The Blueberry Billionaire | John Bragg

0:00:07 Why we succeeded is we tried to find a product we could run and run the hell out of it, as we would say.
0:00:10 We’re by far the largest wild blueberry produce.
0:00:15 As we sit here today, we’re processing carrots.
0:00:20 We’re the largest carrot processor in Canada, so we learn how to do it and do it well,
0:00:23 and then just run it as much as we can.
0:00:28 And then we do battered products, and we try to do the same thing there.
0:00:34 So stick to your knitting, do what you can do, and do more of it, and try and grow it.
0:00:36 Don’t try and do everything.
0:00:42 So many people fail by getting successful in one, and then think they can do everything.
0:00:53 Welcome to the Knowledge Project.
0:01:00 I’m your host, Shane Parr. In a world where knowledge is power, this podcast is your tool kit for mastering the best what other people have already figured out.
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0:01:16 My guest today is John Bragg, the blueberry billionaire.
0:01:25 From humble roots, this entrepreneur that you’ve never heard of has grown Oxford frozen foods into the world leader in harvesting and processing wild blueberries.
0:01:31 And if that wasn’t enough, he also started and grew North America’s largest private telecommunications firm, East Link.
0:01:36 And all of this from a small town with a population hovering around 1200 people.
0:01:39 I traveled all the way to Oxford, Nova Scotia to hear his story.
0:01:46 How did he start? How did he grow from the early days of picking wild blueberries with a rake to huge acquisitions across the border?
0:01:47 We cover it all.
0:01:51 This is one of my favorite conversations in recent memory, and I’m so happy I get to share it with you.
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0:03:31 I want to start with your childhood.
0:03:32 Take me back.
0:03:33 What was that like?
0:03:37 Well, I grew up in a village of 300 or 350 people.
0:03:42 As I remember it, we had a sports event of some kind going all the time.
0:03:47 From the time I was five or six years old, we’d have a Sponge Ball game.
0:03:54 And so a lot of sports activity and skating on swamps and hockey games on swamps.
0:03:58 And in grade eight, we had a new regional school in Oxford.
0:04:06 Brand new school with a gymnasium, which was just a wonder for us because we’d been playing baseball in hay fields.
0:04:14 And to get a gymnasium and a gymnasium teacher was just fantastic for us.
0:04:17 So it became a big part of our life.
0:04:27 I was a member of 4-H and had a winning calf and all those little things that, you know, I guess you build on them through the years.
0:04:31 What kind of values and principles did you learn from your parents?
0:04:34 They were both very straightforward.
0:04:37 My father grew up in a country store.
0:04:41 You had to have repeat clients, small community, and people didn’t travel.
0:04:46 So you had to treat people with respect and honorably.
0:04:49 If you tell somebody you’re going to do something, you’re going to do it.
0:04:53 And if you say you’re going to be there at seven, you’re going to be there at seven or before.
0:04:57 Very straightforward values, you know, good base to build on.
0:05:00 So you started collecting while blueberry is in high school?
0:05:04 I did. My very first year, I was 15.
0:05:13 So I had to hire somebody to drive the pickup truck and we had four or five pickers and picked 4,000 pounds of blueberries.
0:05:18 When you think today we do 150 million pounds, quite a difference.
0:05:22 It was the beginning of an entrepreneurial career, I guess.
0:05:25 And you used that to pay for university?
0:05:34 My last year of high school, I actually made $4,000 pickin’ blueberries because that had developed.
0:05:37 And it cost $1,200 to go to Mount A.
0:05:42 The game was I could pay my way and, well, my parents could afford to.
0:05:46 And then by the end of university, I was doing a lot better than that.
0:05:54 I had a choice to teach school for $3,800 on an extra hundred if I’d coached the basketball team.
0:06:00 And I had made several thousand more than that pickin’ blueberries that year.
0:06:03 So I do what I was going to eventually do.
0:06:06 So you built an apartment building during university too, didn’t you?
0:06:10 As I left university, a fellow student and I built an apartment building.
0:06:13 You’re well informed. I forget about that.
0:06:16 But it was a great venture and a great learning curve for us.
0:06:19 And you ended up owning that for like 50 years?
0:06:27 Owned it a long while. And finally, when we were doing one of our major cable acquisitions,
0:06:30 we said that we would sell some non-core assets.
0:06:36 And that was a non-core asset and went along with some other non-core items.
0:06:40 But after Mount A, you went to Dalhousie Law School?
0:06:47 I went to Dalhousie Law School, which was kind of interesting because I didn’t ever plan to be a lawyer.
0:06:54 A friend of mine was going and so then I had to talk my way into law school at the last minute.
0:06:58 But I was only there about three weeks when I realized it was for lawyers.
0:07:02 But it was a great education. I met some great people, good friends.
0:07:06 It was probably my best education was first year law.
0:07:10 And how did that help you in the business world after?
0:07:15 Where it helped me was the principle of a fair deal on both sides of the table.
0:07:21 We’d like to think that when we’ve completed a purchase or a deal of any kind,
0:07:24 that the other side’s happy and we’re happy.
0:07:27 You can’t always do that, but it’s a good objective.
0:07:31 So you left and then you went into the Bluebird business?
0:07:39 I came back to the small village and decided that my father and brother were in the cell mill business,
0:07:46 that I could help them, but that I could pay my way with the Bluebird business, which worked out all right.
0:07:52 Then in 1968, we had a real turning point when there were big crops in Maine
0:07:57 and the grower price went down and in some cases we couldn’t sell them.
0:08:02 On some days we had to stop picking. I had already made a decision I was going to be in the Bluebird business
0:08:08 and I decided if I was going to grow blueberries, I’d better have my own freezing plant.
0:08:16 So I built a freezing plant in 1968 when I was 28 and didn’t have any idea what I was doing.
0:08:19 Just a focus.
0:08:23 Who taught you the Bluebird business? How did you even start to build a frozen plant?
0:08:30 On the farming side, the Department of Agriculture in Nova Scotia had some very good extension workers
0:08:35 and a commitment to try and grow the blueberry industry in Nova Scotia.
0:08:41 And so I kind of came along with that. It was truly a cottage industry at that time.
0:08:49 And then the frozen food side, we were fortunate to find some consultants in Pennsylvania that had done work in Maine,
0:08:58 so we hired these consultants to design. We built the plant with our own help, but really we’re naive.
0:09:03 There’s no question we’re naive. If you’re dedicated enough, you can make it work.
0:09:09 What was the reasoning for the frozen plant? Like why go frozen? You’re picking wild blueberries.
0:09:16 Picking wild blueberries. Well, in ’67 we couldn’t sell them and if we did, we felt we were giving them away.
0:09:22 Not a good base to go forward on if you’re trying to grow the industry, but you can’t sell them.
0:09:29 I decided I should become master of my own destiny and it wasn’t easy.
0:09:33 The first year we had a complete crop failure, the only one in the history.
0:09:37 We’ve had poor crops and good crops, but that year we had a disaster.
0:09:39 And that was right after all the factory investment?
0:09:50 Having built a factory and geared it up to run 2 million pounds and we ran, I don’t know, 100,000, there just was no crop.
0:09:59 People could understand that. Our bankers, they knew it wasn’t something we did wrong. It was Mother Nature and so we got through it.
0:10:07 How do you handle inventory? Do you save some when the pricing is bad so that you can release it when the pricing is bad?
0:10:15 Sometimes you think that that’s what we should do, but when there’s an opportunity to sell and get the cash, I guess you take it.
0:10:22 And that’s what we do. No, that’s not to say we don’t carry inventory over strategically.
0:10:29 If the market’s too weak, we might carry some while we’re hoping the market will firm.
0:10:34 At what point did you realize the blueberry business could be as big as it’s become?
0:10:45 I don’t think I ever really understood that we could grow it to what it is and that it would be a base to grow other things and other companies and other businesses.
0:10:49 You know, we’ve had good years and bad years, but we’ve made it work.
0:10:57 When I started in the industry, the wild blueberry industry was 40 million pounds in total, and I hoped to do two of that.
0:11:03 And today the industry is over 300 million, getting closer to four, and we do half of it.
0:11:11 We couldn’t see the growth, but of course we made a major acquisition in 1983 in Maine.
0:11:22 We bought one of the two largest operations in Maine, and then more recently we’re developing a lot of land in the Acadia Peninsula, but it’s probably pretty mature now.
0:11:31 Why did you buy more land? The 82 acquisition, you bought more land as it’s come up around Oxford, is that to control supply?
0:11:35 Yeah, I think we have a lot of money invested in the factories.
0:11:41 Our ideal position would be to grow half of them on our own farms and buy half from farmers.
0:11:49 If you took the extreme and bought them all from the farmers, then you could be pretty vulnerable to competition running the price up too much,
0:11:59 or the growers ganging up on you. I mean, they’re all great guys, but you don’t want to be 100% in there when you have all the money tied up in the factories.
0:12:05 And the other side is we don’t want to have 100% of the industry. That wouldn’t be good politics.
0:12:14 We need a good farming community, and we enjoy working with the farm community, and we’ve got friends we’ve had for 50, 60 years.
0:12:21 Well, talk to me about that a little. You do a ton of research, and you make it available to your competitors, you make it available to farmers.
0:12:31 We do. We developed quite a while ago a philosophy that says, if it’s good for us, why don’t we share it with the farmers?
0:12:38 A lot of them deal with us and bring us their fruit. If we can make them more efficient, that keeps us in business.
0:12:45 And we’re continually saying to our own farm people and to the farm community, we have to be more efficient.
0:12:54 We have to compete in the world. We’re competing with all fruits and all foods. So if you’re going to do that, you have to grow more pounds per acre and do it more efficiently.
0:12:56 So that’s the way you stay in business.
0:13:02 Talk to me a little of what’s the agriculture of wild blueberries. My understanding is they’re not planted.
0:13:10 You’re right. There’s different bases in Nova Scotia on abandoned farmland, on the back roads where people moved out.
0:13:21 I say in the ’30s when rural electricity went through, didn’t go to every back road. Now when we’re talking about wireless and internet, we have to be in every back road.
0:13:31 It doesn’t matter whether there’s just a camp there. They want internet. You compare that with rural electrification, which did the back roads, but not the real back roads.
0:13:43 And so a lot of people, when electricity went through, moved off the back road farms and those farms eventually became blueberry fields.
0:13:52 They revert to nature. Spruce trees grow on them. Blueberry plants grow on them. Usually 30 years after they were farmed by a farmer.
0:14:04 And so they’re not planted. They’re there naturally. In many cases, some of these farms had already been taken over by spruce trees, whether quite thick or scattered.
0:14:08 And we would cut the spruce trees down and we had a blueberry field.
0:14:21 Now the industry in Maine, which is the mother of the industry, had about a 50/50 ratio between old farms, which tended to be smaller than they were here.
0:14:28 But then they had the blueberry barrens, which were big fields that were a pine forest originally.
0:14:38 And then through forest fires, they became, you know, there’s history written about them picking blueberries in the 1700s on these barrens.
0:14:48 They’d been burnt over the years. And so that’s a different industry. And now in New Brunswick, on the south side of New Brunswick, again, it’s old farmland.
0:14:58 But on the north shore, it’s a pine forest that we’re clearing. We’re really excited about the potential in New Brunswick.
0:15:06 We’re going to have more acres and blueberries than the Brunswick has in potatoes. So it’s going to change the Canadian financial and the economy there.
0:15:15 What is it about, my understanding is, Quebec, Maine, Nova Scotia, New Brunswick, those are basically the only places while blueberries really grow.
0:15:25 Not quite right. Nova Scotia, New Brunswick, Maine is the mother of the wild blueberry industry. But Lake St. John is also quite a big production area.
0:15:32 In ’83, when you did the Cherryfield acquisition in Maine, was that the big step up for Oxford?
0:15:42 Yeah, I would say ’83 was kind of a transformative year. It’s also the year that we bought control with Stewart Rath’s of Halifax Cable.
0:15:53 It took us from being operating small rural towns to having the major city. And so those were bases that we’ve built on.
0:16:01 We weren’t that well financed, so lots of borrowing and lots of convincing banks, we could do it. So ’83 was a big year.
0:16:04 You’ve never shied away from using debt?
0:16:15 We haven’t shied away from using debt, although today our balance sheets are in great shape. But through the years, we’ve always been, what I would say, almost fully levered.
0:16:23 The food business, we were levered, but we had good assets. The cash flow wasn’t as consistent as you’d like.
0:16:34 But in the cable business, we were buying cable companies all over Atlantic Canada and out west in Ontario. But the cash flow was pretty consistent.
0:16:44 You could budget it and see where you were going. So I wasn’t afraid of debt. And I think that separated me from the original cable owners.
0:16:54 There were lots of them. As the industry developed and fiber came along, we started tying them together and there was a lot more capital involved.
0:17:04 Lots of the small town operators just decided that it was time to move on, that they didn’t want to lever themselves the way it was required.
0:17:18 So we started buying small systems and tying them together and then we had the opportunity to get health acts and eventually Dartmouth, basically all of Nova Scotia except Glace Bay and a little bit in Cape Breton.
0:17:27 We just kept levering and levering and buying and buying some more. It was hardly a year that we didn’t have an acquisition.
0:17:34 I want to come back to East Link in a second because you own one of the largest, I mean, the largest private telecommunications companies.
0:17:36 I think it’s the largest private, yes, by far.
0:17:40 What are the input costs to blueberries? I think one of the big ones is bees.
0:17:48 The biggest single cost are the rental of honey bees for pollination. You know, these berries are 1,500 blueberries a pound.
0:17:55 Every blossom has to be visited by a bee to get a blueberry, so we require a lot of hives.
0:18:08 And I was reading an article this morning on the Canadian economy and where Scotiabank had put out a report that said if we would eliminate the borders within our provinces,
0:18:14 it was something like two to seven billion dollars of efficiencies that would come to Canadians.
0:18:19 So in our bee business, we’re stuck with restrictions.
0:18:27 We can bring bees from the Okanagan Valley all the way to New Brunswick and we have to get permission through each province.
0:18:32 And we get the permits when we bring them, but when it comes to the Nova Scotia border, no.
0:18:39 So Nova Scotia and PEI are the only jurisdictions in North America that have restrictions.
0:18:50 Historically, it was about protectionism. Some local beekeepers come together and lobbied the government and said we don’t want others coming in here.
0:18:54 This is our market, but that’s a small business compared to the blueberry business.
0:19:00 So we’re held hostage by a lack of pollinators in Nova Scotia.
0:19:07 My understanding is like there’s almost like a team of moving pollinators in the U.S.
0:19:13 They start on the West Coast and they sort of like go across the country to Florida and then up to Northeast.
0:19:21 I asked one of the guys about their business model and they said ABC, almonds, blueberries, cranberries.
0:19:28 Then they go to Florida for the winter and then they go back to California and the almonds and they do the route over again.
0:19:30 And it makes them quite efficient.
0:19:35 Where in Nova Scotia, what can you do? You have to stay within the borders.
0:19:39 We have a great junior hockey team in Halifax, the moose heads.
0:19:47 And it’s like saying you can play in the queue, but you have to use only Nova Scotia inputs and you can’t bring anybody in.
0:19:53 It’s not only bees, there’s just restrictions all over the place on border crossing.
0:19:59 And there’s been panels and people studying at Harper Head and study group.
0:20:03 And everybody finds the same thing. It’s kind of ridiculous.
0:20:09 But that’s the country we live in. But there’s always hope.
0:20:12 Do you have a professional beekeeper on staff?
0:20:19 We do. We’re the largest beekeeper in Nova Scotia by far and one of the largest in Canada.
0:20:23 Because we couldn’t get the bees, so we had to start our own apiary.
0:20:27 We still don’t have enough. And the farmers don’t have enough.
0:20:31 And what difference does that bee make in yield, like the pollination process?
0:20:45 Four or five times. I think if you had no honeybees imported and relied on local pollinators, you might get a thousand to fifteen hundred pounds.
0:20:54 We use four to five hives, which is considered high, but we can grow eight thousand or nine thousand pounds.
0:20:56 So it’s a tremendous difference.
0:21:03 And with our research, we’ve been sponsoring research with Dr. Percival at the Agricultural College.
0:21:13 And he’s really taught us how to grow plants that are more productive and with fungicides and fertilizers.
0:21:18 And we do have the basic crop there, but then you have to get it pollinated.
0:21:21 It’s a real problem. And this year was particularly bad.
0:21:26 The farmers lost, in many cases, fifty percent of their bees over winter.
0:21:31 See, we should be taking those bees to Florida maybe in the wintertime.
0:21:33 Because it was too cold? Is that why?
0:21:36 I’m not sure. There’s always lots of reasons.
0:21:42 Our beekeepers say they went into the winter in poor condition, so then they didn’t survive well.
0:21:48 It does mean that if you want to raise bees in Nova Scotia, you know, there’s a second market in New Brunswick.
0:21:54 The Canadian Peninsula is ten days later than Nova Scotia and a microclimate.
0:21:58 So we could pollinate here and then take them to New Brunswick, but we can’t do that.
0:22:01 So our biggest input costs are bees.
0:22:07 If the total is two thousand dollars, a thousand of it’s in bees.
0:22:15 So it’s a big, big factor and a big issue and a big disadvantage to Nova Scotia farmers, tremendous disadvantage.
0:22:18 And when you started, you were picking blueberries with the rakes manually?
0:22:22 That’s right. And how has that process evolved to today?
0:22:30 There have been all kinds of people trying to develop a mechanical harvester.
0:22:40 My brother and a mechanic looked at some of these efforts that were done in Maine and other places and they said we can do this and we can do it better.
0:22:45 So it took them quite a while because we really weren’t focused.
0:22:52 It would be something that we’d say in July, oh, we should get that old machine out and see if we can pick blueberries with it.
0:23:00 So the only thing I brought to the table was I got them a dedicated tractor and said we’re going to start working on this in January.
0:23:02 And they did and they solved the problem.
0:23:12 It took a couple of years maybe, but very talented and the same basic principles being used today that they developed back in the 80s.
0:23:16 So it was a big effort and it costs some money.
0:23:19 But again, we made it available to the farmers.
0:23:21 That it’s still the standard.
0:23:28 There are some other harvesters that are made by local farmers or a mechanic.
0:23:36 But the one that my brother and Lloyd Weatherby developed is kind of the standard.
0:23:39 It was nice that you made it available to everybody too.
0:23:43 That could have given you such a competitive advantage because labor is obviously expensive.
0:23:47 We not only have to have our own farm sufficient, we need the farmers sufficient.
0:23:50 I like how you think in terms of the ecosystem.
0:23:56 A lot of your competitors have sort of come and gone over the years as Oxford survived.
0:23:59 It was a cottage industry when I started.
0:24:10 People were operating like a cottage industry and it’s the requirement for more capital and more capital and bigger operations came.
0:24:18 Most of the existing people really weren’t up to mortgaging what they had and they were a different generation.
0:24:25 And so I’m a young guy that says I want to do this the rest of my life and I want to grow the industry.
0:24:29 So it was more of an attitude, I think.
0:24:33 I just fell into an industry that needed to be developed.
0:24:38 And so in some ways we provided the leadership for that.
0:24:42 Do you think that that long-term sort of approach to it helped you?
0:24:49 Yeah, we’re big believers in looking at the horizon.
0:24:58 There’s a famous quote by Dag Hammershaw who said that only those who look at the horizon find the right road.
0:25:01 If you look at your feet, you’ll stumble.
0:25:09 So we’re big loggers at the horizon saying how can we do this and a private business allows you to do that.
0:25:16 One of the interesting things about Oxford from my point of view is you never got into formulated sort of products,
0:25:21 which would be naturally pretty easy in the frozen food market and probably have higher margins, why not?
0:25:26 Lots of people have suggested we should have our own brand products.
0:25:35 My great friend and mentor, Prudy Crawford used to say, “John, you’ll spend $10 million on a factory but nothing on marketing.”
0:25:44 But our real business was business to business, as we call it, selling to jam manufacturers in Europe and pie manufacturers.
0:25:52 And if you’re a pie manufacturer, you’re going to go where the apples are because they’re 50% of the buys are apple.
0:25:57 Or if you’re in the jam business, you have to have a whole variety.
0:26:00 So Oxford didn’t have anything to offer.
0:26:07 Blueberry Jam in North America would be maybe five or six on the popularity list.
0:26:14 We’re a provider to manufacturers and whether it’s smoothies or whatever.
0:26:17 So there was no economies to scale.
0:26:22 I remember, you know, we have this great golf course at Cabot down in Cape Breton,
0:26:33 and the Industrial Commission of Inverness, before Ben built Cabot, came to see if I would make Blueberry Jam in Inverness.
0:26:41 Well, you know, their intentions were great, but it made no economic sense to try and lug Blueberry to Cape Breton, make jam,
0:26:48 and then bring everything else, whether it’s raspberries or whatever, strawberries from other areas.
0:26:53 So many people chase these higher margin products and they lose focus.
0:26:57 That’s exactly right. That’s a lot of people do that.
0:27:04 Why we succeeded is we tried to find a product we could run and run the hell out of it, as we would say.
0:27:12 We’re by far the largest wild Blueberry produce. As we sit here today, we’re processing carrots.
0:27:18 We’re the largest carrot, certainly carrot processor in Canada, maybe in North America.
0:27:23 So we learn how to do it and do it well, and then just run it as much as we can.
0:27:28 And then we do battered products and we try to do the same thing there.
0:27:34 So stick to your knitting, do what you can do, and do more of it, and try and grow it.
0:27:42 Don’t try and do everything. So many people fail by getting successful in one and then think they can do everything.
0:27:46 Was the rationale for carrots to sort of use the factory more?
0:27:52 Because my understanding is like bluegrass season ends sort of mid-September and then carrot season starts.
0:27:58 We said, “What can we do in the fall? Extend the season?”
0:28:03 Because we start the first of August, running 24 hours, 7 days.
0:28:07 And the minute Blueberries are done, we move to carrots.
0:28:14 It’s taken us quite a while to learn how to do it and do it really well, which we’re doing now.
0:28:20 But that was exactly it. And then we wanted to have a core of people in the wintertime.
0:28:25 And so we started making battered products for McCain foods.
0:28:26 That was the onion rings?
0:28:30 Onion rings and cheese sticks and cauliflower.
0:28:32 But onion rings primarily.
0:28:35 Talk to me about that deal with the McCain’s for the onion rings.
0:28:41 Well, very interesting. I would say typical maritime deal.
0:28:47 I went to see Wallace McCain. This is over 50 years ago.
0:28:54 And said, “Look, I need something to keep my people busy and have you any ideas.”
0:28:59 And he threw me a file on onion rings that they had looked at.
0:29:03 But it didn’t fit because they were doing French fries year round.
0:29:06 And he said, “Well, maybe you can do it.”
0:29:14 So needing something to do in the wintertime and off season, we took the file.
0:29:18 And we had a one-page agreement, which I still have,
0:29:24 which gave us the exclusive right to make onion rings under the McCain label in Canada.
0:29:27 And we’ve been doing that for over 50 years.
0:29:30 And I would say only in the maritime.
0:29:34 And of course, we’ve had our ups and downs.
0:29:40 But in all those years, I never once went back to Wallace or Harrison and said,
0:29:43 “Hey, help your guys or give me an eye.”
0:29:48 I always worked it out behind the scenes because I thought I could go to them once
0:29:50 and I was going to save that.
0:29:54 But if I became a nuisance to them, then the relationship would disappear.
0:29:58 So we’ve worked all these years and I never had to ask a favor.
0:30:01 We’ve done it on a pure commercial basis.
0:30:04 And I think it’s worked well for both of us.
0:30:08 I like the fact that it’s a simple one-page agreement over a handshake.
0:30:12 But at the time you entered that, you had no idea how to make onion rings.
0:30:14 Didn’t know how to make onion rings.
0:30:18 The deal we made is still going, still one-page,
0:30:24 but it’s altered in many ways, of course, over time with investments and so on.
0:30:29 Yeah, we didn’t know how to do it, but we didn’t know how to do blueberries either, or carrots.
0:30:31 What gave you the confidence to figure that out?
0:30:33 Other people in the world are doing it.
0:30:36 There must be some way you can learn how to do it.
0:30:37 It can’t be that complicated.
0:30:40 But this is back in the day before Google or anything.
0:30:41 That’s right.
0:30:44 You’re not like searching how to make onion rings.
0:30:49 Suppliers love to talk, so you talk to the people who make batter and say,
0:30:52 “Well, what kind of batter should we use?”
0:30:55 So they’ll tell you more than they should sometimes.
0:30:57 It was difficult.
0:31:00 And our objective wasn’t to make good onion rings.
0:31:05 It was to make onion rings exactly the same as the competition.
0:31:07 Because then it’s an easy sell.
0:31:09 You don’t have to have something unique.
0:31:13 And that was not as easy as you would think.
0:31:16 And we could make better tasting ones.
0:31:21 We could put them in a blind test and ours would win, but they were a little different.
0:31:24 And the objective was to make the same as the other guy.
0:31:29 What’s necessary to be successful in a commodity business if you’re making the same product
0:31:32 in a very similar way that other people are making it?
0:31:33 What gives you an advantage?
0:31:34 How do you create an advantage?
0:31:39 You have to be the low-cost producer and you have to be top quality.
0:31:45 In blueberries and carrots, there are established grades and so on.
0:31:48 So it’s not battered onion rings a little different
0:31:53 because there was only one major competitor and we were trying to compete with that.
0:31:59 By and large, you have to be a low-cost producer and have top quality.
0:32:04 And top quality doesn’t necessarily cost.
0:32:09 In fact, quite often it’s cheaper because you have less product on the floor
0:32:13 and less shrinkage and you’re doing it all right.
0:32:16 And the end product becomes better.
0:32:18 Top quality, low cost is a pretty good model.
0:32:21 There seems to be a natural entropy in businesses.
0:32:23 You become successful.
0:32:25 You start spending more money.
0:32:30 You start doing things that are different or getting a fancy office
0:32:35 or doing these things, but how do you maintain that low cost over 50 years?
0:32:38 I’d like to think that we’re low-cost.
0:32:46 Hopefully we are, but we strive every day and we have a culture of every year trying to do it better.
0:32:52 There’s always changes we can make in the manufacturing line or on the farm.
0:32:59 And so we have a real culture of being open to doing it better tomorrow.
0:33:06 I could list five or six things that I know we’re going to do better next year
0:33:10 and from some of the things we learned this year
0:33:18 and, you know, improving the mechanical harvester and improving how we unload the product
0:33:21 and how we deal with the farmers.
0:33:28 There’s always steps that you can do and you can’t be satisfied with the status quo.
0:33:32 You know, we could sell 40 million pounds of blueberries, wild blueberries,
0:33:37 kind of a specialty item, but when you want to sell 300 or 400 million pounds,
0:33:45 now you’ve got to compete with cultivated blueberries and with strawberries and marmalade, raspberries.
0:33:51 And we’re always trying to be better and get our costs down.
0:33:55 What’s the difference between wild blueberries and cultivated blueberries from a pragmatic standpoint?
0:33:57 Oh, it’s a tremendous difference.
0:34:04 First of all, the health benefits, the antioxidants are double in wild blueberries.
0:34:06 The flavor is much better.
0:34:14 The cultivated blueberries, they’re a fine product, but if you have them side by each,
0:34:20 anybody will choose the wild for flavor, and that’s a big help.
0:34:26 We have jam manufacturers that one of the biggest in the world is Andrews and France,
0:34:33 and they’ll only use European blueberries, which are a different species again, or our wild blueberries.
0:34:40 And the Europeans can’t compete with us because they’re still a cottage industry, so they’re gradually disappearing.
0:34:50 But there are lots of people who will change the recipe and maybe use 50% cultivated, so it’s a big competition.
0:34:53 Because it’s more expensive, wild blueberries are more expensive.
0:34:59 Historically, more expensive, and we could get a premium, but it’s becoming more difficult.
0:35:04 So our objective is to be the low-cost producer, even against cultivated.
0:35:11 What are the key sort of performance indicators or metrics that you look at to judge the business?
0:35:18 The food business is very difficult to put down on paper.
0:35:26 You know, you’re fighting the weather and all kinds of weather conditions.
0:35:33 Currencies are a big issue. Labor supply is because we’re seasonal.
0:35:41 Really, in the food business, in the blueberry business in particular, we just have to put all the inputs in,
0:35:46 do it all at the right time, the exact day for the sprays and so on,
0:35:51 and then hope that Mother Nature gives you a break and doesn’t take it away from you.
0:35:58 Like, for instance, this year, we think the Acadian Peninsula has great potential for wild blueberries,
0:36:06 and it catches showers because it sticks out in the water and the Bay of Shores on one side,
0:36:14 and either the Miramashi Bay or whatever is on the other.
0:36:20 But they normally catch good showers and have good rain. This year they didn’t get any rain.
0:36:26 And we had a tremendous crop, and you go to see it the day before at harvest,
0:36:30 and there are just little wee blueberries that hardly weigh anything.
0:36:37 And as a result, we had less than half a crop, and so we did everything right, all the conditions were right.
0:36:47 So very difficult to project, but what you need as a farmer is somebody else to be in trouble with their crop,
0:36:51 and your crop work out well. But you’re always looking,
0:36:56 so what’s the cottage industry, and what’s the crop in Lake St. John,
0:36:59 what’s the crop in Maine, what’s the cultivated crop?
0:37:03 So you’re always looking for somebody else to have trouble.
0:37:07 All you can do is farm through the cycles, keep putting the inputs in,
0:37:13 do everything on time professionally, and hope you get the break.
0:37:18 Our advantage is that we are in three different microclimates.
0:37:24 I mentioned that we had a poor crop in the peninsula, but we had a very good crop in Maine,
0:37:27 and so just a different microclimate.
0:37:32 Most businesses you can kind of project and do a business plan,
0:37:35 but in the food business, weather plays a big part.
0:37:39 Let’s switch gears a little bit to bread communications, which became East Link,
0:37:43 but it started way back in 1968.
0:37:52 Right after you just had a crop failure, you just invested all this money into the factory that you can’t use.
0:37:53 Right.
0:37:57 And then you bought your first, was it a television license?
0:38:01 It was a cable television license, and we didn’t really buy it.
0:38:09 The license were owned by the federal government, and so they accepted applications for different towns,
0:38:15 and their philosophy at the time was to have local entrepreneurs do local television,
0:38:23 but that got taken over by technology with fiber and where you could tie 10 small systems together
0:38:27 and have a good size one and a lot more capital.
0:38:32 When we started, we had two American channels that we were offering,
0:38:38 and I remember when we were upgrading Halifax from six channels to 12,
0:38:45 our engineer at the time said, “Nobody will ever watch 12 channels,” and that’s all of my time.
0:38:50 So we built 12 channels, and of course with their short time, that was outdated.
0:38:55 We had to rebuild, so we didn’t pay for the license, the license we applied for,
0:38:59 and nobody else applied, and this is sort of Amherst, Nova Scotia.
0:39:07 We built a system with Corex cable and put up a big master antenna to get the signals out of Halifax,
0:39:13 and then we got microwave American channels in, but it was tough.
0:39:17 It was really tough, and again, we didn’t know what we were doing.
0:39:21 Is it true you used to bus in tapes from New Brunswick?
0:39:25 I wasn’t going to mention that, it was so terrible.
0:39:30 We built a tower down at Mount Shamcook on the U.S. border,
0:39:36 and we received the Bangor channels there, taped them, put them on the bus,
0:39:38 and of course Halifax got them first.
0:39:43 At the time we got them in Amherst, they were two weeks old, but the sitcoms were okay,
0:39:47 but the Boston Bruins two weeks later, that’s not quite so good.
0:39:55 There was not a lot of entertainment, so we were selling these U.S. channels two weeks old,
0:40:01 and then eventually we got a microwave system that brought them in directly,
0:40:06 still off Mount Shamcook, and now of course all this stuff comes by fiber,
0:40:09 and so tremendous changes in that business.
0:40:13 Was it capital intensive back in ’68, as you’re building this out?
0:40:16 So where did the capital come from to build that out?
0:40:21 It was a small town, and so it didn’t take a lot of capital,
0:40:27 but we borrowed the money from the Bank of Nova Scotia, or most of it,
0:40:31 and we worked hard, it’s amazing how it’s developed,
0:40:35 but then we could see that you could tie them together with fiber,
0:40:40 and the more capital was required, so a lot of the other towns,
0:40:45 the guys just decided they didn’t want to put more capital in for sale,
0:40:49 and my corporate lawyer at the time, George, came and said,
0:40:51 “John, there’s something interesting here.
0:40:55 All these towns come up, there’s six buyers, but you always get them.”
0:40:59 And it was basically, we became easy to deal with,
0:41:03 and we always lived by our word, and we always paid top price,
0:41:07 and so we just kept picking them off one at a time,
0:41:12 and made it easy and didn’t over-negotiate.
0:41:15 We gradually picked up a lot of towns,
0:41:22 and then, you know, we bought a company out of Newfoundland
0:41:28 that had systems in Sudbury and in Bridge Columbia and Alberta,
0:41:31 and we just gradually bought them, but there’s nothing to buy anymore.
0:41:34 I think about this, we have both our cable and food business
0:41:38 that were both quite rapid growth businesses
0:41:43 from really small cottage industries to professional companies.
0:41:47 We’ve played that game, and they’re both good businesses,
0:41:50 but I don’t see the next big step.
0:41:52 They’re kind of mature businesses.
0:41:56 Yeah, and all the bigger companies are public companies,
0:42:00 and they’re not going to sell.
0:42:04 At one point, you were losing a lot of money every month,
0:42:07 and you went to see your father and your brother.
0:42:08 That’s right.
0:42:11 I guess maybe it was 11,000.
0:42:15 These numbers, you know, grow or shrink over 50 years.
0:42:18 I think it was 11,000 a month we were losing.
0:42:22 But that’s like hundreds of thousands today.
0:42:26 I thought we should have a little family meeting on it.
0:42:30 Look, we’re losing it, and I’m cutting costs everywhere.
0:42:34 We did cut costs, took all the extra people out.
0:42:38 I can see a light at the end of the tunnel,
0:42:41 but I’m not really sure where we’re going.
0:42:45 I think we could sell to some of our neighbors,
0:42:48 or maybe we could buy one or two,
0:42:51 because they were, everybody was struggling.
0:42:55 My father said, “Well, we spent a lot of money on your education.
0:42:57 We shouldn’t throw it away.”
0:43:00 It was a pretty wise advice.
0:43:03 I said, “I don’t know whether we’ll ever get it back or not,”
0:43:06 but it turned out it was right.
0:43:11 It had an expense of education, and we learned how to go on it.
0:43:13 Sometimes you get a little wisdom.
0:43:15 It takes a long way.
0:43:17 How important was scale?
0:43:21 Well, scale ended up being very important in that business,
0:43:26 and that’s why in ’83, when we got Halifax and were able to tie,
0:43:29 we couldn’t really afford to have professional engineers.
0:43:35 We were relying on suppliers to give us the technical advice,
0:43:38 but scale is absolutely important.
0:43:40 As you expanded this,
0:43:45 you’ve done, I think, hundreds of acquisitions effectively in AceLink.
0:43:49 Why the reputation for paying the most?
0:43:51 I don’t think we paid too much,
0:43:54 but we were prepared to pay at the top of the cycle.
0:43:57 Again, we were looking at the horizon.
0:44:02 If you paid a little too much in your private company,
0:44:05 you just have to live a little longer to make it work.
0:44:08 My brother used to say about buying a woodlot,
0:44:10 “Well, maybe we’re paying too much,
0:44:13 but if we live long enough, it’ll be a good deal.”
0:44:15 So this was the same with cable.
0:44:19 It just meant that instead of a 10-year payback,
0:44:22 you took 12, and you worked for nothing for two years.
0:44:25 This game, that was the right thing to do.
0:44:27 Is that something private companies can do
0:44:28 easier than public companies?
0:44:30 Oh, yeah, absolutely.
0:44:35 We’re still doing all kinds of land development and this development
0:44:38 we have in the food business and the peninsula.
0:44:44 It’s all 20-year horizon types to get the land cleared
0:44:47 and developed and get it productive.
0:44:51 But it’s unique, and nobody else is going to have it.
0:44:55 There are lots of projects like that.
0:44:58 What are some of the other projects you have going on
0:45:01 that you can do privately, that you couldn’t do publicly,
0:45:04 or advantages of just being private versus public?
0:45:08 I think there’s tremendous advantages to it.
0:45:10 If you have good management,
0:45:12 and we’d like to think we have good management,
0:45:14 we’ll work hard at that,
0:45:18 but there’s just all kinds of decisions that we’re making
0:45:20 that we can make.
0:45:23 Of course, if it’s efficiencies in the factory,
0:45:26 we want to have a two- or a three-year payback,
0:45:30 but sometimes you have to make motherhood statements.
0:45:35 You have to say, well, we’ve built a $150 million factory
0:45:37 in the Katie and Peninsula.
0:45:39 That’s a motherhood statement.
0:45:41 I mean, you couldn’t say,
0:45:43 well, it’s going to be a three-year payback.
0:45:47 It’s not going to be, but it’s a good long-term asset
0:45:48 for the area.
0:45:50 It’s a good long-term asset for us.
0:45:54 But so there are some, what I call motherhood decisions
0:45:58 you make to keep yourself efficient and going.
0:46:00 Are there other ones that come to mind?
0:46:05 The land development we’re doing up there is the same thing.
0:46:12 We bought about 3,000 acres of carrot land
0:46:15 in the Annapolis Valley at premium prices.
0:46:17 Why would you pay premium?
0:46:19 We need to secure the base.
0:46:21 That’s where we grow our carrots.
0:46:26 And we were doubling the production of carrots.
0:46:29 So we need the land base, in some case,
0:46:31 paying twice what the market was.
0:46:34 But it’s only available once, you know?
0:46:36 It’s not always available.
0:46:39 Buffett talks about, well, I want all my managers
0:46:42 to run their businesses as if they own 100% of it.
0:46:43 Right.
0:46:46 And then you would do these things where it’s like,
0:46:48 well, this might not make economic sense for 10 years,
0:46:51 but it makes economic sense over 50 or 100 years.
0:46:53 And I’m not sure Buffett would agree.
0:46:58 I mean, he buys going companies with existing revenues.
0:47:02 And I don’t think he’s done much startup.
0:47:06 And, you know, he gave up on Berkshire,
0:47:08 which was the right thing.
0:47:11 But he’s buying companies all over the world.
0:47:14 They’re already cash flow positive and making money,
0:47:16 and he can measure that.
0:47:20 My business of food and cable, and even inland,
0:47:24 were buying kind of startups and growing them.
0:47:29 And maybe we were just lucky, but we’ve made that work.
0:47:33 But, you know, we could see that we could do that.
0:47:35 So it’s a little different than Buffett.
0:47:37 Now that we have mature businesses,
0:47:41 we’d like to find something that fits Buffett’s model,
0:47:45 find something that already has good cash and good management.
0:47:47 And we’re looking every day,
0:47:51 and we almost closed on a significant one.
0:47:55 But at the end of the day, we’ve said,
0:47:58 “No, we’ve reached our limit. We can’t pay that price.”
0:48:01 And we could have quite easily,
0:48:04 but we’d rather buy more Buffett stock
0:48:06 than pay too much for an operating company.
0:48:09 You did — we were talking about this earlier —
0:48:13 you took one public company private in 2007, 2008,
0:48:15 which was AM Telecom.
0:48:20 Yeah, AM Telecom in southern Ontario.
0:48:23 We got some real efficiencies by taking it private,
0:48:27 and it, you know, became a branch plant
0:48:31 as compared with a separate head office, separate accounting, separate —
0:48:34 I don’t know how much it wasn’t that big a company,
0:48:38 but we probably took three or four million dollars of overhead out of it.
0:48:41 Which is part of the cost, sort of, of being public in a way.
0:48:45 It’s costly to be public, and it slows you down,
0:48:50 and you’re a target for everybody.
0:48:54 Public companies attract government.
0:48:59 You know, I’ve been a director of one of the major banks in Canada,
0:49:03 and I’ve been a director of many other companies that were public,
0:49:07 but it seems to me that, you know, living in Oxford
0:49:10 and running a private company or under the radar,
0:49:18 a lot compared with public and public filings and regulations.
0:49:21 And we have them all, and we like our food business.
0:49:25 We run top quality, and I used to have this discussion with Donald Sobey,
0:49:31 who encouraged me to go public because it gave liquidity for the shareholders.
0:49:35 But I’d like to think we could solve that problem without going public.
0:49:38 But it’s really cumbersome. There’s no question.
0:49:42 And very hard to make long-term, 20-year decisions.
0:49:48 One of the things that you never got into with Eastlink,
0:49:51 to my understanding, was really buying, programming,
0:49:56 which seems to be the whole nature of the last 10 or 15 years of the business,
0:50:00 where you have, you know, the Bells and the Comcasts,
0:50:03 and everybody’s sort of like trying to buy up the programming.
0:50:04 Right.
0:50:06 Why did you guys never get into that?
0:50:09 I think it was probably a gut feeling.
0:50:11 They were paying a lot for this programming.
0:50:16 And do you think Bell are happy that they spent a lot of money buying programming now?
0:50:17 I don’t think so.
0:50:19 It really hasn’t worked out well.
0:50:21 Were we lucky?
0:50:25 We thought a lot about it, and there were programming we could have bought.
0:50:29 I guess, you know, we felt we had limited resources.
0:50:33 We’d rather buy another company than buy programming.
0:50:39 How do you think about something like Starlink now with real internet access?
0:50:47 You have hundreds of millions of dollars invested in physical assets delivering internet.
0:50:56 When it comes to the technology business, I’m the wrong one to try and answer that.
0:51:06 It’s very difficult to be better than a good fiber system in rural Nova Scotia or rural areas,
0:51:09 because you have so many options with it.
0:51:13 In fact, we’re doing business with Starlink because when they get down,
0:51:16 they want to have fiber that they can feed to people.
0:51:20 Are they a competitor? Are they a customer?
0:51:22 I’m not sure where that’s going.
0:51:26 And there’s limited capacity in these satellites, too.
0:51:31 Certainly there’s going to be competition, but I take a little different view.
0:51:39 We’ve got the customers, and so our job is to be efficient, provide good service,
0:51:43 make it easy, and can we do that?
0:51:45 I mean, are we going to carry Starlink?
0:51:50 We’re a distributor of other people’s products,
0:51:58 so I think having the fiber network in our office in Halifax on the wall,
0:52:01 we have a picture of our fiber network.
0:52:06 It’s really amazing, and I think it’s an asset that’s not recognized
0:52:11 by the financial advisors and so on of the big companies,
0:52:19 but if you look at our map, we have fiber from Ireland to Bermuda to the east coast,
0:52:26 and then we have fiber going west through Chicago and Detroit through Toronto and up north
0:52:31 and all the way to British Columbia, and a lot of this we own.
0:52:37 Some of it we trade, we might have 48 fibers in an area and somebody wants 12 of them.
0:52:41 We’ll say, “Sure, we’ll give you 12 in a rural area, but we need two to Detroit.”
0:52:46 I’d heard of it to Chicago, so we either own or have trades.
0:52:50 The fiber network, that’s really amazing when you see it on the wall.
0:52:56 I remember I went to lunch in Stockholm with the Ericsson guys
0:53:00 when we were first getting in the cell business,
0:53:05 and I said, “Will you put a set of business, will you put my cable business out of business eventually?”
0:53:10 He said, “Look, we’ve got to get off those towers and into fiber as fast as we can.”
0:53:15 So you think of it as all cell, but it’s really coming to you from fiber,
0:53:20 and wherever the cell is, there’s fiber to another node and you’re picking it up.
0:53:27 I think the cell network is a big asset for a lot of years, but voice is changing all the time.
0:53:30 Talk to me a little bit more about the fiber and the asset nature of it.
0:53:36 Is it more valuable than people think because it’s harder to get permits to put new fiber in?
0:53:40 Is it more valuable because it’s super expensive to put new fiber in?
0:53:43 I think it just gets more expensive all the time,
0:53:48 and by now there’s a lot of fiber networks built, so who’s going to build another one?
0:53:52 There’s a lot of competition, but we’ve got this.
0:53:57 It’s plowed-in capital that’s there that’s going to be a big asset for a number of years, I think.
0:54:01 Why did the name change from Bragg Communications to Eastlank?
0:54:09 Originally, we called it Central Cable in Amherst, and that was to keep our name off it.
0:54:13 But then we had a holding company, and somebody named it Bragg Communications.
0:54:17 Holding company that was not in the public at all.
0:54:22 Some way, as we bought companies, the Bragg name became a little more,
0:54:27 but in most cases we still ran under the original name,
0:54:31 whether it was in Sydney or Summerside or Shroudtown,
0:54:35 for financial reasons and so on, had to put them together.
0:54:39 The holding company named Bragg Communications sort of got out there,
0:54:44 but it was never on the walls of any of our buildings,
0:54:47 because they were all run as halifax scale or whatever.
0:54:52 It was truly a holding company, and then we moved it on from there.
0:54:59 But those were kind of decisions I wasn’t paying much attention to or didn’t care much about.
0:55:04 We were always rejigging the financial structure.
0:55:08 You said something interesting there, which was you didn’t want your name on there.
0:55:11 Most people, I think, would almost be the opposite.
0:55:13 They do, from an ego perspective.
0:55:16 Yeah, well, we don’t have our name on the food business.
0:55:20 Oxford’s a good classical name around the world.
0:55:24 One of the best marketing tools you can have is use your own name.
0:55:25 People catch on.
0:55:27 McCain’s would be a great example.
0:55:29 Everybody knows McCain French fries.
0:55:33 But I was determined that from a family point of view,
0:55:40 and if my grandson or granddaughter want to have just a normal job in the business
0:55:45 or outside of the business, they don’t need the burdens of the name being everywhere.
0:55:48 So I was quite determined to keep our name off.
0:55:55 It’s more so today, but security, you don’t need a high profile in these small towns.
0:56:05 And I think it just makes a better family situation if you don’t have your name plastered over everything.
0:56:08 But I can understand why people do it.
0:56:11 But in my case, I prefer not to do it.
0:56:13 You like the low profile?
0:56:15 Yeah, I like the low profile.
0:56:17 No question about that.
0:56:22 My son Matthew and I were looking at a cottage that he was looking to buy.
0:56:30 It was the former cottage of Alex Kovl, who was the famous artist from Mount Allison, my university.
0:56:35 And it was for sale, and we thought it would be nice to own the Kovl cottage.
0:56:40 And we were there, and there were some other people showed up looking at it on a Sunday afternoon.
0:56:45 And they said, “Oh, we understand it’s for sale. We understand there’s people interested.”
0:56:49 But Matthew and I were there. They had no idea who we were.
0:56:56 And they were talking this as if, you know, maybe we’d know who might be buying it.
0:57:06 And it’s just nice to have a nice low profile and be able to get around and not have the burdens of people.
0:57:11 And not as much for me as for my children and grandchildren.
0:57:19 When you were acquiring all these companies, whether through Oxford or through Eastlink, did anybody ever ask for equity?
0:57:29 Yeah, we’ve had, from time to time, there’s been that discussion, and I face it head-on and say, “Look, family companies are great to work for,
0:57:37 and we’re going to pay you well, and you’re going to feel very comfortable here, but there’s no equity available.”
0:57:44 And too complicated with the finance structures, if you start giving it away, and then if they want out.
0:57:48 And I just didn’t need that complication in my life.
0:57:58 I think historically, there’s a lot of good family companies, and especially in Europe, there’s tremendous generations.
0:58:04 And people are comfortable. I tell the story of a young guy that was a basketball player,
0:58:12 and he was recruited to run the athletic department at St. of X University.
0:58:18 The president of the university said, “I’m probably only going to pay half of what you’re earning today,
0:58:24 but I’m going to give you a job with twice the satisfaction,” and that’s the most important thing in life.
0:58:28 He took the job and needs to get great job satisfaction.
0:58:46 And there’s more to life than just the pay envelope. Having a good civil place to go to work and good fellow workers, and a sense of working together is trying to get ahead of the other guy all the time.
0:58:52 It’s worked for us. We’ve had great employees, just tremendous employees, dedicated. That’s what we are.
0:58:57 Talk to me a little bit more about the culture inside the companies and how you shape it.
0:59:08 Probably the best thing we’ve done on the culture side is everybody is dedicated to doing it better next year and open to that.
0:59:15 Now, we always have some people who have to respond with a new idea, with a negative comment to start with.
0:59:22 That’s human nature, but they get through that within a day, and then they’re the great team leader.
0:59:32 Having a culture that you can just bring up ideas and there’s really no room for naysayers around the table, you’ve got to just say,
0:59:43 “Look, we’ve got to do this. Don’t tell me why it’s difficult to do it. You agree it has to be done. We should be better than we are, so let’s get together.”
0:59:49 And I always say to my team, “You’re smarter than anybody else. Why can’t you figure out how to do it?”
0:59:53 That’s a good challenge, but they’re as smart as anybody else.
1:00:00 You don’t have to bring people from Toronto or Ottawa to decide how to solve problems at Oxford.
1:00:11 There’s a culture of hard work and all of those basics and civility and respect.
1:00:24 I think it runs highly through the business, and we say to people, “Look, if you can’t be respectful or if you’re not happy here, please find a place where you can be happy.”
1:00:28 How do you think about incentivizing the leaders of the company?
1:00:35 That’s always quite a challenge, and we have incentive programs, and they seem to work.
1:00:45 If I had my druthers, I’d rather pay you a million dollars and just expect you to work hard than to pay you 500 with a 500 bonus.
1:00:52 Incentives seem to be a way of life, but a lot of people will perform without incentives.
1:00:57 Certainly, we have incentive programs, and they do seem to motivate people.
1:01:02 Well, John, if you want to hire me for a million bucks a year, I’m available starting tomorrow.
1:01:06 There you go. See? Without a bonus.
1:01:10 No bonus necessary. How do you manage it all?
1:01:19 We’re recording this in my so-called head office, which is only 200 yards from our food processing plan.
1:01:25 But it’s an effort for me to get away from the food business and let the professionals run it.
1:01:30 It’s a very small head office, and we’re running several operating companies.
1:01:37 A few years ago, we started a portfolio, which is, I think, quite significant today.
1:01:44 I read where so-and-so is running $2 billion and $3 billion, and we’re doing more than that.
1:01:48 So we’ve got a big portfolio that’s done very well for us.
1:01:54 So we try to streamline it and keep it simple, and let the operators run the business.
1:01:59 And they have to deal with the people problems. We work at it.
1:02:03 Who makes the investment decisions for the public companies?
1:02:12 We have a very small team here in our head office. I’d say three of us, and we’re not traders.
1:02:19 We’re not trading all the time. We’re trying to — we own a lot of Buffett, and we’re just hanging on to it.
1:02:27 And probably you’ll have it 10 years, although I read an article on the weekend, a contrarium view, but Buffett’s maybe —
1:02:35 Berkshire’s not doing so well, but they compare it with Apple and Microsoft and some iFlyers that have done extremely well.
1:02:41 We’re buying Buffett for a 10 or 11 or 12 percent return. We’re not looking for 20 or 25 percent.
1:02:48 We just like to buy good, solid investments and let them grow.
1:02:55 How do you think about that when they’re so liquid? Like, if they got overvalued, would you sell them, or would you just sort of like hold on?
1:03:03 Basically, we’d just hang on. You know, you wonder whether Berkshire’s overvalued today or not.
1:03:14 He says he buys the stock when it’s a 1.2 type book, but he’s actually buying it at 1.5 times and buying it consistently.
1:03:21 So he knows something that we don’t know. So maybe you should sell the stock, but they’re going to grow.
1:03:35 If you have good stocks, some will be up, some will be down, but we don’t really pretend to be able to pick the iFlyers that really are objective.
1:03:43 We’ve always had a modest portfolio, but when interest rates were down to where we could borrow money for 1 or 2 percent,
1:03:47 we said, “Look, this is an opportunity. We should get at this,” and so we did.
1:03:52 Borrowed lots of money to buy good stocks, and it’s been the right thing to do.
1:03:59 You used to go to the Berkshire Hathaway meetings. What are some of the lessons you took away from Munger and Buffett?
1:04:09 There’s so many, so many basic lessons. I say to my kids every once in a while, “Would Buffett do that?”
1:04:16 And they think, “Well, I guess he wouldn’t,” so that’s the answer. We don’t have to have a big discussion.
1:04:25 We’re looking at a company recently, and my son said, “I think I’d rather have more Berkshire,” and so that’s a good test.
1:04:32 And so he just brings value to our everyday life all the time.
1:04:34 What would Warren do?
1:04:37 What would Warren do? That’s it. Or Charlie.
1:04:41 What are some of the lessons you’ve learned from investing in public companies?
1:04:53 Buffett would say that if you’re a businessman and investing in your business, you’re probably a better stock picker because you use the same principles.
1:05:02 But if you’re an investor, it will help you in your business because you’re using the same principles in your business.
1:05:09 So just like I said, my son, this company we’re looking at, not a very big company, but it would kind of fit.
1:05:14 And my son says, “Well, I’d rather buy Buffett.” That’s a pretty good benchmark.
1:05:22 So he used that every day, and he grew this business by buying other companies, but he didn’t charge money to do that.
1:05:30 He always says he doesn’t borrow money, but in some way he’s borrowing the insurance money.
1:05:37 So he said cash available to buy them. In my case, I built businesses from scratch.
1:05:43 And that’s different, and you have to have some different philosophies than he would agree with.
1:05:51 He wouldn’t have levered the way I did. He would have used this insurance money, but he doesn’t call that leverage.
1:06:00 One of the differences that strikes me from your past and his, and they both obviously worked out exceptionally well, is that after the ’60s,
1:06:06 he basically seemed positioned for success no matter what happened, different businesses.
1:06:10 But look at today, they have 300 billion in cash on the balance sheet.
1:06:16 So if the economy crashes, he’s going to win. If the economy keeps performing, he’s going to win.
1:06:22 If it stays the same, he’s going to win. It sounds like he’s almost positioned, not predicting the future.
1:06:30 Whereas when you’re levering up, you’re making a prediction, it might be reliable because your revenues are constant and you’re borrowing against that.
1:06:38 It is different because he’s relying on the market. If the market crashes, my cable business doesn’t change.
1:06:48 If people still watch cable or still use cell phone, it might go down some, but it’s basically, if the market crashes, people are still going to eat blueberries.
1:06:56 Now, it might be tough going, but they’re not going to stop eating, and you might have to take a year or two when you don’t make any money.
1:07:10 But back in 1978, when interest rates were 18 and 20%, I had a cable business and financed, and the interest rates were killing me.
1:07:19 But we just hung in there and cut the cost, and I remember saying, “Well, if we can survive in this situation, we’ll be in pretty good shape going forward.”
1:07:37 I understand Buffett, but I don’t always agree with him. That money, and as a long-term investor, having that money sitting in cash, I don’t know, he’s got a crystal ball that nobody else has.
1:07:46 I’d be investing it in good stocks because the stocks go down. It doesn’t matter, but I guess he’s waiting for the opportunity to buy them cheap.
1:07:48 We’ll find out, I guess.
1:07:54 Yeah, and he’s creating cash, so he’s obviously anticipating quite a correction.
1:08:03 He does lever up some businesses there, not to the point of a lot of people, but the railroad business has that, especially with the predictable revenues.
1:08:11 What are the key indicators you look at for your businesses on a regular basis to gauge how well they’re doing?
1:08:22 Contrary to Buffett, we’re a big EBITB believer. The cash they generate, if it’s through depreciation, that’s all right.
1:08:29 How much cash are we generating, and how can we service the debt, and what can we buy with that cash?
1:08:41 There’s a private company that’s worked for us. When we were building the cable business, there was lots of depreciation, but the cash flow was good and still is.
1:08:53 It’s the same in the food business as we invest in factories and so on, and we also try to work the angles on the tax situation and use our depreciations.
1:09:06 Warren had said in the past, he’s not a believer in EBITDA, but we are. We think it’s the cash that the business generates, and so we’re always saying, well, what’s the multiple on EBITDA?
1:09:13 And so we know what cash is coming, because you can usually cut back on your capital if you need to.
1:09:27 We’re always trying to measure how much free cash the business are generating, and what do we have to either pay down debt or to buy more Buffett stock or something similar.
1:09:29 How would you classify your management style?
1:09:49 Historically, a lot of hands-on. I really don’t find the day-to-day operations as much fun as I do the investment of the funds, and so I’m enjoying moving to a head office role as compared with.
1:10:06 But I still like to monitor. We still have monthly meetings with all our major investments, so probably a little, people would say a little too much detail and so on, but God, when you’re signing the checks and the notes, you won’t know what’s going on.
1:10:15 And so I would rather be well informed up front so that I can help if there’s a problem than come to the problem late.
1:10:19 Operating without surprises is pretty important to me.
1:10:25 There’s a trend in business, sort of like getting away from the details as you move up in the organization.
1:10:43 A friend of mine one time said, “You can run any company with five points on the back of a cigarette package.” That was years ago. But that’s really basic. You know, just what are the key items? Is it revenue? Is it sales? Is it margin? And costs?
1:10:51 I’m a big believer in being a low-cost producer. It doesn’t matter what you’re doing. There’s no excuse to waste money.
1:10:56 If you’re low-cost, you’re going to stay in business in the tough times.
1:11:13 The key points are different in every business. So I would say, for instance, in the food business, all about costs, because you know what the revenue is going to be, because we don’t know whether we’re going to have a frost or whether the currency’s going to change or whether somebody else got a big crop or a poor crop.
1:11:36 But if we keep our costs in good shape, we’ll be outright in the long run. And I would say in cable, you know, you always have to look at costs, but capital is probably the biggest thing in the cable business, because you can make big mistakes and you don’t get spending, I would say, if they had dollars to get into programming that just didn’t work out.
1:11:42 Every company, I would say every business has, you know, the five points might be different.
1:11:44 You’re 84 now?
1:11:46 84.
1:11:48 And you’re still working full days?
1:12:03 I try to. Yeah, I do. I do. I enjoy it. And I work a little every night. I’m always reading about stocks or reading business stuff. I guess I’m not working quite as much as I used to, but I could share with you.
1:12:22 I’ve given some money to an entrepreneurial school at University of Prince Edward Island. Catherine Colbeck, who was the former Premier there, and the business schools named after her, and she was a friend of mine at university, and a great person.
1:12:36 And so we gave some money to an entrepreneurial school, and I said, on the condition that you put 7-0 on the wall, what’s 7-0? That’s the hours entrepreneurs have to work every week.
1:12:38 I love it.
1:12:42 Not 50, but 70. And entrepreneurs do work 70.
1:12:44 What role did Judy play in all of this?
1:12:56 I’d say she’s a great mother. She’s been a full-time mother. We have four children. I don’t know whether she didn’t have any interest in the business, or I didn’t want to share it. But I do like going home and not talking about the business.
1:13:12 We have four great children, and we have eight grandchildren. She’s been just a very supportive mother. I traveled the world for years, and she brought up our children. Her role is a supportive role, but not directly in the business.
1:13:15 Is there anything looking back that you would have done differently?
1:13:39 Probably, if you said, sure, I have done differently, maybe. But on the other hand, I was very comfortable doing what I did, and I worked hard. But we bought our first cottage, and the theory was that Judy could be at the cottage with the kids, and I could work, which worked out well.
1:13:55 Basically, our philosophy of life and so on, I wouldn’t change. We’ve lived a low profile, a rural community, and at the same time had the ability to do whatever we wanted to.
1:13:57 What role did Focus play?
1:14:21 Focus in business is a big deal. When it comes to business principles, there isn’t one A bigger than Focus. Just stay at it, and work at it. It’s amazing how hard work brings you good luck after a while. Focus is absolutely critical, probably the biggest, maybe the biggest single principle you can have in business.
1:14:29 Is there anything about decision making that you’ve learned that you think most people miss or would benefit from your knowledge?
1:14:55 Stick to your knitting, and I’ve seen a number of friends or associates who made the first man, and then thought they knew how to make the second with ease, and they would get off Focus, go buy another company that they didn’t know anything about, and just not focused on what they knew.
1:15:15 I think it’s fine to diversify, but you have to be careful how you do that. Frank Sobey, when I was in university reading a Financial Times, I don’t know which one, and I read a quote where he says, “Always keep the back door open.”
1:15:35 So although we were levering through these formative years, the real debt load was in cable where the cash flow was quite consistent. The mistake many people make is they have a business, they make the first million dollars, and now they get into things they know nothing about in too big a way.
1:15:55 I mean, if you want to test the waters, that’s one thing. I’m a great believer in not having all the answers. I always say the guy that asks the question looks better than the guy that has the answers, and so I’d like to have the questions, but people get to have the answers.
1:16:05 We’ve all been around associates that once they make a little money, they know more than the next guy.
1:16:11 In your experience, how often have those people self-corrected after they’ve started to go down that path?
1:16:27 I haven’t seen much self-correction. The guy that’s really doing well when he speaks up, you listen to him. When he goes broke, nobody listens to what he is saying anymore. So Megan and me, it didn’t make you smarter, and Lou’s and it didn’t make you stupider.
1:16:36 Talk to me about the role of patience and long-term thinking in terms of your success looking back over the last 50, 60 years.
1:16:59 Patience is a real virtue. I don’t know whether I have enough, but I’ve had to have a lot because we’ve built our team. We have lots of imports now, but in the early days we’ve built our team on locals that didn’t have as much experience as people from away.
1:17:15 Some have turned out to be great entrepreneurs, but you have to have patience, bring them along and get them exposed. One guy said to me, because I was trying to point out the way I wanted to report.
1:17:39 And the guy says, “Yeah, but John, you’re outside and seeing all these boards and reports. We don’t see that.” Although you’re smart, just didn’t have the imagination, but today, tremendous executive. But it does take a little time, and patience, respect, civility, those words are big in our culture.
1:17:47 One of the things that you’ve said that I was most intrigued about that gives me a lot of hope is that most fortunes are made after 50.
1:18:05 I was a member of YPO, like lots of other entrepreneurs, and you get rocked out at 50. I remember saying, “For me, this is just the beginning because I’ve built a base now. I haven’t really made any money, but I’ve built quite a base, and now I’ve got to take that base and move on.”
1:18:23 Most of my real equity, the way you would measure it, has come after 60. But before that, I was building land bases and factories and people, but it didn’t show up in the bottom line. But I was building a real base of assets.
1:18:37 And then I could say that after 70, we’ve done a lot better still. We’ve got the base going, and like the portfolio we have, I didn’t really get started until 75, maybe.
1:18:50 And I shouldn’t say played around. We had maybe a significant portfolio, and some people might, but not one that you would see written up in the New York Times or something.
1:19:07 But when I decided when these interest rates were so cheap that you didn’t have to be a genius to borrow one or two percent and invest in dividends at five, so we didn’t. We could have sat back and done nothing, and not everybody was doing that.
1:19:29 We have a board, and I was explaining to them what my thoughts were and how I thought it would work, and what the downside was. Well, we just plugged away at it, and we’ve got a couple billion of equity or more now in the portfolio.
1:19:39 But all that came late in life. What role does the board play? I don’t want to downplay the board, but one of the great things the board does is bring discipline to our management team.
1:19:51 The team loved to have the board come and like to present, but they also have to be professional about it, so it’s forced our team to be more professional.
1:20:06 Now, we get lots of wise comments too, but the discipline that they bring by the board, the different leaders coming before the board, presenting what they’re doing, answering the questions, that’s great discipline.
1:20:21 I use the board, different people on the board at different times, this listening post. I’m a big fan of private company boards. I don’t think they slow us down in decision making, but we won’t make a big decision.
1:20:35 We don’t like to surprise the board. There might be smaller decisions we just make and move on, but if it’s significant, we like the board to be primed in advance as to what we’re thinking about, what we might do.
1:20:40 So we kind of try to operate without surprises.
1:20:55 You’ve mentioned interest rates a few times. As somebody who’s lived through basically the highest interest rates and the lowest interest rates we’ve ever seen, how do you think about interest rates and how they should or shouldn’t be?
1:21:14 Well, they’ve been a big, big factor. I mean, I was paying 18 or 20% of one stage for loans. Didn’t have as many loans, thank God. And then when they’re cheap, cheap, these rates have been exceptionally cheap.
1:21:29 And then when they get to be 6%, everybody says, “Oh, it’s too expensive.” I never dreamt that I’d ever see 6%. Certainly, I didn’t allow that to slow me down because it’s kind of normal, but now we’re coming back.
1:21:52 It does allow leverage and it affects the portfolio some. You might buy a few more dividend stocks if the money’s cheap, if the dividend’s twice what the cost of funds are. You can get a return without too much risk pretty easily.
1:21:54 Obviously, it’s my cost of funds.
1:21:57 How have you learned to deal with success?
1:22:02 I don’t know. My lifestyle’s not much different now than…
1:22:05 How have you kept it that way? There’s no yachts, no mansions?
1:22:22 Well, we have a few too many homes around, but we don’t abuse that. And certainly, no yachts. You know, hate to admit it, but we have a plane, but that keeps me working. I couldn’t be traveling around the way the oil ports are.
1:22:41 My age and my health… One beauty of living in a small town where an hour and a half from downtown Halvick, I could be going to dinner every night in Halvick, but the beauty of living here is I just put on the invitation story and my executive assistant sends it on.
1:22:51 Got a little profile helps, but the wear and tear of going to dinner and going to receptions takes time away.
1:22:53 Like we’re just about to focus.
1:23:03 That’s exactly right. I don’t feel any different about myself now than I did 30 years ago, because we have a place in Hawaii and so on, and we’re next door to the Americans.
1:23:22 I always say that the business community in the U.S., if they make ten million, they spend like they have a hundred, and Canadians make ten, they hide it. It seems to me the culture in the U.S. is making money to spend it.
1:23:49 I’ve never thought of it that way. I’d rather, you know, we have a significant foundation to typical estate freeze, but I kept a portion of myself that is going to the foundation for public good, and so that’s one of the reasons I keep working is to be able to really, really leave a foundation.
1:24:02 And at the same time, the children will have more than they need or more than they should have probably, but we’re going to have a significant foundation and to work for that as compared to work for a big yacht.
1:24:07 I don’t know how you measure those things, but it’ll give me satisfaction anyway.
1:24:13 Are there any policy changes you would make to encourage more entrepreneurship and business in Canada?
1:24:32 There’s so many roadblocks at every turn. My friend Wallace McCain, one of his sayings, “Well, don’t let the bastards get you down.” Well, I don’t know who the bastards are, but there’s somebody out there trying to slow you down every day, and it’s quite a statement.
1:24:54 So you have to work through that. Tax policies in Canada aren’t bad. Jurisdictional hold-ups at the border, you know, with all these border deals, it’s terrible. I’m an environmentalist. We have big woodlots, and I’m really an environmentalist, but if you’re not careful, they’ll take it over.
1:25:09 You know, we had a woodlot. In this particular case, it was a thousand-acre woodlot, and we were building roads through it to do civil culture work great for the future.
1:25:29 And I went to see where they put a bridge in, and it wasn’t a bridge, but it was half-bridge and half-rock. It ended up costing $75,000. When I was there, there was no water in it, and there was only water in it maybe in the month of April when it came down off the hill, so there’s no fish in it.
1:25:50 But they make it do things that are absolutely no common sense to, and we could have had a nice rockway that you just traveled through. So there’s just things like that. That’s a minor issue, but it’s irritating.
1:26:08 There does seem to be a general lack of common sense in most regulations around the world at this point. It’s like sediment, right? It started out with good, but it keeps adding and adding and adding, and nobody would have chosen to get to the place where we’re at, and yet here we are, and we keep sort of adding sediment to it.
1:26:31 And we can add to it in the most irritating comment that you get from the civil servants is, “But this is the regulation. Don’t talk to me about common sense. This is the regulation.” You know, when the people wrote the regulations, they couldn’t envision everything, but then the regulation covers everything, just bypasses common sense.
1:26:38 And I’ve heard that, “Well, this is the regulation. You know, we’re just going by the regulation.” Drives you crazy.
1:26:45 John, I really appreciate the time today for this conversation. We always end on the same question, which is, “What is success for you?”
1:27:03 Success for me is the development of a great team, and in many cases we have people that worked in this factory through high school and university, came back to work with us and are now running the company.
1:27:17 And that’s, to me, real success. We have the same thing in our other businesses where we develop at Eastlink. We have homegrown leaders that are competing with the world and doing it very well.
1:27:38 And so real success is developing people so that they can add value. My philosophy is always, “How can we add value today?” Or if you can develop good people, they can add value and add value to society or any way you want to judge that.
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