KEVIN O’LEARY: The Ultimate Shark, Mr. Wonderful

Sharks, like humans, have individual personalities, there are those that are solitary and those that are gregarious with strong social connections, fearless, brave, willing to take risks and swallow anything that gets in their way.   Despite his on camera persona as a brash, opinionated, and smart as a whip competitive entrepreneur, Mr. Wonderful actually has a softer, charming role in person as a teacher and mentor. Though diplomacy may not be his strongest point on Shark Tank, his can see right to the truth and his true mission is to educate, mentor and bestow his practical magic for making money onto others. Here Resident discusses his role as a shark, latest projects, views on marriage, and what he sees as the next big thing.

What projects are you involved with now?

Right now I'm an investor in 34 private companies which keeps me busy, but I'm really interested in financial literacy. I've been teaching a lot- at Harvard, MIT, Notre Dame, and others and what surprises me is that these students are geniuses in their fields but have no financial literacy on how to invest in the future or set aside funds for retirement. I teach people in their 20s to put money aside and by investing 10% in the market over a long period of will give them enough for retirement. I'm teaching them to buy bean stocks, even fractional shares at 50 cents per share. They can choose ETFs. Most people think they love a name like Apple or Google, all I try to help them is to diversify their investment.  There's hundreds of different ways to invest. I'm starting to teach them what it is to be an investor which is one of my big projects. To do this I developed an app called Beanstox that allows anyone to invest in fractional shares even if they are using small amounts initially. It is designed to promote long term saving and investing.

What are your thoughts on bitcoin?

I think everyone is figuring out that it has tremendous potential, but not if it's unregulated. No government is going to let their currency be superseded by something they can't collect taxes onto me the potential is very interesting, but I'm not going to touch it until it's regulated. The market is figuring that out and a lot of people have lost their money to bitcoin. There's no such thing as a digital product that can't be hacked.  Built by engineers and hacked by engineers. People who have had their wallets hacked lost millions. The way I look at it, if you want something to be a standard financial services product it has to be accepted by institutional investors.  If you show me a more efficient way to transfer money, save it or cash it or provide an issuance of an asset and its regulated, I'm on board. Until that happens it's going to remain fringe.

What has been your favorite investment?

I've had some really big winners. What I've learned over a decade is that the deals you think will be the biggest winners never are. The ones you think are marginal at best often end up being huge hits.  What that teaches you is that you need a really big portfolio because you don't know what's going to happen. The biggest exiting company on Shark Tank was mine- Plated which was sold to Albertsons last year for $300 Million. I've also had Groovebook which was sold to Shutterfly. Shark Tank has been around for over a decade and the companies I've invested in are now starting to be acquired, it's been a marvelous platform. 

 The number one reason why startups fail in America in the first 3 years is that they are never able to get their customer acquisition cost below the lifetime value of the company. Shark Tank gets their product in front of 10 million people and their customer acquisition cost is zero. This has been a huge thing for these companies and that's why there are hundreds of millions of applications to get on the show even if they don't get a deal. But it's way better if they get the deal and they become part of the Shark Tank ecosphere.

What are the biggest things that you look for?

I like products that are not going into a really saturated market. If you come on Shark Tank with a hot sauce or ketchup I couldn't care less. Those markets are already very established. If you have an innovation or change the market somehow, it's a huge hit. I like companies with a great idea with great management and great execution skills. There are three things that are consistent in the companies that get funded. 1) They are able articulate the opportunity in 90 seconds or less 2) They can explain why they are the right entrepreneurs to execute a business plan and are credible 3) They know their numbers.

Are there any that got away?

I never cry over spilled milk, because in the next 60 seconds there's another. I get shown 5 to 10 deals a day now,  my deal flow is unbelievable. I see so many opportunities. I think forward not backwards. Shark Tank is a competition, let's see another Shark sell their company for $300 million!

How did you get started on TV?

It was years ago I was asked to come on to talk about digital rights, just when pay cable was coming on. I got into a really big fight with the host. I didn't even see the cameras, I just thought they were wrong. I had a different opinion and it lit up the control board. And the producer asked me to come back the next day.  

Television is a powerful medium and a really a big part of social media. It gets chopped up and repurposed and it becomes part of brand building to support your financial interests everywhere. It's part of my platform that I use every day to support all of my entrepreneurs. I have millions of followers and we let everyone know about our products and services.  It's a learning experience for us to see what we can measure. 

Do you get a long with your fellow castmates?

Obviously we all respect each other but Shark Tank can be very competitive. We're fighting over deals and investing our money that's why it's great television.  Sharks aren't thinking of making television they are thinking of making great deals and we don't see the cameras anymore. It's listening to the presenters, the valuations, does it fit in our portfolio, and most of the pitches are over an hour long and they get edited down. It keeps us really busy.  

Where do you see the next big investment?

Even during trade wars, the world is becoming a global marketplace. What I've learned in the last 5 years is that for decades I've only invested in the US which was a huge mistake. There's so much growth going on in other parts of the world, now I have 60% invested in the US and 40% abroad and I've done much better with that.  

I'm also interested in the technology behind exchange traded funds because if you show me a great manager, I can mimic their same performance in an ETF using scientists which will cut my costs in half.  That's why this is the fastest growing asset class- actively managed ETFs are really getting popular. That is why I invested in O'Shares ETFs a company that designs rules based exchange traded funds. I am a fan of setting the rules on financial metrics.  The biggest mistake we've learned is using the past to predict the future. Its sticking to companies whose profits are increasing and de-levering on an individual basis that tend to do better because it's real profit.  This is the future of investing. I'd rather pay only 48 basis points (.48%) in ETF fees than 1% to a manager that may not beat the index.  

Every few months I rebalance my portfolio. The only decision you have to make on an annual basis is ask if my original assumption still intact with this opportunity or has it somehow changed, because things change.

What do you avoid in your financial strategy?

There's this concept of generations passing wealth which is a treacherous road. It breeds entitlement which is a disease.  Each time you de-risk someone's life the outcome is often very bad. They never launch.  I told my kids I will pay for their education and then you're on your own. Good luck to you.  That's what my mother did to me and it makes you take some hard decisions in what you pursue in education and how you will invest your time and what you will spend your own money on. And when you look at multi generational outcomes most wealthy families squander their wealth within 4 generations.  

Do you see a political career on the horizon?

I tried my hand at politics and ran for Prime Minister last year in Canada.  I won in every province except Quebec because I don't speak French. But having gone through that process I see myself now as an advisor. I know all the players both in the US and Canada. Very often it's interesting to be in the back wings just talking about the economic outcomes.  I think I have a lot to say about policy- trade and tax but you don't have to be a politician to influence all of that. You can make your views known with a social media platform, and whether politicians listen or not it's up to their discretion.  

I make my investment decisions based on policy not politics. So you can have crazy stuff happening but have great economic outcomes because the policy is very clear. We have an administration now that wants to cut taxes, cut regulations and the outcome has been great for my companies. Our cash flow has been up over 20% last year just from deregulation. There's obviously a lot of volatility because this is not a normal administration or politics as usual. Don't get bogged down by the Washington circus, focus on the outcome and the policy, because that's what matters. Right now you can see the outcome with the increased market capitalization in the US. I don't see a bubble either. Because the valuations aren't crazy and the earnings growth has exploded while the multiples have remained relatively stagnant. Companies have increased their cash flow because regulation was a huge cost which is showing up in earnings.

Are there any similarities that you see between marriage and running a company?

Many see marriage as a romantic notion. It's not.  When couples form a marriage they are starting a family business. Successful marriages like companies are built on financial pillars. I'm an investor in the wedding space and we sell gifting products and cards. I've learned that the majority of hiccups that occur in the first 5-7 years of marriage, which is about half, has nothing to do with infidelity. It's primarily financial stress and incompatible objectives between couples. When you marry someone you have to know what are their financial goals. If they have no interest in saving money or don't mind having hundreds of thousands in debt it's going to end badly, you have to be in sync with it. Due diligence between couples shouldn't just be based on emotional metrics, it should be about what do you see 5 years from now, what will our family look like? You have to think that through because the horrific outcome of breaking up a union in another 7 or 8 years with children is such a bad economic and emotional outcome.  

So I say it's a business. You can't maintain a lifestyle with debt.  The romantic euphoria in the beginning of any relationship which makes it so magical turns into more of a maintenance mode after 3 years. Are you compatible, do you enjoy each other, and more importantly are you financially stable? The minute you start making money even when you are 16, you should be putting in 10% into long term savings, that is how you survive. Kids are really expensive and people underestimate the cost of raising a family. Even very wealthy people that I meet don't know their burn rate and how much they are spending to maintain their lifestyle and eat into their principal.  

I ask people to look at a 90 day income portfolio across all of their investments, income vs 90 days of spending and its mind blowing. People outspend their income regardless of their wealth. Very often they are burning up to 30% more than what they are making. Most people buy a lot of things they just don't need.  Anyone can cut their spending by 10% and starts with mundane things. It also teaches your children a bad precedent that you can buy anything you want at any time. It's a disease to spend more than you make. 

Where do you find balance?

The way I look at my day, its all about time allocation- for my investments, with my family, new ideas, and scheduling that time efficiently is the hardest job I have to try to make it work. Sometimes I'll hit 5 cities in one day. I travel a lot. If you are an entrepreneur there is no retirement. The whole idea of making enough money is to have the financial freedom to have control over your time and find balance in your life. Freedom is the ability to choose to do the things that matter and say no to everything else. 

I love what I do and that's a very valuable goal to achieve. I wish it for everyone. 

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