Lessons in Entrepreneurship from 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.
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