Most of L.A.’s wealthiest businesspeople fall into one of two broad categories builders or investors.
The builders such as Alfred Mann, Steven Spielberg and Henry Yuen have used their entrepreneurial and creative skills to form a company from the ground up, seeing a need for a product or service and executing an ultra-successful business organization to fill that need.
The investors such as Kirk Kerkorian, Franklin Otis Booth and Ron Burkle have made billions by investing in pre-existing companies that are undervalued or under-performing. They use their finances to influence a change in strategy at these firms, usually making them more profitable along the way.
“Vision and creativity is the trademark of the successful entrepreneur,” said Hal Harrigian, managing director of Duff & Phelps LLC. “Steven Spielberg and Alfred Mann, for example, can take that creativity and create an enormous amount of wealth for themselves and investors.”
On the other hand, the Kirk Kerkorians and Michael Eisners of the world are shrewd businessmen who can recognize an undervalued opportunity, he said.
“Michael Eisner took over Disney and was able to exploit the company’s assets, which has led to record profits,” Harrigian said.
All these executives, however, surround themselves with talented people.
After years spent working in engineering and technology, biotech entrepreneur Alfred Mann, 74, continues to work an 80-hour week as chairman and chief executive of MiniMed Inc., a $5.7 billion company based in Northridge.
Interest in science
A physicist, Mann started his first company, defense contractor Spectrolab Inc., at the age of 30. In the late 1960s, he founded Pacesetter Inc., a leading supplier of heart pacemakers, which he later sold for $150 million.
MiniMed made a fortune developing insulin pumps for diabetics and now is developing an artificial pancreas to monitor glucose levels and deliver insulin. From MiniMed, Mann created Advanced Bionics Corp., which makes ear implants to treat deafness.
Another company, CTL Immunotherapies Corp., which he plans to take public later this year, is developing a cancer vaccine.
“Al Mann is the quintessential idea man,” said Phillip Nalbone, an analyst with Salomon Smith Barney in San Francisco. “Like other successful entrepreneurs, he is very driven and intelligent. He has also surrounded himself with executives who are able to help turn his idea into a successful company.”
Nalbone said the story goes that Mann got the idea for MiniMed while he was visiting heart patients as chairman of Pacesetter several decades ago. “One of the physicians remarked that a good percentage of the patients with serious heart problems were there because of diabetes,” he said.
Like Mann, Yuen has built an empire through being observant and finding creative ways to meet the needs of consumers. He invented VCR Plus, an electronic coding system that allows TV viewers to program their VCRs by entering one simple code on their remote control. It’s imbedded in about half of the world’s VCRs. As his Gemstar-TV Guide empire grows, Yuen’s net worth skyrocketed 116 percent over the past year.
As for the investors, Ron Burkle has become a billionaire by putting money into industries that he understands, and then orchestrating changes within the companies to improve their performance.
He grew up with a father who was an executive in the Stater Bros. supermarket chain, then went on to make his fortune by buying grocery chains, including Ralphs Grocery Co.
“The sundry business is a business he understands,” said Robert Nichols, chairman of Windward Capital Management Co.
But Burkle has gone beyond food, having sold his grocery chain holdings in 1998, and put his money into everything from music/DVD/game distributor Alliance Entertainment Corp. to discount retailer Kmart Corp.
After months of lagging behind bargain behemoth Wal-Mart Stores, Kmart’s growth began outpacing that of its competitor in February. Wal-Mart executive Mark Schwartz left his longtime home to become president and chief operating officer of Kmart in March. And the company’s stock, after hitting a low of $4.75 a share in January, was trading above $10 last week.
Another local mogul who has built his fortune primarily through investing in public company stocks is billionaire Charles Munger, known to many as the longtime partner of value investor Warren Buffet.
As vice chairman of Berkshire Hathaway Inc., a holding company with investments in everything from See’s candy to footwear to insurance, Munger has made and lost millions of dollars. A long slump for Berkshire stock ended last year and it has since regained much of its value, climbing above $67,000 a share last week, up more than 20 percent from its year-ago level.
Munger also has a stake in Daily Journal Corp., serving as director and chairman of the publishing company since 1977. After beginning a slow and steady descent in 1999, Daily Journal’s stock value has recently been on its way back up.
Staff reporter Chris Sieroty contributed to this story.
