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December 4, 2006 6:10 pm

Positive mental attitude trumps any age concerns

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I know this sounds crazy, but 39 years old is old. I am feeling it. I am about to turn 39 in a month, and it is hitting me. The other day I was reading the book, Summer of ‘49 by David Halberstam about the Yankees’ season in 1949. In the book, he comments about how the Yankees team was going to have problems because of its ageing players. For instance, “DiMaggio’s body was breaking down”. You would think DiMaggio was 90 years old. He was 34.

So I put that book down and opened up Chess Life magazine. I turned to an article about the top 20 chess players in the world. The article mentioned that there are only two “old-timers” on the list. Viswanathan Anand, aged 38. And Boris Gelfand, aged 37. Great. I guess I am now too old for that also.

Then a friend of mine called me. He is applying for a proprietary trading position at a tier one bank. “I barely made the cut-off,” he said, “I’m 29 and they aren’t hiring anyone over 30.” In a world where productive lifespans are getting longer thanks to medical technology, the pressure to succeed is hitting ambitious people at ever younger ages. At what point does my résumé transform itself from “string of successes” to “dilettante”?

To be honest, it is starting to get me unnerved. So I did what I usually do when I am down about something. I called up a friend to cheer me up. This time I decided to call John Pappajohn. I called him for three reasons.

First, he’s the most successful investor I know, having returned 60 per cent per year since he started his investing career (and giving most of it away to charity along the way). Second, he’s exactly double my age. He’s 78 years old. And third, he started his career at the age of 41 in 1969. Since then he has started more than 50 healthcare companies that eventually made their way into the public marketplace, including Caremark.

“You’re calling for what reason?” he asked and then laughed. “Listen, it only gets better,” he said, “I have seven financings going on, a company I’m involved in that might go public soon and we just did a reverse merger with another company. Things are better than ever.”

But, John, when you started your first venture deal at the age of 41, were you a little scared? “Oh sure, you’re always apprehensive. That’s normal. And heck, this was 1969, hardly anybody was in venture capital back then and I decided to go into it. I called up another investor, Warren Buffett, and he told me, ‘John, you’re making a mistake’. He told me he was getting out of the business and going into operating a company. And you know what, James, he was right. Interest rates went to 16 per cent, the economy went into a horrible recession, the venture business was dead.”

Pappajohn told me he started his venture business with only $100,000. “That’s all. My wife and I drove around in old cars, we lived within our means, but I always kept a PMA – positive mental attitude. I always held onto that. And then I started a company, Kay Laboratories, which eventually merged into Baxter.” And he told me why it gets better.

“Everyone always calls me now when they have a deal. I’ve been around, so you get to know everybody. Keep your nose clean, build good relationships over the years and people will keep showing you good deals. In one deal that I did 10 or 15 years ago, Quantum Health Resources, the founder, Doug Stickney, offered me the opportunity to invest $200,000 because he liked the way I had dealt with his father on an earlier deal. Well, that $200,000 was worth $60m six years later. And you know what, James, Doug called me just two weeks ago with another deal and wanted to know if I would be interested. Sure I would be!”

Pappajohn went on to excitedly tell me about the various public companies he’s involved with including a special purpose acquisition company called Healthcare Acquisition, American Caresource Holdings, Allion Healthcare which offers disease management services for HIV patients, has $20m cash in the bank and trades for 18 times cash flow.

Additionally, he’s working on a reverse merger with a company that provides healthcare to county jails. “They’ve been in business for 22 years and profitable every year.” One thing that I think keeps John young and excited about coming to work every day is that he gives an enormous amount to charity. One example is the John and Mary Pappajohn Clinical Cancer Center, which is affiliated with the University of Iowa.

“Giving money away is a prerequisite to making more money. When you get older,” he told me, “you have to keep thinking of new ways to create value. That’s important.”

james@formulacapital.com

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