Michael Lee-Chin: a five-point formula, unchanged for 45 years

In 1978, Michael Lee-Chin was 27, working as a financial advisor in Hamilton, Ontario.

He sat down and wrote out a five-point formula.

Forty-five years later he is a billionaire worth nearly $4 billion. The formula has not changed a line.

The son of a grocery clerk

Michael Lee-Chin was born in 1951 in Port Antonio, Jamaica, the eldest of nine children. His mother sold Avon products and worked as a bookkeeper. His stepfather was a grocery clerk.

In 1970 he came to Canada to study engineering at McMaster University. Not finance. Not economics. Engineering.

That is the most important detail. Lee-Chin thinks like an engineer: find the formula, test it, codify it, hardwire it. And he applied that way of thinking to investing.

In 1976, the day before he started as a financial advisor, his blood pressure hit 190/110. He had not a single client. He was waiting at the airport for his mother; her flight was two hours late. He drove around the neighbourhood, saw people working in their gardens, and decided to knock on every door.

That is how he got his first clients.

The five-principle formula, written in 1978

At 27, Lee-Chin reached a conclusion: "Mutual funds are managed in a way that is the opposite of how wealth is created."

He asked himself: is there a formula for producing wealth as consistently as H₂ + O makes water? Two hydrogen, one oxygen, water. Every time. No exceptions. He went looking for the equivalent formula for wealth.

And he found it. Five principles, unchanged in 45 years:

One: own a small number of high-quality businesses. "Wealth is created by owning a few high-quality businesses. The typical mutual fund owns 200." Lee-Chin's AIC Advantage Fund held only 15 stocks. 15 against 200. That is the whole difference.

Two: genuinely understand them. "If you own 200 businesses, it is impossible to understand them all." Lee-Chin put 60% of the AIC Advantage Fund into asset-management companies, because he worked in the industry and understood it better than almost anyone.

Three: industries with long-term growth. He chose asset management because an ageing population means more retirement saving, which means more assets under management, which means more fees. A demographic trend that cannot reverse for 30 to 50 years. He looked 20 years out, not 20 quarters.

Four: use other people's money. He borrowed $500K when his net worth was lower than that. He managed money for 350,000 investors. You do not need your own capital, if the formula is right you can borrow or attract other people's.

Five: hold for a long time. "The typical mutual fund has 80% turnover a year." The AIC Advantage Fund held for years. "Buy. Hold. And Prosper." Trademarked. Three words across 20 years of marketing. Never changed.

The 1983 bet: $500,000 borrowed, into one stock

In 1983, Lee-Chin was 32. He borrowed $500,000 from a bank, more than his net worth at the time, and put 100% of it into a single stock: Mackenzie Financial Corporation.

Why Mackenzie? Because he worked in the mutual fund industry and understood it. Mackenzie was one of the best companies in it. At $1 a share it was cheap under his own principles one and two: high quality, and he genuinely understood it.

Four years later the stock was $7. $500K became $3.5 million.

This was not a hunch. It was not luck. It was the act of someone who believed the formula enough to stake everything and borrow more. Most people talk about conviction. Lee-Chin lived it.

AIC Limited: from $800,000 to $15 billion

In 1987 Lee-Chin used the Mackenzie profits to buy AIC Limited, a small investment firm with $800,000 of assets. And he applied the five principles to the company he now ran.

The AIC Advantage Fund held 15 stocks. 60% in asset managers. Low turnover. Investors bought and held. No other mutual fund in Canada looked like it.

At its peak AIC managed $15 billion. From $800,000. Roughly 18,000-fold in 20 years.

But the most important part of the story is not the number. It is how he held on while everyone panicked.

In 2000 the Canadian press reported AIC was dying. Investors pulled $224 million. The Globe and Mail ran a piece predicting a death spiral. Lee-Chin's response: he sold his Coca-Cola stock and invested a further $65 million into Mackenzie. He sent 350,000 personal letters to every investor explaining his reasoning. The investors stayed. Mackenzie was later sold for double.

In 2001, after the dot-com crash took the market down 50%, AIC fell only 4%.

Buying his home country's national bank in a crisis

In 2002, Lee-Chin bought 75% of National Commercial Bank Jamaica, the country's largest bank, from the Jamaican government for $127 million, while the country was in a financial crisis.

This is the Hetty Green move: buy good assets from a forced seller in a crisis. And the Rainwater move: buy Texas land during the S&L crisis, buy oil at $12.

From 2004 to 2017 NCB Jamaica generated $1.45 billion of cumulative profit, from a $127 million investment. An 11.4x return on profits alone, before the bank's present value.

When the deal closed on 27 March 2002, Lee-Chin thought: "How did I get here? The son of a grocery store clerk. 250 years ago I would have been owned. I did not choose my era. I was lucky."

The QuietVC lesson

Lee-Chin teaches what most investing books do not: the formula matters more than the talent.

First, find the formula, hardwire it, don't change it. Lee-Chin had five principles in 1978. Forty-five years later, the same five. That is not a lack of creativity. It is the highest form of psychological discipline available.

Second, large conviction deserves a large bet. $500K borrowed into one stock when your net worth is less than the loan. You only do that once you genuinely understand. Otherwise it is gambling.

Third, concentration beats diversification, when you genuinely understand. Fifteen stocks against 200. Diversification is protection against ignorance. If you truly understand an industry deeply, you do not need 200 stocks.

Fourth, double down when you are right and the market is wrong. In 2000, with the press predicting AIC's death, Lee-Chin bought more. Not out of stubbornness, but because he had done the analysis and knew the formula still held.

Fifth, lead by example. Before telling clients to invest according to your formula, prove it with your own money first. When clients saw their advisor borrow $500K into a single stock and make 7x, that was better marketing than any brochure.

The son of a grocery clerk in Jamaica.

Started his career with blood pressure of 190/110 and no clients.

Knocked on gardeners' doors to find his first ones.

Wrote a formula at 27. Did not change a line of it for 45 years.

Silent discipline. Compound value.