INTRO: We all know the saying “All roads lead to Mr.
Wonderful.” While this isn’t always true, Kevin is oftentimes the only shark to make an offer.
Now, his offers aren’t the cheapest given that they’re riddled with royalties and debt,
but he usually asks for less equity than all the other sharks. In many cases, he even offers lower
equity deals just to squeeze the other sharks and force them to make better offers themselves. Kevin
also never puts time limits on his deals like some other Sharks. So, though Kevin is often portrayed
as the evil bald dude in the middle, I think Kevin is actually the fairest shark of them all.
In most cases, he just wants a fair valuation and a clear path to profitability for himself
and the entrepreneur. Despite this, Kevin is often the last choice for entrepreneurs
which is a shame given that Kevin is usually the second wealthiest shark in the tank
and the most straightforward. So, here’s the story of Kevin O’Leary and how he became Mr. Wonderful.
KEVIN O’LEARY:
Taking a look back, Kevin’s story dates back to July 9, 1954, in Montreal, Canada. His
official name is actually Terence Thomas Kevin O’Leary, so Kevin is not actually his first name.
Anyway, Kevin’s father was a salesman while his mother ran a small local business.
This provided the family a decent life for a couple of years, but this didn’t last long.
You see, Kevin’s father slowly became more and more of an alcoholic which caused several
fights between Kevin’s parents eventually resulting in a divorce. To make things worse,
Kevin’s father died soon after the divorce when Kevin was just 7 years old. This forced
Kevin’s mother, Georgette, to really grind on the business and look for other streams of income.
Most people in this situation would generally pick up a second job and/or downscale their lives,
but interestingly enough, Georgette decided to make up the discrepancy through investing.
Every week, Georgette invested ⅓ of her paycheck in large-cap dividend-paying stocks,
and this is what really sparked Kevin’s interest in business and investing. Fortunately, things got
better financially after Georgette married an economist named George Kanawaty. Given that he
worked for United Nations though, the family had to constantly move around the world. Usually, this
would be a disadvantage because moving is often just a nuisance. But, in Kevin’s case, I think it
was actually a massive advantage because he wasn’t moving from Minnesota to Michigan or something.
He was moving from Cyprus to Cambodia to Ethiopia to Tunisia. Each of these places
had radically different cultures, languages, and traditions which really opened Kevin’s eyes
to the other side of the world. This actually inspired Kevin to capture his experiences by
becoming a photographer, but due to his stepfather insisting on him attending college, Kevin would
end up at the University of Waterloo where he majored in environmental studies and psychology.
He would quickly turn around a complete an MBA at the University of Western Ontario in 1980,
but this was basically the end of Kevin’s journey through the normal path.
SET ON BUSINESS:
Kevin was pretty set on avoiding a regular 9 to 5 ever since his first job at an ice cream shop.
Kevin was hired as an ice cream scooper and while this seemed like a pretty chill high school job to
earn some extra money, the money isn’t what drew Kevin to the shop. The main reason Kevin applied
for the job is because the shop was located in a mall, and his crush, Elizabeth, had a job at
the store right across the ice cream shop. Kevin was hoping that by working at the ice cream shop,
Elizabeth would notice him and they could potentially grab lunch one day. But, Kevin’s
dreams were shattered on the second day. You see, right as his first shift came to an end, Elizabeth
would notice him. This made Kevin ecstatic as he could talk to her right after the job ended. But
then, the owner of the shop asked Kevin to scrape the gum off the floor before leaving for the day.
Given that Elizabeth had noticed him, Kevin didn’t want to be seen doing such a job, so he came up
with a witty response saying that he was hired to be a scooper, not a scraper. And as you would
guess, this got Kevin fired. As soon as Kevin got home, he complained to his stepfather about his
experience and told him that he never wanted to work another job. To this, his stepfather replied,
well even if you’re self-employed, you’ll be responsible to customers and shareholders
who are often just as demanding if not more demanding. Kevin says that he refused to believe
his stepfather at the time, but now, he realizes that he was completely right. Nonetheless, Kevin
was determined to avoid a traditional job, and this is what drove him towards photography, but it
didn’t take him long to channel this energy into a business. After college, he would end up starting
Special Event Television or SET with two of his MBA classmates. They put out some semi-successful
sports programming including The Original Six, Don Cherry’s Grapevine, and Bobby Orr and the
Hockey League. They also produced soccer films, sports documentaries, and sports commercials.
While this was somewhat successful, Kevin knew that this wasn’t the path he wanted to go down,
so when one of his partners offered to buy his stake for $25,000, Kevin would take the deal.
He instantly turned around and used this money to start a new company and that brings us to Softkey.
SOFTKEY: Kevin founded Softkey in 1986 with
two business partners named John Freeman and Gary Babcock. Middle-class families were just starting
to get their first computers around this time, so Kevin knew that there would be a lot of derived
demand in the coming years. Looking back, I think Kevin would’ve far preferred to start a software
company like Adobe or Autodesk, but at the time, he ended up choosing educational software.
The reasoning for this was that the education niche was under-targeted by competitors, but this
wasn’t a mistake. You see, the education niche is extremely difficult because either you’re dealing
with schools with extremely restricted budgets and drawn-out approval processes or you’re dealing
with parents who don’t really see the value of the product. The pitch to sell the product isn’t
particularly easy either because the benefit is not monetary. With something like Photoshop,
the value is obvious. You get photoshop to produce better pictures and drive in more revenue for your
business. With educational software though, parents have to hope that the software helps
their kids get a better education, and hope that it makes a meaningful difference in their lives,
and hope that it pays off when they grow up and start making money. As you can see, there are
a lot of ifs and hopes and the ROI timeline is extremely long which makes the business extremely
difficult. It didn’t take long for Kevin to realize this, and this forced him to place a heavy
emphasis on marketing. Kevin says quote, “What’s inside the box is important, but it’s not as
important as how it’s marketed." Softkey was one of the first companies to embrace the revolving
CD rack which allowed them to display their CDs more efficiently than any of their competitors.
Kevin also chose to display the product in more general stores like Office Depot, Radio Shack, and
SmithBooks as opposed to just traditional software stores. This showcased the product to a much
broader audience leading to substantially more revenue. Aside from smart marketing, Kevin also
chose to keep the price of the software as low as possible at $40 to $100. This left the company
with razor-thin profit margins, but allowed them to move much more volume and made it difficult for
new competitors to enter the scene. This allowed Softkey to become the dominant education software
company by the early 1990s, and with that Kevin would start to buy out his competitors.
MAD CUSTOMER:
In 1993, SoftKey would merge with WorldStar International and Spinnaker Software to create
SoftKey International. Just one year later, they would purchase Software Marketing Corp
using 600,000 shares of common stock, but their most influential acquisition
didn’t come till 1995 when they got into a bidding war to purchase the Learning Company.
SoftKey did end up winning the war, but it would cost them $606 million. Around the same time,
SoftKey would also purchase Minnesota Educational Computing Corporation for $370 million.
All of this made Softkey bigger than ever before, but they were also more fragile than ever before.
All these acquisitions had taken a toll on SoftKey’s balance sheet and their razor-thin
margins didn’t help much either. Luckily though, Mattel would offer to buy the company for $4.2
billion in 1999. Kevin of course took the deal, and this allowed him to sell his company at the
peak of the dot-com bubble. While this was a smart move for Kevin, this was disastrous for Mattel.
In the year following the acquisition, Mattel’s goal for SoftKey was a $50 million profit,
but the company ended up losing $105 million. Investors were not happy at all by these results
and they would start to dump Mattel stock leading to a $3 billion decrease in Mattel’s valuation
in a single day. A group of Mattel’s investors would get together and file a class-action
lawsuit against Mattel and Kevin for misleading investors and making a terrible acquisition. Kevin
and Mattel would initially deny all charges, but eventually, Mattel would give in. First, in 2000,
Mattel would decide to dissolve all of SoftKey’s assets. They sold the education division to Gore
Technology Group. They sold the entertainment division to Ubisoft. And they sold the brand name
of, The Learning Company, to Riverdeep Interactive Learning. Mattel took massive losses on each of
these sales, and to make things worse, they agreed to settle the lawsuit in 2003 by paying out $122
million. This was truly quite unfortunate for Mattel, but things couldn’t be better for Kevin.
FREEDOM:
Kevin says that he was never chasing money with SoftKey but rather chasing freedom.
And now that he had sold his company, he had more money than he could ever need.
Kevin’s net worth is currently estimated to be around $400 million, and though that’s a solid
amount, it’s pretty modest compared to where he could be. Even if Kevin just invested all of his
money in something like the S&P 500, he’d likely be worth a few billion dollars today, but Kevin
has far preferred to preserve his wealth than grow his wealth. He does have some speculative/risky
investments in his portfolio like Bitcoin and Tesla, but these account for a very small portion
of his portfolio and he doesn’t let them grow past 5% of his portfolio. Aside from limiting
his exposure to speculative investments, Kevin likes to keep a lot of his wealth in cash and
bonds which is obviously not the best for growth. Kevin also avoids debt like the plague and advises
that people should get rid of their mortgage debt as fast as possible. Considering this super
conservative investment style, it’s not clear if Kevin will ever reach the billion-dollar mark,
but like I said, Kevin doesn’t really care about that. It doesn’t really matter for his kids either
as Kevin refuses to leave any inheritance money. Kevin thinks that you curse a child when you
de-risk their lives and he absolutely despises entitlement. He doesn’t want any of his children
or grandchildren to have a poor childhood though due to bad parents. So, he created a trust that
gives his descendants money up until the day they graduate college. But after that, they’re
on their own. In the meantime, Kevin has spent his free time revisiting his passion for photography.
Apparently, he owns a massive collection of Nikon and Canon cameras and he owns every lens you can
think of. And considering all the work he put in to get to this point, I think it’s only fair that
he’s able to finally enjoy his wealth and explore his passions. Are you guys a fan of Mr. Wonderful?
Comment that down below. Also, drop a like if you agree that Kevin is the most underrated
shark on Shark Tank. And of course, consider joining our discord community to suggest
future video ideas and consider subscribing to see more questions logically answered.