Monday, June 13, 2011

A Word on Financial Literacy from the Dragons' Den

Alex Kenjeev
President of O'Leary Ventures
What could be more rewarding for a Dragons' Den fan than talking to a Dragon? How about talking to one of the Dragons' business associates like Alex Kenjeev, President of O'Leary Ventures, a private company owned by Kevin O'Leary? Speaking to me from the set of season six, Alex and I had a a lively conversation which began with a discussion about the connection between the financial literacy level of the average Canadian and the country's economic wellbeing.

Alex shares my view that individual financial literacy is critically important to the economy and agrees that poor financial literacy skills contributed in part to the US mortgage crisis. He talked about how too many Americans got themselves into mortgages that they could never pay off and then suggested that a country would be better off if everyone followed this O'Leary rule of thumb: save one-third of every pay cheque and put it to work for you earning interest or in investments.

Alex explained that Kevin frequently reminds people who aim to build wealth to focus on the big picture when it comes to personal finances, which often means avoiding spending hard-earned money on consumption expenses such as daily cups of specialty coffee. "One of Kevin's mantras is to invest first and then spend only the interest, never the principal," said Alex. "When you have enough interest for your daily latte, then go for it, but not before that."

Disparity in Financial Literacy
When I asked him what letter grade he would give Canadians for financial literacy, Alex pointed out that the more important issue is the disparity between those who are financially literate and those who are not. Alex gave the example of two people with identical jobs and salaries but who have vastly different financial literacy skills. The person with the higher level would do better financially in his or her lifetime, while the other would be more at risk of financial ruin. "This disparity would be amplified over time," said Alex.

When I asked him about the financial literacy level of the average would-be entrepreneur pitching a business plan, his answer was similar: there is a huge disparity between pitchers when it comes to financial literacy. He said that successful pitchers always have someone along who can talk money and articulate how investors can make money by investing in the business. As a fan of Dragons' Den, I've certainly noticed that pitchers who fumble for the right money word or who don't know their numbers rarely get deals, especially from Kevin.

As we talked a bit more about how the show has helped improve the financial literacy level of it's viewers, Alex made this insightful comment: "There is no real reason why more Canadians can't be wealthy."

He's right. There's no cap on the number of rich people there can be in this country. Dragons' Den keeps that fact in our faces. Every time we watch an episode, my daughter and I are reminded that it is possible to go out into the world and be an entrepreneur and make more money, with the caveat that in order to have a decent shot you need to be financially literate. That is a powerful lesson.

Speaking of powerful lessons, we wrapped up the conversation talking about Alex's (and Kevin's) philosophy of money. Of course, I had to ask him my O'Leary question: What three things should we teach five-year-olds about money? By his own admission, Alex's answer could have come directly from Kevin's mouth:
  1. Be honest about money.
  2. Pay attention to money.
  3. Don't confuse money with feelings.
It's About Freedom
Before I let him go, I asked Alex how he would explain the term "venture capital" to someone who might not be familiar with it. He explained that venture capital is like a "dating service for money." It brings together a business that is looking to grow to the next level with an individual who has cash to invest. Hopefully, it's a good relationship that turns into a serious romance.

I can just imagine that in O'Leary terms a "good" relationship means that everyone is making money or there's going to be a nasty break up. After all, according to Alex's boss, "nothing matters more than money." And, when I asked Alex what he thinks about Kevin's statement he said, "Money is about freedom. It lets you do what is important to you. Just look at Kevin. He can do what he wants, when he wants, however he wants to do it."

Alex's comment made me realize that as a wealthy nation, we truly have the freedom to choose whether or not we want to spend our tax dollars on financial literacy education and getting personal finance basics into our schools. I believe there is money at the provincial and federal levels than can be spent narrowing the disparity between those Canadians who would get an A+ in financial literacy and those would would get an F. Just imagine a country in which every high school graduate was financially literate. It could happen here in Canada. As I wrote in an article for the Vancouver Sun last week, the Ontario Ministry of Education is leading the way.

As Alex said, money gives you the freedom to do what is important to you. Do we understand that more of us could be wealthy if more of us were financially literate? Do we get that individual financial literacy is worth investing because it will build our economy? Is raising money-wise kids important to Canadians in every province and territory? I hope so.

Stay tuned for more words from the Den on financial literacy...I will be talking to Dragon Arlene Dickinson later this week.

Copyright 2011. Laura Thomas. All Rights Reserved.
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  1. I don't like the Dragon's Den show much because of how the dragons are a bit mean sometimes -- I'm talking beyond the honest "you're idea isn't for me". I'm pretty sure that they set up some of the presenters to fail spectacularly. Like how American Idol shows the really bad auditions with all the crying and such.

    Also, do you know how firm the offers are? I can't imagine that they are actually firm since no due diligence was probably done yet. If you talk with the dragons then please share about that part.

    But, the do know how to make money and this show is probably a super cheap way of getting good tv.

  2. @Alex From what I understand, due diligence takes place once a deal is made in the Den. To get on the show you have to audition for the producers, not the Dragons. I imagine that while they are looking for deal-worthy businesses, they are are also looking for people and ideas that will make for entertaining TV.

    I would like to hang out at the auditions the next time they come to town, talk to some of the folks before and then do some blogging on their experience. Even better, I would love to give every person auditioning a financial literacy quiz to take while they are waiting for their turn. That would be really interesting.