Des Moines Register
02-04-07
Elbert: With shared love of art, Pappajohns cement philanthropic legacy
DOWN TO BUSINESS
By DAVID ELBERT
REGISTER BUSINESS EDITOR
In 1952, John Pappajohn signed up for what he thought would be a "slough
course" during his senior year at the University of Iowa.
"I took history and appreciation of art, and I had a fantastic professor," said
Iowa's premier venture capitalist, who will soon make what is believed to be the
largest public gift of art in Iowa history.
Pappajohn and his wife, Mary, are finalizing plans to give as many as 16 pieces
of outdoor sculpture by world-class artists to the Des Moines Art Center. The
pieces are valued at $20 million to $30 million and will be installed in the
downtown Western Gateway Park, where, later this year, they will turn a threeblock stretch of the park into one of the nation's top sculpture gardens.
That 1952 art class, said Mary Pappajohn, put her husband on the path to
becoming the state's premier art collector. The Pappajohns began collecting art
as soon as they were married. Today they are the only Iowans, and among only
a handful of Midwesterners, included in Art News magazine's list of the top 200
collectors in the world.
The truth, said Mary Pappajohn, is that art is a large part of the reason she
married her husband. Her major at the University of Minnesota "was art-related,
interior decorating," she said. The couple met through church after college. When
they discovered their common love of art, they started dating.
"We went to museums and galleries on our honeymoon," said Mary Pappajohn.
And they've been doing it ever since.
"I'd never seen art before" that college class, said John Pappajohn.
"I grew up in a really modest environment," as the son of a Greek immigrant
grocer in Mason City, and that first art class "opened up a whole new world," he
said. "We both just got very interested in art."
Between them, the Pappajohns sit on, or have sat on, the boards or committees
of more than half a dozen of the most prestigious museums and cultural
organizations in the country, including the National Gallery and the Kennedy
Center.
For years, John Pappajohn has told friends he wanted to be Iowa's biggest
philanthropist. "He's been saying that for about as long as I've known him," said
Mary Pappajohn.
Now, with the donation of the sculptures, he's on the verge of earning that title,
after having made contributions in the past totaling an estimated $50 million to
various educational, entrepreneurial, health care and art enterprises in Iowa and
elsewhere.
Usually, donations of that size occur after the benefactor has died. For example,
the trust of the late Roy Carver of Muscatine and his family has given more than
$140 million to the University of Iowa and Iowa State University, with the
majority of those gifts occurring after Carver died in 1981.
Pappajohn is 78, in good health and still working every day at his venture capital
business. Most of his big gifts have been made in the past 10 years, but he has
been giving throughout his life.
"Neither one of our families had money," Pappajohn said, "but Mary and I got
started early on" by giving $10 a year to the University of Iowa. "It's just
something that makes you feel good."
The real story, of course, is how Pappajohn made his fortune, which has been
estimated to be in excess of $500 million.
It wasn't a fast start. Pappajohn had to repeat kindergarten in Mason City. As the
son of Greek immigrants, his English was poor. It took him six years to get
through college, because his father had died when he was 16 and he had to
alternate learning with supporting his mother and two younger brothers.
After receiving a bachelor's degree in commerce from the University of Iowa, he
started an insurance agency in Mason City with his brother Aristotle. They started
business in a former hamburger stand and continued to run the family grocery for
a time.
Pappajohn had bigger dreams, but he wasn't sure how to get started, until he met
W. Clement Stone, the author, philanthropist and inspirational speaker. Stone
had also started by selling insurance and later formed his own insurance
company.
"I corresponded with him for two years and finally got him to come to Mason City
in 1960 to speak to local insurance underwriters," Pappajohn said.
"I picked him up at the airport and he said, 'Why don't you start your own life
insurance company?'
"I said, 'I don't have any money.'
"He said, 'You don't need any money. Buy my book.' "
The book was "Success Through a Positive Mental Attitude." Pappajohn bought
it, read it and has been practicing it ever since. Over the years, he figures he has
bought 200 to 300 copies, which he gives to business associates. Pappajohn
continued to correspond with Stone, who continued to offer encouragement.
By 1962, Pappajohn was ready. He moved to Des Moines and founded
Guardsman Life Insurance Co. He sold shares to the public at $1 each, and sold
the company in 1969 for $6 a share.
By then, Pappajohn knew he wanted to be a venture capitalist.
His own stake, at the outset, was $100,000. He was 41.
"Warren Buffett told me, 'John, you're making a mistake,' " Pappajohn recalled
last year during an interview with the Financial Times of London.
Buffett was probably right, Pappajohn told the Financial Times' James Altucher.
The first few years were lean, but Pappajohn would eventually help start more
than 50 health care companies and produce an average annual return of more
than 60 percent for his own venture capital fund.
He started out selling fertilizer companies in Iowa and farm equipment
companies. One of those early deals went bad, spawning a series of lawsuits in
the early 1970s. Pappajohn has described it as an early version of a leveraged
buyout and said people didn't understand it.
His first real success came in 1972 when Kay Laboratories, a struggling San
Diego company that made hot and cold packs for hospitals, asked Pappajohn to
find fresh capital. He found investors, then sold shares to the public and finally
helped sell the company 10 years later. Kay earned him his first million dollars.
More importantly, it got him into health care financing, which quickly became his
specialty.
Pappajohn did wheeling and dealing in ever-widening circles of medical,
technical and financial experts.
He had earned the trust of people he did business with, whether they were
doctors or Wall Street financiers, and they introduced him to others.
Profiles written during the 1990s often focused on his ethics.
"You feel comfortable being in his companies," Helen Degener, a money
manager at Fiduciary Trust, told Forbes magazine for a 1997 article.
"One reason his executives admire him is that he lets them run the business but
is always ready to offer advice if asked," wrote Forbes' William Green.
Pappajohn was named Iowa Business Leader of the Year by The Des Moines
Register in 1993. He was described as "a self-taught expert on medicine (who)
constantly reads medical journals and is as comfortable discussing medical
breakthroughs as he is stock offerings."
Pappajohn was "terrific at zeroing in on the nub of a problem and finding a
solution," the 1993 Register article said.
In 1995, he received a Horatio Alger Award, a national honor bestowed upon
self-made men and women who give back to their communities.
Pappajohn's style is to noodle an idea in his own head and work out the kinks
before bringing it out in the open. He does that with his business ventures and he
does it with his philanthropy.
In the mid-1990s, he noodled an unusual idea for a while and then decided to put
it to work. The idea was to transform the economy of his home state, which had
started out as a risk-taking farm economy but had settled into a risk-adverse
insurance culture.
Pappajohn wanted to change that by promoting entrepreneurship. With his own
money, he created five entrepreneurial centers 10 years ago in Iowa City, Ames,
Cedar Falls, Des Moines and Mason City. The centers have taught thousands of
Iowans how to start and run businesses and inspired thousands more.
Now he's hoping his private sculpture collection, which is an interesting collection
of form and funk, will inspire a different type of creativity among his fellow
Iowans.
Business Editor David Elbert can be reached at (515) 284-8533 or
delbert@dmreg.com