The Bad Boy Accountant: Being P Diddy’s CFO
12th February 2018
This article is based on an interview conducted for the Harvard Business School’s Alumni publication. It’s about an MBA student there, Derek T. Ferguson: a young man from the Bronx who went on to become CFO for one of the biggest names in hip hop, during its heyday in the early 2000s. We’re suckers for a cool accountant story and this is about as cool as it gets…
In halcyon days of mid-to-late nineties, hip hop was a global force to be reckoned with. From Sunnyvale to Surbiton, you couldn’t switch on a music channel without seeing a leather-clad Missy Elliot, or Busta Rhymes in some kind of reflective suit. As usual the cars, clothes and videos only told half of the story. The power, particularly the financial clout, was beginning to shift away from the legacy record labels and into the hands of artist-run brands.
“I was forced to be an artist and a CEO from the beginning, so I was forced to be like a businessman because when I was trying to get a record deal, it was so hard to get a record deal on my own that it was either give up or create my own company.”
Jay-Z (Rapper, Philosopher, CEO)
One of the most famous of these is Grammy award-winner Sean “P.Diddy” Combs’ Bad Boy Entertainment Group. Founded in 1993 by ‘Diddy’ himself, the company dabbled in music, movies and everything in-between: by 2002 they were seeing yearly revenues of over $300 million. This interview gives us an insight to one of the players working behind the scenes at this time, with a quite incredible story of his own.
Derek T. Ferguson was born in bred in the Bronx, the son of trucking entrepreneur. Growing up, the need for a good education was instilled in him from an early age. Although neither of his parents were graduates, Derek threw himself into school. Before he was 16 he had already been bumped up two grades and earned himself a place at Stuyvesant, an ‘academically rigorous’ high school in Manhattan. By 16, he was enrolled in the undergraduate business program at Pennsylvania’s Wharton Business School.
The background of this academic success is set against the burgeoning hip hop movement in the Bronx during the 80s. The dawn of hip hop. Ferguson recounts tales of his brother bringing home turntables, a mixer, a microphone and a record collection they bought by working for their father after school. This baptism into the world of music came in useful at college – Derek earned some extra cash moonlighting as a DJ at the weekends. He admits however, that he never even considered a career in the music business. Music was in his heart but finance ruled his head.
After college, Ferguson first worked as an auditor and M&A analyst at New York’s Cooper & Lybrand; later teaming up with his Harvard MBA buddy Keith Clinkscales to found a magazine. Urban Profile was a lifestyle magazine for young African-American professionals that run until 1991, the year after Ferguson finished his MBA. The pair sold Urban Profile with 75,000 readers under its belt; quite an achievement whilst also studying at the Harvard Business School.
With Urban profile behind him, Ferguson started working for Bain & Company in the heart of New York’s Times Square. One their largest clients, Camelot Music, was a retailer based in the Midwest whose biggest profit drivers were rap and hip hop. Realising the opportunity that this combination of his two passions presented, Derek Ferguson left Bain & Company to become VP of Finance and Operations at BMG.
Then, in 1998, Diddy came calling. One of Fergusons MBA cohort new a friend-of-a-friend of Mr Combs and put in a good word for him.
“I had followed his career and thought a lot of what he had accomplished… He said, ‘Look, I’ve done a lot of this on my own, without a sophisticated businessperson at the helm. Just think of what we can do together.’ He was a good salesman.”
Derek T. Ferguson in Bad Boy’s Good Man: Julia Hanna, HBS Alumni Stories
Diddy was right. With Ferguson’s business nous and finance expertise combined with Comb’s entrepreneurial spirit, Bad Boy flourished. In particular, Ferguson’s implementation of a business structure to finance ventures proved particularly successful. Within five years, Sean John Clothing grew to sales of $200 million and one hundred employees. Other ventures included Justin’s restaurants (with branches in New York and Atlanta), Bad Boy Films and a social program that provided tutoring for hundreds of disadvantaged kids in New York and New Jersey.
It was quite a journey for the young man. Born in the Bronx at the dawn of hip hop, to being one of the biggest behind-the-scenes players of the era and giving something back to the communities he grew up in.
The interview concludes with Derek Ferguson offering some sage advice that we like to live by at Harmonic: “You can be in the corporate world and still incorporate goodness and righteousness in your work. At the end of the day, what really matters is using your skills in a way that has a lasting benefit.”
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