Planting the Seeds of Wealth

‘‘ 26 If you have a fruit tree, the fruit Planting the Seeds ofWealth If you have a fruit tree, the fruit 0 1 0 2 . 4 Q intervew America. Underhisleadership, thesecompanieshave grownorganicallyandthroughacquisitions. Carlos SlimHelúhasamathematicalmindandsimpletastes. While criticized for charging some of thehighestphonefeesinworld,Slim’s criticizedforchargingsomeof While companieshave (Telmex). investinginitsnet- Slimpaidpersonalattentiontothecompany’smobilephoneunit, For more than 40 years, he has lived in Mexico City in the same house, which he describes as describes he which house, same the in City Mexico in lived has he For morethan40years, Bell fromtheUnitedStates, andFranceTélécom revolution, whichbeganin1910, the1929stock marketcrash. andagainintheaftermathof recently beenpraisedforadjustingtheirtariffsdownward. retail shopsandrestaurants. responsible forincreasingTelmex’s marketpenetrationto85percent. ments in a variety of sectors ments inavarietyof according toForbesmagazine,Slimistheworld’swealthiestperson,havingover- yet, And modest. money andnotknowingSpanish.Slim’s self-discipline,edu- fathertaughthimtheimportanceof individual to purchase a card and receive a handset along with it. Prepaidphonecardshavebeen individual topurchaseacardandreceivehandsetalongwithit. nonfamily investorinthecompany. expandingcoverageandcreatinginnovationssuchasprepaidphonecards, whichenablean work, taken Bill Gates and Warren Buffett of the United States and Mukesh Ambani of India. theUnitedStatesandMukeshAmbaniof Warren Buffettof taken BillGatesand Slim Haddad, who was born in Lebanon and immigrated to Mexico in 1902, at the age of 14, without cation, hard work, goodaccounting,andrisktaking.Slim’scation, hardwork, fatherinvestedinMexicoduringits enthusiast, Slim recently made a big investment in The NewYorkTimes, becoming thelargest SlimrecentlymadeabiginvestmentinThe enthusiast, Anavidreader,ematics andlinearprogrammingwhilestillastudent. artcollectorandsports w e i v r e t n i n a Like Buffett, Slim is an astute investor who quietly pieced together a diverse array of invest- Slimisanastuteinvestorwhoquietlypiecedtogetheradiversearrayof Like Buffett, In 1990, whenMexicowasprivatizingitseconomy, Slimandtwo partners Trained as an engineer at the National Autonomous University of Mexico, Slim taught math- taught Mexico,Slim of University Autonomous National the at engineer an Trainedas Slim, 70, hissuccesstolessonshelearnedfromfather, attributesalargemeasureof Julién Slim’s telecommunicationscompaniesdobusiness throughoutNorth, SouthandCentral — printing, mining,minerals, metals, industrialproducts, insurance,

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grows down from the branches If you have a fruit tree, the fruit grows down from the branches B r i e fi ngs on Talen t & L e a d e r s h i p Q 4 . 2 0 1 0 27 Slim recently discussed leadership in Mexico City with branches and you reach for it. You eat the fruit, but you take Gary Burnison, chief executive of Korn/Ferry International; out the seeds and you plant them because you have to rein- Eduardo Taylor, Korn/Ferry’s regional market leader for Latin vest. That’s where the wealth lies — in producing more trees. America; and Joel Kurtzman, editor in chief of Korn/Ferry You will not necessarily have more income every year, but Briefings. The following comes from that discussion. you will have more wealth if you plant the seeds. And if you do it long enough, you will have enough wealth to create a Your success in business has made you the richest man in middle class, which will form the strongest market you can the world, according the recent rankings in Forbes maga- have and the best society. So the responsibility of someone zine, ahead of Bill Gates and Warren Buffett. What role with wealth is to create more wealth. does money play in your life? Does it motivate you? Slim: The house where I was born was better than the house And then distribute it? where I now live. The house in which my wife grew up was a Slim: I don’t believe that you need to create wealth and then lot better than the house where I now live. So I would say the make a distribution plan for it. I think wealth is created be- answer is no. Money does not motivate me. It is my view that cause the market is growing and society is growing and then when families have money in excess and they are not making the overall economy grows. It’s classical economics. But hav- investments and building businesses and creating jobs and ing said that, I can say that the best investment is to fight doing things for society — when they think only materially poverty. Fighting poverty is not just a social issue or an ethical — then something is wrong. That is the way I was raised, and issue. It’s an economic issue, and there is an economic need those are the values that were taught to me. The truth is, to fight poverty. It’s best for everyone and everything because when I pass away, I will not take 1 cent with me. I will not if you fight poverty, you create a bigger market, which creates take anything. In my opinion, wealth is a responsibility and more wealth and with it more stability. If you do that, you in some ways a compromise. You must keep it growing and create enough wealth to educate people and then they have use it to society’s benefit. higher levels of productivity. This means you can create more jobs and employment. And, of course, all of this creates human Are you suggesting that a wealthy person — a CEO, for ex- capital. In my view, prosperity is good. But if only one coun- ample — should be a custodian of the wealth of an organi- try is prosperous, it’s still a small market. What do you do zation or a family? with all of the raw materials and production potential that we Slim: No, not at all. The role of a business leader — a CEO — is have? All of the labor? The more prosperity we have, and the to create more wealth, not conserve it. A CEO needs to grow more wealth we create, the better it is for everyone. the wealth of the company and the country. Wealth is not a privilege, it’s a responsibility. If you are a great doctor, you The American industrialist and philanthropist Andrew have a responsibility to use what you know to treat people Carnegie said, “The man who dies thus rich, dies disgraced.” and to help them. If you are a politician, you have to take re- Slim: That’s crazy. In part, of course, because it depends how sponsibility and use that responsibility to build your country. you make your wealth. If you made it selling arms and killing Having a leadership role in business or politics means taking people, that’s a crime. That’s not true wealth in my opinion. responsibility. To me, the word custodian signifies someone But if you are creating enterprises, creating wealth for your who sells everything and puts the proceeds in the bank. It country, your society, creating jobs for people, that’s some- doesn’t suggest someone who is building. thing honorable.

Some might use the word guardian instead of custodian. Who was the biggest influence on you? Slim: Again, I disagree. The point is not to guard or conserve Slim: My father. His examples of values and work were very what you have, but to create. It’s like planting a fruit tree. You powerful for me. I have this copybook from when I was 13. don’t just guard it or conserve it. You water it. You care for it It is on the wall in my office. He had me write in it and keep so it grows. But you must understand there is a difference records of all my expenditures. It includes my first balance between wealth and income. Wealth should be created, it sheet, which I produced when I was 15 years old. My father should be invested, and it should be used to create more passed away when I was 13. My father told me to make my wealth. If you have a fruit tree, the fruit grows down from the copybook clean and to keep it neat and to do it on time. and you reach for it. You eat the fruit, but you take out the seeds 28 Q 4 . 2 0 1 0 The Korn/Ferry Ins tit u t e What else did you learn from him? Did you learn to invest in periods of crisis from your father? Slim: My father showed me how to work. He had a big business Slim: Yes. I learned from him that you invest in times of revo- for that time period. He closed it down — sold it. The circum- lution and crisis. Then I read books and realized there are stances were interesting because he closed it in August 1929, moments when things that are normally very expensive are two months before the October 1929 stock market crash. It was valued very low. I learned that in business, the time to invest a kind of coincidence. And then he invested in new businesses is when things are not in good shape. When you invest, you and real estate. Then, later, he opened another business — a want to take a better position than your competitors. When merchandise business, a hardware store — when he was much there is a recession, we maintain strong positions. When older and sick with diabetes. I was only about 9 years old, maybe there is a recession and your competition doesn’t invest, they 10, but my father sent me to his competitors to look at the are giving you the advantage. prices of the things they sold in their stores, and he had me write down those prices and go over them with him when I got Were you a big investor during the recent global financial back. I felt like a spy looking at the prices. But I learned a lot. crisis? Slim: Yes. And we would have liked to invest more. At the What were some of the other things he taught you? time, members of the American Chamber of Commerce in Slim: Well, I like to think about another example of my father. Mexico invested $2 billion. That included the investment of He arrived in Mexico in 1902, with almost no money, when the big U.S. companies. At the same time, we invested $3.2 he was 14 years old. He had to learn Spanish. But he made a billion. We invested a lot. The U.S. investment in Mexico is business with his brother and by the time he was 23, he had not enough. capital of $40,000. Then came the Mexican revolution, which started in 1910 and which lasted a long time. During the revo- Why is that? lution, my father started investing. He did it during the pe- Slim: I think the U.S. is being left behind. In Mexico, they are riod of crisis. not in the banks; they are not in telecommunications, water and you reach for it. You eat the fruit, but you take out the seeds B r i e fi ngs on Talen t & L e a d e r s h i p Q 4 . 2 0 1 0 29 or power. They are in traditional industries. They need to ate and do something with quality and to optimize the way invest more in Mexico. they work as much as they can. And they feel very good about the achievements they are making as the building goes up. Did you learn any big lessons from the financial crisis? They feel pride about the things they are doing. We have been Slim: One of the important lessons — especially from the talking about the manifestations of leadership, and this is Lehman crisis — is the power of excess. Periods of excess one of them — making people feel a sense of achievement. make you ambitious, but not always for the right thing. Do you get better at leadership over time? Let’s turn to the topic of leadership. How do you define Slim: Yes, I think you do. Leadership is a combination of leadership? things. It’s easy to think something is white or black, that Slim: There are many types of leadership. You can have leader- people have the genetics to be a leader, or that other things ship in your family, between friends, between a team in sports, are in play. And, of course, there are always circumstances. I in business and politics, in religion, and in the professions. personally don’t believe so much in luck, but circumstances So, it’s difficult to define it in three or four words. True, it is are important. linked to achieving some type of target and to a set of mutual responsibilities. But leadership is also about transmitting con- What’s the best way to determine who is a leader? fidence to people, so they can accomplish their goals. So they Slim: The best way to find out is to look at what they have can better target their achievements. So, in general, it depends done in the past. on the type of activity you are engaged in. Some people can be leaders in one type of activity, not in another. But in business, How have you changed as a leader over time? leadership is linked to fulfilling an organization’s objectives, Slim: You develop a consciousness about your responsibili- to increasing its efficiency, to coordinating its activities, to ful- ties and about the areas in which you must compromise. You filling individual and group responsibilities, to being able to look at things differently that you are working on. You de- compromise, and to having some measurable achievements. velop international references regarding competition be- In addition, when people see that a leader or chief executive is cause you are competing internationally. You learn over time. working, it doesn’t matter what position that person has. They will benefit because the leader acts as a role model for them. Does competition teach people about being a leader? Slim: Yes, but not directly. You see, if you are talking about a What else do leaders do? football game, competition is very important. If you are talk- Slim: I believe the leader sets the direction, and even the emo- ing about education at school, the marks you have — com- tional tone, of an organization. It is about satisfying the emo- pared with the marks of others — are just qualifications. They tional needs of people. It’s not just about taking responsibil- are not the same as your knowledge, your way of understand- ity for things. ing the world. At the same time, I think competition makes everyone better. It requires you to make more effort. You What do you mean by setting the emotional tone? have to look around more. You have to study more. You have Slim: People cannot live without doing anything, without to train more. You have to look at where you need to be better having a direction in life, without work. What good organiza- at what you do. So, competition can be valuable. In business, tions do is to set a direction and help develop people. It’s very it is necessary to have competition to be your best. It makes important for leaders in business to work to create human you study what’s going on in other places to see what your capital that way, to give a sense of purpose to a team, and to competitors are doing. And what it shows is that your com- the people in the organization. If leaders do this, then people petitors are always getting better. So, it makes you under- working in organizations will feel they are doing something stand that you always need to improve, too — not just as a important for society and for the people around them. They leader, as an organization. Competition makes you improve. will have a real sense of achievement. You can see that in con- struction, in a building, for example. There are some people Do you develop leaders for your companies from the inside, in charge who have good leadership skills, and you can see or do you go outside? they work hard. What they are looking for is purpose to cre- Slim: Yes, from the inside. First, the people that are inside the and you plant them because you have to reinvest. That’s where 30 Q 4 . 2 0 1 0 The Korn/Ferry Ins tit u t e that is flexible, and that people can adapt to, and that they feel they would like to join with pleasure. In an acquisition, we don’t really move people. We cannot get involved at that level with so many companies. Besides, if you move people, they will run.

Does that mean that the management of a company is one criterion for an acquisition? Slim: No. The management of the company is important for investors, since you are going to put your resources into a company. But management is by no means the main reason for an acquisition. The reason is primarily when you are in some activity and you need to expand geographically to in- crease the value of the company. Then an acquisition is a good idea. And, of course, we think that if the management of the company we are acquiring is good, then they will be happy to work with us. On the other hand, if the manage- ment is not good, then we will try to improve it.

Are there some industries where management is more important than others? Slim: Yes. There are certain companies where management is very important. This is especially true with technology com- panies. With some kinds of technologies you really need peo- ple with special types of knowledge and understanding. In these sectors, it is very important that people stay in these companies. Management is also important with regard to banks. You need good bankers. In some cases, when you are buying something you know very well — say you’re an inter- national automobile company and you’re buying a local auto- mobile company — you want to have good people there, and you want to give them an opportunity to develop. But people group follow our philosophy. We have a philosophy of leader- who work with us know that they can go as far as their talent ship — some ideas and some concepts. They need to share will take them. We don’t just care about doing the job. We this. Also, because they are inside the company, we see that also care about doing the job in the right way. they work together and not against each other. We all need to go in the same direction. We are not competing on the inside; How do you make sure your managers and leaders develop? we are competing on the outside. What can happen is that Slim: We expanded a great deal in the last few years. In telecom- people coming from outside — when they are new — have a munications, since 1990 for a period of 15 years, we grew at a need to take strong positions to get known. What also hap- rate of 66 percent a year. When you grow so fast, you have many pens is that when people come in from the outside, they problems. So, what we did — years ago, now — was that we told come in at such a high level that it makes people jealous. And our local and regional managers of the companies we wanted they also come in with other ways to work and with other cul- to take international to begin making people available whom we tural ideas and values. That’s not good for the organization. could move outside of the country. I’m not talking about mov- ing 2,000 people outside the country. I’m talking about moving Then how do you deal with acquisitions? one or two or three at a time. But we began planning it and Slim: That is an important issue. You need to have a culture developing our people early, before we expanded so rapidly. and you plant them because you have to reinvest. That’s where B r i e fi ngs on Talen t & L e a d e r s h i p Q 4 . 2 0 1 0 31 Do you consider yourself to be the leader of a big group of particular job very well. I say this because the CEO is very im- companies, or do you consider yourself to be an entrepre- portant to the success of the organization. neur? After all, you built your group from scratch. Slim: I guess I think of myself as an entrepreneur. But an en- So there are times when you go outside for talent? trepreneur who needs to manage people. You see, I think you Slim: If we are going to do something very differently from need to have leadership in business. You need to have leader- what we have been doing since the beginning, then we may ship in all areas of economic activity, just like you need to on occasion need to find an executive who can take charge have leadership in sports. The same is true in politics. But I and make those changes happen. But if we are going to be do- believe you don’t just need to have leadership in the CEO. You ing what we’ve been doing for years, then we need to have need to have it in all of the important areas of the business. people from inside. What is important is that the executive Sometimes you need leadership in the operations people, too, needs to know the essence of the business. This is especially and not just in the CEO. So, I think of CEOs as leaders of lead- true so [he or she] can avoid spending too much time manag- ers, and not as the leader. But in my case, with regard to my ing things that are not important and paying attention to too own activities, I really only have two or three people working many variables that are not significant. Leaders need to have with me. In my role, I work with the leaders of the companies. enough experience so they can simplify things and can focus That’s my job. In our businesses, we don’t have people who on the essentials in order to make the right decisions. are both the CEO and the chairman. We have the CEO, and we have the chairman who, in some ways, is the person who rep- You have talked a lot about the need for enhancing educa- resents the stockholders. Or, we might have a founder who tion in Mexico and elsewhere. Is that one of the aims of works with the CEO. But in any case, my job is to work with your foundation? these people. Slim: Yes. I think that businesspeople, entrepreneurs espe- cially, have very good training in the management of human Do you work with the leaders in your companies in the capital. We have the potential to solve problems. I think for same way? us it is easier to solve some social problems sometimes than Slim: In business, I think there are three basic types of lead- it is for others. One of the biggest problems is to develop hu- ers, and they are usually very different. There are entrepre- man capital. How do you do it? There are many steps. You be- neurs, executives and investors. Then there is also the busi- gin with nutrition for the mother, you pay attention when ness leader who is concerned with political activities — the the child is born, you pay attention to the nutrition of the president of the Chamber of Commerce, for example. In child, then you pay attention to education — to modern edu- small and sometimes medium businesses, and in some large cation, quality education. That’s what the foundation does, private companies, there is some confusion because these but it’s also what we do all the time in our companies. We are roles are often taken on by the same person. In the U.S., in big training people to be the best and to develop their know-how businesses, the entrepreneur doesn’t exist anymore. These to learn. So, I think that economic and social problems — even companies are led by people who are executives with institu- national problems, excluding politics — are areas where peo- tions holding the stock. In some of these large companies, the ple in business have expertise. These are areas where private entrepreneurial type of person is long gone; maybe that per- organizations have the ability to help solve problems. You son left 50 years ago. When that’s the case, the entrepreneur- know, in previous societies the state had the power of econom- ial thinking is gone too. ics, military, politics and so on. But now, society has evolved. Economics is getting complex and society is getting very Is it possible for the same person to perform those roles? complex. The best way to fight poverty is by creating jobs and Slim: The truth is that many people can do all of these jobs. stimulating employment. All companies start small and grow. And the number of small and medium businesses is far bigger than the number of big As a leader, are you still learning? companies. But as the businesses grow, sometimes the Slim: Yes, sure. I learn every day. founder is no longer the best person to run the company. Then, you need to find the best people to run the business. You are one of the most successful people in the world. Are You need to find the best executives — people who do that there words you live by? Slim: It sounds better in Spanish, but I will say it in English anyway: “Impose your will against your weakness.” That is the wealth lies. what I believe. 32 Q 4 . 2 0 1 0 ’’ The Korn/Ferry Ins tit u t e