RICH PICKINGS: Pearls of wisdom
Australia's super rich entrepreneurs are handing out quite a bit of advice at the moment. Given their records of wealth creation, entrepreneurs, investors and students of business would be wise to take note.
Whatever the case, Australia’s super rich entrepreneurs seem to be dispensing a bit of advice at the moment. And given their extraordinary records of wealth creation, entrepreneurs, investors and students of business are advised to listen up.
Here are seven recent pearls of wisdom from some of our wealthiest business people.
"In a young business, taking significant risks is not only justified but a prerequisite of success – while luck in timing can be a major factor. But many a mature business has succumbed by adopting an excessive continuous expansion strategy financed by debt and fatally betting the farm.”
Billionaire David Hains is notoriously reclusive, which made his recent feature-length interview in The Australian Financial Review magazine required reading for wealth watchers. While Hains is best known as a hedge-fund manager, the profile revealed an extraordinary business career, which has included stints as an engineer, seven years playing golf and period as a corporate restructuring expert (which, incidentally, ended because he couldn’t handle the trauma of making people redundant). The central theme of his career is the idea of class – that is, the special offering that sets a business apart from its competition. "A business has to have class to be really successful,” he told the magazine. "Customers patronise a particular firm because it provides something that others do not – or at least equally as well as others but with better service.” It’s a great lesson for business people. What sets your business apart? What’s your touch of class?
"I don’t think there’s any question that we see now as a time to place a few bets. The fact that we’ve been undecided has worked for us, but now we see opportunities in the equity and property markets.”
Toll Holdings chief executive Paul Little is known as a giant of the transport and logistics sector, but he is also an astute investor with a particular focus on property. Like many wealthy entrepreneurs, Little has simply stayed off the market during this downturn and bided his time – now he’s set to move in with prices down. The lesson? Doing nothing can actually be a real strategy.
"In Australia, you are dealing with a small population. There is not a lot of opportunity at the high end. That’s why we are in the mass market. I never looked at the high end. I wouldn’t look because I start from the premise that you need an audience, and there is very limited audience here compared with the US, Europe and Asia.”
Retail veteran Solomon Lew also gave a long interview to the AFR magazine recently, explaining in detail his views on how retail is coping with the downturn. The clear message – luxury is out. But the broader lesson here involves knowing your customer base intimately. Lew talks about his regular trips to shops to see how, what and why people are buying. Everything starts with the customer.
"The yields on property are a hell of a lot better than they are in the bank.”
Mining billionaire Clive Palmer has recently turned his attention to the property, buying an office tower in Brisbane for $20 million on yield of 11 per cent. He’s one of many wealthy investors who have bought commercial property at discounted prices in recent months – Andrew Roberts, John Van Leishout and Lang Walker are others. Palmer says he did the deal to soak up a bit of "excess cash”. While most investors won’t have that sort of change lying around, Palmer’s lesson is that money should be made to work hard at all times.
"I have general faith in our financial system in the long term for equity investments. My philosophy is to look for opportunities where you can invest where there is a good yield and a good long-term outlook. If you can apply that to companies then you should invest in them.”
There’s a bit of Warren Buffet in this quote from Alan Rydge, veteran investor and chairman of Carlton Investments: understand what you’re investing in, buy for the long term and look for value. Rydge is known as conservative, long-term investor and he told BRW that he been taking advantage of "buying opportunities” in recent months.
"Last year, we had no borrowings and people didn’t want to know us. Now we have plenty of cash and they do.”
Robert Millner is the leader of the Millner family, which owns a majority stake in pharmacy-chain-cum-investment-house Washington H. Soul Pattinson. The company has been very conservatively run in recent year, with very little debt and a strong cash position. As Millner says, it’s the sort of strategy that is criticised in a bull market for being lazy and praised in a bear market for being pure genius. Of course, regardless of the point in the cycle, cash gives you options – and that’s what investors love.
"I never thought I’d have a billion to lose. In a way, I’m sort of proud. I think to myself, ‘what a beauty, – I never thought I’d have it to lose'."
This is the way every entrepreneur and investor should look at wealth. Yes, things have been tough in the last 12 months, but we’re still in a pretty good spot. And who knows, maybe Gerry’s shares will be worth $1 billion again one day.