The Wealthy Barber and I are debating whether there is such a thing as a free lunch.
No, this is not some elaborate economic metaphor. The Wealthy Barber is, of course, David Chilton, author of the classic book on personal finance and a star of Dragons' Den on CBC TV. The lunch in question is spread out before us at Epic Restaurant in Toronto: salmon for me, a healthy-looking buffet mix of turkey and vegetables for him. Diet Cokes all round.
The burning issue is who will pay. The tab comes to $99.44, an amount that surely would have appalled Roy, the frugal small-town barber of Mr. Chilton's landmark book. But, against all odds, the appearance of the bill on our table results in a spectacle of man-bites-dog rarity – two personal-finance advocates vying to actually pick up the check.
Let me pay, Mr. Chilton says, reaching across the table. No, I explain, the tab is mine because I asked him to lunch. He objects. I insist.
Bottom line: I pay, but Mr. Chilton's image as Canada's leading frugalista suffers a serious ding.
To be sure, at 53, the Wealthy Barber doesn't have the same motivation to pinch pennies as he did when he was an unknown 27-year-old author. But while it's widely known that Mr. Chilton has done well in the quarter century since his book was published in 1989, his transformation from small-town stockbroker into nationally recognized brand still manages to be stunning.
His initial move after The Wealthy Barber was into other self-publishing projects, notably the Looneyspoons cookbooks written by Janet and Greta Podleski, which went on to become a Canadian publishing phenomenon. Since an amicable parting with the sisters in 2007, he has branched out into a number of other private businesses, most recently as a result of his involvement in Dragons' Den. Over the past three seasons of the show, he has invested in 22 enterprises that were pitched to the dragons, ranging from an ergonomic attachment for snow shovels to a loose-leaf tea company. He typically spends more than 100 days a year on the road, taping TV shows, making personal appearances and speaking to groups about personal finance. All of that has resulted in a net worth that he declines to reveal, but is obviously considerable.
"My big break was the money I made when I was young," he says. "I had more income then than I do now. For a few years, after The Wealthy Barber hit, I did, um, strangely well. When that happens, when you get a lot of money when you're still in your early 30s, you can invest your money for the long haul, and thankfully, I've done quite well."
When he's not on the road, or ensconced in the Fairmont Royal York hotel while taping Dragons' Den, he lives in a 1,300-square-foot house near Waterloo, Ont. Granted, there's also a small cottage near his hometown of Sarnia, Ont., as well as a villa in Costa Rica, but don't call him a hypocrite: He studiously avoids debt, lives simply and took three years off to home-school his son and daughter. His indulgences are books (he reads three to four a week) and attending sports events, especially ones where a Detroit-based team is playing.
In person, he comes across as the same endlessly affable, self-deprecating guy that he appears to be on stage or before a TV camera. He praises his parents, his Dragons' Den co-stars, his kids (now in their 20s and entrepreneurs themselves). Even his ex-wife – they have been split for nearly 20 years – comes in for kind words. "She's the nicest person," he says, and tells the story of how they worked together after their divorce.
According to Mr. Chilton, his success was largely a matter of good fortune. "Speaking is my only natural skill," he says. "I'm not a great athlete, I stink at music, I'm one of the least accomplished artists you'll ever see. But if you say, 'Go up there and talk about [anything] for half an hour,' I think I could do it in a way that would hold the audience."
He is being modest, of course. As he recounts his success story, it's clear Mr. Chilton is not simply a regular guy who struck it lucky. He's also a driven entrepreneur who has a keen eye for products that appeal to regular Canadians. If anyone knows what will sell on Main Street, it's the Wealthy Barber. After all, he's been studying that market his entire life.
A lucky break
As a boy, Mr. Chilton used to hunt for used golf balls and then resell them. In Grade 11, he moved up to selling car detailing door to door. "It was an education," he recalls. "It taught me about how to present a product, about accepting rejection, about staying positive." For a teenager who always wanted to be an entrepreneur, it was also a tutorial on what Canadians will buy.
His parents – a high school principal and a homemaker – didn't always understand their son's passion for business, but they taught him a lesson he says was vital. "My dad's big thing was to be nice," he recalls. "You would think, being a principal, that he would emphasize doing well in school, but beyond a certain point, he didn't really care about that. He always stressed that it's how you treat people that really matters."
Mr. Chilton took that insight with him when he enrolled in the economics program at Wilfrid Laurier University in Waterloo. As a co-op project, he and a friend started a business peddling GICs to savers eager to cash in on the high interest rates of the early 1980s. It was so successful that he and his partner turned it into a full-time occupation.
The business was a natural fit for Mr. Chilton's growing fascination with personal finance. "I was a normal kid and played sports and did all those things," he says. "But around the age of 16, I started reading about personal finance and investing, almost obsessively. By the time I got to university, I had read dozens and dozens of books on economics and personal finance. For some reason it stuck with me" – so much so that when he wrote the Canadian Securities Course financial exam in 1985, he didn't study but still scored the highest mark in the country.
He tried becoming a stock broker but found it unsatisfying and accepted an offer to teach financial planning to teachers. That, he says, was his lucky break. He found that stories and humour worked far better than graphs and equations to communicate key notions of investing and wealth accumulation. He conceived the idea of writing a fictional tale that would use the same approach to explore personal finance.
His first attempt was set in a tavern where a wealthy bartender dispensed financial wisdom to patrons, but that didn't work out so well – "my characters kept getting drunk" – so he switched the locale to a barbershop. A year of writing and fine-tuning later, The Wealthy Barber was ready to meet the world.
Unlike most first-time authors, Mr. Chilton approached his book as a business. A publishing company offered to bring the book to market, but when it wouldn't allow him to keep control of bulk orders, he decided to take matters into his own hands. He bought three books on self-publishing and taught himself the business.
The book had a slow launch and sold only about 12,000 copies in the first nine months. But Mr. Chilton says it had the great advantage of facing next to no competition. "The entire Canadian personal finance and investing arena back then consisted of four people – Brian Costello, Gordon Pape, Chris Snyder and me. So getting media interviews was easy. And I found that using a bit of humour in interviews went over very well."
Once sales began to pick up speed, in the RRSP season of 1990, The Wealthy Barber just kept on clipping faster and faster. It went on to sell two million copies in Canada and the United States and its catchphrase – "pay yourself first" – continues to echo in the minds of a generation of Canadians.
Oddly enough, though, its creator seems nearly embarrassed by its success. When I mention to Mr. Chilton that some people find the book a bit simplistic, he nods enthusiastically. "I didn't particularly like The Wealthy Barber," he agrees. "Personally, I prefer getting information in more of a math-based way. But, then, I didn't write it for myself."
He wrote it for ordinary Canadians confused by the deliberately opaque jargon of the financial world. Unlike most people who develop an interest in money, he's always been less intrigued by high finance and more interested in personal finance. "Why do people simultaneously have big credit-card debt and $25,000 in their bank account? That kind of stuff fascinated me even at the age of 19 or 20."
It can be a challenge to explain such things in plain English. Despite his casual demeanour, he's a perfectionist when it comes to finding just the way to express concepts. For his second book, The Wealthy Barber Returns, published in 2011, he asked 50 to 60 people to read each chapter, monitored their reactions and revised constantly, a process that took a year and a half. That painstaking approach paid off: The book has gone on to sell 400,000 copies.
For the most part, the substance of what he says hasn't changed in a quarter century. One shift is notable, however: He is now a big fan of low-cost index funds that passively track market benchmarks rather than the actively managed mutual funds he recommended in his first book. He says he has come to appreciate just how difficult it is for anyone, no matter how smart, to outguess a business world that is growing more and more complicated.
"Look at a bank annual report now," he says. "I could spend weeks studying it and trying to figure out what's going on. This is complex stuff: international subsidiaries, exposure to derivatives and so on. It's rather ridiculous to think that an average person can come to a judgment about what's going on. And I would argue even analysts can't do it very well."
That is one reason why Mr. Chilton's own attention is now focused on smaller, private companies, where he can directly affect results. He sees a regular stream of them on Dragons' Den and his growing portfolio of investments in those startups is now devouring much of his time.
Finding the right businesses isn't easy, he says. Many of the deals concluded on air fall apart when the dragons actually inspect the books. Others don't work out because the entrepreneurs turn out to be more interested in raising their profile than in welcoming an outside investor.
Before putting his money down, Mr. Chilton performs extensive due diligence, talking to rivals, suppliers and customers, and drawing up his own projections. He wants to find situations where he can add value, by opening doors, offering advice and helping to devise marketing plans.
Helping nearly two-dozen companies grow is time-consuming work and Mr. Chilton says one more season of Dragons' Den is probably his limit.
What comes then? He would like to run one more business himself, without a lot of partners. He's also received TV offers from the United States. But before he does anything, the man who turned the dry topic of personal finance into a bestseller has one more ambition to fulfill. "I've always wanted to write a play," he says. "I'm contemplating taking a year to do that."
Clips from the Wealthy Barber
On luck: "I've been incredibly lucky in life, and my health is my greatest gift. I don't work out much, I love Nibs and Diet Pepsi, but I'm never sick a day, I never get a cold, I hardly ever sleep, and it's all from my mom and dad. They're in their early 80s and still have crazy energy."
On the economy: "I try to be optimistic but you have to be concerned about debt levels just about anywhere in the developed world. I think governments are making promises they may not be able to keep. It would not shock me to see another financial crisis at some point over the next three to five years."
On investing: "It's shocking how badly many people manage their own investments. Mutual fund fees and expenses are part of that, but we also appear to have mastered the art of buying mutual funds that are just about to underperform."
On mutual funds: "Paying 2 per cent [in mutual fund fees] doesn't sound like much, because we still relate things to our high school marks. Losing 2 per cent off a mark of, say, 70 per cent is no big deal. But with mutual funds, you're talking about losing two percentage points of an estimated 8 per cent or so return. That's a quarter of your expected gain."
On alternative investing: "If you're going to get involved with hedge funds, don't invest in them, run them."
On entrepreneurship: "A lot of the people we see on Dragons' Den have the naive idea that the biggest challenge in business is getting their product on the shelves. It's not – it's getting it off the shelves. Once it's in the store, how do you create demand, how do you make it stand out among the competition?"
On perseverance: "No author in history did more interviews about a single book than I did about The Wealthy Barber. I did hundreds of interviews a year. For years and years and years."