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By
‘Tope Fasua
…there is no executive course
in Harvard, Princeton, MIT or Stanford where you will not find at least a
Nigerian delegate, especially in the business departments… Were they taught
strategy at all? For if they were, how come almost none of them have deployed
strategies to ensure they don’t run into quicksand and have to demand for
government bailouts every two years?
I was once close to a Director at a UK Hedge Fund
located at Mayfair on London. I used to visit their plush offices somewhere in
Saville Row and we’ll sometimes go out for drinks and dinner. The financial
markets were in upheaval then. Many of the stuff we were taught about efficient
markets and the wonders of derivatives were unraveling right before our eyes.
Arcane financial products like Credit Default Swaps, Collaterized Debt
Obligations, Mortgage Backed Securities and Structured Products in general were
gradually tanking in some of the big ‘uns. Lehman Brothers and Bear Stearns
must have recently collapsed, so that must have been 2008.
I recall going out for one of those dinners. I
met the CEO of the organization. Ivy league trained all the way. The team was a
bunch you’d want to observe silently. At least that is what I did. When you
meet people who have done greater things than you could imagine, you have to
shut up and learn how they’ve done it; study their personality in the hope that
you may learn something very tangible. I didn’t know the exact state of their
fund then, but I reckoned they must have something big up their sleeves because
here we were, having a blast in the middle of a global meltdown. Every downturn
throws up a new winner, I must have thought. Money never disappears in the
market; someone makes the money; others lose.
These guys then made a move. One day I was
heading to Mayfair only to be told they had moved to Covent Garden. Larger
offices. I went to the new office and was wowed. Every room was themed after
one Golf legend or the other. They didn’t even have space for Tiger Woods. And
I didn’t ask. They had names on each door, of people you’ve never heard of
before. These guys are deep. The kind of education they got is certainly
different from ours. They attended proper schools like Eton and Harrow and
studied Classics. They know real money. Our local champions here don’t know the
colour of cool money really. I moved around the office, mouth agape. Covent
Garden was the place. For those who don’t know, it is a place of culture. It is
where you find the human statues on your way to work, and it’s a short walk
from opera houses, theatres and museums. These classy guys had chosen right.
What geniuses, I thought!
Two weeks later the company folded up.
As in they were gone! Bankrupt. They couldn’t pay
their debts. The leases on the offices could not be serviced. They couldn’t
meet up with the obligations on their fund as they fell due. The company became
one of the statistics in the global financial crisis of 2008 and 2009. I
started wondering; what do they really teach people in these fancy Business
Schools that we pay so much to attend? How do smart people make stupid
decisions?
These days when I find myself around Victoria
Island — Nigeria’s financial centre — I think of the same thing. I
always imagine the brain capacity locked inside those plush offices, the
smarts, in looks and in intelligence. Then I wonder how they manage to lose so
much money from time to time, to the extent that they have to be bailed out by
peasants, when the government wades in and pumps in taxpayers money. VI is the
graveyard of many smart organizations, especially banks. Recent stories we hear
about some of the promising banks just boggles the mind. So, those very smart
guys couldn’t keep their hands off the till. No one thought it would be okay to
run an institution for 20, 30, 50 years?
I admit though, that I am the un-smart one.
Perhaps I missed the lecture where it was taught in business school, that the
trick behind being a billionaire is to gyp the system, to deliberately lose
money, to borrow and fritter into your personal account, because when you
borrow big enough, the government will step in, and with poor taxpayers’ money,
give you a mere tap on the wrist (or perhaps a bear hug and a pat on the head
for being such smart money-wasters), and you can then go and spend your heist
happily ever after. Guys personally become billionaires by sucking the
institutions they manage to death!
…I thought about another
philosophy that seems rife in Business Schools, especially in Nigeria; the idea
that Nigeria cannot get anywhere except it cajoles and courts foreign
investors. Most of our ‘intellectuals’ cannot utter a sentence without talking
about foreign investors and I worry, that at the base of this dependency lies a
certain feeling of inadequacy.
We will come to the Nigerian experience
presently. But first to say that this is almost a global phenomenon. Bankers
are basically the same everywhere, but the bitter experiences of the recent
past, the documentation of history and the angry voices of citizens have set
some of the banks in developed countries straight. Regulation has changed and
become more proactive. Someone could argue though, that the change only came
after they had bailed out airlines, car manufacturers and, of course, banks
that they deemed systemically important. In that era, the people who run
government conveniently forgot one of the core tenets of capitalism; that the
markets should shake out weak and badly-run companies in a process of Darwinian
justice. Instead what we saw was a privatization of profits, and socialization
of losses; the bigger your debt (or the bigger your stupidity), the higher the
chances that government will pick your bills.
And so these were my thoughts when we heard about
Etisalat’s inability to pay their debts of over ₦530 billion to 13 Nigerian
banks, and how those banks had set about liquidating and taking over the
operations of the company. In the first place, this is a company that earns
money daily. Its services are reputedly good but very expensive. I’m their
customer, so I should know. How could it have gotten itself into a situation
where it is unable to simply service its debts? Banks would not fret if there
is movement in their accounts. Etisalat is meant to be owned and run by
Emiratis, who are some of the richest people on earth. Where did all the money
go?
Then I thought about another philosophy that
seems rife in Business Schools, especially in Nigeria; the idea that Nigeria
cannot get anywhere except it cajoles and courts foreign investors. Most of our
‘intellectuals’ cannot utter a sentence without talking about foreign investors
and I worry, that at the base of this dependency lies a certain feeling of
inadequacy. Yes, we have capital deficits, and could do much better with our
infrastructure, but how can we be so fixated on foreign investors when we empty
our own capital into foreign countries, after we must have stolen the country
blind anyway? When we aren’t sending money abroad either to buy irrelevancies
or to invest in other people’s countries, we prefer to hide our people’s money
from our people. We simply deprive our people from enjoying their own
commonwealth. We dig soak-aways and dump money there, we stuff overhead tanks,
and of late, we discovered that many of our ‘big men’ prefer sending the money
to their villages where they sneak into village huts to pinch little by little,
like rats, for their continued oppression of the people.
How can we be expecting foreign investors to fix
our country? What are business schools teaching? Why are we not keenly
encouraging accountability and also local investors?
Of late, what has become obvious is that these
so-called foreign investors have learnt never to bring any money into the cheap
asset they acquire in Nigeria. On one hand are those portfolio investors who
invest in treasury bills and cash out up to 16%, or Federal Government
bonds, or the stock market. Those trained in our business schools say we MUST
devalue the naira in order to keep attracting them! We listened for a while and
before we knew it, the naira became perhaps the trashiest currency in Africa. I
am still awaiting an explanation of that rationale. Why should an economy so
big also have the weakest currency in Africa? And if we say other African
countries have overpriced their currencies, why must it be Nigeria who gets to
be the guinea-pig by devaluing first?
On the other hand, we saw how the guys that
bought our power asset under the Jonathan government complained about having no
capital to run their operations. In October 2015, they were bailed out with ₦213
billion. Apparently many of them had rushed there because there was a kill to
be made. People don’t invest in Nigeria except to make a kill. Not for them a
five or 10-year plan before breaking even. And so when they rushed in, they
soon realized that things would be tougher than expected. They sought bailout.
Nigerian people paid up. As I type this, their financial analyst friends have
started sensitizing the government that the power sector is about to collapse
and that these companies will need another ₦730 billion bailout. Nigerians will
also pay up. If they were SMEs, they can as well keel over and die as soon as
possible. No one will give a toss. This economic philosophy that rewards
criminals is simply insane. SMEs are statistically better run than these large
companies in Nigeria because managers cannot keep their hands off the cookie
jar.
Just last week, we learnt about
how bank directors in Nigeria were ‘directly’ responsible for 40% of the bad
loans sitting on our banks’ books (₦1.85 trillion). Insider dealing is rife. People take it for
granted these days. Nigerians have become more carefree than ever in these
matters, after all, serial bad debtors emerge as bank chairmen in Nigeria.
Meanwhile, while the going was good, these large
companies put our banks under immense pressure – of course with the connivance
of the banks. The deposits that innocent customers put in were swept enmasse
and lent to these guys at giveaway rates with little or no collateral; because
they are big. The best the banks will get from most of them will be a ‘Negative
Pledge’, which means simply that this big client is only promising that it will
not give its asset to any other bank without the lender’s knowledge. Big
companies borrow today at around 12% in Nigeria because they can arm-twist the
banks, while SMEs cannot get any funds below an all-in rate of 30%. It’s
no wonder why SMEs die faster, in spite of being more frugal with resources,
and big companies continue to survive. The big companies also dictate economic policies
because they have friends in high places. You can imagine the future we are
creating for ourselves, where careless borrowers crowd out honest managers.
For Etisalat, the move made by the banks to take
over the company, sent the CBN and NCC into a flap. Meetings were urgently
convened and the banks placated. The banks probably wanted to make a point so
that the CBN will take it easy on them on other matters. You cannot ask them to
take it easy with Etisalat and then harangue them for other issues, can you?
Wink, wink.
What did the Emiratis do with the money? Someone
made a comment about their managers’ spending habits, their binges and the fast
lives they’ve been living, and so on. I’m not close to Etisalat and so cannot
verify. I note though that one of Nigeria’s corporate gurus, Hakeem
Belo-Osagie, is their chairman. Why do these gurus run companies aground and
make us pay for it? What was his oversight role as Chairman of the Board? Is he
not ashamed of himself? This is a person who every government in Nigeria
invites to every serious strategy session on the economy! And with all the
money Emiratis have, they too refused to bring real funds into Nigeria? Anyway,
I have some experience with them. They could be extremely generous, the Arabs.
But they are very bad debtors. My small company was once owed money by a Saudi organization
for two years! Another organization in the UAE has been owing my tiny company
just below US$2,000 for more than four years now. I’ve given up. Is this the
attitude the Emiratis brought in with their Etisalat foray into Nigeria?
We hailed Etisalat as much-needed foreign
investors when they came. Newspaper editors did features on them. They were
said to have brought in US$2 billion. But they must have remitted all they
brought, while playing with Nigerian money. While noting that many foreign
investors dine with Nigeria with a long spoon, and always make a note to
outsmart us (even though we shouldn’t be in a contest), the rest of them have
lately invested in businesses like real estate, where a drive around Abuja and
other capital cities will reveal several expensive ghost estates; overpriced
asset currently decaying where they stand. I visited a few lately and it’s
scary. I don’t know how Nigeria will resolve this problem.
But it is not really just a foreign investor
issue. Just last week, we learnt about how bank directors in Nigeria were
‘directly’ responsible for 40% of the bad loans sitting on our banks’ books (₦1.85
trillion). Insider dealing is rife. People take it for granted these days.
Nigerians have become more carefree than ever in these matters, after all,
serial bad debtors emerge as bank chairmen in Nigeria. Our people simply cannot
be trusted with money. If the money is there, whether it is theirs to take or not,
they just take it. And they have no limits. These are comfortable people. But
until they ruin the organizations that they direct, they never stop. And this
is why many people in government and the public sector also snigger at us that
we private sector hacks should first deal with the log in our eyes before
putting the blame for Nigeria’s collapse on their heads.
Yet there is no executive course in Harvard,
Princeton, MIT or Stanford where you will not find at least a Nigerian
delegate, especially in the business departments. We wear our degrees and
certificates like badges of honour. We judge people by those certificates and
hardly have any moment of introspection to question whether having those
certificates is what it really takes. So one wonders if these executives of
ours learnt anything worthwhile in those places. Were they taught ethics, or
the value of integrity? Were there perhaps courses on sustainability and how to
ensure that their organizations survive into the future no matter what? Were
they taught delayed gratification and the need to have moderation in anything
they do? Were they taught strategy at all? For if they were, how come almost
none of them have deployed strategies to ensure they don’t run into quicksand
and have to demand for government bailouts every two years? We are yet to
resolve most of the loans in AMCON, and their friends are pushing for AMCON 2
already? It takes bad genius to lose so much money, I believe.
…what is more remarkable is
that in Germany, they don’t believe in this way of doing business. As a matter
of fact, this fairly recent and unsustainable phenomenon whereby people have to
live on loans (mortgage, business, credit cards etc.) is alien to Germany.
Wages have been stable for years in Germany…
But I recall my own short Harvard experience. We
were told by the professors about Michael Jensen, one of the tough Harvard
professors who used to preach crass capitalism. He believed that the concern of
the managers of a company should be the maximization of profits, full stop. Not
for him all that talk of having a stakeholder view. Unfortunately for Jensen,
he was still teaching at Harvard when the dotcom bubble bust around year 2000,
and his undergrad students started pelting him objects whenever he wanted to
continue his rubbish talk. He had to resign from Harvard to go into private
practice. Maybe Jensen’s lecture is the type our executives attended very
attentively.
I take a better experience from the Germans.
Those people will rule the world one day – hopefully not through the instrument
of war. They have since enshrined the involvement of staff on the directorship
of their large companies to create controls. They are also giving serious
opportunities to women. Germany is the vocational skills capital of the world
as well. But what is more remarkable is that in Germany, they don’t believe in
this way of doing business. As a matter of fact, this fairly recent and
unsustainable phenomenon whereby people have to live on loans (mortgage,
business, credit cards etc.) is alien to Germany. Wages have been stable for
years in Germany without Germans feeling shortchanged but enabling the country
to produce goods and services cheaper than its European neighbours, thereby
crowding out other European economies. If you go to Germany today, best go with
your cash. They don’t do all that card business. People don’t understand why
you have to eat in a restaurant and pay with a credit card. It is in Germany
that one of the Tata billionaire brothers was fined for wasting food at a
restaurant. They abhor waste of any kind.
Most Germans rent houses till they die, and they
die happy. They don’t put themselves under unnecessary pressure or get into
trouble while trying to keep up with the Joneses the way the rest of us have
become; the way it is now taught in business schools, where its all about the
Top 50 Richest List, Richest People Under 40 Years Old, etc. and the companies
posting the highest returns. Certainly a lot is wrong with these business
school teachings and certificates, and we have a lot to learn from other
business models.
Let me close by sharing this anecdote:
A
boat was docked in a tiny Mexican fishing village.
A tourist complimented the local fishermen on the quality of their fish and asked how long it took to catch them.
“Not very long” they answered in unison.
“Why didn’t you stay out longer and catch more?”
The fishermen explained that their small catches were sufficient to meet their needs and those of their families.
“But what do you do with the rest of your time?”
“We sleep late, fish a little, play with our children, and take siestas with our wives. In the evenings, we go into the village to see our friends, have a few drinks, play the guitar, and sing a few songs. We have a full life.”
The tourist interrupted, “I have an MBA from Harvard and I can help you! You should start by fishing longer every day. You can then sell the extra fish you catch. With the extra revenue, you can buy a bigger boat.”
“And after that?”
“With the extra money the larger boat will bring, you can buy a second one and a third one and so on until you have an entire fleet of trawlers.
Instead of selling your fish to a middle man, you can then negotiate directly with the processing plants and maybe even open your own plant. You can then leave this little village and move to Mexico City, Los Angeles, or even New York City!!! From there you can direct your huge new enterprise.”
“How long would that take?”
“Twenty, perhaps twenty-five years,” replied the tourist.
“And after that?”
“Afterwards? Well my friend, that’s when it gets really interesting,” answered the tourist, laughing. “When your business gets really big, you can start buying and selling stocks and make millions!”
“Millions? Really? And after that?” asked the fishermen.
“After that you’ll be able to retire, live in a tiny village near the coast, sleep late, play with your children, catch a few fish, take a siesta with your wife and spend your evenings drinking and enjoying your friends.”
“With all due respect sir, but that’s exactly what we are doing now. So what’s the point wasting twenty-five years?” asked the Mexicans.
‘Tope
Fasua, an Economist, author, blogger and entrepreneur, can be reached through topsyfash@yahoo.com.A tourist complimented the local fishermen on the quality of their fish and asked how long it took to catch them.
“Not very long” they answered in unison.
“Why didn’t you stay out longer and catch more?”
The fishermen explained that their small catches were sufficient to meet their needs and those of their families.
“But what do you do with the rest of your time?”
“We sleep late, fish a little, play with our children, and take siestas with our wives. In the evenings, we go into the village to see our friends, have a few drinks, play the guitar, and sing a few songs. We have a full life.”
The tourist interrupted, “I have an MBA from Harvard and I can help you! You should start by fishing longer every day. You can then sell the extra fish you catch. With the extra revenue, you can buy a bigger boat.”
“And after that?”
“With the extra money the larger boat will bring, you can buy a second one and a third one and so on until you have an entire fleet of trawlers.
Instead of selling your fish to a middle man, you can then negotiate directly with the processing plants and maybe even open your own plant. You can then leave this little village and move to Mexico City, Los Angeles, or even New York City!!! From there you can direct your huge new enterprise.”
“How long would that take?”
“Twenty, perhaps twenty-five years,” replied the tourist.
“And after that?”
“Afterwards? Well my friend, that’s when it gets really interesting,” answered the tourist, laughing. “When your business gets really big, you can start buying and selling stocks and make millions!”
“Millions? Really? And after that?” asked the fishermen.
“After that you’ll be able to retire, live in a tiny village near the coast, sleep late, play with your children, catch a few fish, take a siesta with your wife and spend your evenings drinking and enjoying your friends.”
“With all due respect sir, but that’s exactly what we are doing now. So what’s the point wasting twenty-five years?” asked the Mexicans.
And
the moral of this story is:
Know where you’re going in life, you may already be there!
Many times in life, money is not everything.
“Live your life before life becomes lifeless”
Originally published on PREMIUM TIMES
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