'You can smell where the money is': Graeme Hart and his innate sense of commerce

Friday, 10 June 2022

Graeme Hart says he was a “terrible” student who was encouraged to leave school as soon as he turned 15, but once he found what he loved – business and commerce – there was no stopping him.

Now 67 and New Zealand’s richest man, Hart says he looks back on his early experiences and on reflection finds them “entirely predictable”.

A very independent person, he didn’t enjoy school, but outside of the classroom he had a “wicked” work ethic, and was always working after school and in the school holidays. He funnelled his energy into buying and fixing up cars, pulling apart engines in the family lounge and filling the garage with tools and cars.

So after the career guidance counsellor at Mt Roskill Grammar took him aside and suggested he might like to leave school the following day on his 15th birthday, it was a natural transition to get an apprenticeship as a panel beater.

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While Hart wasn’t rich or from an entrepreneurial background – his father was a radiographer and his mother a nurse – it turned out that even as a teenager, he was highly sensitive to commercial dynamics and finding value.

In his first year of panel beating he figured out that painting cars was quicker and easier, so taught himself how to do it and was soon offered a job moonlighting for the paint shop. He realised he could make a heck of a lot more money, so cut short the apprenticeship and switched to painting.

His new workplace had a panel beating and painting business, and there was a tow truck business out the back which brought in a lot of business from crashes. Hart was soon painting by day and towing at night.

Not only was he now exploiting his hours, he also earned beyond his hourly rate as he got a percentage of the panel beating repair value and could often make extra money buying and selling smashed cars.

While he didn’t know it at the time, Hart was fine-tuning what he now calls his “value equation”.

After a few years a franchise opportunity in taxi trucks caught his eye. He jumped out of tow trucks and with his father’s support met his first bank manager at the Bank of New South Wales, now Westpac, and began learning about leverage, borrowing $500 to buy a truck.

Still in his late teens, he was now in the carrying business. He quickly figured out that he could deliver parcels around town, or he could do the trickier work and earn a lot more money. In his case, the trickier work was helping Stereo Emporium get their stereos from Auckland to their new store in Wellington.

Stereo Emporium had been sending them by rail, but they were getting nicked en route and by the time they got to Wellington, the carriage was empty. Hart began driving them down overnight, then returning with his empty truck ready for his day job in Auckland, an endeavour he says was “very, very lucrative”.

In these early years after leaving school, Hart was developing the skills that would later serve him well.

“I had a sense around selling my time by the hour versus finding other ways of adding value,” he says. “But all of the time, I had a very strong work ethic with a high level of energy, and I was figuring out how you can exploit that.

“And so in many respects these teenage years were simply the start of what's carried on for the rest of my life. It’s just that back then, I didn’t know it. But I can look back now, and I can recognise it.”

Hart had found that he had an innate sense of commerce and that he loved business.

“I always have loved business, going right back then,” he says. “I can pretty much track my career in terms of the moves that I’ve made from the day I signed up to be an apprentice panel beater and how quickly I decided – hey, that’s a bad value equation, you should get out of that.”

Hart says he has been blessed with a very strong sense of commercial acumen.

“I’ve got an absolute passion for it.

“I describe it to some people as ‘you can smell where the money is’,” he says. “It’s just natural.”

He likens it to the natural ability a great rugby player might have for hand, eye, ball co-ordination.

Asked about his other characteristics, he cites innate leadership skills, energy, drive, intensity and a strong entrepreneurial spirit meaning he is prepared to take risks.

It is a powerful mix when combined with his strong work ethic.

“I get up every morning, can’t wait to get up and go to work, put in my best every day, year in year out,” he says.

From Hart’s perspective, it’s not a complicated formula and no different to a rugby player with innate talents who gets up every day, trains hard, works hard and goes to the game.

The output for him, he says, is “a reasonably successful business career”.

For the record, Hart was estimated in this year’s NBR Rich List to be worth $12 billion.

Hart was encouraged to add some educational theory and rigour to his practical experience so in his late 20s, he and wife Robyn and daughter Gretchen moved to Dunedin where he completed an MBA at Otago University, grateful to gain entry despite having no undergraduate degree.

He says he learnt a lot, describing the experience as “pivotal”. He formed a bond with Otago and made lifelong friends who he later travelled overseas with on annual motorbike tours.

Over time, his business empire has also turned its focus overseas, expanding from New Zealand to Australia and the US and Europe as Hart’s ambitions grew.

He has a loyal team of about a dozen people in his private equity business, Rank Group, who have been together for 20 or 30 years.

“We know how one another think, we have very common views on things – we can get into a debate, but we are never very far from alignment,” he says. “I’m very fortunate that this group have worked with me for a long time and are a significant part of why our firm has been so successful.”

You won’t see this group playing in the crypto market – Hart says he has “no interest” in it.

“That’s definitely not our sort of thing,” he says. “We’re reasonably boring.”

Hart stays away from volatility. He’s attracted to low-risk, quality businesses where he can add value, a mindset he tracks back to those teenage years.

“Most businesses that we own fall into that category,” he says. “I buy what I can afford and then I build it up.”

Hart built Whitcoulls Group into the largest company in its field in Australasia and the fifth-largest in the world. He grew Goodman Fielder into the largest food group in Australasia with Mauri Foods becoming the world’s largest yeast group. And he expanded global packaging and consumer products group Reynolds to reach revenue of more than $20 billion, with 40,000 employees across about 400 facilities in 50 countries – all owned and controlled from Auckland.

He says buying at the right price is critical.

“I’ve always believed that there’s limited point in buying a dollar for a dollar,” he says. “That’s not going to move me very far ahead.”

That means he has to know how to make an asset worth $2, or buy it for 50 cents.

He tackles big purchases through leveraged buyouts, borrowing against steady cash flows.

“If you’ve got a business where you’re confident in the income, and you’re going to improve its performance and increase its earnings that way, then when you borrow money to pay for it, the risk is less than what people think, because we are borrowing against a stream of what we call bond-like cash flows – and that’s what we do,” he says.

In a small country like New Zealand, Hart’s status as the richest person is regularly touted in the media. He says he’s not bothered by it, and “it is what it is”. Although he does try to keep a low profile, keep his head down, and stay away from public comments on politics or ideology.

While some say “good on you”, others say “you rich prick”, he notes.

Hart and wife Robyn have over a long period of time directed their philanthropic energies towards children and their education, health and welfare.

“There are people in society that can’t look after themselves and one of them is children,” he says.

Robyn has been a major support and sounding board throughout his career and the couple has two children, Gretchen and Harry, and four grandchildren.

Time not spent at work is with family, which Hart describes as the centre of his universe. He relishes working with both Harry and son-in-law Duncan and is immensely proud of Gretchen and her work supporting the Starship Children’s Hospital.

The family has long-term associations with schools which they support with scholarships, buildings and infrastructure, as well as Otago University. They also support services such as Youthline and Lifeline, and children’s charity KidsCan.

“Sharing what I’ve earned and learned over the years may make a difference,” Hart says. “We do a lot, we’ve got a lot more to do.”

He travels extensively, with at least 90% of his business interests overseas, but New Zealand remains home.

“Home is home,” he says. “Families put down roots and it becomes intergenerational. We’ve never felt the need to uproot that and move it somewhere else in the world.

“New Zealand’s a great country and this is our home.”

- Graeme Hart is among this year’s laureates to the NZ Business Hall of Fame. The award celebrates the achievements of New Zealand business leaders who have made a significant contribution to the social and economic development of the country.

The awards were set up by The Young Enterprise Trust, a charity that seeks to inspire students and support business education in schools.