Barbara Ellington, Lifestyle Editor
AIC Chairman Michael Lee Chin at his Burlinton, Canada, office. - PHOTO BY BARBARA ELLINGTON
AIC CHAIRMAN Michael Lee Chin was a major player in the world of business and finance long before he inked the deal to purchase majority shares in the National Commercial Bank (NCB). But the eldest son of the founder of the Super Plus supermarket chain has burst on to the Jamaican scene like a breath of fresh air in his own unique style.
His critics grasp fodder from AIC's corporate challenges while his admirers hang on to his every word. But this bouncer turned billionaire takes it all in stride as he enables many to generate wealth through education.
In any serious business discussion with him, one gets the feeling that Lee Chin has grasped the big picture of what's right for Jamaica and the Caribbean and is impatient to see it all come together.
Among his leisure activities are reading, family time and doing more work. And he has no plans to retire any time soon. He packs a solid day's work and lots of exercise in each day and loves to spend time with his children. He has walked with the world's movers and shakers but retains the common touch.
From his corporate offices in Burlington, Canada, last week, Lee Chin told The Gleaner's Barbara Ellington about his focus, drive to succeed, and determination to pursue a guiding philosophy in spite of his critics.
Barbara Ellington: Describe your journey.
Michael Lee Chin: After doing A'Levels at EXED Community College in 1969, I got a job on a cruise ship where I observed that the foreign engineering crew ate their meals before their hos-
pitality crew which mainly comprised Jamaicans. I was not accustomed to that type of segregation so I wrote to the owner of the ship telling him it was not right and should be changed. I did not sign the letter.
The owner made contact with the ship and asked the captain to find the author of the letter. The captain summoned me one night and showed me the letter saying, "I got this letter that you wrote." I asked him how he knew I wrote it and he said I was the most educated Jamaican on the ship and the only one capable of composing that kind of letter. I was not fired, but I made sure not to venture on the upper deck and when we got back to Jamaica I got a job with Alumina Partners of Jamaica (Alpart). I worked in the water laboratory from September 1969 until September 1970 and saved CDN$2,000 with the thought of getting into engineering school.
LETTER TO HUGH SHEARER
I planned to use the money to buy a Triumph TR7 (motor car) if I failed to get into university, but I was successful and after completing first year at McMaster University, in April of 1971, I got a part-time job to lay sod (grass) on campus. I needed another $2,000 but only had $600 at the end of July. I saw no possibility of saving $1,400 by the end of August so I wrote to then Prime Minister Hugh Shearer telling him that I noticed that every year he sent an emissary to recruit fourth-year graduates. I said that I'd been writing to the Service Commission without success.
Mr. Shearer responded by inviting me to see him the next time I was in Jamaica so I took $400 from the $600 I had saved and bought an airline ticket and came home. I met with a Permanent Secretary who gave me a scholarship for three years to complete my degree. That is the beginning of my indebtedness to Jamaica, because without that scholarship I would not have completed university.
BE: What happened next?
MLC: I spent two years working for the Ministry of Works on the Mandela Highway project. In 1976 I returned to Canada because my wife was at that time nervous about crime and violence, and thinking I could make it anywhere, I made the move. I got a job at the student pub as a bouncer (I'd done the same thing as an undergraduate student).
I was doing business courses and sent out 100 resumes for jobs in the engineering field and got 100 negative responses. But I got three non-engineering options: a soap salesman; a truck driver and a financial adviser with Investors Group. I opted for the third.
I was 26, I had one week of training and had to go out and sell. But I as a young Jamaican returning to Canada, I knew no one with money so I had no prospects. It was May 1977 and my mom was coming to visit me. Her flight was delayed by two hours so I decided to drive around the neighbourhood. It suddenly hit me that the people tending their gardens were my prospects. So I plucked up the courage to stop and approach the next person I saw. Out of six such contacts, I got five appointments and after the first month in the business I made $10,000.
I thought cold-calling could be profitable so I decided to venture further afield to hone my skills at prospecting. I drove from Hamilton to Tilsonberg - rural Ontario tobacco-farming country. Each farmer I approached told me to see their accountant A.W. Judd. I met him, told him about my product and he said it was the same one they had been told to recommend to the farmers, at a conference he just attended. He gathered the other accountants and invited me to make a presentation to them.
I built up my clientele so I decided that if I was going to remain in Canada, I would do what was necessary to be a great investor. I began the search for a role model and in 1979 I read the book The Money Masters by John Train. In the book, he chronicled the methodologies of eminent money managers. In the chapter on Warren Buffet, I got an 'aha' moment because I could relate to and replicate his style.
By then I had a portfolio of mutual funds; I was an aggressive investor and in 1983, after five years in the business, I had another pivotal point. I decided to invest in businesses that I understood so that year I borrowed $500,000 to invest in McKenzie Financial Corporation.
BE: Hence one of your guiding principles: Use other people's money.
MLC: Yes, so in November of 1983, I bought the stock at $1.00 per share and four years later it was $7.00 and five years later $500,000 became $35 million. That reinforced my philosophical belief and my confidence that if I could do it for myself, I could do it for others. That was the genesis of AIC.
Buying AIC
I began negotiations to buy AIC in the summer of 1986; never before had a sales organisation bought a manufacturing money management company. I applied to the securities commission. The fledgling company had $800,000 in assets under management and I also applied to start Berkshire simultaneously. The Ontario Securities Commission did not give approval until December 24, 1986. We began business in January 1985.
At the time the Advantage Fund had 150 different stocks and when I took over I reduced that to 15, because you cannot understand so many different businesses. I bought companies that I understood. In a strategy that worked, we invested in our competitors so that if they did well, we would do better. From 1987-1992, we built a track record which was the best in the business. Our methodology was different and we had to prove that it worked. Tremendous assets came in.
GROWTH
In January 1987 we had $800,000.
In October 1987 we went to $13 million and I was selling at nights and managing money by day.
In October 1987 the stock market crashed and the Dow Jones dived by 25 per cent in one day and our stock went down to $8 million. We were stuck there until 1991.
In 1992 we had $40 million
In 1993 we went to $100 million.
In 1994, we had $200 million.
In 1995, we had $400 million.
And in August 1996 we had $1 billion. Eighteen months later we went to $12 billion in assets under management. We had a record of $4.3 billion in net sales in 1997.
BE: What were some of the challenges as you grew the company?
MLC: Being in the steel town of Hamilton, there was no reservoir of trained financial people, so we had growth challenges. Technology was not that advanced so I have to give credit to the cadre of staff I had at the time. We also had the financial strains that accompany fast-paced growth with a small base and having to pay commission. Banks were not supportive because we were small and good quality staff did not want to travel from Toronto to Hamilton.
REDEMPTION
In 1999 technology stocks became popular but we did not invest in them because they made no sense to us, so people began to sell their Advantage Fund to buy tech stocks. A damning newspaper report said, among other things, that AIC had to be selling its McKenzie stock to meet 'redemptions'. That was not true but I thought, what if I did not have to sell as everyone was expecting so the price could be pushed further down?
The result was that I spent $100 million - half was our own corporate funds and the other half was borrowed. I bought only McKenzie Financial Corporation stock. We owned at that time 25 per cent of the company. A year later we teamed up with Caisse D'Pot to buy McKenzie but were unsuccessful and the price stopped at $30.00 per share. At the end of the period we made $100 million profit and our unit holders made $400 million. That was in 2000. And that's how we got the money to finance the purchase of NCB.
BE: Have you made back what you spent buying NCB?
MLC: Yes, the bank is now worth a half a billion US dollars.
BE: Having become a billionaire in Canada, you could have invested anywhere in the world, but you focused on the Caribbean; is there an underlying business reason for this besides the fact that you owe your homeland a debt of gratitude?
MLC: Yes, the centrepiece for my decision making is that you invest in things you understand. I know the Caribbean and Jamaica. Also, to create wealth, you have to buy something inefficient and make it more efficient. In 2002, the confidence level in Jamaica was low, the stock market was cheap and you could buy good businesses for a reasonable price. I am confident about the future and, most importantly, it gave me an opportunity to do a few things through ownership of something that occupied a special place in the hearts of Jamaicans.
Plus, I could give back to the country that put me where I am today; build a business that would be a role model for others and to set standards for executives and their behaviour. NCB gave me an opportunity to have bright aspiring young Jamaicans see their professional and entrepreneurial dreams become reality. And most importantly, all my family is in Jamaica.
BE: If you were to split your assets in two portions, what is the percentage in Canada and what would be the percentage is in Jamaica/the Caribbean?
MLC: In Canada, we have AIC and Berkshire, which handles $12 billion in assets under management. Add to that 300 offices across Canada and 900 advisers. We have the remittance company Senvia, a young robust baby with a bright future.
In the Caribbean, we have NCB; we have 50 per cent shareholding in a company called Columbus Communications which has controlling interests in Cable Bahamas. It owns the cable television station in Trinidad and New World Network which owns Arcos Network - a fibre-optic ring around the Caribbean, Central America and South America, the Virgin Islands and more. It also owns Merrit Communication, whose name was changed to Flow.
Last year we got the licence to bring a second fibre-optic line to Jamaica, Fibra Link, and bought the fibre-optic company. Cables are now being laid in Kingston. We have a pole attachment with Jamaica Public Service (JPS). This will enable us to bring a national cable network into Jamaica. It will enable us to deliver broadband Internet service to houses. It will enable us to bring voice-over IP phone service into homes. It is costing over US$100 million just to lay cables.
BE: Why are you doing this?
MLC: We are now raising money in the United States in a private equity fund to invest in the Caribbean. The coast of North America is saturated. There are 80 billion baby boomers who will need a place to retire in a few years and the only other natural place is the Caribbean.
We are English-speaking, close to the U.S. border, friendly, we have a long history of respect for rule of law. The Caribbean will be a natural fit for them. Even five per cent of the number will have a huge incremental impact on our economy. So what are the services that retirees will need: health care (hence the purchase of Medical Associates); Telecommunications services; entertainment and recreational services; real estate services; and financial services.
Telecommunications and health care are two enablers to future growth and development. With people retiring, they are going to face expensive costs and long wait time in medical services overseas. They now have to go to India and Thailand for surgery, so why not the Caribbean in a villa where they can convalesce in style? We will also have an outlet for the scores of professionals who have left the Caribbean in droves over the years. The economic permeation will be tremendous versus what we now have in the tourism business.
BE: Encapsulate the big picture?
MLC: Someone will be able to send work from India and it will be worked on and ready to be shipped out in minutes in an office setting. Telecommunications is an enabler for economic growth. Jamaica will be able to benefit from businesses such as call centres.
BE: Some people are concerned that your acquisitions are with the bank's money and say it could lead to another '90s-type crash; is what you are doing detrimental to the bank's assets?
MLC: Blue Cross is the only acquisition on behalf of the bank. The Mutual Life Towers is AIC, Reggae Beach, a development for medical tourism; Trident, when it comes on stream; the former Port Antonio courthouse will become a bank and a museum, will all be for AIC. We are also in discussions with United General Insurance Company.
BE: Other than AIC Trinidad, are you looking anywhere else besides the Caribbean?
MLC: We are one of the largest shareholders in Infosys, India. Ghyanendra N. Bajpai, the former head of the Indian Security Exchange Commission and executive chairman of the Life Insurance Corporation of India, is now with AIC. He has access to Indian know-how which we hope to transfer to the Caribbean and his mandate is to start AIC India and distribute AIC funds from Canada.
BE: In 10 years where do you see all this?
MLC: We will continue to go where we are comfortable and partner with people with whom we are comfortable.
BE: Some of your critics in Canada say that where AIC funds are concerned, you have taken your eyes off the ball to focus on the Caribbean. Is that true?
MLC: We have a chief investment officer who oversees investment managers and the process. I am chief executive officer and a portfolio manager since 1987. If I cannot spend five days per month out of AIC, we are in big trouble. What if I were hit by a bus? My responsibility is that if I'm not here, the companies remain sound.
BE: Is it more difficult to garner this next phase of your wealth than it was to garner the first?
MLC: It takes many years to build a reputation and once you do that things become easier; not necessarily linear, but it takes struggle, discipline, focus. Then growth becomes exponential. Most people don't have the perseverance to stay with one philosophy and go through the gestation period. Once it's built, it goes into exponential growth curve. I don't think we are there yet.
BE: What would you say to AIC fund holders in light of continued negative press that leads to 'redemptions' and a fall in the bottom line?
MLC:Assets fell from $15 billion to $9 billion. It's not that we don't know how to stop it. But that's not the right thing to do. You have to stand for something in life. My goal is not necessarily to have the biggest mutual fund company in the world; it's to behave in a way that is 100 per cent congruent with being a growth investor. Every day won't be sunny but there must be consistency of behaviour on rainy and sunny days. Once principles are right we will prevail. From that standpoint, hopefully, people will see what the opportunities are and they will be encouraged to invest in AIC and in Jamaica.
BE: What's your driving force?
MLC: My driving force is the fact that in 1951 a baby was born to an orphaned, single teen in Portland. He went to a Canadian university, entered a most competitive financial sector and went back to Jamaica to buy the former Barclays Bank. Not very likely if one were asked, but it happened, so my attitude is, I am inordinately blessed. There are many who are faster, brighter, more talented but they did not have my opportunities. My driving force, therefore, is that I was given an improbable situation and made it a reality, I will not abuse those blessings. I can be selfish with them or I can use them to do good and lead by example. I would be a sell-out if I took my opportunities and showered myself. Plus, I'm passionate about what I do and curious to see how far we can take it.
BE: You are from a family of siblings who have followed your parents into the family business and taken it to the next level. Are you preparing your children to take over from you?
MLC: No, my wish for my sons and daughters is that they become independent people, they are magnanimous, that they realise their blessings and make sure they use them to help others, they become compassionate and be great role models. One son now works with me but they are not pressured to do it. However, two are showing early inclinations towards business.
BE: What is a typical day for you like?
MLC: I am up and reading at 5:00 in the mornings and into the gym from 6:00-7:30, on to breakfast and am out of the house by 8:30 to be at work by 9:00 a.m.. I do desk work or am out in the field when here in Canada or doing road shows, managing the funds, dealing with business issues. I still advise my clients and when in Jamaica, I have a tight schedule also.
BE How do you relax and have fun?
MLC: Besides playing with my little girls and enjoying my family, I am now a photographer, so that is giving me added joy.
BE: What's been your biggest surprise along this journey?
MLC: The results that have come from building a reputation. I intuitively knew that your reputation is your passport but I did not realise to what extent a good reputation could open doors, present opportunities, how far it would precede and lay the way for you.
BE: What's been your biggest disappointment?
MLC: That has been the way in which the media have portrayed me.
BE: What's your wish for Jamaica?
MLC: That every Jamaican child will be given the tools to be financially independent, wish others well and be great stewards to family and community.
Email feedback to barbara.ellington@gleanerjm.com.
