Interview with Michael Lee-Chin

Michael Lee-Chin acquired AIC Limited in 1987 and has, over the years, taken the organization from $1 million to more than $14 billion in assets under management. Much like his mentor, Warren Buffett, Michael is strong in his convictions. “To be a successful investor you need to look to people who have a lineage of success – a role model,” he says. “Then, ask the role model how they did it. How did they become successful?

Then simply do the same.” He has identified three key needs of investors and has applied these needs to the AIC investment philosophy.

“Successful investors need to preserve their capital; grow their capital at an acceptable rate of return; and do so in a tax efficient way – minimize their taxes payable,” Michael says. Michael Lee-Chin was named 1997 Entrepreneur of the Year for Services (presented by Ernst & Young, Canadian Business, Bank of Montreal, Nesbitt Burns, McCarthy T‚trault, and Air Canada).

The Harbus: You grew up in Port Antonio as one of nine children while also helping your parents with your family store. How did your upbringing make you who you are today?

Michael Lee-Chin: Actually, as a young man, I worked three jobs. As the eldest of nine children, I acquired a sense of responsibility early in my life. I learned to take a patriarchical approach to every task and project that I took on. Since then, I have felt that I need to take charge of whatever situation I come across.

The Harbus: Your mentor, Warren Buffet, was very influential in the development of your fundamental investment strategy and served as a role model after which you patterned at least a portion of your success. What has Buffet’s mentorship meant to you over the years and what business axioms gained from your experiences will you pass on to your students?

MLC: He has been a great mentor, but he has never sat me down and explained finance to me. Over the years, I have read his books and a lot about his methodology, recipe and investment approach. Through him, I learned that success can be summarized in two things. First, I learned that success doesn’t require a high IQ or unique business insight or inside information. It only requires a sound intellectual framework that is based upon principles and a value system. Second, I learned that to be successful I needed to make investments in companies that I could understand. Many individuals that invest in the stock market today have no idea of what they are actually buying, in fact they are just speculating. So having a sound and complete understanding of what businesses engage in is fundamental.

The Harbus: Under your management, AIC has gone from $1 million in assets to nearly $14 billion today. How have you been able to sustain growth and success over such a long period of time? How did you overcome challenges in the market to maintain your success?

MLC: AIC has sustained growth because we never forget what it is that has made us successful. We hold on to the principles that we had when we were bright-eyed and bushy-tailed- those principles and sound intellectual framework that I mentioned before. Additionally, we are loyal, fully committed, positive, intellectually honest, and prepared. Today I follow the same rigor that I did fifteen years ago in everything I do – from how I address work to how I exercise. Unfortunately, most people forget the characteristics and traits that made them successful. AIC never does.

The Harbus: After building much of your success in Canada, you have decided to return to Jamaica with your purchase of NCB bank. Also, you have expressed your aspiration to improve education and reduce crime in Jamaica. Why is it important for you to contribute to the social welfare of Jamaica at this point in your career, and tactically, how do you plan to improve the standard of living for Jamaicans?

MLC: First, I feel individually blessed as a human being because most of the benefits in my life did not come at my choice. I was lucky to be born in the environment and to the parents that I was born. It was a sheer good fortune. I could have been raised in much worse conditions that would have made my success more difficult to achieve.

My history makes me indebted to my homeland, Jamaica. I will help it in every way I can. But in addition, I can make an impact through education and role modeling not just in Jamaica, but also in Canada, and the U.S. I want to explain success – I want people to know that it can be distilled into a formula and that by applying the formula success is achievable despite where and how one starts. There are a lot of misperceptions out there that I want to dispel.

Second, we can change Jamaica by increasing wealth in the country to make things more valuable while making the country less attractive to crime. We can increase that wealth through NCB. AIC, the parent of NCB, purposefully reinvests all of its profits earned in Jamaica back into Jamaica because this will help create jobs and motivate people of Jamaica. We are also calling on all other companies operating in Jamaica to do the same. When we pull together to reinvest in the country, all businesses in the region will benefit because accumulating wealth will ensure better returns for the business.

The Harbus: What is your outlook for business opportunities in the Caribbean and in Jamaica; what types of structures are required, in your opinion, to catalyze investment, economic growth, and widespread improvement of standard of living in the region?

MLC: If you had a choice to invest in an inefficient or an efficient economy, I think that you would invest in the efficient economy every time because the inefficient economy produces lower margins and lower profitability. Today, economies in the Caribbean and in Jamaica are inefficient relative to the economies in North America.

But I think there are opportunities to invest capital and to earn a good rate of return in these inefficient economies. For example, starting a new supermarket business might be impossible in the U.S. at this time.

Large stores such as Publix and Safeway would crush competition immediately. But in the Caribbean, the market is fragmented relative to the U.S. and has less competition, which makes it attractive to start a new business. So, in fact, these inefficient economies do present opportunities that are better than those in the more efficient economies.

The Harbus: You are tremendously successful now, but I read that in the pursuit of your first finance position at Investors Group in Canada, you actually failed a psychological/aptitude test that was part of the application process. That turned out to be inconsequential as you obtained the position anyway, but what personal traits do you think you have that led you to this successful point in your career?

MLC: First, I have confidence in my native thoughts. Once I fully tested my ideas, I’m steadfast in my convictions. Second, my discipline and character have allowed me to become successful. As I said before, I perform tasks today with the same rigor as I did fifteen years ago. Also, I preserve a long term approach to managing a business. For example, the perspective of a publicly traded company leads it to make different decisions than a private company. Publicly traded companies make decisions to ensure linearly increasing profits, while I can make an investment decision today that will yield an enormous profit perhaps ten years later. Finally, I’ve focused on loyalty, intellectual honesty, preparedness, and optimism. I see the glass as half-full, and I’m passionate about what I do.