For those who are fans of CBC’s Dragon’s Den – a television show which provides aspiring entrepreneurs with the opportunity to pitch their business concepts and products to a panel of Canadian business moguls in the hopes of securing investors and partners – the name Kevin O’Leary undoubtedly conjures up an image of the most outspoken, ruthless, and engaging “dragon” of the bunch. As a Beedie Ambassador, I had an opportunity to hear firsthand from this business-savvy, no punches pulled investor, entrepreneur, venture capitalist, and television personality at a recent networking event hosted by MNP: Straight From the Dragon’s Mouth: An Evening with Kevin O’Leary.
Kevin held little restraint with his many controversial, witty, and memorable quotes, including the following words of wisdom on the attempt to find balance when faced with a rapidly growing, multimillion dollar start-up and a deteriorating relationship with one’s fiancé: “I may not be Dr. Phil, but if want my advice, you should ask yourself: which is easier to replace…your business or your girlfriend?”
The evening commenced with sponsor exhibits and networking, where I had a chance to meet and network with representatives from MNP and BMO. This was followed by a presentation from a panel of experts, who discussed their perspectives on the challenges and opportunities that lie ahead for business owners from a legal, financial, and accounting perspective, particularly with regards to succession planning; as our population is ageing rapidly and a large cohort of baby boomers is forced to retire, we are approaching what will be the largest transfer of assets in history. This will be a tremendous challenge for family-run companies (which make up 80% of worldwide businesses) as they attempt a smooth transfer of ownership to the next generation, their children, who are oftentimes less experienced and less interested—with different life goals and objectives.
Of course, the highlight of the event was a keynote presentation by celebrity guest Kevin O’Leary himself, who delivered (in his signature, fiercely opinionated style) his views on the future of private enterprise, the Canadian economy, and more generally what it takes to be successful. Kevin made it clear from the outset that he would make no apologies, and was not concerned whether or not anyone agreed with him; he would simply present the facts, providing food for thought and spurring valuable discussion. In the end, the audience was left deeply inspired by the thought-provoking discussion, and I have chosen to summarize some of the important takeaways from the keynote.
Kevin’s Tips and Insights on Investment and the Economy
- Never invest in stock that does not pay a dividend – 73% of total returns in investment markets over the last 40 years have come from dividends, not capital appreciation. Companies like Apple will have to start paying dividends soon, or they will not have institutional investors much longer.
- Never spend the principle, just the interest – Kevin attributes this philosophy to his mother, whose portfolio of 50% bonds and 50% dividend paying stocks over 50 years beat out everything (every mutual fund, index, etc.).
- The tone of North American investment is changing – The number one attribute of investors today is capital preservation (preservation of one’s wealth while minimizing risk) as opposed to in 2007, when capital appreciation was the primary focus.
- Jobs belong where the growth is – The challenge for Canadian companies is to embrace capital outflows to emerging global economies and remain competitive, sacrificing domestic jobs to better service growing international markets. Growth in Canada and North America remains stagnant, while most of our capital is going to rapidly growing economies such as Brazil, India, and China. While the real estate, pipelines, power utilities, transportation, and telecommunications sectors continue to make money, North America overall is mired with debt, and these are the countries that lent us money in the first place. For the first time in history, BIC countries have more US$1 billion+ market cap companies than the United States.
- Sovereign debt is dangerous, not corporate – In today’s economy, governments are failing, not companies; the S&P 500 has not been this successful in over 30 years. One must only look as far as debt crises in the United States and Europe—debt has been put on the backs of the public.
- Avoid investing in volatile commodities or construction – Oil can have dramatic swings in value, as can real estate. Instead, Kevin invests in the pipelines and rails that are necessary to transport the oil—this way, no matter what the price of oil, he continues to make money. Instead of investing in construction in Shanghai, for instance, Kevin invests in a major global elevator company “because every building needs and elevator.”
- Rules of Thumb – Don’t invest more than 5% in any one thing or more than 20% in any one sector. You should hold your age in bonds (e.g. 50% of a 50 year old’s investments should be in the form of bonds).
Kevin’s Simple Philosophies for Entrepreneurs and Business Students Alike:
- Money=Freedom – The pursuit of capital (money) will NOT drive you to success; rather, the fear of failure is what drives us and money is simply the vehicle that allows us to be “free”. Kevin attributes the success of Dragon’s Den as a cultural phenomenon to this fact. When you watch the show, you are in fact watching the pursuit of freedom—a simple concept that cuts across every social and economic strata in Canada.
- Success and a “balanced life” don’t mix – The most successful entrepreneurs are those who find something they love and have a passion for and are able to make the necessary sacrifices; while it may eat you alive in the early stages, it will set you free somewhere down the road. Those around you who love you will understand.
- Business is war, never underestimate a competitor – The primary focus of a business must be to provide a return to its shareholders.
- Money may go to bad people, but it never goes to bad ideas – Steve Jobs was not by any means a “nice” man, though his vision and innovation made him very successful. Kevin argues that many of his most successful partners have been “ruthless” businessmen.
- You are nothing until you have made money for others – Successful entrepreneurs and companies know this; they do not take out a dime until they have paid back investors’ capital.
- Everyone is replaceable – When you work for a business you are part of team and must work towards a common vision. You cannot think that you are irreplaceable; getting up early every day and figuring out how you can help the business will move you up the ladder.
Kevin O’Leary’s keynote was neither narcissistic nor egotistical as his reputation might suggest, but rather, his words were those of a shrewd investor with strong principles and the attitude of a realist who is not afraid to speak his mind—no matter how objectionable that may be. Love him or hate him, agree or disagree, it is valuable for all of us to consider the cold hard advice of a man whose impressive reputation was built on discipline, entrepreneurial vision, and most importantly, an insatiable desire to succeed. On the bad rep he gets for telling the truth, Kevin simply stated: “if you always tell the truth, you will never have to remember what you said.”