V. Prem Watsa (BT/CH/1971) is the Founder, Chairman, and Chief Executive of Fairfax Financial Holdings, based in Toronto, Canada. He is commonly known as “the Warren Buffett of Canada” for his exceptional investing skills and business acumen. He won the Distinguished Alumnus Award from IIT Madras in 1999. Prem Watsa shot into the news headlines last year, with Fairfax’s takeover of BlackBerry Ltd. in September 2013.
Chennai36 brings to you the second and final part of our extensive and exclusive interview of this great visionary. In Part 2, Mr. Prem Watsa talks about the origins and rise of Fairfax Financial Holdings, his day-to-day work life; and shares some of his inspirational advice for current IIT Madras students.
You can find the link to Part 1 of Prem Watsa’s interview here.
Could you describe the beginnings and development of Fairfax Financial Holdings, which is among the world’s largest property, insurance and investment companies today?
After my MBA, I began applying for jobs, but as an Indian immigrant competing with established Canadians, I had a difficult time. Finally, I got into a company called Confederation Life Insurance (where I then worked for almost ten years), and that too only because out of the four applicants, the other three, never showed up for the interview! My manager there, John Watson, taught me all that I know today about investing, trained me for the job and became my mentor. He was one of the best people I ever knew, and exposed me to the world of Value Investing.
In 1985, which is 13 years after I came to Canada, I and three of my colleagues from Confederation Life started a company called Hamblin Watsa Investment Counsel Ltd, which soon developed into the firm currently called Fairfax Financial Holdings Limited.
It was the opportunities and exposure in Canada which enabled me to develop the company, something that was surely not possible in India at that time. I loved building the company, as it started from nothing to about $6 billion today. The share price was about $3.25 when we started; today it is about $475.
The work culture at Fairfax is terrific; we have always had very hardworking employees, and we have always treated them very well; and ensuring that what we do is good for the customer as well as the employee and the company. We donate about 1-2% of the profits back to the communities in which we do business in, today that is about 12 million and to put it into perspective our whole company was worth 2 million when we started in 1985.
About the business environment in India:-
Everyone must realize the fact that it is business, and not the government, which actually employs people. I feel India ought to open up more and encourage more business, which will in turn create more employment. The situation has definitely improved over the years, but there is still scope to do more. A business-friendly government has a lot of advantages. However, I am still very excited about India and its future prospects.
Describe your day-to-day work as the CEO of Fairfax. What is it that you love the most about your work?
As the CEO of Fairfax Financial Holdings Ltd.; the Head Office has only about 25 employees. It is the subsidiaries in New York, Canada and around the world that generate the business in our Insurance and Reinsurance operations.
All the float managed by the Investment Team at Fairfax, of which I am a member, is worth over $25 billion. Any acquisitions, positions we take and succession planning takes place at the Head Office.
I wouldn’t really call what I am doing “work”, it is what I enjoy and in fact, I plan to do this as long as I can.
I have also been very involved in supporting other organisations like the University of Waterloo (which in many ways is like the IIT of Canada, and is very well-known). I am on the Investment Committee of the Hospital for Sick Children, the Advisory Board of the Richard Ivey School of Business (my alma-mater), the Investment Committee of St. Paul’s Anglican Church, and also the Investment Committee of the Royal Ontario Museum Foundation.
I have three children – two of whom are married now, and also two grandchildren. Although they are not working in or are involved with Fairfax, they are all doing really well. I have told my children that all my shares as I control the voting shares will after I am gone go into a foundation so that Fairfax will continue to grow and employees can build their career with us without any fear that the company will be sold or broken up.
About what I love and hate the most in my work:-
I absolutely love all aspects of my work; building a great company from scratch, doing business as it should be done, in a free, fair and friendly environment.
The only negative aspect, according to me, is when I have to let someone know they aren’t performing very well. However, we do bear in mind that they have families and we treat them with respect and make sure that they are well taken care of.
You have often been called the “Warren Buffett of Canada”, for your excellent investing skills, and your accurate predictions of the global financial crisis of 2008. Have you ever met Mr. Buffett personally?
Yes, I first met Warren Buffett at an annual meeting in 1981-82, which was attended by less than 200 people. He is indeed a great builder of business, and one of the best value investors. Although my business is different from his, I have learnt a lot from him and his methods. I am indeed lucky to have had mentors like John Templeton, who was a big mentor in my life for over 30 years.
Could you please tell us something about Fairfax’s takeover of BlackBerry last year, something which created headlines in India?
At one point in time, BlackBerry’s share price was about $100-140, and everyone loved it. But when it was about $6-8, no one wanted it at all. We felt that the BlackBerry was indeed a very attractive investment, just that it needed a change and restructuring of its management. We appointed John Chen as BlackBerry’s new CEO, and with about 15% of stake in the company, we are now BlackBerry’s largest single shareholder. We have made similar investments in many other companies as well, such as the Bank of Ireland. We always make these investments when we feel we can get really good value, a point which I learnt from John Templeton.
What advice would you like to give to current-day students of IIT Madras?
At your age, I was very much like all of you are right now. I would like to share one incident with you that changed my life:-
I was 21, travelling by train from Madras to Hyderabad in a third-class unreserved compartment after finishing IIT-M. I was sitting on the footsteps of the coach, smoking a cigarette (I later quit smoking), when I met a man, who gave me a book titled “Think and Grow Rich” by Napoleon Hill. It was one of the turning points of my life. Napoleon Hill wrote about the life of 500 Americans who had become financially successful, such as Andrew Carnegie. The phrase “what the mind can conceive, the mind can achieve” convinced me that if you really want to be successful – in any field you might choose – then you surely will be. You are bound to have experiences and turning points like these in your life and when you do act on them.
As far as my personal life is concerned, I got married at 23 and been married, for over 40 years now. That is probably the single best thing that has ever happened in my life. Also, develop a strong faith in God, and practice your faith whatever faith it may be. It will give you a guideline on how to live your life, and will help you make all the right choices for a wonderful future. Once you are successful you should always remember to pay it back and help others who are less fortunate. You will find that personally rewarding.