This article is part of Bísness School, a series that highlights one of the fastest-growing groups of entrepreneurs in the United States, Latinos. You can hear or watch the full conversation with Martin Cabrera below.
Martin Cabrera still remembers the question his high school economics teacher asked him.
“He had asked the class, ‘Who knows what a stock and a bond is?’” Cabrera said. “And I was like, 'Oh, I know. A bond is something between a man and a woman.' And he's like, no, no, that's not what we're talking about.”
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What Cabrera’s teacher, Jim Ortiz, was talking about was the kind of bond that refers to a loan investors make to an entity in exchange for payment back with interest.
“He explained to us what the stock market was, and he challenged us as well,” Cabrera said.
The high school senior had grown up in Little Village, a working class neighborhood in Chicago embattled with gang violence in the 1980s and 1990s.
“We didn't grow up with any money. So we never paid attention or even knew about investments for the stock market, but he did kind of educate us. [He said] we're also going to play a game called The Stock Market Game, where we're given $100,000 in simulation money. And we had to take that money and invest it in companies.”
Cabrera ended up being pretty good at the game. In fact, so good, his high school team won second place at a statewide competition.
Bísness School
“It let me know [that] as broke Latino kids from the neighborhood, it didn't matter that we were broke, where we came from, or what we look like, we could compete against some of the best schools in the state and and win or come close to taking first place in The Stock Market Game. So it just changed everything for me.”
It changed so many things, down to what Cabrera would study in college and where. Cabrera decided to opt for a bachelor’s degree at Northern Illinois University, which had a strong finance major.
After college, Cabrera went on to work at a retail brokerage firm in Chicago.
“I would have to call up complete strangers and make cold calls,” he said. “I had to make 450 phone calls a day and ask complete strangers that they could send me $300,000 so I can invest their money in different stocks and bonds. Most of the people would hang up on me. Some would swear at me and hang up on me. But there were some that I would be able to speak with and convince them to give me an opportunity to work with them.”
Martin Cabera spoke to NBC's Bísness School about why he decided to leave a $600,000 salary behind to launch his own business, Cabrera Capital Markets. The answers have been edited for length and clarity.
Bísness School: What is a bond if it's not a bond between a man?
Martin Cabrera: A bond in the investment world is an obligation by a municipality, say a city of Chicago or state of California, or even a corporation like Microsoft or Apple or BlackRock, that says those investors can invest in those companies and they're going to get a return on their investment. It may be a 6% return. That company, BlackRock, is promising to their investors that they are going to get 6% return on top of their original investment. And the same with Microsoft and Apple and the City of Chicago and the state of California. The City of Chicago and the state of California can then use those bond proceeds for their operation expenses. They might go and build, you know, 15 new schools in a city. They might upgrade the airports.
BS: After you leave your first job post-college, you go to a few other firms. At one of those companies, you receive a fax that has pretty eye-opening information. What did it say?
MC: Somebody sent it from a fax that I received from our California office. It was sent by mistake. And it laid out all of the commissions for the company. And keep in mind, as a franchisee, I had to pay all the overhead salaries and expenses for my franchise operation. But I had also give up 25% of the commissions that I would make in my office to the home office. So when I received the facts, the facts laid out that my office in Chicago was generating 85% of the revenues. And that was very surprising to me because we were generating the majority of the revenues for this company that was based in California. I thought to myself, maybe it's time to go and buy my own company and start up my own company as opposed to paying out a franchise fee.
BS: In 2001, you go and start Cabrera Capital Markets, an investment banking and brokerage firm. How do you fund it?
MC: I put my whole life savings, everything I had, money I borrowed into this company. And 9/11hits and the markets are frozen. There's no activity. Nobody is doing any business. And I thought, like, I'm gonna have to go back to doing something else because this might not work out for me. And it was a scary time, but when you're also scared, it motivates you to be creative and think about how am I gonna make sure that we survive this and get back on track and grow.
BS: When did you know your company was on a sustainable path to growth?
MC: [It was] one of the first deals we did for the city of Chicago. It was a $300 million deal for Midway Airport. And they gave me two hours to sell $17 million in bonds. And I was scared. I was like, okay, I told the people on my staff, you better sell like your jobs depend on it. I was like, 'cause it does. And we did well. We sold, we put in for about $35 million in bonds, in orders. And the city came back, said, "Hey, you did a really good job." And [they said], we want to invite you into another transaction. And I was just sort of sweating. I'm like, "Phew, we did it. We're successful at bringing in the orders." And it just grew into other opportunities. But that fear of failing motivates you and it energizes you to go out. [It’s] like, I'm going to call everyone up and really tell them the story that they need to buy these bonds.
Watch the full conversation with Martin Cabrera to learn how losing his father unexpectedly changed his relationship to work, how his firm trades $2 billion in securities a day and how he turned Cabrera Capital Markets into one of the largest Hispanic-owned financial firms in the United States.
