Stuff Matters: Genius, Risk and the Secret of Capitalism. Harry Bingham

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СКАЧАТЬ success in creating Facebook, you can’t help but feel that his success has been amazing, but also a little predictable. Social networking was clearly going to take off at some point. It was always more likely to take off in America than anywhere. Mark Zuckerberg was a Harvard student who had been programming computers since he was at middle school. Facebook itself started purely as a Harvard thing, and spread from there.

      Please don’t misunderstand my point. I’m not knocking the guy. There were loads of other equally privileged, equally well-educated students at Harvard and elsewhere who did not do what Zuckerberg did. But Mittal grew up without electricity. Without running water. With rope beds and twenty in a house. In a country whose economy was not only backward, but self-isolating from the global mainstream. If, in 1950, you were asked to pick the future king of steel, you’d never have come close to picking Mittal. He was in the wrong continent, the wrong country, the wrong part of the wrong country. All he really had going for him was an able and ambitious family that would educate him superbly and (in due course and through their own entrepreneurial efforts) supply the funds to get him going.

      To take the point a step further, consider how many other companies could have done what Mittal did. British Steel was a badly run state-owned firm when Thatcher privatized it. The company soon became efficient, profitable and with funds to invest. In 1989, as Mittal was wondering what to do next, British Steel might just as well have been asking itself the same thing. Or the big German producers. Or those in France, Spain, or Italy. Or those in America or Japan or Australia. The list of companies better placed – financially, managerially, technologically, politically – to succeed to pre-eminence was a long and formidable one. And none of them did.

      Thirdly, Mittal retained ownership. A slightly more complex point this, but a crucial one. In theory, it’s not all that hard to grow fast and aggressively. You go to the stock market or private investors. You raise money. You acquire assets. You grow bigger and you raise more money. You keep going. Needless to say, it’s not quite so simple – you need a track record strong enough to persuade investors to trust you with their money – but it’s still a much, much easier route to success than funding your growth very largely from your own pocket, as Mittal did.

      What’s more, steel is a business which involves a lot of stuff. Iron mines. Coal mines. Transport. Blast furnaces. Rolling mills. Mini-mills. Power plants. TV stations and railway lines. Tangible kit with a tangible price tag. The reason why most of the billionaires that you’re familiar with are involved in software (Bill Gates, Larry Page, Sergey Brin, Larry Ellison, and Mark Zuckerberg, for starters) is a simple one. If you’ve got a decent computer program, you have most of what you need to succeed. There is not a huge list of physical assets that need to be bought out of cashflow. Steel is the precise reverse of that. There, the assets are everything – and managing to fund an extraordinary amount of growth from cashflow is all the more remarkable as a consequence.

      If you’re not yet persuaded, then wait till you’ve heard the end of the story.

      Mittal went on buying. He tried to buy a Venezualan producer, but somebody was bugging his phones and the deal went elsewhere. He compensated by buying an iconic Chicago-based steelmaker, Inland Steel.

      It was the wrong time. His company was by now loaded with debt. The Asian currency crisis and the post-millennial dot.com slowdown caused a slump in steel prices. The (fairly small) portion of Mittal company shares which were freely traded on the stock market slumped from their opening price of $28.50 per share to less than $2. To the outside world, this looked like a crisis. To an entrepreneur, it was a moment of risk.

      For the Mittals – Lakshmi had now been joined at the family firm by his son, Aditya – the first years of the Noughties were the best possible ones. A global slump in the price of steel meant that there was also a global slump in the price of steel mills. Mittal acquired plants in Algeria, Poland, Romania, Macedonia, the Czech Republic, South Africa and France. The economics of these purchases was alluring. Because of the huge fixed costs involved in steel production, there is probably no industry more prone to huge cycles of boom and bust.^* That means that the assets you pick up for a song in times of dearth stand to make huge amounts of money in times of plenty. And the Mittals were the only players willing to stack all their chips on red, and wait for the turn of the wheel.

      Eventually, the buying spree reached its natural end. In 2006, Lakshmi Mittal made a formal offer for Arcelor SA, the world’s largest steelmaker by revenue. The company could boast world-class technology, a century of steelmaking experience, and had achieved its success in the heart of Europe, one of the world’s most sophisticated steel markets. (The company was headquartered in Luxembourg, but had recently been formed from a merger involving French and Spanish steel companies as well.)

      The bid was one of the most keenly contested in financial history. On the Arcelor side, there was a tangible sense of who do these people think they are? This wasn’t the way the world order was meant to work. European flagship companies weren’t simply sitting in a shop window, waiting to snapped up by the first emerging market billionaire to take a fancy to them. There was no evidence of racism, as such, in Arcelor’s outraged defence, but – well – there was outrage. Arcelor had the history. It had the technology. It was the industry’s biggest name. It was European. Indeed, it was practically French! And the company was about to vanish because it had been out-thought and out-manouevred by the nobody-from-nowhere, Lakshmi Mittal.

      Mittal won. The resultant company – ArcelorMittal – is the world’s largest steelmaker by any ranking at all. The industry that gave birth to the Industrial Revolution itself had finally been consolidated by a kid from Rajasthan, whose family continues to own slightly more than two-fifths of the resultant behemoth.

      This story is astonishing and little known. When the British press talk about Mittal, it is largely in the context of his very large fortune, which has been as high as some $26 billion (and is, of course, down again in the midst of the current slump).

      But who cares? Counting Mittal’s money misses the point almost as comprehensively as it would be to obsess over Napoleon’s medals or to count Einstein’s honorary doctorates. Those things – the money, the medals, the doctorates – come with the territory but they are, ultimately, inconsequential.

      What matters for the purposes of our investigation into the heart of the capitalist Big Bang itself is what Mittal’s story exemplifies to a quite exceptional degree.^* And the most striking thing about it is precisely its Napoleonic quality. Its speed. Its surprise. Its boldness and decisiveness. Few entrepreneurs have this quality to the degree that Mittal has it, but they all have it. You can’t create a business of any scale without it. If an appetite for risk is the fuse that ignites the entrepreneurial bang, it’s the Napoleonic appetite for conquest that propels it forward.

      This might, in fact, be a good point to remind you of the millionaire mindset challenge with which I started the chapter. I left you with a drill bit stuck 1,500 feet down a drilling well and an oil crew hanging around with no oil to pump because they can’t get the drill bit out. You want to get restarted as soon as possible and you won’t make money until you do. Getty’s answer, the billionaire’s answer, requires Napoleonic thinking. Decision, speed, surprise – and force.

      Getty wasn’t an oilrigger, he wasn’t a mechanic and he wasn’t an inventor. But he liked to get things done. So he commissioned a monumental mason – the sort of guy who normally carves tombstones for graveyards – to make him a granite spike. Six feet high, as wide as the drilling shaft, and pointed. Once he had his spike, he transported it over to the hole and dropped it in. Getty didn’t know what would happen when a six-foot granite spike fell 1,500 feet onto a jammed drill bit, but he knew that something would. And it did. The spike smashed the drill bit. The riggers got drilling again without delay. The СКАЧАТЬ