The Pomp Podcast - #441: Kevin O’Leary on Alternative Assets

Episode Date: December 1, 2020

Kevin O’Leary is a Canadian businessman, author, politician, and television personality. He is a Shark on ABC’s hit show Shark Tank and has had numerous previous business successes, including when he sold The Learning Company to Mattel for $4.2 billion in 1999.  In this conversation, we discuss the economic impact of the pandemic, the PPP loan program, the current state of personal finance in North America, and alternative assets, including wine, watches, and Bitcoin.  ======================= BlockFi provides financial products for crypto investors. Products include high-yield interest accounts, USD loans, and no fee trading. To start earning today visit: http://www.blockfi.com/Pomp ======================= Choice is a new self-directed IRA product that I'm really excited about. If you are listening to this, you are likely part of the 7.1 million bitcoin owners who have retirement accounts with dollars in them, but not bitcoin. I was in that situation too. Now you can actually buy real Bitcoin in your retirement account. I'm talking about owning your private keys and using tax-advantaged dollars to do it too. Absolute game changer. https://www.retirewithchoice.com/pomp ======================= Masterworks.io is an exclusive platform that makes it as easy as trading stocks online. And the best part is: you don’t need to know anything about art. Their experts will create a custom portfolio to meet your investment needs. With Masterworks.io you don’t have to choose between big risks and big returns. Sign up today, select PODCAST and you can skip the 70,000 waitlist to get first dibs. Just go to www.masterworks.io and use code "POMP"

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Let's kick this thing off. Kevin O'Leary is a Canadian businessman, author, politician, and television personality. He is a shark on ABC's hit show Shark Tank and has had numerous previous business successes, including when he sold The Learning Company to Mattel for $4.2 billion in 1999. In this conversation, we discuss the economic impact of the pandemic, the PPP loan program, the current state of personal finance in North America, and alternative assets, including wine, watches, and Bitcoin. I really enjoyed this conversation with Kevin, and I hope you do as well. Before we get into the episode, though, I want to quickly talk about our sponsors.

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Just go to masterworks.io and use code POMP to skip the wait list. Masterworks allows you to buy fractional shares of art. No brainer, you should go do it. Masterworks.io, use code POMP and thank me later. All right, let's get in this episode with Kevin. I hope you guys enjoy this one. Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his

guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only. All right, guys. Bang, bang. I've got Kevin O'Leary, Mr. Wonderful here. Thank you so much for doing this, sir. I love doing this. Great to be on. Thank you so much. Absolutely. Let's jump right in. For the three people who are watching who don't know who you are, give us kind of the two-minute on your background, and then we'll get into some of

the different investment asset classes that we're going to discuss today. Well, I'm an entrepreneur. I mean, the good, bad, and the ugly is every entrepreneur has had some great successes and catastrophic failures. I'm no different. I got involved in Shark Tank 12 years ago. That's been an incredible platform. Everybody knows the show now all around the world. And we've launched so many businesses, created millions of dollars of wealth for people and sold billions of dollars worth of products. So we're very excited about that. But basically, it's the celebration of entrepreneurship. And I'm an investor. I invest in a lot of different things. Some really work out, some don't. And I take my lumps like everybody

else. I had an opportunity when I was young, my dad worked at the United Nations. So I've lived in Cambodia, Tunisia, Ethiopia, Cyprus, France, Japan, Switzerland, Germany, everywhere. Every two years, different place. So like an army kid. But that gave me a different perspective in terms of how I think about investing globally now, because I've been to all those places. And I think as an investor, a little differently with that perspective. Yeah. One of the things I want to talk about is obviously the macro environment and the economic chaos that's occurred because of the coronavirus. You've been pretty outspoken about the PPP loans and a lot of just the state of personal finance of people in Canada and the United States. How are you thinking about that

today? And where do you think we go from here? Well, I lived through the whole PPP loan. It started in March. And I have crystal clear clarity on what happened nine months later, basically. And so here's my observations about it. It was a very blunt instrument. It was necessary in some ways, but I would guesstimate now that about a third of it was completely wasted because it went to businesses that aren't going to survive regardless of how much you stimulate them. And the reason that is occurring is that because of a pandemic that nobody could have anticipated, consumer preferences and purchase behaviors have dramatically changed. And I'll give you an example. Movie theaters, you would have never thought that all of these very strategically located

movie theaters in malls all over America would ever go to zero, but they are going to go to zero for a bunch of reasons. Number one, we've gone from 1,800 malls to 1,200 malls down to 1,000 malls. We're on our way to probably 500 malls. That is not a preference on how consumers purchase anymore. They've gone online. They've also started to consume all their digital content on a streaming basis, either to their 80-inch monitor in their basement or to their personal device. Who cares which one it is? The point is that that's not a business I, as a taxpayer, would have wanted to fund because I think it's going to zero anyways. The wedding industry, same thing. Dramatic changes going on in all of the billions of dollars spent on weddings. There hasn't been a wedding with 200

people in it since March 7th. Why do I know that? Because I have lots of investments in the wedding industry. Most of them are going to go to zero. On the other hand, 80% of my companies have done the great digital pivot have moved the focus of their sales out of retail, direct to consumer. And I would remind everybody when you sell direct to consumer, you're making a hundred cents on the dollar, not 50 cents as you do in retail. So as a result, they've been able to come back stronger than ever with a bigger focus on telling their stories and building relationships with their own customers. That all happened in eight months. Look at Nike's numbers. Last quarter, they reported two weeks ago, they're now one third of every sale they make around the world is direct to consumer.

They don't need retail as much as they used to. That's all happening. And I'm very, very bullish, even though 20% of my companies aren't going to make it. The other 80 are going to come out of this mess a lot stronger than they went in, and they're going to develop new business models. And I call it the great digital pivot, America 2.0. So I'm optimistic. Yeah.

And we just saw Black Friday numbers that have started to surface as we're recording this. And one of the things that was really interesting is that over $7 billion of the transactions are coming from online. And so is that something where that was just the virus accelerating those online trends? Or do you think that we actually would have seen something similar even without the virus

and it's just a shift of preference? No, I have pretty good data on this. What the virus has done has accelerated 36 months of online sales. In other words, if you were budgeting for three years from now to be 50% online direct to consumer, it was gonna take you 36 months, three years, and that was your capital expenditure plan

as it was for many of my companies, we achieved that in five months. And so we, by necessity, we had to close retail and we just reached out using geo locked ads on Facebook, using Insta, using all the different social media platforms. And we learned that our customers were willing to at least two thirds of the time and buy direct from us. And they're never going to go back to retail, buy the product or service. And so it's been a dramatic acceleration. And in some ways you would have never taken that risk. You would have never shut down your headquarters. You would have never said, I'm never going to go visit a buyer at a big box retailer. And yet we couldn't. So we started using Zoom and other video technologies. We're doing meetings direct for Q1

on Zoom. I'm meeting with my CEOs next week on a series of calls direct to buyers for Q1 product placements that normally would have cost us $10,000 worth of business travel. We're spending zero on aircraft. We're doing it direct in 18 minutes on Zoom calls, far more efficient. And by the way, when the pandemic's over, we're not changing that either. I'm cutting my business travel and entertainment by 50% in my portfolio over the next 24 months. We are saving a fortune. Yeah. One of the things that happened with PPP was you also got to see kind of up close the financial state of many of the employees of these businesses. And I know that you've talked in the past about just your shock as to how bad they are at saving and kind of their

financial investments. You've created some technology to try to help them. Talk a little bit about what you saw when you started to understand what the employees of these businesses were doing. Yeah, this totally freaked me out. I mean, I didn't see this coming. I could have never guessed it. I mean, there's so many cases like that in this pandemic. So here's how it went down. Starting in the third week of March, as soon as we got to read the PPP plan, it was passed on a four o'clock on a Friday in the house. And we all got it through our accountants and lawyers, and I spent the weekend reading it. What it said was you had to take a snapshot of your payroll on Feb 15th and then it would be compared against your payroll June 30th. And that would determine

the structure of the loan you're about to get or how much you get in the first place. But you had to have good accounting records and you had to have really good records around payroll. So, you know, that was the first lesson I learned. Some of my companies were kind of sloppy in their accounting and that really hurt them because we couldn't get the PPP for them because they didn't have the records. But the ones that did, there was a huge panic going on amongst all the employees, not just in my companies, but the up and down channels of supply chains, tens of thousands of people in their late 20s, early 30s, freaking out. And I didn't know why until I figured it out. 95% of them had no more than two weeks of salary and cash in the bank. That's it. They had no plan

for savings. They had no investment strategy. They had nothing. And they're, they're now sort of three or four years into their career and they haven't put anything aside. That's crazy. That's a failure in financial literacy. So what I did was I formed an app with a team and I built a business called Beanstocks, B-E-A-N-S-T-O-X. And what it does, and I realized this by talking to these employees, nobody knows how to buy a stock. I mean, there's this whole, you know, thinking that everybody knows how to trade and buy stocks and develop portfolios are diversified. Very few people can do that. So with Beanstocks, we made it completely simple investing. You just put a hundred bucks, if you can, aside a week, it puts it to a diverse portfolio of exchange

traded funds across a wide range of sectors and stocks. And it lets you over time build a portfolio. And the reason I did that in telling them this is if you can afford to put a hundred bucks a side a week. And the markets do over the next 40 years, what they've done over the last 150 is give you six to 8% a year of compounded returns. I'm not talking about saving. I'm talking about investing. Now you can't get that in a savings account. You got to put it into the market. You'll retire with about a million and a half dollars in the bank. That's a good nest egg to have because you don't know what the next 40 years are going to do to you, but you do want certainty that you can somehow save a hundred bucks a week. That's what being stocks is all

about. Anybody can download it, check it out. I worked very hard on it. And what I would say about it, and people say, what's the difference between that app and all the other apps out there? This app invests according to my investment philosophy. I'm very conservative. I couldn't find anything that was as conservative as I was towards long-term investing, so I built it myself. Yeah, this is really interesting because one of the things people give me a lot of flack for is, I always say that anyone can become a millionaire. You just have to have discipline and have a really, really long time horizon. Obviously, you've got to be young to be able to do it. but this idea of saving a little bit, but investing it, not just putting it in a savings

account. How do you think about or talk to some of these employees about how much they should save and kind of keeping that rainy day fund versus what they should be investing into the markets in a kind of conservative way? Well, you're dead right. You've asked the right question. There is a big difference between saving and investing. Saving, you don't even beat the inflation rate anymore. Basically, that's the amount of cash you should have on hand just in case poopoo hits the fan catastrophic illness in your family car accidents something tragic occurs i like to have 90 days of window so whatever it costs you to live for a month have three of those just in case poopoo hits the fan so 90 days but then you should find a way

to change your expending habits and you know people spend money on all kinds of crap they don't need. You look at your closet full of clothes you never wear anymore and shoes you don't wear anymore and all the junk you don't need and consumer electronics. Take a little bit of that and just invest it, not save it, invest it. And that is where you take and use an app like Beanstalks to pull a hundred bucks out of your account and automatically put it into a wide, diverse portfolio that you hope will achieve six to 8% a year over a long period of time. That's how you become a millionaire when you're in your sixties and you have a nest egg that you can fall against when you want to retire as opposed to having nothing in the bank.

I think the scariest outcome for people would be to have nothing saved in their 60s. That's insane. Beanstoss can help you avoid that tragedy. And that's why I did it. Yeah. One of the other things that's really interesting is there's this kind of common belief that the only way to get more money is to save money, right? And what I mean by that is cut out excess spending, et cetera. But one of the things I've seen you talk about is everyone should have a side hustle, especially if you're young. And so this idea that it may actually be easier to go make an extra $1,000 than it is to cut $300 a week out of kind of your expenses. Why do you think that side hustle is so important for young people? The side hustle is really a great idea.

And let me explain why. I used to run around just a year ago, we might have a talk like the one we're having right now. And people would say, well, how should I invest for college? And I always say, well, there's only three options if you want to get a job, engineering, engineering, and engineering. And if you want a backup plan, become an engineer. But I don't feel that way anymore because what I've learned in the last nine months is when I look at the money I've spent on artists, who are they? Copywriters. I've spent money on videographers, video editors, photographers, animators. Why? Because I've had to redo my entire digital platform on all my companies so that people would engage in the product or service and make it rich enough

content that they would buy direct from us as opposed to go to retail, which doesn't exist anymore in the same way. And that's all art. That's all great storytelling. That's all great photographers. Now that's a great side hustle. If you know how to cut video, if you know how to use Adobe, if you know how to record stuff, if you can write copy, if you can do animation, if you're a good photographer, come on. Are you kidding? The world is screaming for those talents and you can make plenty of money on the side. I'm paying tons of dough to editors in Israel and France and England and Australia, time shifted, even in China and India, all these people that are working with us on digital content, just so we can be working 24 seven digitizing all of our platforms. So

there's a big opportunity. And a lot of kids know how to do this because they've become hip to social media. They know how to use their cameras. And a lot of the stuff that we actually post now is shot, you know, with iPhone 11s. And now the 12 is 4K, 60 frames a second. It's spectacular video quality. That's broadcast quality. We're going to be using it for all of our social media. So I'm looking for talented people that know how to do that. Yeah, that's great. Because of the coronavirus and kind of all the economic chaos, people have been now looking for alternative assets. And you probably more than most were already positioned to do well there. I want to to talk about one and I want to talk about watches, two areas that you've been investing

heavily in. What's kind of the investment thesis for those two assets and how's it been going so far? Well, you know, when you're an investor, I mean, the core for me is I like to have an investment philosophy, you know, in my case, and I say this to people, it's not about just investing for growth. It's, it's investing to protect your money in case there's a catastrophic change in the market. Preservation of capital is my number one mandate. Towards that, one of my early investments was to found my own indexing company, a company that makes exchange-traded funds. I did that. I own 50% of O'Shares, which is a company that's been very successful producing products like OUSA, a core subset of the S&P that I can invest in long-term so that I'm getting dividends.

And then for the digital economy, I told the CEO, I said, why is it that I'm spending so much money? This was two years ago. Look at how much I'm spending on Zoom, how much I'm spending on CrowdStrike, how much I'm spending on Shopify. Look at my budget on JD.com, on Alibaba, on Facebook, on DocuSign. I'm spending millions on these guys. Why don't you index that for me? figure out the top 70 companies around the world that are digitizing the economy, build me an index and I'll invest in that. And that's what OGIG was. That thing is up over 80% this year. And I, obviously that's a big investment of mine. And the thinking for me was, if I'm writing checks to those companies, why don't I own them? Why don't I own them? Because they are the new,

they're allowing the digitization of the global economy. They're the internet giants and they're growing at 20, 30, 40% a year. I mean, Shopify has a million businesses on this platform now, including all of mine. And the reason I do that is I do business with Amazon. That's 40% of my sales, but I also want to sell direct where I collect my own customer data and I can't do that with Amazon. So I do it with Shopify. That's part of the index of OGIG. So that's, you know, one of the ways I invest. And I just look at it and say to myself, invest in things you understand and how they're growing. And that's what I do. Another area that really I found interesting, and this falls into some of the discussions we're going to have about alternative asset classes like

Bitcoin, et cetera, in a minute. But two or three years ago, people kept calling me up saying, Kevin, why aren't you, you're a known investor, why are you not investing in cannabis? Why don't you have a big portfolio of weed companies? And every time I want to invest in them, and I did, my guys in Washington would tell me, hey, Kevin, this is a Schedule I narcotic. It breaches the RICO statute if it goes from one state to another where it's illegal, and you're going to be a shareholder. It's a very bad outcome for you. You can't invest in cannabis for recreational purposes. So then I got approached about a year and a half ago to invest in psychedelics as medicine. Again, LSD is a Schedule I narcotic. At that time, psilocybin.

it was an illegal drug. I said, guys, how can I invest in that? It's the same thing as cannabis. And this time they said, no, no, no, no. These are going to be FDA approved trials. We're only doing medicine, no recreational drugs. So I became a big spokesperson for that sector and I invested heavily in it. And the way I look at it in investing in these platforms is invest in the ones that have a lot of trials and a lot of different molecules, because you don't know the outcome. You don't know if the psilocybin is going to work, the LSD is going to work, The A18 MC is going to work. Invest in something that has a big portfolio of them. There are multiple trials going on all around the world. And that one was called MindMed. So I became an

investor in MindMed early on. It went public. It's one of my most successful investments this year. I'm a huge advocate for it. I want them to do more trials and just keep growing this platform because the anecdotal evidence of microdosing is really interesting to solve for opioid addiction, for everything like depression, alcoholism, ADD. We haven't had new medicines in that space in 37 years. This may be them. That's why I'm an investor. Yeah. When it comes to psychedelics, what's really interesting to me is there is this kind of comparison or correlation to the cannabis industry. But you seem pretty convinced that by only going after medical use cases and not recreation, that you can avoid a lot of those problems. Is this something where kind of once

we get the legalization like we saw in Oregon or in other places that are working on it, there's this kind of gold rush and just the institutional capital flows into this space? Or is this something that's going to take much longer and it's not going to be just one or two kind of legalizations? You're going to need kind of federal legalization to really kind of get institutional capital attention. And you really know what you're talking about, kiddo. You're absolutely right. The reason cannabis failed and the companies lost 80% of their value is they never got any follow-up with institutional capital. That's not gonna be the problem with psychedelics

because they're not even attempting to go into the recreational market. They don't want to get involved in that side of the mess. They're just staying focused on the medicinal outcomes, trial, FDA approval, and release as a medicine, a prescribed medicine. And that's how they're getting institutional capital, including guys like me, to say, I'm interested

because I met the board, I met the CEO, and I said, listen, you tell me right now what matters more to me is to shake your hand and tell me you're not going to pursue recreational drugs. I have no interest in getting involved in that. I know what that did to the cannabis people. I have no interest in that. But if you're telling me you're developing medicines, I can become a big advocate and a big investor, which I did. And so you're absolutely correct. The entire sector of psychedelics as medicine is going to avoid that blow up they had in cannabis because they're never going to pursue recreational drugs the same way that cannabis people did. There's groups like

Mothers Against Drunk Driving that don't agree using cannabis as a recreational drug. Whether you feel or I feel that it's okay, there's not enough tests to determine how the amount of THC is affecting your driving skills. They have some saliva tests in Europe, but they haven't really adopted those here in Texas or in Florida, New York, or California. And the Mothers Against Drunk driving is a powerful lobby group. And they certainly, I've spoken to them and they've talked to many senators and governors about this stuff. And they have made their opinion known that they endorse medicines. They don't endorse recreational drugs. That kind of issue is boiling over in America. But you just saw at the election, the day of the election, that Washington, D.C.

and Oregon approved the legalization of psilocybin to pursue a medicine for it. And that kicks in in about 20 months. And as a result, if you look at the price and the valuations of the companies like MindMed that are researching this, their valuations increased dramatically the week after that decision was made. Yeah. And do you think that it's going to be important for those companies kind of long-term success to continue to get legalization? Like I know one of the things that most investors, including yourself, aren't huge fans of is basically waiting around for politicians or regulations to change. It feels like with this though, because of the focus on the medicine and not the recreation, that's not as big of a risk to these businesses?

You know, I make the assumption in my investment in MindMed that they're never going to make it legal as a recreational drug ever. And that will never come off the schedule list. It will only be allowed as a medicine. And I think that's the best way to think about cannabis too. You can keep talking about the individual states that are making it legal, but until it is off the schedule one narcotic list, it is subject to RICO statutes. It is a controlled substance. It cannot cross state lines. There's all kinds of problems with it. And so I just don't see the Biden administration or certainly the Trump didn't endorse it. So I think cannabis is going to sit there forever waiting to be legalized federally. I don't think it's going to happen. And I don't think it's going

to happen for LSD or psilocybin either. But pursuing them as medicines to provide for the misery of opioid addiction or alcoholism or depression or ADD or all of these syndromes that we've had no medicine work for, I think there's a lot of interest in determining it through clinical trials, stage one, stage two, stage three. And at MindMed, we have multiple trials, many of them in stage two. That's really important. So I'm hedging my bets. I always ask when I'm offered another opportunity in a psilocybin company or a psychedelic for medicine company, how many molecules, how many trials? That's how I'm thinking, just like an ETF, do I have diversity? And if I don't have diversity, not that interested. I like a lot

of different opportunities to get a positive outcome. Speaking of diversity, one place where you have an unlimited number of assets is in wine and watches. What have you been doing there and kind of how has that gone so far? Well, wine is a really interesting hobby and there's an old joke about it. How do you become a millionaire in the wine business? Start as a billionaire and get into wine. The truth about the wine industry is for decades and decades and over 100 years, it has been controlled through a Byzantine distribution system. West of the Mississippi, three tiers of distribution. East of the Mississippi, two tiers. So you have to pay two sets of distributors. It's really, really hard to make money in the wine business. The break-even

is 100,000 cases, and very few people can do that. Now, four, maybe five years ago now, now that I think about it, the laws changed and it allowed makers of wine in California and Washington state to ship direct to customers in 42 states. Now, when that happened, the first thing I said was, wait a sec, I'm a well-known guy that loves wine. People know who I am. People trust me in selecting wine for them. Why don't I partner up with somebody like a QVC, which sells hundreds of millions of dollars worth of food in just minutes? You know, they have 6.2 million viewers there. Why don't I go into partnership with them? We go to the wine business together. I'll launch a Leary Fine Wines on QVC and see if I can get to that critical mass of 100,000 cases.

Well, that happened in the first weekend. And so we learned a lot about the business. We figured out the logistics of being able to do it. And yes, I was selling wine in retail, making no money doing that. Now I'm in a profitable partnership with QVC. We had a huge wine sale just before the holiday, you know, hundreds of thousands of dollars a minute in wine. And we continue to grow that business because I basically say to people, look, I've got your back on wine. And here's the facts about the wine industry. 97% of wines sold in America is sold for under $15 a bottle. So you have to figure out how to make a great wine for under 15. And I know how to do that. And so people that get my wine like it, they trust me to bring a Pinot, a Cabernet Sauvignon, a Chardonnay,

you know, Moscato. These are some of the varietals I've done. I've done Malbecs. I've done all kinds of wines that I make and I blend myself. I need people to trust my palate. My wife works on the whites. She's got an amazing New World palate. She's almost a sommelier now. And so we together blend these for our family. And, you know, I've extended my family through my QVC relationship. It's a business like all of my other businesses. It relies heavily on social media digital direct to consumer that is america 2.0 absolutely and watches okay watches is a disease that's a big problem um nobody needs a watch anymore because you get perfect time on your your device and so you know i'm wearing um an eddie mark pk um 1159 a new

brand that they brought out two years ago this is one of a hundred made um you know it's very very expensive but it actually has appreciated in value my rolex is my patek philippe's my aps um seiko grand seiko is probably the the biggest value in the watch industry today some of the mechanics coming out of japan now rival that of patek philippe i have a huge selection of those as well i'm buying watches as an investment that's what i say to myself my wife just calls me an idiot she says how many can you possibly own how many can you possibly use and she's right i have to wear three different watches a day just to get through just one collection i've got so it's a big problem but i will say today you can mark to market the

value of your watches every 24 hours with apps like chrono 24 and my collection of watches is up 113% year over year. So that's how I justify it to myself that I have these. It's an alternative asset class, just like art. But I just bought another watch yesterday that I don't even know when I can wear it, but it's incredibly rare and very, very unique. And I'm going to wear it on Shark Tank next year. What's the most expensive watch you've ever bought? that's a great question um well i've learned i've been ripped off now twice both out of two different facilities so i no longer say how many watches i own or where they are that's my first rule because i have a big complex insurance program now i have them in three different

cities i'm not even saying that they're north america anymore but i would argue that the better way to answer that question is, what's the most valuable watch I have now? It's probably an F.P. Journe. One of 10 made for the New York boutique. Only 10 ever made. I was not an F.P. Journe collector when I met this watch. I just by a happenstance was in New York. This is an interesting story you may find interesting. I got a phone call from a friend of mine who is part of the royal family of the UAE, United Arab Emirates, and may be the largest watch collector in the world. I won't mention his name, probably is. And he said to me, Kevin, have you ever heard of F.P. Jorn? I said, no. And this guy knows every micro brand. He knows every watch on earth.

He is the guy in watches. He said, if you're in New York, why don't you just call up the boutique? They know who you are and ask to go see some watches. So I called up F.P. Jorn and there was a woman there named Michelle at the time. She was the manager of the, she said, Kevin, just by happenstance and maybe it's destiny, we're having our annual event where all of our collectors from around the world are meeting here in New York tonight for a giant dinner. And FP Journe himself is going to be there and everybody in management from Switzerland be our guest. So I go zooming down to this event. They lend me a watch to wear because I don't own an FP Journe. And I met the craziest people I've ever met in my life. Brain surgeons, army generals, collectors, psychologists,

politicians with this crazy disease of F.P. Jorn collecting. Now Jorn only makes 900 watches a year. Like just to get one is impossible. And that's when I saw this one of 10 made for the boutique for celebrating this big event. And I got down on my knees and begged to buy it. it was a crazy price. And they said, no, I mean, you've got a thousand collectors ahead of you that have been with the brand for years. Why would you get it? And I said, okay, what's it going to take? He said, well, maybe if you owned another one, I said, I'll buy four. I'll buy four at once. Has anybody ever done that? I don't think they had. I did. And I became part of that family. The FP Journe watches now, for those that collect watches, if you go online and read what's going on,

prices are going from, you know, 50,000 to 700,000 in auction. It's crazy. F.P. Jordan himself is like Picasso, but he's alive. He's still alive. He makes these incredibly complex timepieces and he's still around. So you're buying something made by him, designed by him and a bunch of people that he works with in Switzerland. I visited the factory. I know I'm going on too long. You can see I'm passionate about it. But if you're into watches, you got to check out FB Journe. It's just crazy. I love that story. That's an awesome story. And I love that you bought four instead of two. It was the only way to get the one of 10. It was the only way to get it. I mean, it was just, and people have called me since saying, will you sell that watch? Never. What's it worth?

Priceless. They'll never make an 11th. I've got one of the 10 and it's just a, it's a piece of art. You know, you got to be careful because people get bored when you talk this way. But for me, I'm infected. It's a disease. I love it. I love time pieces. People know that. And I have a very, very, very eclectic collection. Each year, I select eight dials to put on Shark Tank. Every single one has a red band. You can see this is red. This was on Shark Tank last year. This is an incredible time piece to say P. It's probably gone up in value. Who knows how much? And they only made a hundred of them i got maybe the sixth first one for six all right let's talk about bitcoin you uh early on i don't know 2012 2013 seemed to be a proponent then you kind of soured

on it where are you now are we a proponent not a proponent how do you think about it i i do own a small amount of bitcoin and the reason i did it was i was teaching i'm a guest lecturer at harvard MIT, Notre Dame, Temple, Waterloo, McGill. I teach graduating cohorts of engineers. And at my last Harvard meeting regarding this sector, the class challenged me to buy not just Bitcoin, but just get involved in cryptocurrency. Because their argument was, look, I have a 5% weighting in gold. Each quarter, I have bullion, which I store and I pay to store it. And I also use ETFs to balance each quarter to up or down to 5%. And it's been a good stabilizer against inflation. And you've seen gold set a big move lately, being concerned about inflation. So has

Bitcoin. But Bitcoin was originally sold to me as a counterbalance to the equity market. In other words, it would move in a different direction. So if you had a big correction in the stock market, theoretically, Bitcoin would go the other way and it would protect your assets. That's not true. it has a very heavy correlation to the stock market it too achieves new highs when the market achieves new highs and when the market's correct it too corrects so it's very volatile you saw it dip 3 000 bucks last week it's back up over 18 today it's moving all around the place so i would argue it's fair enough i have a couple of questions for you to answer and everybody that's listening. Why is it that only one cryptocurrency gets this designation, Bitcoin? Because if you

bought a basket of cryptocurrencies two years ago, and there's many, many, many of them, you haven't made a lot of money. There's simply nothing like Bitcoin. And so it's the only one. And that's a little perverse in the sense, if you look at the stock market, it's not the stock market. It's a market of stocks. There's many different ones you can buy, but you can't seem to play that game in the crypto space. You have to be very concentrated to get these returns in one cryptocurrency, Bitcoin. That bothers me a little bit. Okay. On the other hand- Wait, let's talk about that for one second. So if you think of an economy, right? Take the US

economy, for example. There's only one currency, right? The US dollar. If you think of Euro, right? There's one currency that is the nation state currency or kind of the selected currency, right? And if you kind of go to the global economy, right? There's really the global reserve currency, which is the dollar, and kind of each micro economy has their own currency. If you think of kind of the digital economy, or you talked a lot about digitizing the world, the digital economy doesn't have a native currency, right? So if you were talking to somebody like a Jack Dorsey and ask him, why is he so bullish on Bitcoin? What he would actually say is the first native currency of the internet or the digital world is Bitcoin. Now, the same

thing applies though, that you're not going to have 10 currencies, right? You're only going to have one currency that is native to that environment. And so it becomes this really interesting thing where if you think of it as an economy, right, Bitcoin does become that global reserve currency of the digital economy, right? Listen, on that, I totally agree. But that is not what has not happened yet. Here's the problem. Let's say I want to use Bitcoin as a currency to make a large asset purchase. So just theoretically, I want to buy some real estate in Switzerland. Okay. I want it to be above board. I'm not trying to do it on a clandestine basis. If today I wanted to send a million dollars over to Switzerland, I would have to disclose why

I'd have to get permission. I'd have to notify, you know, the banks, they would have to know by the regulators that this transfer is occurring and I could purchase the land. If I try to do that with Bitcoin, the problem is the seller is not willing to take the volatility risk of Bitcoin. So if you're valuing a Chateau at $10 million US or 10 million Swiss francs, and you want to pay in Bitcoin, you have to somehow guarantee that when the conversion hits and it goes back to Swiss francs or US dollars, that the seller gets the accreted bought amount. That tells me the sellers do not have the confidence to do large transactions yet in Bitcoin.

Now, I'm sure that can change over time, but it is not today. The other issue with it is I wish, I agree with your premise that we could get an international global currency that I could avoid exchange fees. In other words, when I want to go buy something in British pounds, I have to pay the conversion fee from the US dollar, which I do all the time because I have an ETF in England and I have one in Euro and I have one in Swiss francs. So I have that major headache. I wish I could just do it with Bitcoin.

I can't. And so the reason is the regulators in these countries don't agree yet that Bitcoin is the standard. So if all the regulators agreed that Bitcoin was the standard for the globe, you would be 100% correct. But that is not the case right now. I totally agree with your premise that the globe needs a digital currency. 100% would I agree. If you told me the Swiss and the Euro and the American and the Canadian, Australian governments agreed to whatever that is,

I would put up to 20% of my portfolio in it because then I could move across those geographies easily without paying all the fees. associated with converting from one currency to another. Love that idea. Now, that was attempted as a payment service with Facebook, as you recall, an initiative that started early last year that went nowhere so far. But that was a great idea because they wanted approval from the government, but the Fed didn't give them that, and the SEC didn't either, not yet. But I think it's inevitable. You're correct. But you have to bet, if you're betting on Bitcoin, if you're buying it today at $18,000, whatever it is, that that is going to be the de facto currency, and I don't think you have enough assuredness of that yet. So this is really interesting because there's

kind of an evolution of currency. You described it earlier of right now, the volatility makes it really hard to use as an actual currency, right? But obviously as a store of value, somebody like yourself who's got 5% of your portfolio in gold, do you look at it as, wait, this could be digital gold and actually can do a better job preserving your wealth, right? Last year, it's up 90%. This year is up over 175% so far, whereas gold has been up, but it's only up, you know, 20% or so this year. Do you ever think about maybe you should take half of your gold allocation and put it into the digital gold version? So leave two and a half percent in gold, two and a half percent in Bitcoin? You know, I have thought about that, but, you know, fortunately, 5% of my portfolio

is a lot of money. And, you know, it's sort of, if I'm going to do this, am I willing to live with the volatility that that brings into my portfolio, having days where I'm down 10, 12, even 30% on Bitcoin, it's extremely volatile. Gold actually is not that volatile. It's something that's been around for 2000 years and it's a very good hedge against inflation and still is. But you may be right. If I'm willing to add, let's say 1% of my portfolio to Bitcoin, I would want to know what the most liquid way to do that was. And I haven't even researched it yet because, well, that's the other thing is a lot of fees associated with getting in and out of Bitcoin that I don't understand why I'd have to pay. If it really is a currency, I should be able to be very liquid in it.

And that's not easy to do. And also because I'm, you know, an issuer of securities in the sense I'm a shareholder in something like StartEngine, which is now doing crowdfunding and, you know, a huge advocate for that. And I own a portion of O'Shares, 50% of that manager. I would want to make sure that everything I do is approved by the regulator. I can't afford to go offside in any way. And every time I talk off the record to the regulators, because I've talked to them all the time for various reasons, they're a little squeamish on Bitcoin. They're not quite there yet. When can you get this thing regulated so that I can put millions of dollars into it and know that I'm not offside and that in any way I'm not breaching anything? And that frankly, it would

be stable, if that was the case, if tomorrow morning we woke up and the SEC said, you can create an ETF with Bitcoin and we think Bitcoin is a legitimate, you know, payment system and storage of wealth, not only would it go up, but you'd have a lot of people like me investing in it because I'd say, okay, I'm going to give it a 5% weighting. So, you know, I don't really want a significant portion of my portfolio having that amount of volatility. Remember I started this conversation saying I want to preserve wealth. That's what I try and do. That's what what I'm all about. But you're right. It's been a great asset class this year until it had its big sell-off last week and its big run-up again today. That kind of volatility scares a lot of

people away. Absolutely. And I think what's really interesting is you really highlighted an important point, which is the Bitcoin ETF, right? Because people in the Bitcoin community, what they would argue is there's companies that have bought Bitcoins. You can buy the companies and kind of get indirect exposure. There's things like the Grayscale Bitcoin Trust, which really is kind of this, again, you get an ETF-like product, but it's not actually an ETF. In international exchanges, you can get ETPs and things like that, but there hasn't been that ETF. And I think many people who listen to this that come from the Bitcoin world will actually be surprised to understand that traditional investors, the ETF is this big kind of breaking of the dam or kind of

approval point that will allow a lot of capital to flow in that just is sitting on the sidelines saying, hey, this is interesting, but I'm not going to buy it until we have that kind of approval or checkmark, right? Well, what I would like, and the reason I suggest an ETF, I'm very comfortable with ETFs and I live in that world. The majority of my money invested is in ETFs and the ones I've created myself, OUSA, OGIG, OER, OUSM. They've been very good capsules of preservation of wealth for me because I helped design them myself. What I would like to have in a cryptocurrency would give me the top seven cryptocurrencies, put them into an ETF wrapper, and let me invest in it with liquidity so that I can, if I want to buy a million dollars worth of it in the morning and

sell a million dollars in the afternoon, I can do that in an ETF format. But to me, I don't believe that you can only have one successful cryptocurrency. There must be the idea that there's other and alternative ways, Ethereum and others, that would also benefit from the overall move to a cryptocurrency payment system, you know, preservation of wealth vehicle, whatever it's going to be. And I would prefer to own them in a probably market cap weighted basis in an ETF. That to me would make a lot of sense. And frankly, I'm not the only person that says this. Many others would. But when you go to the regulator, like the Winklevoss twins have done, and I think many others have applied for these applications. I even looked at it once, never went anywhere with

it because the regulator basically said no. And so until the regulator says yes, you won't get that institutional, you identified something very early on when we talked about cannabis, the importance of the institutional investor long-term to support a sector. You want that institutional investor supporting Bitcoin and other cryptocurrencies. They're not there yet. It's a slow creep into it, but you can't deny the success of Bitcoin this year. But it's just this year. What happens if there's a correction next year? That's the issue that institutions have. Absolutely. Before I let you go, I want to ask one question, which is when you think of your portfolio today, how do you break that down? Whether it's on a percentage basis or kind of

just buckets, you obviously have a majority, I think, of your portfolio invested in kind of equity-based ETFs and other sorts of vehicles. What else is in there or kind of on a percentage basis? How do you think about your portfolio construction? Yeah, it's an interesting question and every investor has a different way of looking at it. Here are the rules I live by that have worked for me. I've even recently been teaching my son this, who's gotten very interesting investing too. I never have more than 5% in any one stock or asset. So never more than 5% in any one concentrated elements. That's why gold's only ever 5% of my portfolio. I never have more than 20% in any one sector, like energy or technology. We have 11 sectors in the S&P. I have many private

assets. I think right now I'm sitting at about 30% of my net worth in private companies, a wide, massive diversity of them. And I value them based on their ability to generate cashflow because I'm very fortunate. I get to see a lot of interesting deals and I put money to work in them. And there are all kinds of technology companies and the ETF company I talked about, O'Shares, for example, and many, many, many, many others. And then for a long time, and this has been a big change for me. For 20 plus years, I had a massive portfolio of real estate. And I've recently taken down that portfolio from a 31% weighting, so way over the 20. It had grown so large. And real estate's relatively illiquid. You can't just flip a building.

And I've reduced it down to 8% in the last nine months because I'm seeing this digitization of America. I'm using less office space. 78-foot AAA towers aren't going to be worth as much as they used to be, because people don't want to get in an LA with 60 people. I know when COVID's over, 15% of people that are working from home are going to stay there. So I think there's going to be a reduction in that element of real estate that I used to own a lot of. And I also, I realized all of these stores that I used to sell all my products in, we're never opening those marginal stores and all those strip malls. We're never going to open those again. We're selling direct to customers. So I sold all those too. And so now I'm sitting on a mountain of cash,

over 34%. In fact, we're just doing the numbers last week for the year end. I've never had so much cash in my life and I've got to put it back to work. So I'm really, really interested in finding the next mind meds and these big ideas that I can redeploy my capital into. So America 2.0 is not going to be the same as the old America was. Those old stalwart assets like real estate aren't going to be worth as much. A movie theater chain or Bed Bath & Beyond close to 100 stores. I bet you those get converted into climate-controlled storage facilities for everybody that's shipping direct to those suburbs. But they won't be stores anymore. Maybe they're condos. Maybe they're cloud kitchens. But I'm glad I have a lot of dry powder. I'm ready to go

back and redeploy. And I'm looking for ideas. And I want to back management teams. I'm an investor. I love entrepreneurs. And I just feel invigorated and very optimistic that what's coming in the next couple of years is going to be really, really interesting. And I'm ready. I'm ready to invest. Take 1%, put it in Bitcoin. You'll be very happy, my friend. I can't, I can't, I can't argue with you, but I gave you a lot of reasons that you got to think it through a little bit. And I think some of those, if we had a debate, I mean, I am not against Bitcoin. I'm not against it, but you know, when you're talking about putting millions of dollars to work, you really want to understand that you can think long-term about it. And I have a feeling

there'll be other alternative ideas. Maybe I should put some to work. Maybe you've convinced me. It's a major benefit of our time together today. Maybe I put a little bit more in just for the heck of it. I have a little bit just so I can watch the price. But, you know, it bothers me when I can't get the regulator on board. I really, there would be so much interest in Bitcoin. You ready for this? I'm going to blow your mind right now. Two years ago, myself and my partners, we raised money from US public pensions and bought Bitcoin with it. So US public pensions are doing it. Fidelity, they've got a whole business doing it. PayPal, they got the regulators to approve it. The OCC, they came out, they said that banks, you can custody this, right?

I agree with you that the SEC- I know, I'm aware of that. But if you actually look at the percentage of their assets invested in Bitcoin, it is so small that it doesn't even show up in another category. It's 0.0000. But believe me, I know what institutions are doing. That's my whole job, watching institutional funds, sovereign pension plans. Just buy 1%. Just 1%. Yeah, no, it's true. But even the sovereign guys aren't there yet. I mean, when Bitcoin becomes a sovereign pension plan asset, I'll know about it before you. I love it. All right. Ask everyone one last question. I'll let you go.

Aliens, are you a believer or a non-believer? I believe there is life outside of the ecosphere of the Earth. there's no question um there's just so many i'm a big fan of space and i track it it's almost a hobby for me i read a lot of the research i am a believer that there are uh organisms alive outside of our planet and i think we're going to start when we start scooping you know more soil from mars and bringing it back looking for micro you know all kinds of micro life we'll probably find some it won't be it shouldn't be a surprise to people that other conditions can exist somewhere in the billions of star systems that are out there.

So, yes, I'm a believer in aliens. I love it. Kevin O'Leary, ladies and gentlemen. Thank you so much. I really enjoyed it. Take care, my friend.