In his final episode as guest host of The Daily Show, Hasan Minhaj grilled Kevin O'Leary (US video).
It didn't start that way. Minhaj even opened with a compliment for the Shark Tank star:
“Me and my dad love you on Shark Tank. Shark Tank is one of those shows a family can sit down and watch together. We can cosplay as entrepreneurs and vicariously live through a fun piece of unscripted semi-reality content. So thank you for giving us that.”
That was where the compliments ended. The remainder of the 30-minute interview was Minhaj interrogating O'Leary:
“Are you a great investor, or…are you a great spokesperson?” (Both, said O'Leary)
“You are part of financial hot take media…it creates potential chaos and risk at scale because it's on the internet.” (Not a bad thing, said O'Leary)
“I would imagine you would feel some level of guilt when some of the companies that you are promoting end up leaving retail investors holding the bag?” (No, said O'Leary)
The entire conversation captivated me. It reminded me of Minhaj's predecessor, Jon Stewart, interrogating CNBC's Jim Cramer 14 years earlier for his irresponsible remixing of entertainment and financial advice during the Great Recession. I've grown accustomed to comedians doing good editorial journalism.
Minhaj leveled a wide-ranging critique of O'Leary. You'd need to know something about crypto, FTX, indexing, diversification, private equity, and more to keep up. But to understand the thrust of his argument, you only need to know the difference between two terms: venture investing and retail investing.
Kevin O’Leary Isn’t Playing Your Game
Venture investors, like O'Leary, play a high-risk game that involves investing in early-stage companies called startups. The startups in which they invest will either
- grow massively, and investors will win back many multiples of their original investment, or
- fail outright, and investors will lose most, if not all, of the money they put in.
Venture investors meet with company execs, tap into a network of professionals to perform due diligence checks, and sometimes even take an active role in influencing how the companies run.
Most venture-backed startups fail. The minority of startups that succeed do so well that venture investors make back all of the money (and more) that they lost on the failures.
Winning in venture capital means playing an aggressive style of baseball, always swinging for home runs: take 10 big swings, knowing full well you will miss entirely on 8 of them. If you hit one or two, you make up for the misses and more.
If you're reading this article, you are probably not a venture investor. If you're investing at all, you're known as a "retail investor."
Retail investors like you and me don't play power-hitting baseball. We compete in an entirely different sport. We run marathons with the assistance of a pacer. To win, all we need to do is keep pace.
Practically speaking, this means regularly investing in something like VOO - a stock representing the 500 largest publicly traded companies in the US. If you buy $100 of VOO, your investment is split proportionally across 500 large, well-established companies. (Aside, the halal version of this would be investing in something like SPUS. I hope to write more about this later, in sha Allah).
The point is that the retail investing you and I should be doing differs entirely from Kevin O'Leary's venture investing. And attempting to apply piecemeal tactics from the venture capital game to retail investing is like trying to swing a bat while running a marathon. It just doesn't work, and you'll probably get hurt.
Be Boring
The problem is, as Minhaj points out, watching venture capitalists at play is entertaining. They'll pop up online and on tv and offer opinions about how they plan to win the game they're playing (again, not the game we're playing). It's high-stakes and drama-filled. It's entertaining.
Meanwhile, good retail investing is boring - there would never be a hit TV show about it because it would last about 5 minutes. It would be footage of people calmly opening brokerage accounts and setting up automations to buy and hold index funds. No drama, no fun.
When Minhaj asked if O'Leary felt guilty for, knowingly or not, promoting risky investments to the masses, O'Leary responded:
“You know with certainty in venture investing - investing in startups - since the beginning of time, eight out of ten are going to fail. I know that. You know that. The whole world knows that”
But the whole world does not know that. And, unfortunately, celebrity venture investors like Kevin O'Leary continue to pull people into a game they're bound to lose.
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Written by Farooq Maseehuddin
Farooq Maseehuddin (Muslim Money Guy) is a financial educator and writer. He holds both a Bachelor of Education (BEd.) and a Master of Education (MEd.) from the University of Alberta. He's been a high school teacher and Muslim community organizer for nearly two decades.
