What thoughts do you have about entrepreneurship, and how does it frame your professional and personal experience?
I grew up in Angola. My father had a business there when Angola was a colony of Portugal. After the revolution of Portugal in 1974 and the independence that came afterward, my family sought refuge back in Portugal—where we were originally from. My dad had had his own business in Portugal before. Then he moved his business to Angola, and he lost everything in the revolution and the civil war. It took him several years after we got back to Portugal for him to start his business again.
You might wonder why I would want to go into business and be exposed to the risks that come with being an entrepreneur. It is in my blood; it has always been a passion of mine. As a teenager I started freediving and spearfishing in the south of Portugal. Fish are valuable in Europe, and I remember making quite good money. My brother and I and a friend of ours were the only teenagers in our town with disposable income, and it was because of these activities.
Much later I dropped out of college to start a business that failed, frankly because of lack of experience and lack of capital. I learned that those are two key ingredients to making a venture successful; you need experience and you need capital. That is why I decided to do an MBA and pursue business.
Tell us about your personal history and the connection between Portugal and coming to the United States.
When I was thirteen we had been back from Africa for three years. My parents were unemployed, and Portugal was in a depression similar to our depression in the United States in the 1920s and ’30s. We were contacted by LDS missionaries. With the revolution had come freedom of religion, and the Church was allowed into Portugal. That changed my family’s life in many ways and gave us hope that otherwise we did not have. It opened my eyes to possibilities that were not in my vision before.
When we came in contact with the missionaries, there was a special light. I was talking with someone just a couple of weeks ago in Portugal, and we were talking about the missionaries in my hometown. She was describing these missionaries as people who have this special light, and she was asking me about it because she didn’t know what it was. As a thirteen-year-old I felt the same attraction to them. One thing they seemed to have in common was that they were educated, and a lot of them went to BYU. It became my goal, since I was thirteen and first met the missionaries, to come to BYU. After my two-year LDS mission and two long years in the military, BYU didn’t know what to make of my transcripts, so they said, “Go to Ricks College and get 32 credit hours and then reapply,” which I did, and that is how I got to BYU.
What are some experiences that stand out from when you were a student at the Kennedy Center?
The class I remember the best was Political Science 200. Stan Taylor was the professor, and he was a dear friend and mentor. Professor Taylor’s style and demeanor put us all at ease, but, that being said, it was a very rigorous class. It was difficult for me as a foreign student. Chad Emmett was another favorite professor of mine; his geography classes were incredible.
Help us connect the dots from international relations to an MBA. How did that happen?
I was always interested in international business, but I wanted to get an MBA, so I did the international relations degree with an economics emphasis for the breadth of the degree. Frankly, I think I should have done accounting and finance. Given my interest in business, those were holes I had in my preparation. The international relations degree was wonderful in giving me that breadth of experience. I started a venture that failed after two years, and then I worked for a commercial construction enterprise for a couple of years before I came back and did my MBA.
I wanted to do strategy consulting when I started my MBA, but I didn’t realize BYU didn’t place students very well in strategy consulting. Into the first year, a couple of students and I decided to start a management consulting club, which I understand is still doing well on campus. We brought recruiters to BYU, and we started the strategy program at the Marriott School. It was difficult to open the Marriott School to the idea of strategy, but we have some great professors there. We had tremendous success in getting recruiters to recruit here—we had Bain and McKinsey and Monitor and Boston Consulting. We had a number of recruiters who didn’t have BYU on the radar for graduate degrees come recruit here. A headhunter came from Leucadia looking for someone to fill a specific position. When I was exposed to that, I did the interview kind of as an afterthought. However, once I found out what Leucadia did and I met with the chairman in Salt Lake City, I became excited. They gave me an offer, and I took the job, and I’m really glad I did.
Leucadia was a dream job that gave me exposure to many things. It was like drinking out of a firehose of experience. Immediately I was thrown into doing pretty substantial deals around the globe and helping the president of the company navigate those deals. The two partners running Leucadia were like Berkshire Hathaway, with two main shareholders running the company. They weren’t looking for partners, and I eventually wanted to have my own thing. With a former colleague from BYU and another partner, we started HealthEquity, which has done quite well.
The common factor is value—creating value and adding value—and the more value the better.
What is HealthEquity?
HealthEquity started with the premise that no one is better at spending health-care dollars than the person using the health-care services. In the United States today, and for a couple decades now, there is runaway inflation in health care. That stems from having third parties pay for the services—insurance companies, employers, and the government. The idea is to get the health-care consumption back in the hands of the patient or the user of the services. We started with a pilot program called “medical savings accounts.” We lobbied heavily in Congress to make that program permanent, and in 2004 President George W. Bush signed the act that made health savings accounts official.
What’s a health savings account? A lot of you probably have one. Essentially, it is taking your insurance and increasing the deductible to catastrophic levels, meaning you pay $5,000 to $10,000 out of pocket before the insurance company starts paying. Then the premiums go down dramatically. You can save 50 percent—sometimes more than the cost of the premiums—by doing that. Let’s say you save $5,000 if you go from a regular insurance with a low deductible to a policy with a high deductible—let’s say $10,000. Then $5,000 or $7,000 in savings is yours and can be put into a health savings account, which happens to be tax deductible and was part of the lobbying we did. We weren’t the only ones, but we were certainly leaders in the effort. The money goes in, and it grows tax free and comes out tax free as long as you use it for health-care consumption. If you don’t have a health savings account, then you are foregoing a very important tax break.
As you moved through these ventures, how did you analyze risk and reward?
A lot of people think entrepreneurs like risk. That is not true; entrepreneurs do not like risk. Entrepreneurs try to limit risk and often think their risk is small. How do you limit risk in any venture? The common factor is value—creating value and adding value—and the more value the better. As an entrepreneur I want to capture some of the value, but I don’t want to capture all of it. That is value creation. At Leucadia it was trying to pick up $1 for $0.70 or $0.50 and then improving things. I don’t pretend to be a specialist in anything. I’m a generalist. But if there’s anything I’m good at, it is value creation.
HealthEquity was just that process. I was not in a health-care profession, nor was I a health-care specialist in any way, but the idea was about an industry that’s broken. Is there anything we can do to fix it? We picked the toughest industry in the United States, and with a lot of luck and a lot of work along the way, we were successful.
And then you moved into the group called Public Development Partners?
Public Development Partners is a real-estate development business I started with a partner. Since moving to Portugal, I still have a partnership with him, but I am no longer affiliated with Public Development Partners.
Public Development Partners does infrastructure, city, retail, hospitality, office—a wide spectrum of projects?
Yes. One project that might be interesting is a project we started working on about five years ago: the relocation of the prison at Point of the Mountain [in Draper, Utah]. My partner and I were approached about five years ago by a former chairman of the Board of Pardons and Parole. He said, “I left public office about two years ago. I’ve retired, but one project I’ve been working on for the past twenty years with every governor I’ve served with is the relocation of the prison. It needs to happen, but nobody can figure out how to do it. Help me figure this out.”
We started doing analysis and realized that the consultants who had been working on this project had missed the main point. Basically, the analysis had gone like this: We have this 670-acre piece of real estate in Draper, which is a beautiful piece of real estate and which is now being used by a prison. It will cost about half a billion dollars to build a new facility. The state can maybe generate $120 million when they sell the land, but there is still a $400 million gap. How do we fill it? Every single governor who looked at it said, “We can’t afford it,” and moved on.
What they missed were two huge nuggets. One of them is that the prison we currently have is basically a warehouse for inmates. It doesn’t reform them. It doesn’t help them in any way. It really is embarrassingly at a minimum, and it’s socially irresponsible for us as a society. If I had the same background and experiences these inmates had, I might be there as well. I’m not a corrections specialist, but by trying to connect the dots, by talking to people, and by reading and researching a lot, I found out that the recidivism rate is 57 percent. We did an analysis to see if we could affect the recidivism rate. I’m not talking about the social impact, just economically what would happen to our prison system. The national average is 40 percent—terrible. It’s influenced by these old facilities across the country. Let’s assume we can get to the national average. Instead of the prison population continuing to grow, we could not just bend the growth rate and not just slow the growth rate but actually make it negative. We could actually decrease the population in our prison system by matching the recidivism rate of the nation. First of all, the impact of that dollarwise is huge. We are talking hundreds of millions of dollars that catch up to you in savings if you bend the curve down. Could we do that? Is that possible?
The end result is this: If you have a new facility and a new system, you can actually pay for a new facility multiple times. The net present value of the savings—just the economic savings—multiple times pays for the construction of a new facility.
You are now in Portugal, and you have a new venture in your native city of Lagos. Tell us about that.
Things in Europe are difficult, particularly in the peripheral countries, namely Greece, Italy, and Portugal. It’s not realistic for me to think I can fix Europe, but I thought, “What can I do in Lagos—my hometown—that could have an impact and create value?” I could start an NGO. As romantic as the thought may be, NGOs consume resources; they don’t produce. This is not knocking NGOs by any means, but that’s not my thing. My thing is the creation of value.
I started looking at Lagos and the resources we have that are unused today. One of them is the fisheries. We have this huge coastline, and we have the largest economic ocean area that belongs to a country. Portugal is a tiny country, but if you account for the ocean and the islands, the territory is actually bigger than continental Europe. The percentage of GDP that comes from the ocean every year is around 2 percent. That knowledge was incredible to me, so we are starting a fish-processing plant by taking resources that are not in use: people who are not employed and fisheries that are almost abandoned due to European central policies that have driven fishing to nothing.
How is the Church doing in Lagos?
The Church is struggling. Most of the people who were baptized in Lagos, including my family, left [Lagos] for better things. That was one of the draws for me and my family—to do something in Lagos that might diversify the economy away from the seasonal tourism business. Our LDS members are unemployed most of the year. They are employed in the summer almost 24/7, so they can’t come to church. It’s difficult for the people to have any flexibility.
What advice do you have for students in the Kennedy Center who are interested in international issues, who are trying to prepare for their futures, and who are asking, “What should I be thinking about?” “What direction should I be taking?” “How can I think like an entrepreneur?” and “How can I create value in my own career for myself and my family and also to help build the Church?”
One thing would be to look for opportunities outside of your comfort zone. Whether it be geographically or industrially, look for new things. Explore new things. My instinct is always to see how I can be an influence in the world—in my world, starting with my own family. How can I be an influence for good? How can I be of value? Once again, that doesn’t need to translate into dollars. I think if you ask yourself that question it may lead you to search for things you haven’t considered. A lot of people in this audience and those connected to the Kennedy Center are people who are interested in policy things and being diplomats and so forth. Look outside of the lines.
It comes back to David M. Kennedy, who was an ambassador at NATO and an ambassador at large. He started off as a banker. If I could say something about Ambassador Kennedy: I can’t hear his name without being humbled by it. I don’t know if a lot of people here know this, but he was instrumental in bringing the Church to Portugal. Once the revolution took place on April 25, 1974, the Catholic Church was the de facto church, and 97 percent of the people were Catholic. I was one of them. Ambassador Kennedy was sent by President Spencer W. Kimball to speak with the generals who were leading the country right after the revolution. These were generals with whom Kennedy had connections through his NATO experience. I am very grateful to Brother Kennedy.
What are the differences of value creation in the United States versus Europe?
I think it was President Uchtdorf a few conferences ago who highlighted the fact that everybody is different and that that’s good. Your background, your family, your training, and your spiritual DNA that you come with all affect how you approach business and how you approach value creation. The people who have been most successful aren’t solely motivated by money. They are people who want to create value, and they know that most of it is not theirs to capture. I think that is true in all aspects of life.
You have started companies in the United States and you’re now working on a venture in Europe. What has stood out in that setting?
The fundamentals are always there. You have to adjust to the local realities, and one thing I took for granted early on in my career was something I learned from my bosses at Leucadia. They were very well connected politically. You can’t take that for granted. If you want to influence the world for good—whatever your world is—you need to be connected to people who have the ability to be coinfluential with you. The political environment certainly cannot be ignored. There you have venture capital, private industries, and industries that are well developed. For example, we started HealthEquity and raised $2 million to start. I put in a little bit of money, but the money mostly came from other investors: friends, fools, and family—you know, the three Fs. Through successive rounds, it took a lot more money and a lot more time than we thought, which is always the case. We raised more than $30 million over the course of five or six years. The bulk of that money came from private equity and venture capital.
In Europe, particularly in Portugal and southern Europe, there is no such thing as venture capital. It doesn’t exist. What you have—and it’s a lot less efficient, I might add—is the central government in Europe that has allocated funds for development of special areas and special industries, and that is true in Portugal. I have had to learn how these funds work. I have found that it’s a lot better than venture capital. It gives me the ability, as an entrepreneur, to leverage my dollars and my investments with funds available from the European Union. You have to work within whatever context you are in.
Have you considered serving in the Portuguese government now that you’re back home?
I have, I have. Yes, I have.