John Paul DeJoria went from living out of a car to becoming a shampoo and tequila billionaire. Some forty years after he struck it rich, he shares investing wisdom he’s gained along the way.
John Paul DeJoria in 1980 invested his entire $700 life savings into a business selling new shampoo he developed with hair stylist Paul Mitchell. The duo chose the now distinctive plain white bottles with black lettering because they did not have enough money to pay for color inks. At the time sleeping in an old Rolls-Royce automobile, DeJoria pounded the pavement, selling his product in salons across Southern California. As the 1980s rolled on, the Paul Mitchell brand became a big hit with salons and their patrons who were willing to pay premium prices for high-end hair care products. DeJoria became a wealthy man and began to diversify into new ventures, like he did in 1989 when he co-founded Patrón Tequila, selling the brand to Bacardi in 2018 for $5.1 billion. In 2013, DeJoria appeared on Shark Tank and was part of an Emmy winning episode, where he invested $150,000 for 20% of a novel Florida irrigation company called Tree T-PEE. DeJoria is also a major investor in the House Of Blues nightclub chain. After his initial success as an entrepreneur, DeJoria also began investing in stocks and real estate, and learned a lot over the past four decades about how to maximize his returns while minimizing losses. Forbes recently met up with DeJoria, now 79 and worth $3 billion, at Utah’s Montage Deer Valley Resort during Goldman Sachs’ “At The Helm” private wealth management conference.
Forbes: How did you get your start in investing?
John Paul DeJoria: I got my start investing as a little kid. I was around 11 years old and had a paper route. I found out I could open a savings account, so I went to Citizens Bank in Atwater, California. I think I had $3. But other than that, I never had the money to invest. So when I really got started in investing, whether it’s in the stock market or real estate or other things, I was more into my 30s after Paul Mitchell was finally underway making some money. I figured that I’m making enough money now, how do I preserve some of that for the future. What you should do in life to be successful is when you start making money, don’t do what so many people have done—they start making money, they feel it’s never going to end. Then the next year, it’s not coming in and they’ve already mortgaged their future with debt.
Before I made any investment, I made sure I had enough money in the bank for six months of every bill I had—movie theaters, popcorn, gasoline, insurance, every cost—so I knew if anything went wrong, by gosh, I’d be okay for at least six months.
The next thing I would tell investors is to realize you are the best investment you could ever make in your life. If you can invest in yourself, in education or something that’s going to benefit you or your family, that is the first big investment you could ever make. I wanted to buy a house to start with, so I saved money until I had enough to buy a small house. Then I started making money with Paul Mitchell. I didn’t increase my standard of living for one whole year. I did not change or spend more money. And I did that every year for several years, not knowing how long it would last. That’s how I got involved in investing.
Forbes: When you started in your late 30s, what were some of the things that you invested in?
DeJoria: It was a combination of things. At first it was some other businesses that I thought were great and because I wasn’t involved in them, they didn’t go as well as they should go. Then I started investing a little bit on the stock market because I never really understood it. I didn’t have a lot of money in it. One of the most unique ones was Enron, which went for many dollars a share, but then Ken Lay was exposed for not doing the right thing and the stock went down to something like 10 cents and I think I bought about 10,000 shares. I sold it when it went up to 40 cents. I made a big profit out of it and thought this was cool. That was one of the early ones.
Forbes: How would you describe your investment strategy today? And how has it changed and evolved over the years?
DeJoria: It’s evolved over the years. You can’t invest in only one thing. It’s like drilling a well, if everything goes into one oil well, and it doesn’t go right with it, you’ve lost it all. So, I’m very diversified now. I have some in the stock market, some in precious metals, or companies that I have are involved in precious metals. I have a couple of gold mines in New Zealand. I invest in the places that produce the gold and the silver. I also invest in real estate.
When I look at investing today, especially in these last several months, what I really look at is not “this is the one that’s going to do great in the next year or two.” I look at how much staying power do they have? Have they been around through, for example, the problems we had in 2008, 2009 and 2010, the recession. If they were around during Covid, how did they survive? In other words, if I invest in a company on the stock market, are they one that if everything goes wrong, they’re still going to be here in so many years. And I invest in real estate without ever over-mortgaging. People go broke over-mortgaging. If I’m going to invest in something, I’m going to be able to afford it.
Go very slow, and always invest less than you can afford to invest. And never ever put more than 10% or 20% in any investment, even if you think it’s a sure thing.John Paul DeJoria
Forbes: What type of real estate do you usually invest in?
DeJoria: Office buildings, big developments. One thing I’ve been partnering with quite a bit in the last six years is a group called the Discovery Land Company. They have fabulous real estate and private memberships in various parts of the world. These are big developments—300 or 400 big homes in places that people love, like Austin, Costa Rica and Scotland. They’re family-oriented; I could bring my grandkids there. It’s all private, have the best security in the world, all the finest chefs, golf courses and other outdoor pursuits.
As times changed, I ended up buying Hamburger University in Chicago. McDonald’s moved to a bigger facility closer to the middle of town. It was about 80 acres, with a gorgeous 700 square foot office space, a lake and a Hyatt Hotel. It was the headquarters for McDonald’s to train managers and for people who want franchises. After I sold Patrón, I bought the whole thing. The city let me come because I was going to leave it with ecology in mind and not hurt the lake and make everything there more beautiful.
Forbes: What is it being used as now?
DeJoria: Ace Hardware has their headquarters there right now and a couple of accounting firms, too. It’s an income producing property for future generations. When I get a lot of projects, I’ll put 75% in my name, but the other 25% into a trust just for my children. So no matter what happens to the 75%, there will always be something for the future.
Forbes: Which investment do you consider to be your greatest triumph?
DeJoria: John Paul Mitchell Systems. When I didn’t have any money for it, I said, I’m going to figure out a way to make this happen. It was the greatest thing I ever did in my life. That money opened up Patrón Spirits and other businesses. [DeJoria sold Patrón in 2018 to Bacardi in a deal valued at $5.1 billion.]
Forbes: Which investment do you consider your biggest disappointment and what did you learn from it?
DeJoria: I got into the telephone reselling business, reselling minutes when it was hot as can be. I didn’t know anything about it; I thought the people involved knew what they were doing. I lost a few million dollars on it. That’s when I learned not to stupid invest. I didn’t know anything about the business. I trust these people I was looking at and thought they were going to quadruple my investment in a year. Wrong, wrong, wrong. I learned to not act so fast; do your due diligence. I have a home office [family office] now that does all my due diligence for me.
Forbes: Are there any particular factors, either micro, fundamental or macro that you pay particular attention to as an investor?
DeJoria: Yes. Number one is how do I feel about it in my heart, not just my brain. Is it something that will do the greatest good for the greatest number of people or is it just for money? Those are very important to me. Is it something that the customer will really love and will say this is really great. And how can I possibly help make that better? Whether it’s oil and gas or something else, how can I maybe get involved—make this investment—but make it better for the planet or the people. That’s what I look at when I get into something.
Forbes: If you could give your 20-year-old self some advice about investing, what would it be?
DeJoria: Go very slow, and always invest less than you can afford to invest. This way, you don’t lose it. And never ever put more than 10% to 20% in any investment, even if you think it’s a sure thing, because of Murphy’s Law. If something could go wrong, it might. Five percent is even better.
As an investor if you are right 51% of the time, you’re ahead of the game. I’ve been lucky a few more times.
Forbes: Who are some of your investing mentors and what have you learned from them?
DeJoria: I wish I had investing mentors. I’ve never had them until I got involved with people like Goldman Sachs, Discovery Group, and then my own home office where I learned about other ways to invest. Because I didn’t have a mentor. The closest was my mom—giving my brother and I a lot of love and saying, boys, you can do anything in your life, just stick to it.
Forbes: How about an investor that you admire? DeJoria: I think Warren Buffett is super cool. And then some of the guys in my home office, who really have a keen eye watching out for my investments as well as their own.
Forbes: Is there a current investment idea or investment theme that you think is particularly appropriate for investors today?
DeJoria: Don’t just look at today, what’s hot or what’s standard. Look at what we may have and need in the near future and look at the companies on the cutting edge of doing it—not just the things promising to be on the cutting edge. I will give you an example. One of the big things going around today is a shot for diabetics called Ozempic. People that I know lost a lot of weight the first month or two, but the majority had terrible side effects—headaches, nausea. They lost weight but said it just wasn’t worth it. They were told by their doctors to get off it. I ran across this group that made—I’m going to call it a vitamin pill. It’s made out of three plants, no chemicals. And they said, we made it for diabetics or pre-diabetics, but they seem to have an unusual side effect. People are feeling better, their skin looks better, and they’re losing weight. So I said this could be something I may want to get involved with. So I got a hold of enough where I could take it and try it on people I knew. We tested it on at least a dozen people. How did it work? Every one of them within the first week felt better, felt more energy. The worst one that we experimented with lost one pound a week for seven weeks; the best lost within two months a little over 20 pounds.
Forbes: What is it called?
DeJoria: I can’t say right now as we are trying to complete the deal because I’m definitely getting involved with it. Every one of the plants are good for you. Some of the Housewives of Orange County were blown away from it. They want to put it on their website. And it doesn’t cost $1,200 a month either; it’ll be about $100.
So look for things that people need, that are going to be good for the future, not just right now to make you some money.
Forbes: What would you tell investors today and what keeps you up at night?
DeJoria: Nothing really keeps me up at night anymore, but I would say if you can’t sleep, my suggestion is to get up and get a piece of paper and write down everything on your mind, whatever it is, such as I can’t pay my bills. Take it and put it in your bathroom and go right back to bed and tell yourself now I don’t have to think about it anymore. It’s on a piece of paper and when I get up, I’ll read. That really helps.
Also, if you’re going to invest with anybody, check them out thoroughly because many times people aren’t what they seem to be. I found that a few times in my life in different types of investments, and the ones that people weren’t what they seem to be always went sour.
Forbes: Are there any books that you recommend every investor read?
DeJoria: First book everyone should read is one I read many years ago when I was selling encyclopedias. It’s maybe the greatest book ever written on people in business. I think it was written 90 years ago. It’s called How to Win Friends and Influence People by Dale Carnegie. Another one is the Richest Man In Babylon by George Clason—a poor guy who started taking part of what he earned and put it away with the phrase in mind “part of what you own is yours to keep.” So before you pay your bills, you pay yourself 5%. Even if you owe more money than what you’re making, just put it away and make the rest due. It accumulates over a period of time.
Forbes: Thank you.
Excerpted from the October issue of Forbes Billionaire Investor.
This article was originally published on forbes.com and all figures are in USD.