Kevin O'Leary Keynote at Notre Dame

I tell them how I want to spend our time together today. I'd like to talk a little bit about television because obviously one of the reasons I'm here on Shark Tank is because it's such a remarkable success that we're all in awe. We are thrilled with what it has become It is a platform to launch businesses It is the number one show in America watched on Fridays The number one show watched by families The fastest growing demographic is women ages 9-18 who know that they must mature faster than men I guess, but it's still growing, it's phenomenal and we talk a little about it because people ask me why do you do so much television or are you a narcissist, do you love watching yourself talk, do you want to change all the channels and watch ?

Your face and I are going to discuss today and we are going to do an experiment together that the discipline of business the science of business is very binary either you make money or you lose it it's black and white television it's pure chaos and still I'm going to show them a wonderful synergy between the two, obviously Shark Tank is a platform, there's no doubt about it and what happened on this show is that a lot of people realize that if you can access it and you have a product on the market. You can increase your sales by 10,000 percent in 24 hours, but the true test of its power would be to take a basic product, something that is ubiquitous in America, that we can buy anywhere and see if it makes it onto Shark Tank, can you?

Would you differentiate the result from that? company how powerful Shark Tank is how powerful it has become, so my theory was why not fund a basic product, something you can get anywhere, and see if we can somehow build a national brand on something that has no property value, that would be the true test of what was Shark Tank now? What could that be? Let me give you an example. What is more common than a cupcake with water and sugar flower? Anyone can do it. A company from Kohath, Massachusetts came and called Wicked Good Cupcakes in the shark tank.

None of the others. The sharks were interested, but I had this theory in mind, let's test it, so I'm going to show you a couple of minutes of video of this particular deal, we'll look at the deal itself, we'll see how it was structured and then I'll show you the numbers, what happened in the first 24 months of 36 weeks since then, what happened to good and evil cupcakes, so look at this first, what is happening with this company? It airs at 9 o'clock on a Friday night. The month before Shark Tank or the month before 24000 airs, look, what happens next?

Run rate is 450k per month, will generate free cash flow of 800k. Danny, the 27 year old, just got married. I helped him with a prenuptial agreement. She has $800,000. This company is actually owned by her and her mother, so this is the fastest growing cupcake company in America right now. It recently secured a 10% buyout from the Fisher family in Chicago, who brought the crumb retail chain out of bankruptcy. Starting next week this will be on sale throughout the United States, we have moved to cakes and are charging 20% ​​more for gluten free products. I love it and I love it, so the shark tank factor is very much alive and I think.

As you look at what this is, it really is a launchpad, it's clearly a commodity and it's growing very quickly and I think the United States estimates that we have 110,000 applications for the current year that we're starting to shoot. Everyone understands how this works, but what is it? What's really going on here with evil cupcakes is that they discovered that the customer acquisition costs of being on Shark Tank are zero, they don't spend any money on advertising, what they're trying to do is stay on TV and because they're husbands or sorry. I have a daughter and mother team who are very hot in America right now for appearing on daytime television.

They are omnipresent, they are everywhere. They've hired a lot of new people. We are creating jobs here. Actually, 42 new ones. This is a little dated this slide you see them every week on a show another Good Morning America next week charting their success this mother and her daughter have figured out how to stay on television and continue to grow now let me give you some statistics on the capital of risk of more than 50 years years, it is a very risky proposition if you look at 10 deals in the last 50 years, including the Internet bubble, only 2 in 10 capital is returned, meaning 80% of The times, nothing changes, so if you look at a typical venture capital company gives a big 80% of the time they lose their money after six years.

Shark Tank is now achieving a return on equity on 40 percent of its deals, four out of ten. Why is this my speculation for a marginal company that would spend twelve to Fifteen percent of advertising is eliminated to overcome those costs, they get it for free, so even a cupcake company can enjoy tremendous growth without advertising costs. customer acquisition, so this platform is a giant infomercial worth about twelve million dollars a year to a company. Go on, how do I know? Let me give you a case study that is 48 hours old. How many of you remember Groovebook?

Remember this one 11 months ago. Brian and Julie, a young couple from Chatsworth, California, brought this deal to Shark Tank. Very simple shots. hundred images from your phone every month and sends you this catalog that catalogs your life, your children, your family for $2.99. How is it possible that they can do that? Because this slot allows the book to bend 34 degrees so it is considered a magazine, not a book. ships for 85 cents instead of 250 the value is on the beat they had 14,000 subscribers when they aired today they have half a million Shutterfly called me a public company said we should buy this you're stealing our share and they offered me seven million dollars for 11 months later and I said, are you kidding me?

They never bought it on Thursday for $14.5 million in cash Julie and Brian are billionaires 11 months later, the American dream is alive in a big way and we see it happen on Shark Tank why is Shark Tank so successful? Why would anyone be watching this? Why would a nine year old girl be interested in watching something about business? The network wants to know the advertisers. Do the competitors want to know? There are seven different programs trying to get it right. Now I have a thesis. I'll tell you what it is. What are you watching when you watch Shark Tank?

You are watching the search for freedom. Is there anything nobler than creating your own wealth and setting yourself free? No, that's what Shark does. It's the essence of personal freedom it's not about getting rich it's about achieving something for yourself that is unique to our society and capitalism personal freedom and that's why I'm here today I want to talk to you about that that's what matters that It's what creates everything. The great thing about America is the ability to start a business from scratch in your basement, whether it's a cupcake or a group or a court.

Thousands of other ideas create a business worth millions of dollars. It employs hundreds of people. You support your family. good things that we enjoy about capitalism, which is freedom, now there is a lot of sacrifice, participation, talking to those of you in this room who want to become entrepreneurs, so let's try to learn something from the shark tank experience that I want to share with you , plus fun images. like these, three attributes common to all the deals that were funded on Shark Tank versus all the ones that weren't. This does not talk about the result of business, it is aimed at those entrepreneurs who can sit in front of investors or stand up. there and actually get your money and I want you to realize that there is a huge opportunity to understand something unique here because in each of these three cases they were present in 100% of the deals that were funded in thousands of presentations, but in all cases these There were three attributes there and the reason I mention it now is because I know some people will be in front of me in just a few minutes and I want them to listen to what I'm saying here because they might want to modify it.

His presentations were a bit ok Number one in 100 percent of the cases The deals were funded The entrepreneur was able to articulate the vision in 90 seconds or less The idea was so dazzlingly simple that it could be understood in a minute This is a cupcake we put it in a jar we send it to people for six ninety five. I understand. This is a book of rhythms. I carved a groove in it so I could ship it at the price of a magazine. I understand. Look what I'm saying. 100 percent of the time 90 seconds or less number two in all cases the entrepreneur is generally a team more than 80% of the time we are able to articulate why they were the right people to execute the business plan what credentials what confidence what experience why they are able to take an idea and turn it into a very important business present in 100% of the businesses that were financed now this last point is much more sinister because in front of me several times I have seen businesses that are now like a isotope Sizzling, the first two are present, the sharks are fighting, everyone wants in and then it happens 100% of the time, people, but they find that they were able to answer every question about their business model and their numbers with perfection when you're sitting listening.

As an entrepreneur, you start asking them how much market share you need to break even. What are your margins? How big is the market? How fast is it growing? Who is your number one competition? How much free cash flow do you think you'll earn in the first one? three years if you can't answer those questions or you make a mistake or you seem lost you are screwed this is very important this last one is deadly and I want you to remember it because today I tell entrepreneurs if you are not good with numbers, bring someone who is incredibly important.

I want to talk about the economic environment we're in for a moment because you're going to enter the workforce. I manage about a billion dollars in one of my companies in a mutual fund. company, so I have a lot of data with me and I don't want to make it complicated or long, but I want to talk to you about the environment that you are in and what has changed in the last 10 years, first of all, we are very lucky in North America, Even if you can't read this graph, explain what it says. Our company's SP500 has record profits until yesterday.

Record cash flow. Record profits. Record share buybacks. You made more money than you're making now, so that's the good news: You're entering a really interesting economy even though we have a lot of bad things to worry about: pandemics. Isis Russia, our companies have never made more money than they can make right now. Well, a lot of people tell me, wow, the bull market is old, it's going to correct, it's going to crash right when you graduate, take the excitement, let's look at the data. I love looking at data. This is a chart of how many days between 15% corrections in the stock market a 15% correction is painful.

It has been 714 days since the last 15% correction. There are many periods in history where thousands of days have passed before the market corrects. I believe we are in the third inning of a bull market, that is how I am investing not only in small companies but also in large ones. I like to take the emotion out of the data. The challenge everyone has in America today, especially those who are retiring. With these low interest rates, most of us who have been retired would buy municipal bonds or a ten-year government bond and earn 5 to 6 percent over a hundred years.

We could do that and in recent years the rates have fallen to less than three, but I want to show you something. I spend a lot of my time studying what economists think will happen in the next 24 months and what I see coming: rate increases of about 30 basis points, a third of a percent in the next 24 months. That's the general consensus globally on what's going to happen, so should we be worried if rates rise with a market crash? Let's look at what happened back in 1999 when the rate swap or, more recently, in 2004, basically nothing: high rate levels mean more economic activity.

The market falls 67% and within ten months it returns with force. It's also good news for all of you, because you want to graduate in a growing economy. Obviously, there are some changes in this economy and I'll tell you what the demand and I are. I will explain what this chart says: Institutional investors today have changed their minds about many things and one of them is the concept of dividends because of all the volatility of 2007 2008 2009, what really happened in the market is that they can be bought two types of companies, those that pay dividends and those that don't, so I took the data and said if you invested in the sp500 and bought all the companies of which half have my dividends, wouldn't you make about 10 percent if will you just buy? companies that were increasingdividends earned the same 10 percent, but here's the difference: They had 40 percent less volatility in the stock price of those companies, so now, suddenly, institutional investors have placed a huge premium on stocks that pay dividends because we don't want the stops to go up and down in our volatility, that's why Apple Computer, after Steve's job died, declared a dividend, they couldn't attract institutional investors because everyone wants to reduce volatility and that matters to you too because you will be asked to make more money than ever when you get a job, your managers, whether you start a company or work within one, the pressure on you globally to provide returns that based on cash flow will be unprecedented because people want security.

Now that's what matters, let's talk about what it takes to be a great entrepreneur. First I want to talk about balance in life. This is not good news for some of you. If you are going to take the path of entrepreneurship, there will be no balance in your life. not during the period when you are growing your business and I will tell you why you have to fall in love with your business, it will consume you, it will consume your living hours and if you don't have the passion to do it. your competitor will do it and kick your ass because they are so in love with what they do.

I'm going to tell you a little story that is difficult to hear but it is the truth. I was teaching a class very similar to this one afternoon. Recently at a university, when a young man who was at the top at the end of class at 9 pm raised his hand and said: May I ask a question, Mr. O'Leary, I am struggling with a problem, a personal problem, and I said: well, I'm not dr. Phil but let's hear it he told me that his fiancée in the morning was a Friday he had told him he couldn't spend or couldn't spend more time with his family she was going to leave him I said what consumes your time he said well I'm still in love with me last year here, but I started a software company that provides compliance software to hedge funds in the Boston region, there are tons of hedge fund companies, my subscription rate is 5 million dollars a year and I'm running out through my door I said wow are you kidding me what's the problem? he said well, I have to work all day all night, I have to go to school and I have to work on my coding.

I have 16 people working. Me coding globally with me I'm busy and then building this and it's working, we're providing compliance reports to the SEC and we're making five million dollars a year, but my fiancee is leaving me and I said we'll wait. Let's be pragmatic, which is easier to replace? What I want to say here is that if you choose to become an entrepreneur, you must have a partner who understands the journey and the reason why you do it, you do it to free yourself one day. That's why you do it and if you're ready to make that sacrifice you can be on your way.

I don't know what happened to that couple but I guess it didn't work out and I'm sure he's still doing it. money, great entrepreneurs have enormous knowledge of what they sell, they know a lot about everything, but it is better that they know a lot about what they sell, you never want to be caught giving explanations and not knowing your product, that is because you are so passionate that you pass all your time doing it that's exactly what matters they put shareholders first the moment you take someone else's money you're definitely number two for the rest of your life the reason you can raise capital is because your shareholders understand that.

This is incredibly important in your life if you are going to be an entrepreneur who takes other people's money and that goes far beyond you. The best thing about entrepreneurship is that if you are passionate and successful, you will awaken them. One day you will wake up rich, you won't really go for the money, it will just happen to you. Everyone I talked to is successful. They don't remember the day they became millionaires. No idea. It's not important to them. They remember winning. They remember. building a business to be successful again the search for freedom is manifested in the passion that's what it's really about you have to love what you sell if you don't don't bother you have to love it more than them promised you just gave up I know that It's cruel, but it's true, it's the idea that you spend so much time at the beginning of the journey to get the freedom you want.

I have also noticed that great entrepreneurs have used all the technology available today to become more and more. efficient, if you work in your own business, you work 14, 15, 16 hours a day, it will just happen that way and there is a lot of great technology to improve what you do and it is economical, so our productivity continues to increase. In America, that's really what's happening here: people are using these things. The barrier to entry for starting a new business is practically zero. You can do it online, it doesn't mean it's easier than 10 years ago, but it's pretty cool that you can do it. do it for practically nothing.

I want to talk to you about something else here that is unique to your generation. You are no longer competing only with the United States. You are competing with everyone around the world. Someone in China right now wants to kick your ass. 250,000. engineers a year who graduate there are no longer copying us, they are creating completely new technologies, even if you have a product or service that you sell right here in this city, someone somewhere else wants your market share, you can't think in the scope national, none. Many of you have to think globally, let me show you a picture and it is a snapshot of market capitalization for the first time in your life.

There are more billion-dollar market cap companies outside the United States than within the United States while we have been growing at two to three percent, the rest of the world has been growing at four to seven percent, so that in every industry we compete in there is a giant competitor in everything, it's a vicious game and now you don't even know the name of some of these. companies and they are bigger than many domestic offerings here the first time so when you graduate think global because your competitor certainly is and wants your market share look at this picture of Shanghai as a garbage dump 11 years ago there were probably no live fish in that River look at it today you have any idea how much capital it takes to make those billions of dollars I looked at this image and I said to myself I bet I could call the CEO of Otis Elevator and ask him a very simple question, the largest supplier of elevators and escalators in the world there must be a lot of elevators there, one of the best things about being a shark is that everyone calls you back, so I asked them how many elevators are being sold in the United States this year and they said worldwide There are five. one hundred and forty thousand elevators installed annually this year in the United States. 12,800 will be installed in China.

Four hundred and twenty thousand. Wow, that's competition and I want you all to be very aware of it. I want to close with some ideas that may be controversial for you, but I have watched over a long career as an investor both successful investments and failures, so I think they may not. I hope that what they leave you with is that you think about them, they stimulate your thinking, that's why I'm here. Let's do the right thing today, let's start with some of the basic premises of what makes a great entrepreneur and a great manager. First of all, employees are the core of a company, whether there are two hundred or two hundred thousand of them, and they are united by something called culture that you, the CEO, create a guide, nurture and advance, that's the good news: if everyone is on board linked in the culture, you get tremendous productivity beyond your salaries, but this is the downside when you recognize that someone is going off course and no longer believes in the mission and is no longer on site with your vision of the future you have to fire them you have to take them behind the barn and shoot them you know why because they do tremendous damage inside the organism and it's very difficult to do it but make no mistake about it even if it's your mother she's gone the business has to survive that's it What matters is this sounds cruel and heartless it's true and the way you're going to find out is that you're going to be weak and you're not going to do it.

I'm going to wreak havoc on you and you can remember my speech today and you're going to thank me when you have to drink. that difficult decision. Unfortunately in my life I've fired thousands of people, it's hard every time and I do it myself and explain to them why I give them the best package I can and I move on because I have to make money for my shareholders that's the important thing this seems so obvious and people don't understand it the customer always comes first above all else and I'll tell you why I'm telling you this because there's a really interesting change happening in the way people invest today.

Turns out I'm going to give you some good examples that work at Trump's price. I'm going to give examples to everyone in This room understands if you can create great customer service in your product or service or whatever it is that you're selling to someone and have everything that they need from your organization and that their time in Customer service can charge an outrageous price over its competitors. which is a great example of that Apple computer: you pay thirty-five percent more for a Mac laptop than a Windows one why it does exactly the same thing you love the brand you love the customer service you like the look of the store you feel comfortable knowing they have your back whenever you need them there is a theory these days in venture capital and private equity: you buy companies with really weak customer service, you do nothing but fix that and raise prices by a 15% and get an IRR of 33%, it turns out that around the world customers want the path of least resistance.

It's a bit of a secret sauce. I want you to know that if you build an organization, spend a third of your time worrying about your customer service. Listen to what they say if they are not happy with your decision. To not be successful, there's no doubt about that, it's a bit of a controversial thing now. I recently spoke at another business school. We had a great debate about this. When I want to buy a company and take a 51% controlling position, I don't ask. Me and the CEO want to meet with the man or woman who runs sales and I want to drink a good Burgundy with them, invite them to dinner, get to know them a little and ask them about their challenges in any organization.

In the United States the person who knows the most about the business about the challenges about the competitors about the product about the market is the sales manager, they know everything and what I would like to do is spend a couple of days with them and then leave . know the CEO and if they know less than me, the first person I fire when I own the company is the CEO who does not want to pay more in sales. I believe that in an organization, the number one person in terms of compensation should be the sales manager, whoever has the hardest job should earn the most money, the sales manager, who knows the most, the sales manager, who determines the destiny of the company the sales manager this is how I run my organizations I take off the covers and let whoever runs sales have unlimited advantages.

I want to be incredibly rich, because that is the fuel that makes any business successful and it is also the hardest job. I have also learned over a long career that everyone is replaceable. I love it when someone tells me oh we can't get rid of that person they are irreplaceable I fire them right there everyone has to understand that whatever you do someone can do it better you have to bring your best game every day there is nothing unique about each individual what He is unique, his passion is his ability to execute to achieve goals and surpass them the moment you lose that ability in capitalism you leave it is fair trade the engine that makes you rich can take everything away from you there are no guarantees, I think that is incredibly important now, which always gets me in trouble in today's world and maybe even here your teachers are telling you that your responsibilities go beyond just making money for your shareholders, that you have a responsibility to society, that You are not just leading a business, you are an organism that should solve many problems beyond profits.

I think that's bullshit. I think the DNA of a company is to make money for its shareholders. It is the shareholders' job to take their profits and redistribute them. to whatever cause they want after receiving their dividends or profits, their job is to go out into the world and understand who they serve, it is not their responsibility to solve all of society's problems and pay taxes to a government to do that, their job It's going to war every day and winning to gain market share to salt the ground your competitors walk on to steal your customers and take their profits and win that's your job and make profits for your shareholders so they give you more capital.

To create more jobs, be more successful, pay more taxes to provide the standard of living we have today in the United States, your job is not to solve everyone's problem, it is to solve your clients' problems.problems of their shareholders problems of their employees It makes me very sad when people tell me something companies should donate a third of their profits to charity that is scandalous, they should give everything to their shareholders who then donate to charity think about all the great things that the Bill Gates of the world the Warren Buffetts of the world do today.

The only reason they can do that is because they make money for their shareholders. Don't get lost in this debate. Stay focused and true to the mission. Business is war. You have to win it and you take the spoils with your profits and help your fellow men, but. First, you earn money for the simplest Shark Tank case. We had a sock company come out and say every sock we sell and we donate a dollar to charities for homeless people who need socks. Do you know why they will fail? It turns out that the price of socks is incredibly price sensitive.

If you are a doll or more expensive than everyone else on the shelf you are going out of business, it would have been much better to sell a better sock at a lower price to make a profit and then. give it to the homeless, that's my point, now not everyone agreesokay, try it my way, first go out and earn, create businesses, create jobs, create profits and don't let anyone steer you off course, that's it the essence of the business. We'll leave you with a story. I have an 18 year old son. my dad lives in Switzerland he is 84 years old my mother died six years ago he is alone so I often fly there from Boston or wherever I am and take one of my daughter my son my wife whoever wants to come we are leaving on Friday morning night we have dinner with Him on Saturday He gets back on the plane Sunday and flies back, so my son likes to do that.

He recently took the flight with me and as he was going up to the galleys for an approximately six-hour flight to Geneva, he told me the first time. Sometime Dad, why when we get on this plane do I have to turn left and sit in the back and you can sit in the front with the good food, the big screens and all the movies? I said Trevor, you don't have any money thank you very much for your time today yes, I spent about 11 minutes so I have a couple of minutes for questions, but I want to keep us on schedule because today we will see three offers, I will say one.

What happens with the agreements I'm going to see quickly. I intentionally didn't look at the business plans because I want you to know something about Shark Tank. We can't see the businesses first, we have no knowledge of what they do. and that puts pressure on the entrepreneur and those who have not introduced me today to be very concise in what they are doing. Remember, we looked at the three things that mattered, so if you thought I looked at your offers, I didn't. You better be really good at introducing them, that's what matters, and by the way, if someone contacts you on Shark Tank or you don't admit that he did it or not, they get kicked off the show and so are you. he comes running down the street and says I want to talk about something in a pond on Shark Tank.

I immediately say please don't tell me anything because I'll have to reveal that you did it and you'll never appear on the show, but that's why it works, we make the discovery together. Anyone has any questions? Yes, sir, it's a great question, sir. In fact, in this cohort the statistics say that about 25% will start their own business, and that 20% will be very successful, so it's tough. path, but for those of you who decide to go work for someone else, understand that you get a better balance in life, but every day that you are there you have to help your boss or whoever make money, otherwise you won't They are worth nothing. you will be fired today in the United States we are trying to reduce costs every day, the first thing we look at is which bosses we do not need the most expensive part of an organization after its input costs are the people if you are going to be an employee be good make sure setting your goals and achieving them can be a great life there is nothing wrong with it and there is no dishonor in it I was working in an ice cream shop once when I was about 15 my first real job and on the second day I was asked to scrape the gum off the tiles Mexicans from the floor and I told the owner of the store that it was called Magoo's ice cream parlor, you didn't hire me to scrape the gum.

She hired me to serve ice cream and this girl from the shoe store across the street is looking at me. I do not want to see her. I scraped off the gum and she said: What are you talking about? I own this store. I'll do anything. I want with you get on your knees and scrape that gum when I said I won't she said you're fired last job I had. I owe everything to that woman. I don't like working for people that many of you here I hope to inherit there's nothing wrong if you want to control your own destiny you work for yourself that's how it works I'm trying to inspire those of you who are at the tipping point Take advantage of the opportunity that you are young, do it.

There is nothing better than being able to wake up in the morning in 10 or 20 years and do whatever you want. It's about freedom. That's what matters. I'm not saying that being an employee is bad, but believe me, being an entrepreneur is better. a little biased any other question yes sir I will repeat the question what happens the offers that do not appear on television 300 300 offers are recorded like 230 on the air sometimes we stand in front of the lights you lose it we have a psychiatrist there on the set things happen bad sometimes some people can't stand rejection it's real life they are so convinced they are right that they don't get a deal or they collapse and blow it or they don't know their numbers and I have to shoot them.

All these things happen. Can you imagine having that opportunity on Shark Tank and you don't know your numbers? You should go to jail one more time. Yes sir. I love that, so one of the main things she said was. that you have to love what you do, a lot of people who come on Shark Tank you've told them that your love for your product is blinding you, so how do you determine that a business is failing and that you're not giving up too? soon or you're not passionate enough the difference between that's all I couldn't get to the last part not passionate or not what not to give up or give up too soon because you tell a lot of people just give up this idea is oh, I see, yeah, yeah , you know, you know, I get a lot of criticism because, you know, telling the truth, I'm the only shark that tells the truth because I think about your mandates and as an entrepreneur, you're X years old, it breaks my heart.

Watching someone spend months and then years and then their entire family's money on a really stupid idea. It is better to face the truth and abandon that search and start another. The best thing about entrepreneurship is that if you fail, you try again, but after three years. If you've done it, if you're not making money, it's a hobby, it's not a business, some people can't stand it. I couldn't care less, you know what's going to happen, reality is going to bite you in the ass anyway. Lucky that you met me, I saved you for a year that's why they call me Mr. marvelous