Lessons from Serial Entrepreneur Kevin O’Leary

Kevin O’Leary might be best known to the world as the sassy biter on ABC’s “Shark Tank,” the thoughtful co-host of Discovery Channel’s “Project Earth,” and a whiz with words as a frequent contributor on CNBC, but there is much more to this Canadian-born entrepreneur than meets the eye.  Most recently he called out Congresswoman Alexandria Ocasio-Cortez for selling a pricey sweatshirt on her website that bears the message “Tax the Rich.” To further add insult to injury AOC donned a custom made gown with this same slogan at the $36K per ticket Met Ball.  O’Leary’s viral video contends that this marked-up merchandise is proof that “inside of every socialist, there’s a capitalist screaming to get out.”

Part of his secret to success is calling a spade a spade and mixing humor with constructive criticism which makes him a formidable mentor and also a captivating entertainer.  His personal passions are deeply rooted in a love for travel, music, sports, photography and writing. Kevin is also the author of several top-selling books, including “Cold Hard Truth on Men, Women and Money” and “Cold Hard Truth on Family, Kids and Money.”

And it is that kind of bold philosophy and insatiable quest for independence that has made him one of the planet’s most successful financial and forward-thinking minds of a generation.

“If you ask any entrepreneur, you’re going to find out that they had some seminal moments in their lives when they decided not to be an employee,” Kevin said, reflecting on his teen summer position as an ice-cream scooper with a crush on the girl who worked at the shore store across the way. “The woman who owned the store said to me, ‘look when you give a little (sample) and people try different flavors and they throw their gum on the floor. Before you leave, you have to scrape all the gum off the tiles.’ And I thought, if that woman sees me on my knees, scraping gum, I’m toast. And that was the moment I realized that there are two types of people in the world. There’s the people that own the store and the people that scrape gum off the floor. You have to decide which one you are now.”

And he most certainly did. Now 66, Kevin’s entrepreneurial resume reads part thriller and part thought leader: beginning with meeting a man with an odd idea for software creation soon after completing an MBA. It was a risk that came with quite the reward. In 1986, Kevin founded SoftKey Software Products – which was later re-named The Learning Company. It was the first software company to apply the principles of consumer goods marketing to the software industry, and in 1999 it was acquired by Mattel for a cool $4 billion dollars.

In the ensuing years, Kevin has gone on to co-found everything from Storage Now, a leading developer of climate-controlled storage facilities to becoming a founding investor and director of Boston-based Stream Global Services Inc.  He now leads the O’Leary Financial Group – a cluster of companies that includes O’Shares, ETFs, O’Leary Publishing and a continually growing roster of other businesses.

IW: Are there any family influences, or anyone in a family, that was entrepreneurial or did it start with you?

KO: My mother worked for her father, who was an entrepreneur. I’m half Lebanese, half Irish. When the Lebanese side came over from Lebanon to Montreal, Canada, they founded a company called Kiddies Togs, which made winter clothing for children and was highly successful. All the daughters worked for the father, and their brother ended up taking over because, in those days, it was very chauvinistic. They just assumed the son would take it over.

But in many ways, it was my mother that was the financial wizard behind the business. She taught me everything I know about investing. At a very early age, she was taking 20% of her paycheck and was buying S&P dividend bank stocks and telco bonds. And she kept that account secret from both her husbands. She was married twice. And when she died – I was the older brother and executor of the state – he (her husband) called me and said, ‘Your mother died an extremely wealthy woman.’ And that was the result of 50 years of being in the market with a very conservative portfolio that just kept growing and growing and growing. And I learned from her. She was very disciplined.

When I graduated from college, she said, no more money, zero. You get nothing after this. That was pretty scary for a couple of years, but she hated entitlement. And that is the way I’ve structured my life and my trust for my kids. It’s full freight from birth to the last day of college, and then they get nothing. It’s extremely motivational when you’re getting towards the end of college to figure out, ‘oh, what happens next?’ So I don’t entitle my kids.

 

IW: Have you found that has worked with your children? Have they gone the entrepreneurial route?

KO: I set this structure up after my first liquidity event, the sale to Mattel. I went over across the river to Boston and set up a generation-skipping trust. That is exactly what my mother did to me. Then I went home and explained to my four and six-year-old what I’d done. And they just laughed. But years later, when my son was in high school in Boston, he said, ‘dad, can you walk me through the trust deal again?’ I said, sure. Mom and I are going out for lunch and dinner, then to a movie. And if we get run over by a truck, you’re going to be able to finish high school. But you get nothing after school. What that really meant was you got to go make it on your own.

And today, he is starting his first week at Tesla as an electrical engineer. So he has figured out his path.

 

IW: So what are some of the qualities for success that you have seen in budding entrepreneurs that you’ve backed?

Kevin O’Leary: First, that they have made that critical pivot, that they do not want to work for anybody else. And only about a third of the population is going to make that decision. When you become an entrepreneur at an early age, you sacrifice your life. You’re going to work 25 hours a day, 53 weeks a year. I guest lecture at Harvard, MIT, Notre Dame. I talk about the journey of entrepreneurship and how brutal it can be. One guy put up his hand and said, maybe you can give me some advice. He had set up a software cloud business, and he was bringing in $5 million a year. It was an incredible story. But he said, ‘well, my fiancé told me this morning that I had to make a decision.’ I was not participating in her family’s life. I never had any time on weekends. I don’t go to the soccer games. I don’t go on family picnics. I just work. The class exploded into the debate of, you know, love and money and yada yada. But clearly, you can’t pick a partner that doesn’t understand your journey as an entrepreneur.

 

IW: Exactly. And what are you investing in now?

Kevin O’Leary: I have three sectors that I’m very focused on. I’m extremely interested in mental health and health care. I’ve sold most of my commercial real estate, from 31% of my portfolio down to eight. I’ve sold my energy stocks; anything to do with hydrocarbons has fallen out of favor with institutional investors for many reasons. I’m getting out of energy, getting out of utilities, getting out of commercial real estate. I am taking that capital and investing in healthcare technology and consumer stocks, specifically becoming very focused on mental health. I’m extremely interested in what’s going on in psychedelics, trials for LSD and psilocybin. There haven’t been new medicines for alcoholism or anxiety or opioid addiction in 30 years. And all of a sudden, these trials look very promising.

 

IW: Do you think the pandemic has shifted your investment strategies and what’s happening in the world?

Kevin O’Leary: I do not invest in companies that have retail distribution strategies anymore. I’m only interested in direct-to-consumer.

 

IW: What are your thoughts on digital currency and cryptos?

Kevin O’Leary: I have no problem with crypto. The problem is, it’s being touted as an institutional product, and that’s not quite true. But at the end of the day, you’ve got to understand two things. Number one is that Bitcoin’s market cap is around $800 billion, which is nothing in the currency market. So it is a single cell amoeba. Number two is  that I think people should be really careful about in making a decision to allocate. I don’t use Bitcoin. I have some Bitcoin, but I don’t use it to hedge against inflation because it hasn’t proven to me that it’s a reverse correlation to the market. When the market goes down, Bitcoin goes down even more. The whole idea is you want something that counterbalances volatility.

 

IW: What are you doing to hedge against inflation- this massive hyperinflation with all these countries printing money?

Kevin O’Leary: So that’s why you want to reduce your fixed income and anything with duration. I’ve sold utilities, sold preference shares, sold commercial real estate, reduced my exposure to fixed income. And I bought companies that have pricing power. When inflation does hit, which I think it will, I’ve also increased my weighting in gold by up to 5%. Some people will use cryptocurrencies. It’s a good idea to put up some insurance policy. I like gold, but that’s how I’m doing it.

 

IW: What are some of the things that you’re looking at on Shark Tank, or do you have anything that you’re particularly excited by that you’ve seen?

Kevin O’Leary: The deals you see now are deals are, for example, much higher quality food, much more plant-based food, foods with less sodium, foods with less sugar, or direct-to-consumer delivery foods. Many businesses are being designed for no retail distribution, only direct to consumer. And that’s all I want to invest in.

 

IW: So what are some of your biggest hobbies? I know you have the wine business now you’re into dinosaurs and watches.

Kevin O’Leary: I have a very large pen collection, writing instruments. Many people don’t know this, but some of them are as expensive as a hundred thousand to a million dollars. They appreciate and value even more than watches. In some cases, most of these are built by a German company and they make a special collection.

Obviously I’m involved in watches. My watch portfolio is up 113% over the last 18 months. And there’s a really good app now that has AI in it called chrono24, which most collectors are using that will market your collection every 24 hours. It looks at the last trade in every country of every watch and it determines what yours is worth giving you an automatic valuation of the auction value of it.

I’m also looking at a deal to buy a dinosaur. I don’t know if you saw what happened to Stan, the dinosaur. It was originally purchased for $3 million and just sold at Christie’s Auction house for $31.8 million with rumors of being displayed in the Dubai airport. My plan is to buy a dinosaur, rename him Mr. Wonderful T-Rex and brand it to teach financial literacy to kids that are five to seven years old since every kid goes through a dinosaur phase. Then we’ll tour museums, and I’ll probably partner with a media company.

 

IW: No cars?

KO: I was into cars for a while, but cars are a pain to store and all the tickets. I take 10, 15, 20 watches with me when I travel. I’ve got a massive collection. I can’t take 15 to 20 cars with me, so I’m just not into it. You can’t be into everything.

 

IW: What are some of the other philanthropic endeavors you’re involved in doing?

KO: My strategy with my wife is to pick five charities for five years and just focus on those five. You have got to have focus. We are philanthropic. We give a portion of our income away each year. We try and maintain a relationship where we have hospitals, where we’ve got a dance troop, we’ve got universities. We fund a thyroid clinic in Boston. So when you’re concentrated on five, I can ask for statements. I want to know where my money went, and I want to know the expense ratio and I like to see some performance metrics associated with my donations.

Photographs by Udo Spreitzenbarth

Shot on location at The Continuum South Beach, Miami