A family business
When I was a teenager, my brother and I worked for our dad in the family business. We had to do a little bit of everything, as most people in small businesses do. We weren’t assigned a particular task, we had to get things done. That was it.
If there was a problem, we had to sort it out as fast as possible, at zero cost. Top management did not approve much spending.
That meant we had to improvise a lot – the fewer resources you have, the more you improvise, it is as simple as that.
Looking back, these are two things I carried throughout my career:
- The sense of alertness that you develop when you work in a small business
- The propensity to solve problems in unconventional ways. Improvisation is an often-overlooked aspect of creativity. Apparently, it doesn’t sound that glamorous.
My dad worked in banking for several years. Over the years, he saw a lot of people going into and out of business.
As a consequence of the experience he had in financial markets, he was always very conscious about the interest rates we paid. He taught me to understand interest rates using a simple calculator when I was about 13.
He always cited Einstein’s famous quote on compound interest being the eighth wonder of the world.
He would often say that as small businesses we paid more, and had less access to funds than the big companies – and consequently, we had to employ our funds much more carefully. We could afford a lot fewer mistakes than the big guys, he would say.
That was in the late 80s, and early 90s in Brazil – in a time of hyperinflation and low growth in the economy.
I was a teenager with no corporate experience back then, and to be honest, did not see his approach as being a valuable business practice. I did what I was told.
The years went by, and I had the opportunity to work in different businesses, in companies of all sizes. In time, I came to realise and understand exactly what my father meant. Particularly over the period of low-interest rates that looked as if they would stay low forever.
The truth is, in an economic environment of low-interest rates, companies can accommodate a lot of inefficiencies and still survive. But the game changes drastically when interest rates rise.
Risks in the commodity world
In commodity trading, we move a huge volume of goods, attempting to make a small profit in the process – and that is the case when everything goes according to plan. Unfortunately, things can and will go wrong!
The problem is that mistakes cost a lot more today than before the pandemic, simply because of the increased cost of money. Risk management plays a much bigger role today than it did a few years ago.
This new reality presents a challenge to companies that are too tolerant of their own inefficiencies. They may take too long to acknowledge and address their weaknesses. Our current markets demand fast, corrective actions.
There is no way around it. Face it and deal with it today! Don’t leave it for next quarter. Someone I worked for used to say, by the time you realise you have to do something, it is probably already too late.
Adaptability and experience
In these new times, businesses that are able to foster a culture of adaptability to different market situations will definitely have an edge over the competition.
I first started in agricultural commodities, focusing on sugar and ethanol. I found it interesting that I met several senior sugar and ethanol traders (or brokers) who had worked in coffee and orange juice.
When I moved to grains and oilseeds, I met a few traders that had started in sugar and ethanol. I also worked with a cotton trader who had worked for many years in grains and oilseeds.
I bet none of these professionals had planned these moves when they started their careers. In order to thrive, companies must be, more than ever, alert to market opportunities and threats – and adjust their strategy accordingly. Different times require a different game!
There are many changes happening in the markets, and these changes bring both opportunities and threats.
The challenge companies face today is that they must act less like institutions, and more like the individuals I mentioned above. Companies must be more pliable, and more adaptable to new market scenarios.
Executives running businesses today face a very challenging scenario. A scenario that most universities and business schools haven’t prepared them for.
These new times require executives to be more alert, use resources strategically and improvise accordingly.
Looking back, I realise how privileged I was to learn a lot of that from my dad.
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