Original thinker: Kinko's founder Paul Orfalea wasn't good in school, and doesn't like to work hard--but he listens to his customers and employees.

Kinko's founder Paul Orfalea is no fan of formalities. The L.A. native, who lives in Santa Barbara, stays at the California Club when teaching a course in global studies at USC and grouses about the club's "stuffy" dictates on wearing jackets and ties in the dining room. Disdain for convention helped Orfalea, the son of a clothing retailer, transform a taco stand turned copy shop into a chain of 1860 stores before he and his 125 partners handed over control to buyout firm Clayton Dubilier & Rice in 1996. Orfalea and his partners expected Kinko's (named for his kinky hair) to go public, but when it hadn't after six years, he accused Clayton Dubilier of dragging its feet on the IPO. After legal wrangling, the original Kinko's owners were bought out for $344 million, and Orfalea received $116 million for his remaining stake. The company was sold last week to FedEx for $2.4 billion.

Question: Since Kinko's, you've been busy with a number of new ventures. Why not relax?

Answer: I love starting and building businesses. That's what I do. Right now, I've got a chain of bowling alleys and I'm developing real estate projects in Alabama and Louisiana with my cousin.

Q: You're also trying to get into workers' compensation insurance. How did that occur?

A: I own a company called DataProse, which does fundraising consulting and mail-billing. It was originally classified as a Xerox dealer, which still makes up a large part of our business. Then the state Workers' Compensation board reclassified it as a mail order company, which sent our premiums from $2 per $100 to $10 per $100. It was a 400 percent increase and we were ripped off. But it got me thinking about offering an alternative to the state.

Q: But experienced insurers have been fleeing.

A: You can either complain or look for opportunity in every problem. I prefer opportunity. Think about it--I could charge a company similar to DataProse just $6 per $100. I could undercut the Workers' Compensation board and still be profitable.

Q: You also have a money management firm, West Coast Asset Management, which you run with a cousin, Lance Helfert.

A: I started West Coast with Lance alter I left the board of Kinko's. I was always interested in investing and I knew many of the Kinko's shareholders were looking for someone they could trust with their money. Lance was looking to start his own company. We had been talking about doing something for a while because we think alike.

Q: What's been your experience with investing in not-so-great ideas?

A: I've invested in a lot of tailed businesses and passed on some good ones. I put money into a Chinese restaurant chain, thinking we had something like a Starbucks for Chinese food. That failed. Meanwhile, I had a chance to make an early investment in Starbucks before it went public and didn't. What a missed opportunity.

Q: What other things have you been doing?

A: One of the things my wife and I are doing is building inter-generational centers for both children and older folks. It's really neat. Children and seniors, they're in the same place in a lot of ways, so they interact in such interesting ways.

Q: You're pretty busy.

A: I'm not that busy. I have Lance handling the money management and other people running my charities and my partners running other businesses. If I find a great idea, I work on it at the beginning, then bring in other people to make things work. Actually, I've always been good at getting out of work.

Q: Even at Kinko's?

A: Kinko's grew because I hated work. I had one store to run and I hated that job. So I expanded Kinko's and hired people to run the stores. Then I realized I hated supervising people who ran stores, so I hired people who could do that. Then I needed someone who could watch over them, so I hired people who could do that. Really, when you think of it, I never ran Kinko's. My real contribution was walking from store to store, seeing what people did right and exploiting it.

Q: What do you consider to be your biggest asset?

A: I listen to people. My one advantage is that I'm dyslexic. I wasn't a good student. So I could never think I was a lot smarter than the next guy. I've spent nay time listening to the customer and to the employee.

Q: So that's where you get your ideas?

A: You're not going to get your ideas by sitting behind a desk. A lot of my best ideas came from talking to customers and employees. At Kinko's, customers told me they wanted 24-hour service, so we kept the stores open all hours. I was at another shop when a customer told me he wished the self-service printers were in the front. So we did it. We added notary publics to the stores. We added self-serve printers up front when customers with small jobs asked for them.

Q: Does this dovetail into your investing strategies?

A: Certainly. Today, my best idea might be getting back into Microsoft stock. We were in the stock, but got out of it because we were worried about how Windows would compete against Linux. But I was in Wal-Mart the other day looking for a car racing video game and I was talking to a sales lady. She told me the Xbox was selling better than the (Sony) PlayStation. That got me thinking about investing in Microsoft again.

Q: You seem to put a lot of faith in your employees.

A: You have to nurture your people. I learned that in the early '70s, when I was hiring people as cashiers. At that moment, I realized my name was on the receipts and invoices. That's my money. Well, how do you treat people who are touching your money? You kiss their fingers. Happy fingers equal happy employees and that means more money. That didn't mean I was mellow. I had the velvet glove and the steel fist. And sometimes I used the steel fist. But you can tell how good a company is by looking in the employee's eyes.

Q: Some people in business don't understand that.

A: There are a lot of businessmen who stiffer from executive-itis. They graduated at the top of their class, so they're not used to listening to anyone who aren't their equals. They can't wait to talk to themselves or to people like themselves. But they don't talk to customers and employees. So when their business goes down the tubes, they're scratching their heads.

Q: Lessons from experience?

A: I saw it after we did the roll-up. When (Clayton Dubilier & Rice) first came in, they thought Kinko's was in the retail business. So they tried selling things that no one bought. They didn't realize Kinko's was in the time business. We were renting time on copiers and computers.

Q: Ultimately you were bought out. Have you paid attention to the company since you then?

A: No. It's like high school for me. I mean, you can't spend your life angry about the past. So you have to learn to move on.

INTERVIEW

Paul Orfalea

Title: Co-founder

Organization: West Coast Asset Management Inc.

Born: Los Angeles, 1948

Education: University of Southern California 

Career Turning Point: Moving to Santa Barbara after graduating from USC so he could stay close to college life

Most Admired People: "My dad and uncles Nick and Amil. They were shrewd people who learned how to balance between work and fun."

Hobbies: Talking to strangers. "That's where I get my best ideas."

Personal: Married, two children