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If you like Carlos Slim's story, you might also like:
Steve Case,
Ray Dalio,
Michael Dell,
Michael Eisner,
Lawrence Ellison,
Bill Gates,
Henry Kravis,
Craig McCaw,
Ted Turner,
Stephen Schwarzman and
Dennis Washington

Related Links:
Carlos Slim's Web Site
Fundación Carso
Grupo Carso

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Carlos Slim
Carlos Slim
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Carlos Slim Interview (page: 4 / 9)

Financier and Philanthropist

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  Carlos Slim

In any profession, in any career, there are bound to be some failures. Have you suffered setbacks? Have you suffered failures? How do you deal with that?

Carlos Slim: Well yes, but like I said, small mistakes or small failures. We take small failures very often. We have failures in investment. We have failures in operation, but no big mistakes or big failures. How do we take that? Like ordinary business.

You've been known to buy companies in sectors that other people were leaving. Wasn't that risky? When businesses were failing in Mexico in the early '80s, you had the vision to buy into those businesses, knowing that they would be of great value in the years to come. What gave you the courage to do that?

Carlos Slim: Well, it was in 1982. I was 42 years old. I had good experience, and there were many factors that made it very clear that I should do that.

During the Revolution -- and that's very important, the experience of my father -- my father made his business -- buy 50 percent from his brother -- invested in Mexico. My father was very young. He had no family. He was not married. He was without so much roots in the country, and he stayed in Mexico, and you cannot make any comparison with the revolution. Yet, he invested during that time, and he worked hard in this time after 1911 to 1920 during all these times.

When you read about what happened, in the U.S. in the '30s, it was clear that the country was not finished. We had a big problem (in the 1980s) because the fiscal deficit was very high, but also because the interest rates went above 20. It was 21 or 22 prime rate. The price of the companies was crazy. Not only the values were very low. That was really very, very low. Let's say three percent of the book value, or five percent of the book value. It was crazy. Very, very low.

There were available businesses (to buy). Because in our country, the companies have a "group of control" regularly, because they're not such big companies. Also, there is a group, a person or through the bank, that the controller of the companies is there. In these years, the U.S. companies -- the foreign companies -- want to sell, because to be investing in Mexico was not good, and they sold out these Mexican operations. The banks sold the assets, and many people wanted to sell everything, and we were the only buyers.

[ Key to Success ] Courage

That is one of the reasons I got so complex a group with so many sectors, because these businesses were available, one day after the other. That's the only reason we were involved in so many things.

For me, it was very clear that a company that has a debt in foreign currency also has assets in foreign currency, and it was an accounting problem. Let's say a company, before the devaluation, that buys an asset and has a debt in foreign currency is bankrupt that next day. But if you make the investment the next day after the devaluation, it is just accounting. There are also accounting problems that make you think that things are worse than what they are. No?

I think it was a very important experience, what my father had done. I know the history of Mexico, how we had problems in the past, from the 19th century, and the experience of the economies and the markets when you get a depression, a recession. You know, I believe we don't need to have economic cycles.

Economic cycles makes sense in agricultural civilization when you have good weather and bad weather. But in a society of services, it's a psychological problem, no? That sometimes you are very euphoric, very positive, very optimistic, and you get to the euphoria, and everything goes up, up, up, and a lot of inflation of assets and crazy things. In some ways, something is happening. And in the other way, you are pessimistic. You are depressed, and everything is bad. Everything will become worse, and you get out of everything any time, any price, and this is not -- that's completely irrational.

It helps when you understand the numbers and read balance sheets well.

Carlos Slim: That's important to know the balance sheets, but also it's clear that some things will change. You know, a country that has a problem with prices -- after a devaluation, prices are very down, very low, they need to come back to have investments. There is an overshoot of the currency and some other conditions, and we have done when -- we are very clear that we are not speculators or investors in a short term. We are looking for a long-term plan. We don't worry about what is happening because there is a crisis today, like it was in '95 crisis. We invest more. It's a better moment to invest because you find many things, many opportunities of people that want to get out.

[ Key to Success ] Perseverance

Could you tell us how you overcame a challenge from a competitor? What about the Spanish company Telefónica? What was difficult about that?

Carlos Slim Interview Photo
Carlos Slim: When Telefónica went to Mexico? When any international company can come in, while you stay only in your own market, he can corner you, because he can move the prices as he likes, just to destroy your market position. So we decided to go where he was. We couldn't go to Spain. It was a pity. We'd love to be in Spain, but we went to many countries as we were, Argentina, Peru and Brazil, especially Brazil, and we were looking to be international. We told our managers -- the ones who want to be international -- we gave them a special, accelerated training, because they were going to go to other countries. We began in a small part of Brazil, then Colombia and Ecuador and Guatemala. Many countries. We're in like 17 countries now.

When you went into those countries, did you acquire a company and then put your managers in charge, or did you start from the grassroots? From the ground up?

Carlos Slim: Well, depending. If some company is available on good terms, we buy the company, and in other places, we buy the license, and we begin with zero, work from the grassroots, like you say. That was the case of Uruguay. In Brazil, there are many regions. In some regions, we buy a company there, in other regions, we buy the license.

To do an acquisition, as opposed to starting from the grassroots, there are positives and negatives about both of those. Is one easier to do or better?

Carlos Slim: Depending on the price that you are paying. If they are selling you a company that's very, very, expensive and you can buy the license yourself, it's better to buy the license. It's always better to begin with a working company because they already have market infrastructure. You win time if they're already in the market. Sometimes you can't buy a company, and you need to buy the license and go from scratch. It doesn't take too much time, but it takes time to begin with zero, like you say. You need to create not only the infrastructure and the investments, you need to create the human team, the people. You need also to create your dealer organization, the dealers that are going to sell your products.

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This page last revised on Apr 06, 2012 14:46 EDT
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