Lessons from the wolf

IT’S HARD to decide whether the handsome man with the strong New York accent before an audience of financial professionals is repentant about the millions of dollars he stole or cheated out of stock brokers in the late ‘80s and ‘90s.

As he speaks, you wonder whether he is using one of his well-crafted persuasive techniques on you? Whether you like or hate him – whether or not you believe a criminal should be profiting from their wrongdoing – you can’t say Jordan Belfort’s story isn’t interesting.

The convicted money launderer was speaking to 200 platform development and distribution specialists recently at the 13th annual Wraps, Platfroms & Masterfunds conference in the Hunter Valley.

His name had become well known with the imminent release of The Wolf of Wall Street, a movie based on Jordan’s life and starring Leonardo DiCaprio in the title role.

He’s a rapid-fire speaker, jumping from one sentence to the next like a gymnast, and it’s not hard to see how Jordan could double talk his way out of virtually anything.

He showed the first signs of entrepreneurial greatness at just eight years old when he started a local paper route. He knocked on doors, expanding his route to the point where his mother had to step in.

“Mum made me sell the paper route. I was knocking on so many doors, I didn’t want to go to school anymore,” he tells the room with a laugh. “So I sold the route and I retired for $35.”

At age 16, Jordan found himself earning big money.

“I was in New York and I went down to the local beach, which is Jones Beach,” he says. “It is a massive beach – far bigger then Bondi. It was a Sunday afternoon and there was about a million people there. I could see that it was a long walk from the sand to the concession stand so I thought, ‘Hmmm, I wonder if I had a cooler full of ice-creams, drinks and this and that I could sell them and make a profit?’”

The next day he struck a deal with the local ice cream distributor to purchase a 100-scoop barrel of ice cream for $7, then selling the ice cream for $1 a cup. He purchased a cooler and in 45 minutes of stepping onto the beach, Jordan had sold out and made a cool $100.

“The year was 1978. Back then that was a lot of money for a kid – it is a lot of money now – but back then $100 in less than an hour was just ridiculous.”

That summer, Jordan and his friends made $25,000. He used the money to put himself through college.

LEARNING CURVE 

Before stepping into Wall Street, Jordan had owned a meat and seafood truck company. Showing his entrepreneurial skill there too, he grew the business from one truck to 26 in less than six months, but then the growth spun out of control and he had to file for bankruptcy.

“I was making a ton of money – or so I thought,” he says, “but I was actually making every mistake a young entrepreneur makes. I was over-expanding; I was under capitalising; I was growing on credit; I was hiring anybody off the street that would answer an ad.

“You learn more through failure than anything else in life. This was a colossal failure and within a year and a half I was bankrupted.”

Jordan also went to dental school – dropping out after a few hours.

“I went to the first day of dental school and the dean of the school – a white haired guy – walks onto the stage and delivered his welcomes to the large room. I was thinking ‘so far so good’. Then he says, ‘the golden age of dentistry is over – if you’re here to make a lot of money you are probably in the wrong place’.

“And I walked out,” he laughs.

Not yet out of his 20s, Jordan was now a dental school dropout and a failed business owner. But things were about to look up for him.

INTO THE INDUSTRY

“I answered an ad in the paper for a big Wall Street firm and I went into the building where there were 100 people lining up for the interview. I knew I had to do something extraordinary,” he says.

“My resume was not looking that good. I told them I can work hard, I can sell hard, I will be your best broker. They were shocked – they’d never seen someone like me. They said, ‘You’re either going to end up as the biggest broker in history or in jail’.

“The guy was a genius,” Jordan says (met with a huge laugh from the audience). He was hired there and then, but didn’t go near a deal for six months, earning just $85 per month and working on the weekend to see him through.

'BLACK MONDAY'

On Monday 16 October 1987 – Wall Street’s darkest day – Jordan got his break and was finally allowed onto the stock exchange floor. It was his first day, but he and a large majority of his colleagues lost their jobs as the stock market fell by 580 points.

“I went home to my wife; she had no idea that the market had crashed and I had lost my job. She had champagne ready,” he says quietly.

“I collapsed in her arms and I started to cry. That day I took a big punch in the guts. I thought the world was against me. For one day I was paralysed with fear and negativity. I couldn’t pay the rent, so I had to go back to work. I had no intention of going back to Wall Street – Wall Street wasn’t hiring. They closed down.”

Jordan searched through the Help Wanted sections, coming across a small brokerage firm that dealt with penny stocks, located just outside the city. It was there that he learnt about the dealings of penny stocks, a stock usually sold to ‘poor people’, according to Jordan.

“When I saw the 10 cent and 30 cent penny stocks, I said to the manager, ‘If I could sell one million of the penny stocks I could get $600,000 for myself?’ He said, ‘Yeah, but not really – rich people don’t buy penny stocks’.

“The first guy I spoke to, I sold him for $5,000, which is pretty much the biggest penny stock exchange. What I didn’t realise was that when I hung up the phone the entire office had stopped and they were all crowded around me, taping the call,” he recalls.

“They’d never heard a real Wall Street wrap from a big firm.”

Jordan’s money problems quickly disappeared. He made $50,000 in his first month and it escalated from there.

THE GOOD DAYS

Seven months later, Jordan launched his own firm, starting out with 13 staff – “just average guys with low IQs”. A great believer in scripts and dialogues, Jordan perfected the speech. This time, however, he went back to his original thinking – his firm was going to sell penny stocks to “rich” people.

The scripts his employees used to seal the big deals aimed to overcome three major obstacles that a new business selling an unfamiliar product encounters.

“It hit me: I realised there were a couple of things going on,” he explains. “The first was that I thought, why were these big firms able to sell people, through a cold call, millions of dollars of stocks? I realised no one had heard of us before.

“Second, the big firms were recommending stocks like Kodak, IBM – brands people knew. I was recommending stocks no one had ever heard of. Two strikes.

“The third strike was that I was a broker no one had ever heard of. Three strikes in American baseball and you are out,” he says.

“So I wrote a script for our guys to follow. Firstly, they would introduce themselves and our company, explaining why you haven’t heard of us before.

“‘You haven’t heard of Shrapnel because for the last 10 years we have been a strictly institutional trading firm, dealing with banks…’

“It explained away why they hadn’t heard of us. And then the first time around, instead of trying to sell a $5 stock we would sell it cheaper and the second time I came back to them we sold it for $6.”

The script worked and one of Jordan’s best guys made a sale with $120,000.

“My team became multi-million dollar producers ... these were kids in their early 20s,” he says.

THE DARK DAYS

Jordan explains the days that followed in quick succession, not really giving much away about his fall from Wall Street grace. He confesses, however – as the movie shows – that the firm ‘partied hard’. As the money rolled in, Jordan became embroiled in drugs and alcohol.

“I then simply got greedy,” he admits. “It wasn’t the drugs or alcohol – I got greedy.

“One thing that I didn’t know back then when I was a kid, and I know now, [is that] when it comes to business the most important thing is getting value first. Today my mantra for my life is to give 10 times as much value as I would ever expect to get back in money.

“You know what? The money takes care of itself; people will always pay for value. Your job is to give the value and give it in bucketloads.

“Learn from the good and from the bad because I promise you, if I could do it all over again, I would have done things very, very differently. I wouldn’t have taken the first bag of cash for a payoff that started the process, and from there I went on a rationalisation spree. Before I knew it, I was associating with people I never thought I’d associate with; doing things I never thought I’d do.

“I look at my life as a cautionary tale, and also as inspiration that you can come back from anything.”