Why “Mr. Wonderful” Kevin O’Leary thinks failing makes for better business leaders

The Street

Kevin O’Leary, also known as “Mr. Wonderful,” joins TheStreet to discuss why he thinks failure makes for better business leaders.

Transcript

00:00 As we know, you're known for giving advice and helping small businesses grow.

00:07 And you said you like to work with entrepreneurs who have experienced failure.

00:11 Why does failing make somebody a better leader or business creator?

00:15 The sting of failure is extremely motivating.

00:18 And usually you've learned your lesson.

00:21 You know, most people don't know what they don't know when they start out.

00:24 So I always tell people, be an apprentice for a couple of years.

00:27 If you love a sector, work for somebody in it and then break out on your own.

00:31 But if I meet somebody that's had two failures in a row, I have no trouble investing in them again.

00:35 Because I've done that too.

00:37 I mean, if you're an entrepreneur, you're going to fail.

00:40 And the ability to just get up and keep competing is what really matters.

00:44 I don't believe people can do it right out of the gate.

00:48 It's very rare. It never happens quite that way.

00:51 You may have a plan, but that doesn't mean you're not going to hit valleys and peaks.

00:55 And I just prefer people that have been, call it, tempered by the extreme pressure of failure.

01:05 It's very hard.

01:07 And entrepreneurs that have been stung by it have learned a lot.

01:12 And I appreciate that.

01:14 And what's the biggest mistake you see entrepreneurs making early on in their ventures?

01:20 Inability to pivot when facts change.

01:24 And I see this--I have to swap out a lot of CEOs in what I do.

01:29 I've got to fire a lot of people.

01:33 It's very challenging to get your first million in sales.

01:38 Really hard.

01:40 When you get to five million, you've proven demand for your product beyond your uncles and sisters.

01:46 You've got real market information about what you've created as a good or service there's a need for.

01:56 Because you're solving a problem.

01:58 Great entrepreneurs find problems and they solve them.

02:00 But the ability to scale from five to 50, that's rare.

02:05 That is when you actually have to find talent and give them their ability to make their own decisions.

02:11 And very few founders can delegate authority.

02:18 And so when I see them get stuck at five, which happens a lot, I have to make a change.

02:27 And this is when I have a control position, not through debt or equity.

02:30 But I explain to them it's not a bad outcome for them.

02:34 They're still a great founder.

02:36 They will remain a shareholder, but they will stop trying to create value because they don't know how to get to the next level.

02:45 It is a very difficult conversation, but I can recognize it almost immediately.

02:51 And it is what it is.

02:54 And if you don't make that change, it's a cancer inside the organization.

03:01 You're doing surgery.

03:03 You're keeping the whole organization alive, protecting the customers and the shareholders,

03:08 and doing the right thing for that entrepreneur.

03:11 But it's not without pain.

03:13 [silence]

Category

Transcript

Recommended