Steve Jobs Was the "Toughest Bastard" I Ever Met | Kevin O'Leary

Welcome back to segment 3 with Kevin Oli. All right, two words: Steve Jobs. Um, the toughest bastard you've ever met. He is tough. He was, you know, I went to his, uh, I called him up. Um, I said to him, "Listen, Steve, you have 2 and a half% of the market and we are your number... Sorry, what year is this?" This is 1998, before Apple ruled the universe. They were in a wobbly situation. Yeah, they had 2 and a half% share. My development cost was 54 million a year for his titles. You know, I was the number one, uh, title on the Mac platform for reading in math.

And I called him up and I said, "Look, Steve, I need to meet with you. The economics are not working for me." Um, he said, "Sure, I'll take a meeting with you." So we go out to Cupertino, and uh, Jobs shows up with probably seven other executives in the room. I'm there with my head sales guy. He said, "Steve, thanks for coming out. I have a very simple request: you're going to have to give me $54 million if you want me to develop the next cycle of title for the Mac because there's no economics that makes sense for me." He looked at me and he just started to verbally abuse me, every swear word in the world. Just... he said, "Are you out of your beep beep beep beep?"

And then he got up out of his chair and he circled around and said, "You be some beep beep beep." I'm looking at him, I'm stunned. Like, the guy is just beating me up verbally. I'm used to hard times, so, you know, whatever. I said, "Hey listen, this is all great, but are you going to give me the 54 million bucks?" And he said, "Get out of here, for... get in the parking," just abusive like crazy. I said, "Okay, this is over." I walk up to the parking lot and there's one of these windows you have to roll up to the bottom, and he rolls up. He's yelling at me from down the parking lot.

I looked up and said, "So do we have a deal or not?" He said, "Call me tomorrow." Like, the guy just wanted to beat me up 'cause he was, I guess, frustrated that... 'cause he had a lot of pressure too at that time. So anyway, so at the end of the day, we remained the number one U player on the Mac platform. We built a business off it.

Years later, I met WNC, who was a completely different kind of guy. But I understand how Jobs worked; there's a certain amount of fear in that organization for him. I mean, he tears into people after he looks at the IIA or anything of a product, and he'll rip their heads off. Yeah, like people don't want to get in an elevator with him.

Okay, so you have this line about, uh, if you don't come to work on Saturday, don't bother coming to work on Sunday or Monday. Are you serious, or do you value some balance for your employees? No, no, there's no balance when you work for me. And look, here's the whole point. See, I’ve discovered that this is the way it works. If you want balance, go work for a company that's 9 to 5. Buy a dog, go see your kid play baseball, but you're never going to get rich. You work for me, generally speaking, you get options in the company. I expect you to work 24/7 like an animal until we're successful so that you can cash out. You're trying to get some form of freedom when you work for me.

So my employees, when I meet with them, say, "Look, here's how we work. If this is going to work for you, give it a shot. Maybe you work for 3 years, 4 years, you cash out. That's great. Don't come here to make friends. I'm not going to be your friend; come here to make money." It's that simple. Not everybody can take that, but the ones that do come in, we form powerful teams. We're vicious competitors. That's the kind of guy I want working for me, or woman.

Okay, so one thing is, you have been called a lot of bad words. You're right. I will say this: everyone has an ego; it's how you manage it. But I did not detect a single hint of arrogance in this book, which is, I think, surprising. People would have expected you to be somewhat arrogant. But my question is, you did one thing with Michael Perch, which I think even I'm not mad enough to do, which is when you brought him on to be, um, your partner, you made him co- and an equal partner.

Now mind you, I had vested, I guess, to some extent, so it was easier to do that, but that's a big thing to do. I mean, because the company had been around. So what is your view on partnerships and why are they so important? So here’s the way I look at it: you know, the key to success as an entrepreneur is not to understand your strengths; it’s to understand your weaknesses.

Now here's what I knew: I was weak at logistics, manufacturing, and shipping. Logistics bores the crap out of me. I'm just not interested in it. When Walmart came on board and said, "Look, we're going to change this whole industry and we're going to make you our guys in educational software," we had the challenge of moving 80 million units. I can't do that; that's not my skill set.

Michael Perch, on the other hand, is myopically focused at that kind of thing, and I knew that he was one of our sharers. I went and approached him and said, "Listen, why don't you leave your PE firm? Okay, I'll give up the title of CEO. You're going to be the CEO. Your number one role is going to be logistics because if we are not successful at this, we're going to fail. This is the only thing that matters: shipping these units all around the world."

He looked at me and said, "What's in it for me?" I said, "You know what? I own a ton of stock, lots and lots of it. I'll make a deal with you. I'll make you equal partners." And this is how, and I'll in the book, in writing it, I looked at every transaction where I've made money—not just learning companies, storage. Now the Larry funds deals before that, all the deals where I made money were partnerships. All the ones where I had catastrophic failures are things I tried to do myself.

So I've learned now that it's much better to partner with somebody who actually fills in the holes, or many people. Yeah, many people, of course, but in the case of Perch, there was actually three people: myself, Perch, and Scott Murray. So Perch is logistics, I'm sales and marketing, and Murray's the CFO. We were the most feared management team in the consumer software business.

If we called you, you know bad times are coming your way because either we're buying your company or we're going to compete with you. You mentioned the word fear: better to be respected or feared? Both. Respect and fear. No, both. On this show, my show, my rules. The reason people respect you is they fear you. That’s what happens; they actually have the same thing.

Okay, but again, only one can’t be both. What's more important: who you know or what you know? Oh, that's a good one. Um, who do you know? Okay, you've eaten—and I say this very respectfully—but you talk about them in the book. You've eaten cat food. Amazing story as a former sales guy myself. And you've scraped gum off the floor. Which one changed your life more?

When you look back, you're like scraping gum off the floor 'cause I got fired, and it changed the direction for me forever. Fair enough, fair enough. You say money goes to bad people but not to bad ideas, which I think is a very true and genius thing to say. Expand on that idea.

So the concept is that, you know, people say, "Well, you have to be a really nice guy to make money." That’s not true. Many [expletive] make lots of money. Money goes for the path of least resistance. It doesn’t care about your personality. It's looking for an opportunity to grow and expand with the least risk, with the least, you know, resistance to success. So I've learned that I work with many people that I would never be friends with, but I make money with them, and I respect them for that.

Many, many, many people—I can certainly keep the emotion out of that decision. You mentioned that altruism and capitalism have to coexist. My question is, I see that to some extent, but in your mind, does everything have to make money? Yes, everything. Everything has to make money or have performance metrics. Think about even a charity.

Yeah, talk about the five for five. Sure. My strategy is very simple because I get bombarded with requests to give away money, and I'm happy to do so. I take the same percentage every year of my income after tax, and I pick five charities for five years, and they get the same amount every year for 5 years. When that 5 years is over, I get five new charities. And that way, I can stay focused, make a difference—they know that they're going to have some kind of return from me—and that way I can do this in a way that I've got that deal done and I know it's going to work.

Agree or disagree: greed is good, which is a quote from the fictional character Gordon Gekko. You talk about greed being good, but do you agree or disagree? I agree, and I think greed is not only good; it’s wonderful. It’s wonderful. Okay, character expander. Next question. Okay, let's go. Next question.

There's a few more things. There's a quote from Douglas Ivester, former CFO and brief CEO of Coca-Cola. He basically says, quote, "When your competitor is drowning, stick a hose in his mouth," end quote. Do you agree or disagree with that? I agree, but I would pour boiling oil into that hose. Ouch!

Alright, next quote. Dick Parsons, former chairman of Time Warner, current chairman of Citigroup, quote, "When you negotiate, leave a little something on the table," end quote. In other words, don't get so much like every penny you could because it's a short life; you're going to run into the same business people. And if they feel you had the massive upper hand and it wasn't a fair transaction, they're not really going to want to deal with you again. Is Dick, is Mr. Parsons right or wrong?

Well, he's right in some ways, but I look at it a different way. The best deals are ones where both sides are unhappy. Oh, interesting. Okay, not happy—unhappy. Both are unhappy? That's expand. Why? Because if you're both unhappy, you’ve both left—both sides left lots on the table. In other words, you never got what you wanted; either the other side—that's a good deal and generally the beginning of a great partnership.

What is stronger—and this I think is more an investing question, but it would apply to management and entrepreneurship as well—what is a stronger feeling: greed or fear? Fear. I think fear is a better motivator than greed. Is the stock market efficient in terms of information? Do you have massively more access to information than regular Joe who's looking at investing in IBM or Apple? No, um, the market is extremely... I'm not accusing you of ins... no, I, I don't do insider trading anyways. I mean, I don't actually trade at all because I'm a fiduciary fund, so I'm, you know, prohibited from trading.

So I look at it this way: the market has become extremely volatile because there's lots of transparency and lots of information, and we now have high trading programs that do this. So I anticipate that we're going to have 2% to 3% moves every day for the rest of my life in the market.

Okay, you talk about business being in your DNA. You've also heard about the line about, you know, Warren Bennis, professor of USC. He says, "Leaders: are they born or are they made?" So my first question is, you are a hell of a salesperson—are salespeople born or are they made?

Well, everybody's born. But the way I look at it is great salespeople are able to live with very strict metrics. So I hire all my salespeople, and what I try and look for in them is: can they get up in the morning and say, "I want to go to bed at night richer than I woke up"? That’s the hallmark of a great salesman because they're paid on commissions. That's how it works.

You know, sales is tough, and only two-thirds of your sales force are going to work out long-term. Most of my firings occur in the sales area because it's clear to me it's not working. It's a combination of relationships, a little art, a little science, and in an organization, the people I respect the most, they're not the CFOs; it's the salespeople.

That's where I have a ker... speak. A couple more questions. Don’t you say, "Don't let others determine your worth"? I totally get that. Now let me ask you something: your best sales guy walks into your office and says, "Boss, it's time for me to go start my own company." Do you A, try to pay him so much to stay; B, change his mind; or C, say I want to invest or get out of—?

No, no, but you know, I looked at you... pour hot oil on—no, no. If people don’t want to stay, I never try and keep them. That doesn’t make sense. I mean, if he's found a better opportunity, but I would never invest in a salesman because they're not generally the best managers. They're the best salesmen. Never promote your best salesman to run sales. Sales differ; it's a different, different breed.

Okay, final questions are sort of sub-questions regarding your investing track record on Dragons' Den and Shark Tank. So how many companies have you invested in on the two shows? Oh, about 20 by now. Okay, 20. How much money have you invested in all of them? Oh, I'd have to add it up; the deals are in size. The high... the biggest one was 2 million, and the smallest one was 5,000 bucks. What did you get, what percentage for the—?

You own um, that deal is a royalty deal, so it's 51%. But here's something about... look at the statistics. CU, you ask. This is an interesting line. Let me tell you: the uh, the stats vent—you're investing. This is going to be shocking to you. Since from the, from 1992 to 2001, one in 10 deals got liquid and made their shareholders money. Hear me on this: since 2002 to today, it's one in 125.

The returns on venture investing actually negative on Dragons' Den and Shark Tank. Every time there's a handshake when you see a deal like that, only one in three of those closed because two out of three don't survive due diligence of the investment portfolio, including the British, the American, and the Canadian, where there are hundreds of deals done: one in 17 has made money.

I don’t doubt that it’s venture cap investing, but I get a sense from the little I’ve seen in the show and what I’ve read and what I’ve heard, it’s more almost like a bank loan or like a, you know, a—it's changing now because banks aren't lending, so real companies are coming on. Think of Dragons' Den as this: it's the venture capital—it's the American Idol of venture capital. If you get your product on there, 2 million people see it four times a week; your sales are going up 35%.

So I'd argue that I'd rather invest in a company that's a consumer good or service and have it on Dragon's Den, get the free advertising, but making money with it. Now, most of their deals are being tailored with royalties or some percentage of cash flow paid back to the investor form factor.

Yeah, so okay, I want to just—two more sub-questions on this. Any exits yet from your investment on the shows? Yes, there was one called, um, IQ Zone in season 2, which was an app, one of the early apps for, uh, Nokia cell phones. That was an exit; it was a good outcome. Um, there's another one that's coming along very, very well called Digidog gloves, which is from two seasons ago. It went from zero to 400,000 in sales. This thing is taking off; it's building a brand.

Uh, the rest are the living dead, basically. You know, I'm writing checks, and you know, frankly, that's going to be the ratio. It's going to be 2 and 8. Alright, we could chat for hours. Fascinating. You do a great job of telling your life story. It's probably from a bi—like biography perspective, this book was probably more entertaining than most bios, and from the money and business lessons, it was great. Cold hard truth; it's available in bookstores, online, and great places.

Kevin O, thank you very much. Thank you very much!