Lessons in En­trepreneur­ship from Korn Chatika­vanij

Thai-American Business (T-AB) Magazine - - Front Page - Writ­ten by: Korn Chatika­vanij

The year I started work­ing was 1985. The tim­ing was per­fect, be­cause it was the mo­ment that Bri­tain’s fi­nan­cial in­dus­try was in the midst of ma­jor re­form that would lead it on the path to full com­pet­i­tive free­dom. Mostly im­por­tantly for my ca­reer, it was the year that a vast num­ber of for­eign in­vestors started to turn their in­ter­est to Asia. As the only Asian em­ployee at S. G. War­burg, I was given full op­por­tu­nity in my work and as­signed re­spon­si­bil­i­ties that far ex­ceeded my age and ex­pe­ri­ence.

My two years at War­burg pro­vided me with three things that greatly im­pacted my readi­ness and choice to open my own com­pany.

Firstly, I gained knowl­edge of the busi­ness tech­niques nec­es­sary for in­vest­ment bank­ing – both in the as­pects of be­ing a bro­ker as well as a fund man­ager. Had I lacked un­der­stand­ing of ei­ther of these, I never would have suc­ceeded.

Sec­ondly, I built a net­work. Lon­don is one of the world’s key fi­nan­cial cen­ters, and S. G. War­burg a lead­ing or­ga­ni­za­tion in the Bri­tish fi­nan­cial cir­cles – there­fore, I had the op­por­tu­nity to rub shoul­ders with hun­dreds of busi­ness own­ers and fi­nanciers. I am still in con­tact with many of the peo­ple I met in my early ca­reer to this day.

Thirdly, I ac­quired val­ues. I was very for­tu­nate to learn the im­por­tant prin­ci­ples of do­ing busi­ness, such as putting the cus­tomer’s in­ter­ests first, at a time when the same cir­cles in Thai­land still placed great em­pha­sis on share­holder in­ter­ests, of­ten pay­ing more at­ten­tion to their em­ploy­ees than they did to their cus­tomers.

NEVER FALL IN LOVE WITH YOUR IN­VEST­MENT

Af­ter two years at War­burg, I de­cided to re­turn to Thai­land and start my own busi­ness. At that time there were al­ready many se­cu­ri­ties and ex­change com­pa­nies in Thai­land. But be­cause for­eign in­vestors hadn’t started in­vest­ing in Thai­land yet, none of those com­pa­nies ser­viced for­eign cus­tomers – or even the clients of Thai in­sti­tu­tions ( be­cause in those days, none of the com­pa­nies were jointly man­ag­ing funds). So as I saw it, even in a seem­ingly Red Ocean ( al­beit this term that did not ex­ist back then), there was very clearly a Blue Ocean space that I could com­pete for. I had two choices avail­able – to open my own for­eign branch, or en­ter a joint ven­ture with an in­ter­na­tional com­pany that had of­fices around the world and an ex­ist­ing clien­tele in its hands. The se­cond op­tion re­quired less fund­ing, was less risky, and was also much faster to ac­com­plish – there­fore that is the op­tion I chose and be­gan ap­proach­ing var­i­ous com­pa­nies around the world. In the end I was very for­tu­nate to have Jar­dine Flem­ing join as a share­holder, which put cus­tomers all over the globe in my hands from day one of open­ing my own busi­ness.

I man­aged this busi­ness for 11 years, which dif­fered from my orig­i­nal plan to go pub­lic af­ter six or seven years, but the for­eign in­vestors were not sup­port­ive of that idea. By the eighth year we were in the midst of the Tom Yum Kung cri­sis and the op­por­tu­nity was lost. For­tu­nately, we were soon able to sell our shares to JP Mor­gan Chase at a price sim­i­lar to the IPO which was orig­i­nally set. As soon as I de­cided to sell my shares though, my mother asked me: “Are you sure you want to sell them? Don’t you re­gret los­ing what you built with your own two hands?” Ac­tu­ally, I felt a pang of re­gret in my heart, but I re­al­ized that noth­ing is per­ma­nent in this world – es­pe­cially in the world of in­vest­ments. Once a com­pany achieves the right value, it is time to sell, in ac­cor­dance with the les­son that War­burg taught me - never fall in love with your in­vest­ment.

COM­PET­I­TIVE AD­VAN­TAGE

Be­cause I en­tered busi­ness when very young, age has al­ways been a chal­leng­ing fac­tor for me in my work – es­pe­cially with Thais, for whom age is much more sig­nif­i­cant a fac­tor than for Western­ers.

The chal­lenge starts the mo­ment some­one is hired and ex­tends all the way into the process of gain­ing the trust of busi­ness part­ners. This was the is­sue that in­spired me to hire co- work­ers who were close in age to me at a higher ra­tio than ev­ery sin­gle one of my com­peti­tors. This ended up be­com­ing a dif­fer­en­ti­at­ing fac­tor in my com­pany’s work­ing cul­ture and im­pacted the flex­i­bil­ity of the or­ga­ni­za­tion and its abil­ity to adapt to the en­vi­ron­ment at the time which was highly volatile and fraught with change.

The fact that I had many joint ven­ture part­ners who were for­eign­ers and many col­leagues who came from the new gen­er­a­tion ac­tu­ally im­proved our abil­ity to present new prod­ucts and new ways of do­ing things to our cus­tomers. The lim­i­ta­tion of “age” sud­denly be­came our com­pet­i­tive ad­van­tage, and it has been ever since.

Siz­ing up the sit­u­a­tion from a dif­fer­ent per­spec­tive was an­other crit­i­cal fac­tor that helped us eval­u­ate the risks im­me­di­ately prior to the Tom Yum Kung cri­sis more ac­cu­rately than our com­peti­tors – and our flex­i­bil­ity en­abled us to ad­just with poise and over­come that cri­sis, while many of our com­peti­tors keeled over and were ul­ti­mately oblit­er­ated from the in­dus­try.

FIVE PRIDES IN DO­ING BUSI­NESS

If I were to iden­tify the most prom­i­nent feel­ing that comes with found­ing and run­ning my own busi­ness, I would say that feel­ing is pride – with the first pride be­ing that of build­ing a com­pany that was prof­itable even in its first year. That is my great­est pride.

The se­cond pride was my com­pany’s re­turn on eq­uity ( ROE) which has been very high all along, high­est for ev­ery year of the stock in­dus­try of that era. In fact, ROE is a mea­sur­ing stick for an en­tre­pre­neur that shows whether or not you have ef­fi­ciently used your in­vest­ment money, es­pe­cially in this day and age when funds are some­times over­flow­ing but skill is lack­ing.

My third pride is that my staff have al­ways had the high­est in­come re­turns in the in­dus­try. There was a time when our com­pany cre­ated some buzz by dol­ing out bonuses that av­er­aged 36 months’ worth of wages – a first for the in­dus­try. Even our chauf­feurs and house­keep­ers re­ceived, at min­i­mum, a 12- month bonus. Even though they hadn’t con­trib­uted di­rectly to the com­pany’s in­come, we viewed them as part of our team. What we earned, they also earned. And in any case, their base in­come was al­ready much lower than that of any of the other staff.

The fourth pride is that we have al­ways been in­no­va­tors. We have al­ways tried to turn ev­ery job that we en­gaged in for our cus­tomers into an evo­lu­tion and de­vel­op­ment of ad­di­tional blue ocean space amidst the red ocean.

The fifth pride is that we have never taken ad­van­tage of any­one – whether cus­tomers, staff, in­vest­ment part­ners or even our own com­peti­tors.

THE MOST IM­POR­TANT FAC­TOR IN DO­ING BUSI­NESS

There is some­thing I have en­coun­tered in my busi­ness ex­pe­ri­ence that I’d like to leave with ev­ery en­tre­pre­neur read­ing this, and that is the mat­ter of ethics. Any­one who has ever done busi­ness be­fore will know very well that sooner or later it will be nec­es­sary to make a de­ci­sion be­tween right and wrong that will im­pact the profit and loss of the com­pany at least in the short term. I usu­ally ap­proach solv­ing this prob­lem with two sim­ple prin­ci­ples of ac­tion.

The first prin­ci­ple is the fol­low­ing: for those mat­ters we al­ready know we should not en­gage in, but that tempt us from time to time, I al­ways ad­vise my sub­or­di­nates that we should not do it in any case. And if any­one comes and asks, “Hey, boss, how about this time? Can we do it?” I would pun­ish them. This pre­vents both my staff and my­self from temp­ta­tions that we might suc­cumb to in our weaker mo­ments.

The se­cond prin­ci­ple is this: for de­ci­sions in grey ar­eas, mean­ing is­sues that aren’t en­tirely wrong based on ex­ist­ing prin­ci­ples or the law – but for which we have a lin­ger­ing feel­ing that they might be slightly in­ap­pro­pri­ate – I al­ways pose this ques­tion to my staff: “If this was plas­tered across the front page news to­mor­row morn­ing, would we feel any shame or get in trou­ble with our cus­tomers or so­ci­ety?” Usu­ally, the situations that call for this ques­tion turn out to be things that we should not do. For­eign­ers have dubbed this ques­tion the ‘ Front Page Test’.

I want to ad­vise ev­ery en­tre­pre­neur to do ev­ery­thing by the book as much as pos­si­ble. If you are ap­proached about a busi­ness that in­volves break­ing the law, leave it to oth­ers and move on to some­thing else. An­other thing I re­ally want to em­pha­size is pay­ing taxes – one of the re­spon­si­bil­i­ties that ap­plies to ev­ery en­tre­pre­neur. When I sold my com­pany’s stocks, I sold them out­side of the se­cu­ri­ties and ex­change mar­ket which re­sulted in tax­able prof­its. In re­al­ity there are many ways to avoid pay­ing those taxes, but I chose to pay all ap­pli­ca­ble taxes in full. I re­mem­ber the de­bate that went on in my mind, as this was no small amount. Of course, I had no clue at the time that one day my fi­nan­cial his­tory would be sub­ject to scru­tiny as a politi­cian. But I de­cided to do ev­ery­thing right, af­ter which I had to put in a no­tice of in­tent with all my joint ven­ture part­ners, be­cause if I paid the taxes but they did not, it could have caught the eye of the Rev­enue Depart­ment and got­ten my own part­ners in trou­ble. I had to ex­plain and con­vince them that since I had al­ready made a lot of profit for them, they should per­mit me to do as I wished on the mat­ter.

I never considered the im­pact this de­ci­sion would have on my life, and in that mo­ment I cer­tainly had no idea that in the future I would be­come a politi­cian. Sur­pris­ingly, not many years af­ter that I played an im­por­tant role in uncovering a tax avoid­ance scan­dal on the part of a politi­cian at the Prime- Min­is­te­rial level who sold his stocks. I prob­a­bly wouldn’t have dared carry out my duty in that sit­u­a­tion if I had been be­set by a nag­ging fear that some­one might un­cover my own lack of in­tegrity ( and dig out my past they did).

To this day, I still feel very glad that I’ve al­ways made the right de­ci­sion in this mat­ter. Be­lieve me – a bit of money to­day, or even a lot, will have no value com­pared to your own peace of mind ( and pride) in hav­ing done the right thing, and main­tain­ing in­tegrity in ev­ery mat­ter.

Korn Chatika­vanij was the Thai Fi­nance Min­is­ter from 2008- 2011 and is cur­rently the Pres­i­dent of the Thai Fin­tech As­so­ci­a­tion. He can be con­tacted at info@ ko­rn­demo­crat. com.

The ar­ti­cle is an ex­cerpt from “Dare to Do: 12 Lessons in En­trepreneur­ship from 12 Up­com­ing En­trepreneurs” writ­ten by Korn Chatika­vanij and trans­lated by Anne So­manas. The book will be re­leased in 2017 by the Five Frogs Press.

Khun Korn Chatika­vanij speaks at AMCHAM’S monthly lun­cheon on Jan­uary 27, 2016 at the Sher­a­ton Grande Sukhumvit

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