Kevin O’Leary – from Dragon’s Den to Redemption Inc. The Montrealer February 1, 2012 19545 Kevin O’Leary has worked extremely hard – make that ridiculously hard – to become rich. In a recent interview, we had a wide-ranging conversation about his early life, his incredible success with SoftKey, rebuilding his business after selling to Mattel, how he came to CBC’s hit show Dragon’s Den, and his current reality television show Redemption Inc. We also talked about his love of playing guitar. Kevin O’Leary is a rare and unique individual – his energy level is off the scale and he has the intellect to match. He has a keen sense of identifying ‘the idea’ of how a product or service can fill a need in the marketplace. He then launches a full frontal marketing assault to ensure that the product makes money – lots of money! Kevin also understands that he needs expertise in finance and distribution; that he needs partners and associates to build a business. “I’ve always had a partner – because I need someone else’s strengths to balance my weaknesses.” Kevin respects money for the freedom that it brings. It’s a lesson he learned from his mother Georgette, whose family came to Canada from Lebanon with nothing – and built up a successful clothing business in Montreal. After her father’s untimely death, Kevin’s mother ran the business successfully for many years. Her lesson; save one-third of your money, and only spend the interest – protect the capital. It’s a lesson that Kevin would employ decades later with his fund management company, O’Leary Funds. Georgette had the ‘freedom’ to loan $10,000 to Kevin when he was staring at the imminent collapse of his fledgling company, still working out of the basement of his home in Toronto. Ten years later and after a wild ride of expansion, purchasing competitors, and revolutionizing how computer software was packaged, marketed and sold; Kevin and his partners sold their company to Mattel for an astonishing $4.2 billion. Let’s go back to the early days in the life of Kevin O’Leary for glimpses into events and experiences that formed him – that gave him the insatiable drive that has proven to be a potent combination for his intellect. Kevin’s mother married Terry O’Leary, the top salesman at her father’s company in Montreal. The young couple and their two boys, Kevin and Sean lived in the Town of Mount Royal. The boys attended St. Georges School. Unfortunately, Terry had spent too much time enjoying Montreal’s famous nightlife; and it took a toll on the marriage. Terry loved his family and continued to be a top producer for the company – even after his marriage to Georgette ended. Kevin had trouble keeping up with the other children in his class as the youngsters began to read and write. “The words on the page were jumbled into an incoherent mass.” He was diagnosed as dyslexic, and his mother sought out a new treatment program at The Montreal Children’s Hospital. Dr. Sam Rabinovitch and Dr. Margie Golick had a theory was that if treated early – dyslexia could be overcome. “I was nervous about going to the hospital. However, when I saw that they had a trampoline – I thought this might be ok after all!” The trampoline was part of the therapy; the idea being that vigorous exercise would release a child’s energy and enable him to concentrate better on the exercises. “My mother took me to the Montreal Children’s week after week – and it worked. I was able to read at a level so that I was able to stay in school.” “My mother re-married to George Kanawaty. He worked for an international aid organization, and we travelled the world as he went from one assignment to another. We lived in places like Cambodia, Tunisia, and Cyprus. My parents went out into the communities and learned about the cultures. George worked closely with local farmers and businesses, showing them how to increase production, be more profitable and therefore improve the lives of their families.” Continuing, Kevin states; “It’s what made me a global investor. I have a pretty good knowledge of many countries, and like George, I get out into the neighbourhoods, the countryside and visit the factory sites where I am considering an investment.” The boys and their parents enjoyed Cyprus immensely, with Kevin and Sean attending the British Junior School. Kevin was now old enough to be interested in girls and to attend high school. He wrote the entrance exam… and failed miserably. The Principal (who later admitted that the exam was far too difficult after many other students failed) was adamant – Kevin could not attend the only English high school on Cyprus. The family returned to Canada to search for a school and found Stanstead in the Eastern Townships. Kevin would attend boarding school while his mother, brother and stepfather returned to Cyprus for the remainder of George’s contract. It was a devastating separation for thirteen year-old Kevin from his closely knit family. George subsequently had postings in Ethiopia and Tunisia; and the family decided that Kevin should continue his high school education at Stanstead. Kevin joined the family for school and summer holidays – but it was a lonely existence for a teenager. As he states in his book, The Cold Hard Truth, “I think being alone toughened me in good and bad ways.” Watching Dragon’s Den and seeing how quickly he computes company valuations in his head, it may surprise you to learn that Kevin O’Leary has an artistic side to his personality. An avid photographer as a teenager, he continued his hobby at the University Of Waterloo, expanding into making movies. During our conversation, Kevin and I discussed his love of playing guitar, and he described his experience of purchasing a guitar in New York from the great Les Paul. While working towards his MBA at the University of Western Ontario, Kevin proposed that he produce a documentary for his MBA thesis. The subject would be to illustrate what he had learned during his two years at Western. In addition – Kevin agreed to let Western use the film as a recruitment tool. It was a huge success, setting Kevin apart from his classmates. Perhaps most importantly, it gave him the necessary skills needed for one of his first business ventures, Special Event Television, which he set up with Scott Mackenzie and Dave Toms; both of whom had assisted on Kevin’s MBA film. After producing several successful films; including a series with Don Cherry called Don Cherry’s Grapevine, the partners sold the company in the early 80s. Kevin used his share to make a down payment on a house in Toronto, and he purchased one of the early home computers. It would prove to be a life-changing event for Kevin O’Leary – and the people he eventually brought into his software business; most notably Scott Murray who became CFO and Michael Perik, the logistical and strategic genius of the company. Within ten years the partners would be rich – very rich! Kevin and his partners developed and marketed computer software at a time when the programs were sold on cd. They developed everything from encyclopaedias to industrial programs. The business grew exponentially – but not without an early and near fatal setback. A financial backer committed $250,000 in development capital to the fledgling company – and then backed out the day before signing the documents and delivering his cheque. Kevin was devastated; “I walked out the front door and just kept walking the streets of Toronto for hours. We wouldn’t even be able to make our payroll – let alone expand.” As much as I hated to do it – I called my mother Georgette and asked if she could loan us some money. She willingly agreed to $10,000. It was enough to give us three months of breathing space.” That financial lifeline enabled Kevin and his partners to build their software company into an international colossus, with annual sales approaching $1 billion. “I learned the critical lesson of having more than one source of financing available.” Over the next ten years the partners purchased competitors, sought new lines of distribution, using such retail giants as Walmart; and quite literally revolutionized the distribution of computer software, adapting to changes in the marketplace with lighting speed. Decisions were made within hours. Kevin and his partners eventually sold to Mattel, who realized that they needed to take Barbie, Hot Wheels and their other iconic brands into the interactive world to develop new revenue streams. Kevin and his partners sold The Learning Company to Mattel for an incredible $4.2 billion. It turned out to be a difficult union – the Mattel lumbering management style was incapable of adjusting to the rapid high tech business. Key decisions were delayed, the company lost market share, Kevin was blamed (unjustly) and fired with a $5 million severance – plus he still owned a ton of Mattel stock. Kevin would subsequently be vindicated; “Mattel eventually sold the company for nothing more than a share of future profits, and the new owners – a tech company – restored it to profitability in just eight weeks!” Appearances on a couple of business television shows (including the forerunner of the popular Lang and O’Leary Report led to a suggestion that Kevin audition for Dragon’s Den. The show that has entrepreneurs make a pitch for financial backing to the Dragons (who use their own money to make the deals) is now one of the most popular shows in Canada, with ratings numbers that rival those of Hockey Night in Canada. Redemption Inc. on CBC Kevin was having a fine time with his television appearances, the business investments, and the growth of O’Leary Funds. Then – television producer Jasper James re-enters Kevin’s life with an idea for a new reality show. In 2008 Kevin and Jasper had worked together on a documentary for the Discovery Channel about Greenland. James’ concept was for ex-convicts to be given a second chance during the course of the series. Kevin’s initial reaction was negative – which James turned back on Kevin as proof of the stigma that ex-cons face. “Jasper had me – I said tell me more…” “I had always assumed that you came out of prison, having served your time and then you got on with the rest of your life. I was wrong! You can’t get a loan, buy a car, and you’ll never pass a background check to get a job. You can’t even work at MacDonald’s… all because you made a mistake somewhere along the line.” Kevin has researched the subject; and believes that training is a good investment. “Without the ability to get a decent job and rebuild their lives, most ex-cons are back in prison within 24 months. And here’s the kicker – it costs between $150,000 and 250,000 a year to keep a person in prison. That’s wrong and a poor use of our money.” “On Redemption Inc. we have a series of challenges, and the winner gets $100,000 from me to help get them started in their own business.” There are no losers – the participants who Kevin releases have the opportunity to take an exit package that will assist them in the development of their business – or they can stay and compete until the end. In a recent interview, Kevin spoke of the special place in his heart for the ex-cons and the issues they face. “…when I was a kid I had dyslexia, I was failing in school, I was rejected by my classmates and started getting in trouble as a teenager — just like many of them. That’s when you go to the dark side, but thankfully I had a step-father come into my life at that time who put me on the straight and narrow and forced me to work on my problems, which I’m very grateful for. It was incredibly emotional to look at one of these people and realize that could’ve been me.” To prepare for the show, Kevin had himself arrested, processed and jailed. “I didn’t know when it was going to happen, and when it did, I wondered if it was really happening. I was in a holding cell with nothing. The light was on all the time, nothing to read, no-one to talk to and every decision is taken away from you. My perceptions were completely blown away.” “The employers who hired our people said that our contestants were so eager to be successful that they worked 20% harder than everyone else – and they cost 20% less. I’ve learned that the stigma we place on ex-convicts creates a big cost on our society. Releasing them from prison with no skill sets doesn’t make sense. I’ve learned that long sentences don’t work.” For a guy who is regarded by many Dragon’s Den viewers as “the mean one”, Kevin O’Leary is opening his heart as well as his cheque book to make a positive difference in the lives of ten ex-convicts. Bravo! Redemption Inc. airs Monday evenings on CBC at 9pm, and is proving to be very popular. Cold Hard Truth is published by Doubleday Canada and is available at Chapters and other bookstores.