Sunday, March 27, 2016

Book Review - "Dream Big - How The Brazilian Team Behind 3G Capital..."

As I discussed earlier I am trying to read more "real" books and less random items on the Internet. I am going to try to take a few minutes to blog about them, too.

The book is called "Dream Big - How the Brazilian Team Behind 3G Capital... Acquired Anheuser-Busch, Burger King, and Heinz".  These Brazilians started in a dysfunctional, controlled economy in Brazil beset by hyperinflation and other emerging market ills and ended up taking control of iconic components of the USA including staples we consume every day.

How they did it is documented in this book, and it makes for a great read.  The businessmen believed in a ruthless meritocracy, and didn't allow their wives or children to enter the business.  They emulated early Goldman Sachs, which was a partnership that demanded discretion and dedication rather than splashy purchases and high current income.

When they acquired a business, they generally followed the same playbook, including:

  • Only acquiring businesses where they could control management (not a financial investor)
  • Manage businesses for the long term
  • Implement zero based budgeting and ruthlessly control costs, including items such as having executives share hotel rooms while on the road and print double sided on paper to avoid waste
  • Using the 20 / 70 / 10 rule from GE where the bottom 10% were eliminated every year but the top 20% could reap huge awards, a multiple of their salary, in bonuses
  • Take down walls between the executives and staff and move into an open and informal floor plan (this was very radical in class conscious Brazil)
  • Drive revenues up and attack the competition by using data and metrics to measure success and have specific goals that are publicly displayed
  • Promote younger, aggressive staff into lead positions including the CEO, and always make way for upcoming talent
With these rules they turned around businesses rapidly and left cozy corporate offices in the dust.  These principles could be effectively applied at almost any business and attack the heart of the "Principal / Agent" problem where shareholders want growth and a rise in the stock price but employees prize their own stability and comfort and don't want to take risk.  By acting as shareholders and not managers and staying for the long haul, the 3G leaders shook out all the old guard and effectively turned over the entire culture, leading to a metrics-driven high profit enterprise.

This book is highly recommended and is a bracing contrast to the softer side of employee management and back to the "roots" of shareholder-driven capitalism.

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