Reading time: 4.5 hours
This book narrates the career stories of Brazil’s richest man, Jorge Paulo Lemann, and his two main associates.
Jorge Paulo graduated early from Harvard University with a degree on Economics, and right off the bat started working on the financial sector on Brazilian banks. After ten years of making numerous connections and some money (around 200 thousand dollars), he became unemployed, yet set out to build his own bank. By copying the same meritocratic and result-driven business ecosystem as Goldman Sachs, he turned his bank into one of Brazil’s most well-known financial institutions, making a lot of money in the process. During the following decade of working and developing his firm, Jorge Paulo met two of his best workers (who later became partners) in his firm. When the bank started declining in results and quality, he sold it off and made around 200 million dollars. Jorge Paulo and his two partners then started their own private equity firm, acquiring Anheuser-Busch (the world’s largest brewery at the time), Lojas Americanas, and Heinz, all multi-billion dollar companies.
Here are some of the more important ideas from JP’s career and strategies running a company:
– The 10 main lessons from the group:
1) Always invest, especially on people
2) Don’t be afraid to dream big, and use it to support your momentum
3) Create a meritocratic culture with appropriate incentives for everyone
4) You can export a culture to different industry sectors and geographies
5) Concentrate and focus on building something big and lasting; money will follow
6) Simplicity is golden!
7) Being a fanatic is good
8) Discipline and patience are key, especially during hard times
9) A disciplined and high-level management committee with aligned motives and goals is a powerful tool
10) Look for counselors, consultants and mentors, and also connect them amongst themselves (adding value)
– Jorge Paulo and his associates preached that meritocracy, low costs, and a quality crew with aligned goals were the main ingredients for a successful business model
– Finding, training, and keeping quality workers is an ongoing effort, and a priority
– Everyone’s income must be stimulating, just and in sync with the firm’s interests. Early in his bank’s history, Jorge Paulo wanted to make sure everyone got compensated fairly, but not so much that it would make the associates complacent and comfortable with their current situation. The bonus-driven meritocratic system in his bank could make an intern become a partner, as long as he showed himself to be worthy. He met his 2 main partners this way
– The 20-70-10 rule: Employee evaluation was key to maintaining quality while evolving the company. Every year, JP would promote the top 20% of workers, keep the middle 70%, and fire the worst 10%. This was the best way to keep talent on the roster and instill a sense of urgency and high-level work in the firm
– A boss’ main goal is to pick people better than himself to continue the firm’s legacy
– Leadership comes from clear ideas and daily example on minimal details
– A good firm is always trying to get better. There is always room for improvement. Even when he was a billionaire well over retirement age, JP was still looking for his next investment. This also says something about how what he does is part of himself, and money is not the main goal
– Innovations are great, but copying good models is way easier
– Associate education and training must be ongoing and ingrained in day-to-day activities
– A big, challenging, common and essential goal helps everyone work together
A few other cool ideas and facts:
– JP and his billionaire partners were extremely “common”. They often wore jeans and t-shirts, disliked flashy cars and houses, and avoided press attention. The main reason why Banco Garantia failed and was ultimately sold was because most associates were making too much money, becoming complacent and distracted with material possessions.
– When the bank started making immense sums which were not all given out as bonuses (to prevent distractions), the trio would then look for companies to invest on with their new profits
The business trio was not afraid to fire low-performers. Every time they acquired a new business (Like Antarctica and Lojas Americanas), a firing barrage would usually follow
– This opened up room for new young talent, but also cut many costs and inefficiencies
– Before making monster acquisitions, no one really knew a lot about the industry in question (beverages and beer, or retail). However, the trio looked for mentors and experienced people to help and guide them with valuable information. After a few months of intense mentorship and studying, they already knew enough to turn the business around.
– They considered themselves to be “one trick ponies”, and always copied proven models and systems to their new acquisitions (always yielding great results)
– Acquiring Antarctica may not have been the best decision on paper, and they admitted they lucked out by skipping their due diligence, which would have prevented them from going through with the purchase.
Sometimes being lucky is better than being good.