- Chewy cofounder and former CEO Ryan Cohen described his father and Warren Buffett as the "two biggest influences on my professional life" in an interview with Business Insider this week.
- Cohen learned the importance of focus, independent thought, conviction, and a long-term perspective from the two men.
- He also explained why Apple is his biggest investment, and how the tech titan is benefiting from the pandemic.
- Visit Business Insider's homepage for more stories.
Ryan Cohen ignored the naysayers when he cofounded an online pet-supplies retailer in 2011 and squared off against Amazon and Pets.com.
After his father suffered a heart attack in 2017, Cohen made a series of tough calls to spend more time with him: scrapping plans to take Chewy public, selling the company for $3.4 billion, and resigning as CEO the following year.
Cohen broke with convention again by investing the vast majority of his wealth in two stocks, Apple and Wells Fargo, and later placing a contrarian bet on ailing video-game retailer GameStop.
The entrepreneur attributes his independent streak to the "two biggest influences on my professional life": his father, Ted Cohen, who passed away last December, and Warren Buffett, the billionaire investor and Berkshire Hathaway CEO.
"Something critical that I learned from my dad and Warren Buffett was the ability to separate myself from the herd and think independently," Cohen told Business Insider this week.
The pair's teachings allow him to "block out the noise, develop my own point of view, and not be influenced by daily headlines or the consensus or what's in style."
For example, many people initially doubted Chewy would be able to ship 30-pound bags of pet food to customers and make any money.
"In the early years, few investors thought Chewy was a good idea," Cohen said. "I struck out raising capital over 100 times."
Ignoring the skeptics, as well as avoiding distractions and saying "no" to all but the best opportunities, enabled Cohen to focus on the things most critical to Chewy's success: competitive prices, compelling products, fast shipping, and personalized customer service.
The former Chewy chief credited his dad, who ran a glassware-importing business, with giving him the courage of his convictions.
Cohen's father taught him to trust his instincts, treated him like an adult from an early age, solicited and listened to his opinions, and demonstrated what it meant to deeply understand a business.
"I learned how to build my company by watching him build his," Cohen said.
Going all in
After selling Chewy, Cohen plowed the bulk of his windfall into Apple and Wells Fargo, flouting traditional investment advice about the need for a diversified portfolio.
Cohen felt comfortable with his decision partly because he bought his first Apple share at age 15, making it one of the first stocks he ever owned. The technology titan's ecosystem of hardware, software, and services — which makes it a headache for users to switch to rival products — was a key attraction, he said.
Apple's offerings have become even more integral to people's lives during the pandemic, Cohen argued. People increasingly rely on their iPhones, iPads, MacBooks, and apps to keep in touch with friends and family, work from home, conduct daily tasks such as shopping and banking, and entertain themselves.
"The strongest business in the world," Cohen proclaimed, echoing Buffett's comment in February that Apple is "probably the best business I know."
Cohen also brushed off concerns about Apple's valuation, arguing that it's relatively cheap when rock-bottom interest rates mean bonds are yielding close to zero.
Cohen declined to comment on his Wells Fargo and GameStop investments.
Betting like Buffett
Cohen's emphasis on focus, independent thought, and investing with conviction aren't the only strategies he shares with Buffett.
The Chewy cofounder cited 'disciplined capital allocation," or spending money strategically and responsibly, as a key driver of his company's success. Buffett specializes in taking the cash flowing into Berkshire from its scores of subsidiaries, and redeploying it where it's needed most.
Cohen focused on selling pet food at Chewy, because he recognized that customers would slash every expense they could before cutting back on feeding their pets, resulting in a "sticky" customer base.
Consumables offered slimmer profit margins than toys or accessories, but the lifetime value of their buyers relative to the cost of acquiring them meant they generated higher returns in the long haul, he added.
Buffett famously favors companies that sell essential or staple products and services to a dedicated customer base. For example, Berkshire counts American Express, Visa, Mastercard, Coca-Cola, Procter & Gamble, and Kraft Heinz among the roughly 45 stocks in its portfolio.
Cohen and Buffett also have investments in common. Apple is by far the most valuable holding in Berkshire's portfolio, and the conglomerate owned $3.3 billion worth of Wells Fargo stock at the last count.
Finally, Cohen practices Buffett's advice to "be greedy when others are fearful."
"Value doesn't move but stock prices do, creating an opportunity if you have the right temperament to buy stuff on sale," he said.
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