From the Weekend Switzer archives
Jerry Seinfeld’s TV program Seinfeld was a show about nothing. After seven years of analysing and deconstructing legendary retailer Gerry Harvey, I have to say that this Gerry’s life is a show about something!
Every six months in reporting season since 2010 I take the long drive to Gerry Harvey’s office beside Flemington Markets in Sydney. This is the type of headquarters a seasoned investor would like – it’s cheap but not nasty. There is nothing ostentatious about where Harvey Norman is run from and it shows that the executive chairman and founder is not a money waster.
And the stock market gods agree, with the company registering a record profit of $348 million. Before write-down and impairments, it was more than half a billion dollars!
When I started the interview with Gerry this week, I kicked off by pointing out that since I started showing interest in him with my TV program on the Sky News Business Channel, the share price had risen 170% (or around 30% per annum) and had gone from $2 to $5.50. So clearly he was deep in my debt.
He duly noted this development and indicated how my role in his success would never be forgotten. He added that he hoped I’d hocked my house and gone long HVN shares and that I remain long those shares while he takes profits to $1 billion and his share price to $10!
This is the big dreaming side to the 77-year old Gerry Harvey, who, when I asked him when he would retire, simply said: “Never!”
He loves what he does and when I asked him how he picks winners, he said he looks for the characteristics of a winner, though he admits there are probably 50 of them.
“It’s the sum total of all those little things that makes someone successful,” he pointed out. “But if you get down to the nitty gritty of it, there are a few crucial things: a passion for what you do, you’ve got to have a work ethic and you’ve got be good in the space you work in.”
This neatly sums up Gerry Harvey.
He notes that other traits such as people skills, great advisers, a respect for money matters and hanging out with the right people are all important as well.
He admits that one of his early smart plays as a young Gerry was to hang out with people who were good at what they did.
“I love meeting people who are really good at what they do,” he admitted. “If you meet someone who is really good at growing vegetables, I have a wonderful time just talking to them about it. I love to talk to a doctor who has made a new heart or someone who has built a business that is making money or is changing mankind. I love success.”
But why do people lose?
“Bad luck has a fair bit to do with it,” he insisted. “I have a cattle business where I lost $50 million in three years and it had nothing to do with my business ability but it was something that came from left field. After that, I realised that anyone can stuff up in business.”
That said, he suggests that if you are in a winning business sector and you lose, then there are some realistic repairs you must make to what you do.
“I tell my people to look at the five or 10 people in my business who are doing really well, talk to them, study them and learn about their attributes. If you can’t make it after doing that, you’re never going to make it.”
He says he’s perplexed why people fail. “I have 600 franchisees out there and 50 are nine-and-a-half out of 10. Fifty are nine out of 10. We have all those in the middle. And the bottom 50 are four out of 10!” He says that he’ll get three of the four out of 10s up higher but there could be 47 of them that “I’ll never do anything with”.
Gerry thinks anyone who wants to go better in any endeavor has to associate with winners.
“I can’t think of anything better,” he advised.
And he took his own advice when it came to his wife, Katie Page, the CEO of Harvey Norman. He argues that she’s the best retailer in the country and the best businesswoman as well.
“When I met Katie she was working for me and was 26. After four months I thought ‘I have someone special here’,” he recalled. “People liked her and she was able to form good relationships with suppliers easily and she makes it win-win.”
He thinks the bashing of suppliers you see in the big supermarket space is bad business and explains why their results have been disappointing.
“How is it working with your wife?” I asked.
He says they have a philosophy of when they have a disagreement that they go to their separate corners for a while to get over it. And if either one wants to carry it on, the other won’t play ball. Well, that’s the theory, and Gerry seems to think it works.
He admits Katie has a lot more to do in the day-to-day running of the business so that record profit clearly builds the case for his strong wrap for his wife’s business skills.
“I take a chairman’s role and put my nose into everyone’s category from time to time but that’s what I should be doing to try and work out how we’re going to build this company going forward.”
“How has Katie changed Gerry?” I asked.
“The easy answer is: I’ve tried to bring her down to my level and she’s tried to make me up to her level but I have to say I’ve never worked with someone – male or female – who is as good as she is.
“Her business skills across the board are better than any woman across the country.”
He says she knows how to “grow the money tree” by seeing what will sell, how it needs to be improved and how it needs to be marketed.
Note that he didn’t really answer my question but, between the lines, the leader in Gerry Harvey knows he lives with a leader called Katie Page. Clearly, the big change in his life has to be that he knows that sometimes he has to follow someone who sometimes is a better judge.
I should have prodded him on that but knowing him as I do, he would have conceded the point. On his own admission he loves “successful people, who are good at something” and Katie fits this bill.
On how he changed her, his success-orientation approach to life appeared again. “I opened the gate for her,” he said. “There are a lot of talented people out there but no one opens the gate for them, so I think her association with me, in the beginning, allowed her to grow.”
He laments that there are thousands of Australians out there with great ability who have never had the gate opened for them.
On the future, he doesn’t see any of his family members wanting to take over the reins. His kids from his marriage to Katie don’t want to be retailers and while his son and daughter from his first marriage are in the business, they don’t want to run the show.
This is why he easily answers the retirement question with a “never”.
I did ask him, however, if he was affected when the share price was $2 and the experts were implying that he’d lost it with the online challenge and Harvey Norman had to consider if he was the right man at the top.
He’s delighted that he’s proved his critics wrong and that many of the online retailers, who were going to bury Gerry under the information super highway, have either gone broke or are struggling.
But, at the time, the criticisms did get to him a little. “To be honest, I was asking myself ‘Is there any truth to this?’ and I asked others for a rational response to the question but my response was always ‘I think I know what I’m doing’.”
He makes the point that even now, for the big retailers here and around the world, the percentage sold online is small. And with the kinds of things he sells, he maintains that people want to see the lounge (for example), they want to sit on it, feel the material and experience the retail therapy.
It’s like The Beatles song when ‘everything old is new again’ and Gerry keeps singing that retail tune and we keep buying.
“What would you like to see on your epitaph?” I cheekily asked.
“Nothing! Once I’m dead, I’m dead,” he declared. “While I’m on this earth, I will do the best I can.”
A Harvey rule is that you must exploit yourself to the maximum and just see who you can be. “Try to rise above your own expectations but try to stay humble,” he adds.
I’d caught up with Gerry at his office a few months ago on another matter. He was looking for lunch and asked if I wanted to eat. I said “yes” and we jumped in his aged Lexus and drove around the corner to a dingy looking deli in Flemington markets.
The place was packed with market blokes and he ordered prawns with spaghetti and I followed the leader. I’m still comfortable at the markets as my Dad had a providore business before he passed away far too young. I worked with him there while I was doing my HSC and throughout university. The restaurant was cheap but definitely not nasty – it was like I was eating in Sorrento or maybe the back streets of Milan. My son Alex was with me and as a businessman and a father, I was so happy to see Alex absorbing Gerry’s demonstration of success without attitude. It was typical Gerry. He had found a successful chef in an unlikely place and it attracted him like bees to honey.
Maybe the lesson is that if you’re attracted to people who are good at things, good things like record profits and a champion performer like Katie Page might just come your way.
And that’s a life about something.
Peter's interview with Gerry Harvey on Switzer can be watched here.