Risk, Reward, and Royalty: Kevin O’Leary Unplugged

0:28We always recommend Shopify. Ladies and gentlemen, welcome back to another exciting episode of Mick Unplugged. And today we are talking to my blueprint. He's the man who turned discipline into currency and results into legacy. Before the world called him Mr. Wonderful, I called him the blueprint. Because everything that I teach about leadership, about accountability, about performance, he's the force that made excellence the expectation again. Ladies and gentlemen, welcome. My God. You know him as Mr. Wonderful. Kevin O 'Leary. Welcome to the show, sir. Thank you so much. I really appreciate it.

1:05I appreciate you. You know, I said that you're the blueprint and here's why. Early on watching you back on the days of the Dragon's Den and then reading your books, you taught me something that I think most business leaders and entrepreneurs miss. And that's that results matter. We care about a lot of things that that are cute, that are nice to haves. But at the end of the day, results matter the most. And so I owe you that because everything about all of my businesses, my teams will tell you the philosophies that I teach are centered around you telling me that one day. Everything is cute, but results matter the most.

1:44So I owe you that. Thank you. But, you know, that that is a consistent and it's perpetual and is really important more today than ever. Absolutely. Absolutely. Absolutely. And before we get into where that started, like I always like to ask my guests, what's your because? Right. Like Simon Sinek taught us to start with why. And for a lot of folks, your why is your family. Right. Maybe your friends or your businesses. But I think your because is something deeper. If I were to ask you why your kids are your why, you normally start with because A, B and C. And so I care about your because. So if I were to say, Mr.

2:21Wonderful, what's your because? What's your purpose? What's your mission today? What drives me and what my because is, is I absolutely love it when people tell me I can't do something. And that I shouldn't try because I'll never make it. I love that. I absolutely love that. And every once in a while, when I hear something like that, it's usually in industries that are, you know, well established. And I'll give you an example. Watch insurance. The insurance market is incredibly difficult to break into because it's highly regulated in every state. And it's impossible to acquire customers from the behemoths.

3:09You know who they are. And I'm a watch collector. And so I'm not happy with my insurance options. And many other watch owners are not happy either because the basic problem is you put it on your home plan. you know as a rider and then 10 years later your rolex is stolen or lost and it's worth five or 10 times what you bought it for and they're paying you out a depreciated value that's one of the problems with many houseplants but i remember people saying to me oh you can't get into that business and i say bullshit watch this and my secret sauce is my mid my army of followers that I tell the truth to and millions of them, over 10 million of them.

3:55And I say to them, Hey guys, does anybody want to try a different idea for watch insurance? I don't, if you don't want it, don't worry about it, but I'm going to, I'm going to create this company called wonder care and it's going to do an incredible job on watch insurance. Does anybody want a policy? And I put one of those out there and got 3 ,500 policy requests. And I showed it to Chubb and said, have you ever seen anything like this? Have you ever been able to get 3 ,000 policy requests with zero customer acquisition costs? Has anybody you know never done that? Why don't you partner with me?

4:30And they looked at it, said, whoa, okay. So there's always a way if you're motivated. And I'm kicking ass with Wundercare right now. And I'm proud. So all those people that told me I couldn't do it, fuck you. That's how I feel about it. Absolutely. And here's what Mr. Wonderful didn't know about me is that my career and life started in the insurance space, in the property and casualty. So business insurance and the home side. So I personally am about to send all of my clients and followers information on Wondercare because is you're right. The basic insurance writer, whatever you set it for day one, typically is what it is 12 years later.

5:17Now you have something that you can't ever get replaced. So kudos to you for a break. I appreciate it. But that's what keeps me going. I want to win. I want to compete. I've got a great team of people that come with me and I want to make them all rich. And I just, you know, this is the American dream. That's what it is. You've got to find a pain point. You've got to come up with a solution and you got to drive it home. That's how it works. And you can't let anything get in your way, particularly people that say you can't do it. That's just noise, absolute noise. Don't worry about it. Yep. And again, that's why you're my blueprint.

5:50That's why you're the person that I follow and believe in. And you talk about winning. And to me, that ties into the results, right? Because you taught me that, Mick, results create freedom, results create credibility, results create legacy. Why do you believe that results are the true language of business and leadership? Because you can measure them. It's very simple. Business is very binary. Either you make money or you lose money. And there's no in-between. You're either profitable or you're not. You know, break even, that's okay, but that's on the way to one side or the other. You're either on the way up to being profitable or on the way down when you're breaking even to losing money.

6:32And so it's just a way stop. It's like a bus stop on the way. Setting goals allows you to put measurement into the model. And so results are the outcome of your team agreeing on the roadmap. And, you know, you can pivot, you can change based on new information, but if you don't get results, you're going to fail. And there's no, you know, messing around with it. You got to set a goal, you got to make it. You know, there's no room for excuses. There's always an excuse, but there's no room for it. You have to deliver. You have to figure a way around the obstacle and you got to go get it done. And the great managers, the great leaders get stuff done.

7:19And, you know, it's sometimes they don't. It gets prickly, but you're not trying to win friends in business. You're trying to have people respect you. And the way they respect you is you deliver results. I do business with a lot of assholes that are not nice people. But boy, are they productive. And that's why I'm doing business with them. You know, they don't come to my cookout. But I do business with them and I risk money with them and I invest in them because they deliver results. Yeah. It's not, it can't make everybody happy. That's not what the game is about. The game is setting a goal and achieving it.

7:56And along the way, there's going to be some people you offend. Well, that's too bad. That's life, right? That's life. But, you know, and on the way to winning and getting results, something that you talk about is a critical pillar in what you believe in is discipline. You told me, or not just me, but you told the world in a bunch of masterclasses and conversations that success is built on discipline, not desires. Where did that mindset start for you? Well, there's something I've learned about in teaching cohorts of young. you know i i'm an executive fellow at harvard so i teach the hba the mba and the executive program and i'm honored to do that you know my son is going there right now and he won't come to my classes he doesn't want that shark tank stuff you know i don't blame him i get it but what i've learned if you look at a class you look at the cohort let's say there's 240 people in it.

8:57A third of them are going to be consultants and they're going to live a life of mediocrity. They'll never make a decision of any consequence. And they will float around in a useless primordial ooze of just nothingness. And they eventually will go to hell for being consultants. And I tell them that. They don't like to hear that, but it's true. A third are wannabe entrepreneurs who are going to try multiple times and fail because they don't have what it takes. And then there's a third that have the founder's mindset that have in their head, no matter how many times they try and fail, they're going to keep going until they win because they know they'll have to win one time.

9:43And every time they fail, they learn an important lesson. Founder's mindset is the ability to work in an environment of risk and understand that risk is the ocean you're floating in. It's every day has risk. Every day, something that you didn't plan on is going to happen to you. Every day, it's up and down. And the reason I can tell you that with certainty in my portfolio of companies, over 50 of them, this is in the startup venture area. I do other stuff, but this is the kind of the shark tank companies, but beyond just shark tank. Every morning I get up at 545 and I ride my bike when sunset for an hour and 20 minutes, that's my exercise routine.

10:29And I listened to all the feeds from around the world from business cable and BBC and CNBC and Fox and CNN and get the seven stories of the day. And while I'm listening in that hour and 20 minutes, the phone starts ringing, interrupts the feed, no problem. And every day there's a story of total depression, total woe and destruction for one of my companies oh no i just got sued oh i just got kicked out of walmart oh i just this i just that it's a disaster and then 20 minutes later it's total euphoria oh i just got a million a hundred million dollar offer for our business and you own 30 percent of it you have the right of first refusal what do you want to do that's in the same hour right and so you got to get used to the ups and downs in the in the you know founder's mindset that are going to happen to you the total euphoria to the total depression and that's all in one day and so those are the people you want to invest in that can handle it that just can take the hit figure out a way around it and move on and and that's about a third of the population yeah the other two thirds are going to work for them.

11:40And there's nothing dishonorable about that. But only a third have the founder's mindset. Does that make sense? It totally makes sense. And I want to double down on something that I know you've been talking about for the last couple of years. And I had to change something that I was doing because one of my businesses, I was labeled as a consultant. And I heard Kevin O 'Leary say, you should never hire a consultant. And if you have one right now, you better fire them as quickly as you can. But I understood what you were saying. For the people that are listening and watching, break that philosophy down on why you can't be beholden to consultants forever and why it can be and probably is a detriment to your business growth and strategy.

12:27Because they've never made payroll. They have no idea how to run a business. They speculate based on what they see out there on what should be done right and done wrong. And they've never, ever, ever, ever, not once made a decision of consequence where they own the results, ever. They're worthless. They have no idea what it's like to make life and death decisions in a business. They have no idea on how to process that. They just make recommendations based on their experiences as a consultant, which are worthless. And so why pay for that? Why would you do that? Why don't you actually give somebody equity that you respect their opinions and let them take risk with you as a partner, and then you mitigate what happens to you?

13:21I mean, when I see these reports, the size of telephone books that these giant S &P 500 companies pay for, it disgusts me. I just think what a waste of shareholder value. Like what a waste. And you know, look, I don't disrespect consulting firms. I just don't use them. I don't understand why anybody would. It's just another opinion tied to zero risk. Yeah. And one of my companies, We literally changed what we do when I heard you say that because we were labeled as consultants, but not in the sense of what you describe as a consultant. But we were in that bucket. And I said, here's the deal. We will be tied to equity to prove that what we do and say actually matters.

14:17Or we only go in to do a specific tangible thing and we get in and we get out, meaning we're not going to be there forever. we're going to come in and actually fix a problem, not give you advice or tell you how things are or charge 200 grand to change your marketing strategy. You taught me that. And you made me change a business philosophy. And I applaud you because you challenged me. Well, you know, Mick, I like the idea you've got there. If you told me a consulting firm was willing to take on risk in their decisions, in other words, get paid on success only. Right. That's interesting. That's half the battle won.

14:56Say, look, you take stock. You give us a recommendation. We implement your recommendation. If the stock goes up, you get a piece of the action. Right. If it goes down, you added no value. In fact, maybe your recommendation was worthless in the first place. I mean, it's kind of, I'd like to see them take risk, not just get paid up front. I mean, anyways, it's, you know, I've been doing this a long time. I've seen consultants come and go. And I tell I tell young students they're going to do that. What's very attractive about it is the three hundred fifty thousand dollar base when you come out of your second year, you know, in one of these business schools.

15:36But that's it. You know, an entrepreneur could work five years and that's just a rounding error of their outcome. They could get thirty five. They get three hundred fifty million dollar outcome. But a consultant just floats in that sea of mediocrity forever. and the more hours they build, they make a little bit more, but they never achieve greatness. They've never done anything of consequence. And then they're that horrible outcome. Consultants all go to hell. I mean, I feel so sorry for it. No, you changed me. You changed me. And I'm going to switch gears. I'm going to get in trouble right here because, you know, Damon's my mentor.

16:09I met you through Damon, obviously. But I've always said the shark investor that I appreciate and taught me the most in investing was Mr. Wonderful. And here's where I'm going to say the truth because, you know, I was on set. You've also changed the mind of a lot of sharks and they start to invest your way to talk to us about, you know, why you would in certain instances, royalties actually matter more and you'd rather invest that way with the royalty. Like explain that to the folks. Well, let's talk about venture capital, certainly all the Shark Tank deals. They're the highest risk investments you can make.

16:51And you never know with certainty what's going to work and what isn't. So you got to do seven to 10 deals a year because you don't know which two are going to make it and pay for the other mistakes. But in venture capital, and this is way back since the 50s, I think 1954, they started when the first venture capital fund started in Boston area. You do 10 deals, you wait five to seven years, and only two out of 10 work. The others fail or just drift off into mediocrity. But those two are such extraordinary outcomes that they pay for all the mistakes. And so you're betting on a 20 % outcome. We do slightly better on Shark Tank because we have television supporting customer acquisition costs.

17:27That's remarkable. 110 million people see the show in syndication every year. So that matters for entrepreneurs. But the concept is, you give somebody a million dollars on Shark Tank. You're not going to make a return until you get the million dollars back. And then the first dollar in is where you return. So a million and one dollars, you've made one dollar return. So the concept is return of capital, not return on capital, is what you're looking for in venture investing. So a royalty mitigates some of that risk. It says from every dollar of revenue before it goes through the meat grinder of the income statement, you're going to get your 7 % or whatever it is.

18:08And in the beginning, 17 years ago, all the other sharks went, oh, I would never do that. Yada, yada, yada. Woof, woof, woof, woof. Yada, yada, yada, yada. Now they all do it. Why? Because that's the right way to invest with this high risk. You can take a taste of equity. You get a royalty. The royalty can be perpetual or not. It can be based on some kind of a determined return, like 3x on your money, then the royalty goes away. But one way or another, I'm getting a royalty. And all of a sudden, Lori to my left, squawking like a chicken, wanting royalties. Barbara on my right, squawking like a chicken, wanting royalties.

18:44By the way, the only reason Barbara gets to the set every year is I buy her a new brew. And I'm very happy to do that. But the whole point is they're figuring it out too. They're grasshoppers that are learning the ways of venture capital. And then there's Cuban. Even he started thinking about royalties. And that guy took a long time to train. No, but like me now as an investor, like that's usually the first option that I'm offering. And when people balk or they don't understand, again, I take this from Mr. Wonderful. I usually say you don't believe in yourself then you want someone else to believe in you or your product more than you do.

19:24And I'm unwilling to do that. But if you're willing to have a royalty conversation, I know that you actually believe in what you do. And again, I learned that from you because I see you do it every season. Well, I think you're onto the right path here. I mean, look, it's been time proven. It's been 17 years. I mean, it's not like it's yesterday. So these are the things that I care about. There you go. There you go. All right, Mr. Wonderful. There's other things that we have in common that you didn't know. One, our love for the New England Patriots. Oh, love that. I have an uncle who is in the Patriot Hall of Fame.

20:02So Stanley Morgan, all-time wide receiver for the Patriots, in the Patriot Hall of Fame. I go to three or four Patriots. Wow, that's an honor for your family, man. That's a big deal. It's a huge deal. It's a huge deal. But our Patriots, we're starting to come back a little bit. The whole history of Brady and Belichick and Kraft and all of that story, it's so rich in New England. And I was living there. My kids were growing up during that period. It was just unbelievable that the camaraderie of the community with that team and and craft is such a great guy. And he gives back. And, you know, I've got to know him a little bit.

20:42He's amazing. And the family's amazing. They really care about the community they service. It's not often owners. well many are but but he's probably the the best example in the league of integrating the team's values with that of the community and you know boston is one hell of a sports town yes if you're not winning they spit you out like you know a bad date it's really bad yeah you don't get years you gotta perform i don't care if it's hockey baseball football you gotta perform or the fans get ugly. And I love that about that town. Absolutely. Absolutely. Another passion that we have is tequila.

21:28You have a couple of brands that I love and are some of my favorites. And one of my best friends in the world is celebrity chef Robert Irvine, who also has a passion for tequila. We've sipped some of your tequilas together. When did that love of tequila come about you know it's i i really try and limit what i drink i want pure substances with no additives and really no sugar and so there's only two drinks that i drink i drink really good wines most of them i blend myself and i drink my tequila because my tequila is actually the plant has grown for six years and then pressed on location. Zero additives, nothing in it.

22:13No sugar, no additives. I do a Blanco and a Reposado and I love them because they're pure. And so if you're going to drink alcohol, make it really good because I can't stand hangovers. I hate all the additives that are put into so many inexpensive. Unfortunately, that tequila, that's over a hundred bucks a bottle. But for those that care, you can get it at KevinOleary.com and you can order it there. I think it's the best tequila I've ever tasted. And, you know, of course, I'm talking to my own book. And of course, O 'Leary Fine Wines. I have an exclusive partnership with QVC because they buy all my production, all of it.

22:49And I sell millions of bottles a year with them. You can just order it on QVC. But it's about the desire to bring something really healthy and good. And I'm not saying alcohol is healthy, but if you're going to drink it, make sure it's good stuff. Yeah. You already went there. So I was going to tell people Kevin O 'Leary dot com. Senor Moravioso is mine. That is mine. Like, I love it. It's Mr. Wonderful in Mexican. I love it. Yeah, yeah. I love it. I like so Robert Irvine and I shake it on ice and let the agave rise. And yeah, by the way, the design of the bottle, the label was from Tattoo Panda in Miami.

23:30and that's a guy has he's never the association in mexico that allows really it's very controlled they saw tattoo pandas design of my eyes and they said this is phenomenal and if you look at the bottle it's just stunning i mean tattoo panda is a genius it's just you know i love the guy and and and he's actually designing or at least part of a team that's designing a watch for me a one of a kind of a shark swimming in a coral reef. Beautiful. Well, I know you're busy. You have a lot going on. So I'm blessed that you took some time with me today. So before I get into my rapid fire, my quick five questions, I want to ask you this and you hit on it a little bit earlier, but but the fire that remains in you, right?

24:23You've accomplished so much. Most people, you know they can check boxes and say i'm here i'm done and kind of shut it down but you continue to have that drive after all the wins what continues to drive you now it's a great question but i and i thought you know the answer comes from the past because when i had my first big liquidity event the nine of us that were founders the next morning we were never doing it This is the sale of a learning company to Mattel,$4.2 billion. We never did it for the money. We were so passionate about winning and being number one in our sector in software, reference software, educational software, math and reading skills, Rita Rabbit, Carmen Sandiego.

25:06We even did Myst. We did so many titles all around the world, many countries. And it was a phenomenal team. But we started with nothing. And then one day, we wake up and we're rich. and but it didn't matter we all came back to work because we didn't know anything else we didn't know what else to do and i eventually said well i'm going to take a vacation i'm going to go to every beach on earth just want to sit on every one of the beaches on earth cyprus thailand cambodia you know singapore like everywhere where there's a beach i want to try it and i i did that for about 18 months and boy was i bored out of my mind and i thought i gotta get back in the game yeah i gotta do something with the rest of my life i want to do stuff i don't need to but i want to and so when you get to that place where you've achieved financial freedom you spend your hours doing the things that are you really are passionate about yes sir and that takes you to a new level because you want to even work harder i want to be a better guitarist and so i have to find time to practice and I do and I've gotten way better than I was even a few years ago I want to be a better photographer I own every piece of known you know photographic equipment I just shot a magazine spread on on the weekend with a photographer for our for our new movie Marty Supreme coming out Christmas Day I'm in that movie with Gwyneth Paltrow and Timothy Chalamet I'm Gwyneth Paltrow's husband in it.

26:41He shot that shoot with an Olympus camera from the late 80s, a tiny Olympus camera, a film camera. And the results were stunning, Andy Warhol-like. And I thought, that is genius. I've never done that. So I learned something from him. And I scoured the earth to find one of these Olympus cameras because they stopped making them a long time ago. And I found a guy that had two of them and they're up they're on my desk right now i did the deal last night and he had delivered them this morning and i'm gonna go get film and i'm gonna start shooting with those so i'm learning i'm learning the whole point is i'm learning and i want to keep learning i call you know i collect watches like you know you i mean one of a kind chanel the crash from Cartier.

27:36These are extraordinary watches. I love that. I love the watch community. So these things motivate me more than money. I don't need more money. I need more time. And so I want to use my time in the best way I can, including, you know, doing this with you. This is important to me. I wouldn't do this if I didn't want to, because I think it's very important that we have this narrative. We have this discussion to help young entrepreneurs on their journey. That's my real mission. If you're thinking about being an entrepreneur, you're only one third of the population. Now's the time to start now, because don't talk yourself out of it saying, oh, I'm too nervous.

28:13I can't do that. You don't know what's going to happen. You got to try. And if you don't try, you'll never get the outcome you want. I mean, or if you're happy working for some of the rest of your life or even worse, don't be a consultant. Please don't go to hell. Don't do that. No, but you're exactly right. I mean, I talk to young people all the time. I get asked this question a lot and I always hate it. Like, Mick, if you could talk to the 16 year old version of yourself, what would you say? I'm like, why would I do that when I can't, when I can go talk to 16 year olds, when I can go talk to real 18 year olds and impact their lives?

28:49And I tell them the same thing our grandparents told me. There's more resources for you to be a business leader, to be an entrepreneur than there ever has been. Right. Access it. But you've got to have that that earning for learning, as I like to call it, which you just talked about so eloquently. the information that young people have today and not just young people, but society has today to go start a business, the resources, the knowledge to be able to tap in to a Mr. Wonderful. Right. I mean, you speak all over the country and you give so many nuggets of wisdom at all of your speeches and all your masterclasses.

29:32People can go get that. Right. They don't have to go hire you for an hour, they can buy a ticket to an event that you're at because you're going to give everybody everything that they need right there. But I don't think people are taking advantage of it the way that they could or should. And so I try to help them understand where these resources are, because to me, it's critically important. Well, I really appreciate it. I mean, that's. It's, you know, people say you're the mean shark. I'm not the mean shark. I just tell the truth. And you've got to deal with the truth. If you think I'm bad, wait till the real world hits you.