stakes in that translation from thought to practice. We spend a whole hell of a lot of energy on this ephemeral thing called sports and regardless of the motivation that brought us here our justification for all the time, effort, and heart put into this thing comes down to some sort of expected payoff. Right now, that abstract payoff becoming something blissfully concrete technically rests on Lasry’s shoulders.
Perhaps Lasry & Co. will be able to put aside their decades of flipping assets after relatively slight down payments and “modernization” of a firm’s cultural ethos when it comes to the Bucks. They’ll recognize that spending big money on an asset that doubles as a frivolity comes with the territory and is The Right Thing to Do. Or they’ll recognize that spending big money on an asset that doubles as a frivolity isn’t exactly in keeping with the core motivation that drove them to acquire the operation from Herb Kohl: Get in on the cheap, bring the thing up to date, ride the cash cow without harming your financial outflow too much, bank some extra money in Opportunity Zone development, and move the thing on at a huge profit.
There is, of course, the daunting unknown that is Giannis Antetokounmpo’s pending free agency decision. Assuming the Bucks are lucky enough to earn a few more years of Antetokounmpo’s services Lasry will be the guy calling the shots when it comes to choices made about the team during the course of Giannis’s next contract.
That means dealing with things like deciding to go into the tax, and if there’s one thing billionaire hedge fund owners who specialize in trimming the fat off a distressed firm and re-ordering the core components want it’s to make necessary changes without getting themselves too stuck in the mud. That is to say the question of tossing money at an asset is not as clear-cut as we’d like to believe. Luxuries? There’s no such thing as room for luxury in this current environment:
During today's media session with the owners, I asked Marc Lasry about the Bucks' luxury tax situation.— Eric Nehm (@eric_nehm) October 4, 2019
He and Jamie Dinan responded. Here is the entire three-minute exchange: pic.twitter.com/UoFmdcuF8s
Lest you think every decision made regarding free agency was directly tied to Lasry’s new power, it should be noted that handing over of the governor’s seat occurred during the July 2019 NBA board meeting after the heart of NBA free agency had been decided. Milwaukee’s fate had already been self-sealed: Malcolm Brogdon was traded, Milwaukee’s other FAs retained, and guys like Robin Lopez and Wes Matthews brought in. Presumably all these decisions were made within a collaborative atmosphere that doled the majority of decision-making power on GM Jon Horst. We’re still waiting for the next big inflection point for evaluation.
The difficulty in assessing any of ownership’s impact is that we miss out on any day-to-day activity. Where we get to watch the actual players perform 82+ times a season in the open and with a sea of stats to wade through, the consequences of machinations from on-high only reveal themselves from time to time and sometimes not until long after the consequences start rolling in.
We won’t know the outcome today, tomorrow, or next month, but we will know sooner rather than later. It will be on the path to fires of glory or the fires of ruin that we will find the true Marc Lasry, and for our sakes let’s hope he proves to be something more than meets the eye.