Industry veteran Len Ainsworth has left little to chance in building his second fortune. Colin Kruger reports.
If you believe common wisdom, it takes a little luck to build a fortune in the world of business. Len Ainsworth, the father of Australia's poker machine industry, may beg to differ.
Ainsworth turned 89 last month having successfully built a second fortune from scratch over the last decade with Ainsworth Game Technology (AGI). From a standing start, Ainsworth's controlling stake in his latest venture is now worth more than $400 million, with the shares up more than 650 per cent since November last year.
It may soon eclipse the value of the shares in Aristocrat Leisure he bequeathed to his wives and seven children in the 1990s amid a health scare and brief retirement.
For veterans like Ainsworth, success comes down to experience and "building a better mouse trap" - to use his own controversial words from more than a decade ago to describe the machines that have been linked with gambling addiction.
The top six executives at AGI have close to 300 years in the electronic gaming industry, including Ainsworth with more than 57 years under his belt.
"Everybody at senior level here has had 20 to 30 years or more experience and it just makes the difference between knowing what is right and knowing what is wrong for the industry," he says.
His second career with AGI did not include some of the challenges from his first with Aristocrat. Ainsworth's fledgling career in the poker machine industry was almost literally blown apart in 1954 when his new factory in Alexandria had its roof ripped apart by a bomb that could have destroyed the entire factory.
It could have been a fatal blow at a time when banks were reluctant to lend to poker machine makers due to the stigma around gambling. It was an issue that AGI also faced in its early years but for different reasons.
Ainsworth's deep pockets kept his second venture afloat for most of the last decade as losses mounted and then the financial crisis hit.
"We had one or two people here with their hair standing on end at the most difficult time because we got hit with the credit squeeze the same as everybody else with the economy turning down," he says.
In 2009, when he was acting as the company's sole source of funding, Ainsworth took strong measures to ensure the company survived even if he didn't. The maturity date on the $40 million he had loaned to the company was extended to four years from the date of his death.
"I gave a fortune away to various members of my family after Aristocrat was floated," he said at the time.
"Most of my boys have done well, but there is the odd exception, and you can't control what's going to happen when you're gone."
Things have changed since then. AGI is in the black and its share of new poker machine shipments into the Australian market is starting to rival that of Aristocrat.
With AGI thriving, the apron strings were cut in April via a capital raising to replace Ainsworth's financial lifeline with more traditional funding sources.
Aristocrat and AGI may be duking it out in the market for control of Australia's poker machine market, but it's no accident that most of his children remain on the other side of the fence, holding about 30 per cent of Aristocrat's issued shares. It's the way that Len, who has previously described himself as a "benevolent despot", designed it.
Anyone who sells out before Len dies has to give him 80 per cent of the proceeds. It was one way of ensuring his family retained some interest in the business he devoted most of his life to.
It's not as if Ainsworth is a particular fan of Aristocrat's management, which settled an intellectual property dispute with AGI in June. Ainsworth highlights the contrasting executive experience at two companies with Aristocrat Leisure now run by former Foster's executive Jamie Odell.
In Ainsworth's view there is a world of difference between selling beer and wine, and selling poker machines. When asked if he thought it was possible for someone with no industry experience to run a company in the electronic gaming machine market, Ainsworth says there is not much chance "unless they get a right-hand man to sit alongside them who's going to take them through it and teach them [about the industry].
"It's like you decide you'll be a doctor and operate on people. They'll die on you."
But Ainsworth is happy to use a liquor industry analogy to defend the industry against allegations it encourages problem gambling.
"Well, that's the same as saying have one beer and [you] could become a drunk," he says. "I suppose you could but let's get back to reality." On the contentious issue of limiting the amount that gamers can lose, Ainsworth said: "Pre-commitment wouldn't work, and I'm not going to elaborate but there are some simple ways in which they could minimise problem gambling."
With his 90th birthday on the horizon, the octogenarian has no plans to step back from his role as executive chairman at AGI, but he remains mindful of how things can change quickly.
"I've got a pretty active mind, but who knows how long that lasts. You don't see too many chairmen when they get to 90, 95 or 100, there's only Rupert Murdoch," says Ainsworth with reference to the embattled News Corp executive chairman who is close to a decade his junior.
Once again, luck plays no part when your career endures over such an extraordinary period.
"If you're born with the right set of genes, you're OK, if you're born with a bad set of genes you've got problems," says Ainsworth.
"And of course you've got to pay attention to your diet and not be an alcoholic and not do stupid things."
The passing of the years and AGI's recent success has given Ainsworth pause to consider a different legacy to family and his place in the gaming industry.
With family largely taken care of by the bequest of his Aristocrat shares, charitable interests will be the main beneficiary of his latest fortune. "I will be devoting the money primarily to medical-type charities because that's where my interest lies and that's where I think the future of humanity lies," he says.
Sections of the will specify that his children will receive additional support if something "diabolical" happens, but more than half the fortune is to be earmarked for charitable causes.
Ainsworth is no stranger to charity. He made a $1.5 million donation to the Sydney Children's Hospital in 1996 after his first retirement.
He named the Garvan Institute of Medical Research as the sort of institution he would be looking to support with the charitable trust. The Cancer Council also rated a mention.
But while blood still pumps through his veins, Ainsworth remains focused on what he knows best.
Poker machine sales are picking up in Australia and America and he is not ignoring the growing population of gamblers in Asia who traditionally favour table games over poker machines.
Ainsworth cited a forecast from Las Vegas Sands, which has casino operations in Las Vegas, Macau and Singapore, saying Asia will need eight to 10 gambling areas the size of Las Vegas to fulfil the region's demand for gambling.
But he also sees plenty to cheer about in the US, which is still the biggest in terms of poker machine numbers due to its expansion of casino operations on native American reservations. It makes it a very different market from when the US market consisted of little more than Las Vegas. "These days of course you have the whole of America, plus Indian casinos with as many as 12,000 machines," he says.