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- Kevin O’Leary: Crypto is going to become the 12th sector of the S&P 500.
- Kevin O’Leary: I want America to be the number one decider of the protocols for crypto. We don’t want to give that to the Chinese.
- Kevin O’Leary: You are not really an entrepreneur if you’re just counting your success on cash.
Kevin O’Leary is indeed Mr.Wonderful. Elegantly dressed, in a black suit and black tie, accented with the red pocket-handkerchief, O’Leary has an approachable and yet do-not-waste-my-time demeanor. He’s tough, but polite and affable. Politically savvy, iron-willed, the Montreal-born, Shark Tank millionaire investor, known for his sharp and no-nonsense approach to life, is blazoning new trails in blockchain, NFTs, and decentralized finance.
O’Leary is a recent, self-declared “crypto convert,” and his involvement in the blockchain community is making headlines. Due to his extensive social media following, celebrity status, and the massive public interest in all he does, will O’Leary make crypto more mainstream? On a quest to find out, I sat down with him for an The Pavlovic Today interview in New York City.
“I think that crypto is going to become more mainstream, whether I’m involved with it or not,” O’Leary began.” I’ve been a crypto convert, because the regulatory environment has become more accommodating,” he continued. “I’m an investor, primarily, and I’m always looking for new opportunities. I’m intrigued by the potential of DeFi [decentralized finance]. I already own Bitcoin and Ethereum. I’m a shareholder already, so to speak,” he added.
“I change when things change. As I said at SALT NY, the environment changes. I need to have an allocation of crypto. It’s not my only asset, but it used to be only 3%. By the end of the year, it’s gonna be 7%.”
O’Leary looks at crypto as the future sector of the S&P 500. “The S&P 500 has 11 sectors,” he said.” In my discipline of investing, I never put more than 20% of my assets into any one sector and I never put more than 5% into any one name,” he added. “This is a personal opinion, it’s not dictated by anybody,” he wanted to clarify, “ Crypto is going to become the 12th sector of the S&P 500. It will happen over the next few years.”
O’Leary predicts that people will look at crypto assets the same way they do with any other asset. “Real estate became the latest sector of the S&P 500. It’s the 11th sector. Well, crypto is going to be the 12th. And so I’m positioning myself to allocate 40. That’s the way I look at it. There’s a lot of controversy, and people are always saying this and that, and the community, and the regulators, and yada, yada, yada.. that’s all noise! The fact is: you either believe in it as an asset class, or you don’t. If you don’t, don’t invest. I do believe, and I’m hoping it will outperform the index.”
In decision-making around crypto investments, to what extent does Kevin O’Leary, Mr. Wonderful, rely on the power of his instinct versus on the research?
“You know, I talk to investors,” he told me. “My primary work is with institutions and pension plans and sovereign funds. I talk to them every single day. And I’m watching: they’re interested, they’re not participating yet, but they are waiting.They’re waiting for the regulator. That’s trillions of dollars of buying. I’m looking at it saying, well, why wouldn’t I take some allocation? Because if they’re going to get involved, I want to be already fully knowledgeable, fully infrastructured; I want all of that stuff in place for compliance. So I’m doing it to prepare for the eventuality of it.”
—“And you see it coming?” I wanted to know.
“I see it coming,” O’Leary responded with firmness. “I think we’re probably three years away. But I have found a way to build a compliant infrastructure within my operating company, which was very hard to do, to get my compliance people and my external auditors to sign my statements, and then provide status to the regulators. That’s not easy. That’s very expensive. I’m investing in it, because I want to be able to do that. And then, I can increase my allocation from 3% to 7%; I can have more than just Ethereum and Bitcoin. I’m planning to have 17 to 20 positions. I’m gonna grow.”
O’Leary is an investor in a new blockchain company, WonderFi, with a mission to help people navigate the very complicated legal landscape of DeFi through technology. His company empowers people to interact directly with financial markets and allows anyone to engage with personal finance. O’Leary has also invested in FTX, and he gave me the scoop that he is going to invest in Circle. “I use Circle for USD Coin (USDC)” he said. “These are not consumer products; these are corporate platforms and they’re built for corporations,” but with WonderFi he is opening up the gates to retail consumers.
“If my daughter wants to invest $14,000 out of a bank account and actually write contracts on USDC, it’s impossible to learn how to do that and be compliant with tax authorities. You have to report your interest and your capital gains and losses. That’s why I got involved in investing in WonderFi. It’s an app on your phone; you can download it. It does it automatically for you. It keeps all your records for you. It shows you how to do it, very simply. It makes it easy to invest that way. You don’t put all your money with it, but you learn how to do it. That’s how it works. That’s the whole idea.”
O’Leary sees WonderFi as a step toward the democratization and consumerization of finance. “That’s really what it is,” he said. “It’s a consumer version.” Also involved with WonderFi , O’Leary has a great team of strategic investors, from TikTok wonder Josh Richards to crypto billionaire Sam Bankman-Fried. “Josh Richards, on TikTok, 4 million followers. He’s beside me as an investor. Together we have 15 million followers in aggregate. So, that’s going to reduce our customer acquisition costs. I’m from the baby boomer generation. He’s Gen Z. That’s how we partner.”
With decades of business experience, O’Leary has constantly kept his finger on the pulse of innovation and developing trends with Gen Z and millennials, helping many young entrepreneurs with great potential to bring their ideas into life.
“My team that I’ve built around me are all very young people. They’re smart; they’re young; they’re hungry. I keep investing in young entrepreneurs. I stay current because I talk to millennials every day, and Gen Z-ers and, you know, they’re huge Shark Tank fans, so it all fits together. When I go to a high school, I sell it out, because I’m proud that those kids watch Shark Tank; they’re learning how to become investors. So, I’m pretty convinced social media drives market capitalization. You saw that with Robinhood; you saw it happen with all the things that are going on in Reddit, and I’m part of that culture. I try to use that to reduce customer acquisition cost,” he told me.
Enter Jordan Fried. “You’re gonna come tonight, right?” O’Leary asked the young entrepreneur who had just walked into the room. “This is how I stay young on this,” he continued, pointing to Jordan Fried, owner of NFT.com. O’Leary is investing in the young man eyeing stardom. “He is a very smart guy,” O’Leary was not short on praise for his protege.
“This company [NFT, part of Immutable Holdings] is going to be another public company soon. We’re going to tell the story and bring our investment team together,” O’Leary revealed. “Paris Hilton wants NFT.com/Paris Hilton. Well, the only person to do that through is Jordan.”
O’Leary’s eyes sparked while giving me heads up on the next young entrepreneur in the crypto community to watch. “This is a really interesting story,” he said. “When I heard it, I immediately invested. So this is the kind of thing that you want to get early on,” he told me.
At SALT NY, O’Leary made a bold call to regulators to get involved as soon as possible with the crypto community and provide guidance to investors. “We needed it badly,” he fired off instantly. “I cannot afford not to be compliant. I don’t have that option. I don’t want to go to war with the regulators. I want to cooperate with them. Just tell me what I have to do. To make the analogy. I love football. I watch it on Sundays. The players can’t play if they don’t know the rules. I’m a football player in crypto; I can’t play if I don’t know the rules. I got to know the rules. We need rules. Whatever the rules are. Just tell us.”
—”What is stopping them?” I asked.
“Well, I’m glad they’re not rushing into this, because I want America to be the number one decider of the protocols for crypto. We don’t want to give that to the Chinese. We don’t want to give that to Europeans. This regulator will decide for the world how it works. Everybody’s waiting for them, and they don’t want to make a mistake. So they’re doing the right thing. Even if it takes two or three years, who cares! Once they decide what it is, trillions of dollars will come into the market from all around the world because they have decided. I want them to be the leaders so that we can be the innovators. Once we know the rules, then I can pour more money into my investment so we can grow and grow and grow.”
O’Leary also expressed his displeasure with the media for claiming that the crypto community is adverse to regulators. “I don’t like what’s happening. I don’t like the media saying that the crypto community is at war with regulators, they want to break the system, they want to defy everything, they don’t want to work with regulators. That’s not true. That’s not true at all,” he said. “The majority of the players that I invest in and I work with are all interested in solving this problem because the potential is so huge. To solve this problem, because then we get trillions of dollars in investments. So this war with regulators is not good. Even the perception of it is not good. Because the regulators are people: they’re reading the press too, and they’re saying ‘What is this? Are they against us ? Why are they against us?’ That’s my point.”
Politics play a big role in the future regulation of crypto, and it will be interesting to watch the direction the policy around it will be shaped in Washington DC. “There are smart politicians,” O’Leary said. “Look at Mayor Suarez, Mayor of Miami [emphasis added], what he’s doing. He’s saying ‘You can pay your taxes in Miami with crypto’. That’s forward thinking. He’s saying: it’s a payment system, why not explore that? I really like to see that happening, I really like to see that growing.”
O’Leary’s attitude when it comes to regulators is: “Let’s get all of these people to back innovation.” At SALT NY, he talked about FX trading and how he can’t stand paying FX fees. “That really pisses me off,” O’Leary was blunt. “This is a way to get rid of them and help them find real careers, where they create value. They don’t create any value here. They’re just friction. They’re just noise. So the whole payment system, the whole crypto, the payments services are going to reduce friction in financial services globally. Innovation is what matters. I’d like to invest in that.”
Business is a tough industry, but O’Leary is not a one-dimensional entrepreneur. There’s a creative side to him that is clear in his background and interests in psychology, photography and music. While many believe that a business degree and a job at Goldman Sachs is a safe bet for entering the top echelons of the world of business, O’Leary shared with me a surprising, non-traditional way of defining success and making hiring decisions.
“When I hire people to work in my teams, I look at their resume and I say, what else have they done besides just businesses? For example, I like when you find, let’s say, a woman, recently a manager. I looked at her resume. She was a professional dancer all through high school, right into her college years. Full-time, she worked all day, and then she danced all night. Well, that shows a very interesting, different side of her. The discipline of getting up at three in the morning with blistering toes. Classic dance, even though she knew she’d never be a premier ballerina. She wanted to get as high as she could get in that art form.”
— “And you appreciate that?” I was curious.
“Yeah. I tell myself: I’ll never be John Mayer on guitar, but I’m getting better every day. I play guitar. I take photographs, I’ll never be the best photographer on Earth, but these things give you a creative outlet. That makes you a better manager. They make you think on a different plane. That’s why I hire people like that. I like people that are different. Just because you graduated from Harvard and worked at Goldman Sachs, that’s great. What else have you done? That’s all? ‘Cause that’s not interesting, I want more.”
With an impressive and prolific career in business and in leading different ventures, what is the biggest sacrifice that Mr. Wonderful has had to make in order to succeed?
“You have to make the decision at some point that you’re going to be an entrepreneur, and that is very scary, because you don’t have a job. You’re going to have lots of failures and lots of twists in the road, and I went through all of that in my twenties. I’ve been very fortunate because I’ve had many successes and lots of failures. I’ve made money. I’ve lost lots of money too. It’s not easy. It’s not easy, you know. At the end of the day, I’m glad I did it, but people think you get rich overnight. It takes a long time,” he said candidly.
“My first deal was I sold The Learning Company for 4.2 billion. I thought that I don’t need to do it anymore. I retired for three years when I was in my early 30’s, and it was very boring. I realized: It’s not really about money, it’s about finding things to spend your time on that are really interesting. And, you know, I’m very fortunate now: I don’t have to do anything I don’t want to do, so I back entrepreneurs like that guy [Jordan]. I do things that are interesting.”
The business world is exhilarating, but it can also take a toll on an individual starving to reach the top of their game. Burnout and general life dissatisfaction are not rare phenomena on the millionaires’ playground. What’s the secret to a Happy Life?
“I think you need the balance and the challenge. Great entrepreneurs never talk about money; they talk about personal freedom,” he began. “Everyone I’ve ever talked to,” he continued, “Do you remember the moment you became rich? say, ‘No I don’t. I just kept working, and I just kept doing what I’m doing.’ The guys that I back are all like that; they don’t give a sh*t about how much money they have in the bank,” O’Leary was adamant.
“You’re not really an entrepreneur if you’re just counting your success on cash. It’s irrelevant; that’s just greed. I think they want success in being able to compete in the market and get motivated to do it, and sometimes you win, sometimes you lose, you don’t know.
—”What’s the secret to a happy life?” I put a question in front of Mr.Wonderful.
“Balance,” he quipped. “Happy life is a balance of family, friends. I have millions of followers on social media, but they’re not my personal friends. I only have a circle of maybe 18 people that I spend my time with, and then my family. I have very close relationships. Happinesses is about relationships that are long. I keep my friendships close to me. And you know, life always throws you curveballs. Sh*t happens all the time. So, my attitude is, you know, you want to be balanced.”
Recently, on CNBC’s Money Court with Kevin O’Leary, where he presides over a wide range of financial disputes, O’Leary emphasized the importance of getting everything in writing. But what about entrepreneurs who are just starting and don’t have money for legal teams to walk them through the legal pitfalls of entrepreneurship?
“You don’t need huge legal teams. Getting a contract in place, putting your agreement on paper is not that expensive. You can do it on Legal Zoom, and it’s not that expensive, but you need the basis upon which you agreed. If you and I made an agreement now; we have to write it down, read it together, make sure we agree on everything it says, then sign it. It doesn’t have to be the best contract, but at least we have that basis. People that really get screwed up, they don’t do that, they forget that, and that’s a big mistake. “
—”Is there something about success that you know 100% to be true?”
“No,” he said categorically. “It’s elusive and you’re never guaranteed anything,” he added. “Whatever you think is a sure bet never is. The key is diversification. As soon as you get liquidity and let’s say your first exit, you can never bet on it again because you just don’t know what’s going to happen. It’s that simple. At the end of the day, you’ve got to realize that there’s risk in the world every day. I have great teams, great lawyers, great accountants, great compliance officers but I know there’s risk, and shit happens. It always does.”
In 2017, O’Leary entered the race for leader of Canada’s Conservative Party, but eventually, he dropped out. Is a second foray into politics on his immediate horizon?
“No. Not the immediate horizon,” he revealed. “ What I learned when I made my run in politics is: In celebrity, people like you or dislike you. In politics, they hate you. And they want to kill you sometimes. That’s not for me. Not for my family. But I am glad I did it. I learned something; it was one of those learning experiences,” he said.
Recently, on Money Court, where he deals with real financial arbitration of litigation, O’Leary had a situation where one of the litigants said: ‘I’m signing this document to allow Mr. Wonderful to settle my case. I don’t like him, but I trust him.’ “So I’d rather be trusted than win a popularity contest,” responded O’Leary. “I just believe I tell the truth. I do. Some people can’t handle it, but that’s just the way it is.”
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