53. Greed

Dear Gerard,

The fast, flexible, energetic and charismatic leaders you described do indeed have one goal: how to increase the size of their bank accounts as fast as possible. They appear to be fast and flexible, but they and their companies have created a lot of products which only appear to be good for their clients. It is only in the small print that you find the real value of the products. These leaders were dethroned after the widespread crisis of 2008.

I remember the internet business boom, which began in 2000. I worked for one of the richest people in the Netherlands. The core of the strategy was the interaction and conversion between multimedia, i.e. television, internet and phone. One of the targets we looked at was the predecessor of the first Dutch internet broker in the Netherlands. The old brokers traded via telephone and the use of the internet for trading was a brand new idea. The internet and automatic trading made it possible to process a lot more trades.

Before we took a look at the company, there was a potential buyer from the US who wanted to pay €90 million for this broker, without having done due diligence. But the owners of the broker wanted more money, they believed in the concept, the strategy but they did not realize that operationally, it was a mess and there were a lot of claims. The owners thought that operations were not so important and could be quickly improved. The US company increased their offer to €110 million subject to due diligence. You can guess what happened, the failing operations and the claims meant a high price could no longer be justified. The buyer stopped the purchase and was no longer interested. The owners of the broker received no more than a few millions.

This kind of greed leads to disasters. The concept was good, the strategy was good, but the operations failed. If these brokers had been conservative and cautious, like yourself, then they would have received the lion’s share of €90 million.

The lesson from this is that you need to have some greed to see opportunities to earn more money, but this is always in second place. First, you have to focus, work very hard (most of the rich people I know are hardworking people and didn’t receive anything for free), you have to be creative and be able to see potential and added value for the clients and the new owners of the business. But you cannot forget about the details of the operations, because in the end these form the heart of the company.

Regards,

Jan