The CEE Web Log

CEE Review: Startup MBA | Thiel’s Zero to One | The Really Big Tech Issues | Does Money Buy Elections?, and more

News and Opinion

jeff-sandefer The Startup MBA program: entrepreneur and BusinessWeek professor of the year Jeff Sandefer co-founded the Acton MBA. The Savvy Street.

Why are tech entrepreneurs focused on gaming and photo sharing — and not on the big problems of the infrastructure of the virtual world? Stanford’s Balaji Srinivasan’s paper on Regulation, Disruption, and the Technologies [pdf].

Nigerian billionaire Tony Elumelu’s plan to develop 10,000 African entrepreneurs in ten years. Forbes.

Free speech and entrepreneurs: “Comfyballs” is too much for the US Patent Office.zero-to-one-thiel

Anurag Wadehra reviews Peter Thiel’s Zero to 1. Constellation Research.

And Philip Broughton reviews Alex Epstein’s The Moral Case for Fossil Fuels. The Wall Street Journal.

Does Money Buy Elections? When Billionaires Court Voters. Stephen Hicks at The Good Life.

Announcements

Jim-CollinsIdea: “A company should limit its growth based on its ability to attract enough of the right people.” (Jim Collins)

This will be our final CEE Review for the year. See you in 2015. Here are the previous editions of CEE Review.

CEE Review: Startup cities | Saving Detroit entrepreneurially | Does Power Corrupt? | Billy Yeatts, and more

News and Opinion

Our new Kaizen interview with Argentine entrepreneur Billy Yeatts. This one could be subtitled entrepreneurship from Buenos Aires to Tierra del Fuego to Houston and Bolivia and more.

Making local politics entrepreneurial: Zachary Carceres and the start-up cities project. CityLab.com. Detroit-rebirth

The Economist: No One Expected Latin America To Slow Down Like This.

Two economists at Johnson and Wales University on Uber, Lyft, and the effect of barriers to entry on consumers. Mercatus.

And P. J. O’Rourke has a plan to save Detroit: turn it into Hong Kong. Related: Hong Kong’s #1 status in the Index of Economic Freedom.

Why Power Does Not Corrupt. It’s Character That Matters Most. Stephen Hicks at The Good Life.

Announcements

Unique venue — an academic conference on a cruise: First International Conference on Medical Ethics, Healthcare Systems & Global Business Issues At Sea.Thomas_Paine Sailing from Miami in June 2015.

Idea: “We have it in our power to begin the world over again.” Thomas Paine

See you next time with our digest of new and interesting items in entrepreneurship, ethics, and political economy. Here are the previous editions of CEE Review.

CEE Review: German productivity | Montessori and leadership | Culture and entrepreneurship | and more

News and Opinion

Culture: Why Germans work fewer hours but produce more. Knote.

Ambiga Dhiraj on how her company revamped management training to develop leaders the Montessori way. Harvard Business Review.

“If we really want to fix development, we need to stop chasing after ideas the way we go on fad diets.” Michael Hobbs on aid, development, unintended consequences, and complex adaptive systems. The New Republic.sarah-coffee

Should governments focus on stimulating entrepreneurship — or on reducing the many barriers to entrepreneurship? A video short on Sarah Travis, a Chicago coffee entrepreneur who left Illinois due to its burdensome regulatory environment.

More on culture: Professor Arielle John on cultural influences upon entrepreneurship, with special reference to Trinidad. YouTube.

Dale Halling on the modern explosion in inventiveness: “The best explanation for the preeminence of English speakers in lifting humanity out of its ten-thousand-year-long Malthusian trap is that the Anglophone world democratized the nature of invention.” The Savvy Street.

Announcements

Saint Vincent College announces the Douglas B. Rogers Conditions of a Free Society Essay Competition for undergraduates.

Stephen Hicks is in Lisbon, Portugal this week to give a graduate seminar on postmodernism and politics. The seminar is hosted by the Institute for Political Studies at the Catholic University of Portugal. Information about the Portuguese edition of Explaining Postmodernism is here.ford-cars

Idea: “Whether you think you can, or whether you think you can’t, you’re right.” (Henry Ford)

See you next time with our digest of new and interesting items in entrepreneurship, ethics, and political economy. Here are the previous editions of CEE Review.

Kaizen interview with Argentine entrepreneur Guillermo Yeatts

This interview could be subtitled Entrepreneurship from Buenos Aires to Tierra del Fuego to Houston and Bolivia and more.

Yeatts-smBilly Yeatts has had a long and colorful career, working as an analyst for Citibank in New York and an executive for Ford in Detroit and Massey Ferguson in Argentina, before launching his own entrepreneurial businesses in oil and gas.

Along the way he found time to co-found several nonprofit organizations and write ten books on topics ranging from the petroleum industry to the problem of poverty in Latin America.

Here is Billy Yeatts on entrepreneurship in Latin America.

For more of our interviews with leading entrepreneurs, see the Kaizen page.

Interview with Argentine entrepreneur Guillermo Yeatts

Entrepreneurship in Latin America

Yeatts,GGuillermo “Billy” Yeatts was born in Buenos Aires and studied at New York University and the Harvard Graduate Business School. He has worked as an entrepreneur in SOL Petroleo S.A. (refining and marketing), Diamond Shamrock Boliviana S.A. (Bolivia; exploration and production of crude oil and gas); Cadesa S.A. (Tierra del Fuego; petroleum drilling), Joss S.A. (Buenos Aires; petroleum transportation) and as Chairman of Massey Ferguson Argentina (agriculture machinery), Ford (Dearborn and Buenos Aires), and Citibank (New York). He is also the author of ten books about the petroleum industry and about the causes of poverty in Latin America. He was the recipient of an honorary doctorate in philosophy from Universidad Francisco Marroquín in 2013.

Education

Kaizen: You’ve had a long career as an executive, entrepreneur, and author. But your story starts here in Buenos Aires?

Yeatts: Yes. I finished primary school in the United States in Danville, Virginia. My dad was born and raised there. My parents came to Buenos Aires in the early fifties. I finished my middle school and high school here in Buenos Aires.

I then spent two years in the University of Buenos Aires. Later I decided to go to United States to college.

Kaizen: Where in the U.S. did you first go?

Yeatts: To New York University, where I got a bachelor’s degree (B.S.) in finance and a master’s degree in economics. Later, I was accepted as a Ph.D. candidate in economics, but I never completed it because I accepted a job in Argentina.

Early Career

Kaizen: During your time in New York, you were also working?

Yeatts: Yes, I worked for Citibank in New York at their head office for six years in the commercial credit department, afterwards in the European district covering Italy and Vatican accounts.

Kaizen: What was your master’s work on?

Yeatts: My master’s thesis was on the automotive industry in Latin America, because the strategy in the 1960s was substitution of imports to create jobs and reduce imports from abroad. The effect of this was you had low sales volume and huge costs and therefore the creation of artificial industries that were non-competitive in the world markets.

Kaizen: Why did you pick the automotive industry for your thesis if you were working in banking?

Yeatts: I went on vacation to Argentina and saw about 30 assembly plants that were allowed to import provided they started manufacturing in a closed economy. As a result of this observation I said, “There is no way these will survive,” and in the end only five started manufacturing facilities. This was why I wrote my thesis on the auto industry. Later that year Ford came to interview college graduates, so I asked to be interviewed by them to inquire whether they were looking for college graduates in Argentina

Executive Career

Kaizen: Why was Ford interested in a graduate student from Argentina?

logo-fordYeatts: I was an Argentine married to an Argentine and had lived there, so my potential relocation should be rather simple, and I knew a bit of the industry because I did some research for my master’s thesis.

Kaizen: What did you see as a strategy in Argentina for the growth of an infant industry, and why would Ford be interested?

Yeatts: The thing I found interesting was the strategy of import substitution because you create local employment, reduce import requirements of the balance of payments. As a result, the cost of the vehicles was two or three times higher than in the States. The reason for this was that local content requirements were between 70% and 90% for each vehicle and in many cases you had a one source supplier. This is what constitutes crony entrepreneurs protected from competition with a closed market. Close to the government, far from the market. This strategy was developed by the think tank CEPAL headquarters in Chile and applied throughout Latin America.

Kaizen: Was this the law that required local content and banned imports to allow local manufacturing to prosper?

Yeatts: Yes, this was a law. Under this scenario you create millionaires because there is no competition.

Kaizen: It becomes a seller’s market — the person who has the regulation in their favor.

Yeatts: Correct. It’s like going to the zoo to hunt.

Kaizen: Ford eventually sent you to Buenos Aires. What were you to do for them?

Yeatts: I was named supervisor of cash management and insurance. One of the first things I did was try to reduce our insurance cost. I cancelled 20 insurance policies and started self-insurance. I received a lot of praise for reducing our cost on risks which were self-financing after a period of time.

Three months later on a Saturday, I see hail coming down. I was like, “Oh no!” I had cancelled hail insurance. [Laughs] There were about 1,000 cars out there. I called everyone in to look at what we had left as insurance coverage. We still had thunderstorm insurance, so we tried to understand if the hail caused the damage or the wind which had propelled the hail against the vehicles. We built a case that it was the wind and thunderstorms that caused the damage, not hail. We had a lot of evidence in the district that wind had thrown many trees, lampposts, and advertisement signs.

Kaizen: You were trying to squeeze it under your thunderstorm policy since you didn’t have the hail insurance.

Yeatts: We had the hindsight to keep thunderstorm and wind. We told the pilot insurance company that the damage was coming under thunderstorm policy and it was for them to challenge it; but if they did, they might suffer from a claim of unrealized profits because of the delay in sales of the damaged inventory.

Kaizen: Did the insurance company go for it?

Yeatts: Yes, I had proof of the damage caused by the wind and storm. They accepted our evidence and we got the check for the damage.

I went to see my boss, thrilled with the check. He looked at the check and asked me, “What am I supposed to do with this? Stop the production line and the paint tunnel to get these cars fixed? You better get your act together if you do not want to be a satellite.”

Kaizen: So you were almost back to first base?

Yeatts: Yes, I could not sleep that night, but the next morning I said, “I have the money” — the check was not deposited — and figured out that this represented a 35% discount of the price list for a new Falcon. I saw the marketing director and said “Let’s have a sale with a 35% discount.” The options would be that the dealer or the customer fixes the bumps and they individually negotiated the split of the discount. Let the market work it out. The plan was accepted and it was a success because it increased market share and future sales of the after-market for more vehicles.

Kaizen: So everybody ended up happy. Did you also reinstate the hail insurance?

Yeatts: No. In the previous 30 years there was no hail.

Kaizen: It was a one-off then. How long were you with Ford?

Yeatts: Six years. I went back with Ford to Dearborn Head Office to the Profit Analysis Department for Latin America. That’s the area where the affiliates come up from Latin America to review performance of the past year against the approved budget and submit next year’s budget for approval

Kaizen: Your wife is Argentine?

Yeatts: Yes, and we had four small children. My wife wanted to go back to Argentina. Ford did not want to send me back.

Kaizen: Were you locked in?

Yeatts: No. It’s a free labor market. I sent out about 100 résumés.

Kaizen: To companies here in Argentina?

Yeatts: No, to companies based in the U.S. with operations in Argentina.

I got three job offers, and I finally I took a job with Atlantic Richfield as Overseas Financing Manager, after turning them down twice because I did not like the Vice-President in charge of Personnel. At the time I turned them down, I had two job offers (Massey Ferguson and Xerox). I later called them to tell them I had accepted Atlantic Richfield.

Kaizen: How old were you at this point?

Yeatts: I was 38.

Kaizen: Did you ever see the Vice-President in charge of Personnel?

Yeatts: No, I never did.

Return to Argentina

Kaizen: How did you get back to Argentina?

Yeatts: A year later they called me from Massey Ferguson. MF had bought the company Hanomag Argentina, which we had discussed previously, and they offered me the job of Financial Director and Board member. The salary was 50% of my existing salary. I said I was not interested in the job or the salary. I said I would accept the offer of Chairman of the Board and a salary twice the amount offered, plus a defined performance bonus.logo-massey-ferguson

A month later they agreed with the following conditions: I would go down as Financial Director and Board member at the salary requested, and before six months I would be nominated Chairman or the contract would cease upon payment of one year and expenses incurred to return to New York. I accepted.

Hanomag is a known tractor in Europe — in Germany. They built tanks in the WWII. The company had been getting ready for production, naming dealers and production suppliers throughout the country.

The Argentine Secretary of Industry invited us to visit with him. He told us, “I’ve heard that you’ve started production and everyone is very excited. But you know that you cannot manufacture Massey Ferguson tractors.” The president of MF said “What do you mean?” “There’s a law here that does not allow imports and protects local companies such as Fiat, John Deere, Deutz and Hanomag against competition. The counterpart of this is that you have to source a high percentage of local content in your tractors like the rest of the industry.” The president of MF said, “We bought the shares to build MF tractors.”

Campbell, the president MF, then said to me, “We’ve got to fight the government and build Massey Ferguson tractors.” I said, “We are taking undue risks in building tractors that we cannot sell domestically or export.” Campbell said, “You are with me or against me. If you are against me, I will fire you tomorrow.”

Kaizen: A high-risk choice.

Yeatts: A very high-risk choice. This was about three or four months after I arrived here. I had bought a house and the kids were in school. And he’s telling me, “We are going to build these tractors as fast as we can and put them in front of the fence.” So the market starts to see us building tractors and we started developing supporters among our suppliers and dealers in this same quarrel.

Kaizen: Learned that lesson.

Yeatts: The government comes in; they caught us. We had tractors all over the place. It was the talk of the industry: “What are these guys going to do with the tractors?”

Kaizen: You were just building tractors? Were you waiting for the government to come to you?

Yeatts: Creating pressure. Not only did we have the tractors, but we had the suppliers on board. But we do not build to keep; this is not a museum. We build to sell. So the government says, “You guys are going to go to jail.”

My mind had started to change with all of this government stuff when I saw Falcon cars being sold in Argentina for two to three times more than they were being sold for in the United States—because the government is protecting these one-source suppliers.

Anyway, they said, “You can’t do it. You cannot sell in Argentina and you cannot export. We are the authority here.”
– “Do you believe in private property?”
– “Yeah, sure.”
– “Well, I am on my private property and on my private property I do as I like. And as a matter of fact, we are increasing our production.”
– “You cannot export; you cannot sell.”

The offices in the States, by then, knew that we had a quarrel. It was divided.

Kaizen: So it was head-to-head and who would blink first.

Yeatts: Right. The head office thought that this was a bureaucracy that could be fixed. So they transferred Campbell to a big job in Rome.

Kaizen: Even though this problem in Argentina was not yet resolved?

Yeatts: Not yet resolved. I said, “You can’t leave now!”

Kaizen: You were left holding the bag.

Yeatts: Yes. Campbell said, “I’ll tell you what we are going to do. You are going to go see the head of the Agriculture and Farm Show and say that you want this piece of land at the entrance of the show. They will say it’s not possible. They will refuse. You then give them a signed check by both of us and tell them you will write the price for the lease of 30 days. Tell them that Massey Ferguson is coming to Argentina to change the method that you work the land, and you should be with us. We have a lighter tractor with lighter implements and lower costs. We are bringing state of the arts to the agricultural sector.”

Kaizen: Innovation.

Yeatts: Yes, but not solely innovation — the price! Forty percent of all of our tractors have interchangeable parts. This means less money for us because when we ask for a valve, we can ask more from that valve and get it for a lower price. That means less stock for dealers. It means better service because they have the spare part available.

Kaizen: So the idea is that if you can get into this agriculture show you can demonstrate what you have, the customers will be excited, and you’ll have more pressure on the government?

Yeatts: Yes. If you want to get things done here — who do you have to be close to? The government. Even though the people would say that this tractor is very good, politics will block it.

So we got the piece of land right on the entrance, and in the opening the Minister of Agriculture comes to see a tractor he had not seen before. Pictures were taken of him sitting on a MF tractor. The following day, La Nacion, the most important paper in Argentina, printed a picture of the Minister of Agriculture sitting on a tractor that is not authorized to be manufactured. Well, it did not say that, but all hell broke loose.

Kaizen: Fireworks over policy?

hanomagYeatts: Yes. I’m like, “Look, we are bringing new technology to a closed market. Why don’t you have advances in technology? Because you have price controls! This is what happens.”

So we got the “Okay.” We could build tractors. One qualification: these dummies said, “They must be called Hanomag.” We had in small letters Hanomag and in big letters model Massey Ferguson. We went from the lowest market share of 7% to being leaders with a 35% share in four years.

Kaizen: A success story.

Yeatts: Yes. And all the board was under 35 years old, replacing a board of about 60.

Entrepreneurship

Kaizen: You then decided to become an entrepreneur in oil and gas. How did that decision come about?

Yeatts: After seven years at Massey and seeing all of the big bonuses I thought, “There is so much money to be made out there, and here I am working for a salary.” And if someone called and said, “I need you here in Des Moines, Iowa at 8: 00 a.m. Monday” — I’d have to go. So I said, I want to go out on my own.

I resigned and set up a company, putting in my savings, my personal credit line, and I sold shares to make a down payment for the purchase of German earth-moving equipment. I went into this line of business because front-loaders are similar to tractors. I obtained contracts from the two largest road building construction companies here in Argentina. I planned to discount these contracts with banks to pay the import tariffs for the machinery. In the meantime, the two construction companies went into Chapter 11 because the government was not paying for their road-building contracts.

Kaizen: Oh my.

Yeatts: So the bank says to me, “No money. Both companies are in Chapter 11, and they will not pay you and you will not pay me.”Tierro_Argentina-oil

So I decided after a lot of research to ship them to Tierra del Fuego, where there are no taxes at all.

Kaizen: There are no taxes in southern Argentina?

Yeatts: Yes, there are taxes except in Tierra del Fuego, which is a big island. The capital city is Ushuaia; it’s the southernmost city in the world.

I had never been there before and had no idea of what I might encounter as far as work is concerned. My maximum concern was I had no cash to nationalize the equipment in Argentina.

Kaizen: So be tenacious? Work the system to find the opportunity and push hard to make it happen?

Yeatts: Even in the middle you think it isn’t going to happen, but there is always opportunity. A lot of times you don’t find it, though.

Kaizen: Did you leave construction?

Yeatts: No, I went to Ushuaia (a city 3,010 kilometers south) where 14 pieces of equipment landed. This was in 1979. The whole town was at the dock asking if new roads, a new town, or what was going to be built. In Ushuaia the only thing that existed was deep-sea fishing and a couple of warehouses to assemble Philco radios for export to Argentina.

I decided to visit Rio Grande, in the north of Tierra del Fuego, which is an oil exploration small town. As I drove north I saw many oil pumps and drilling rigs which I had never seen in my life—nor did I know the difference between them. The next week I visited them to try enquire who the owners of the rigs were, who their customers were, where the rigs were bought, how much was invoiced per hour or meter, and how many days they worked during the month. After two days at my hotel, I realized this was a tremendous opportunity to make money, but my first step would have to be earth-moving to open roads and set up camps.

In the next three months I was the main supplier to drilling-rig companies for opening road and setting up camps, since I took a 40% discount to the going rate in Tierra del Fuego. At the end of the year, I was a sole supplier of four companies and “persona non grata” in Rio Grande.

After two years of earth-moving equipment in Tierra del Fuego, I decided I wanted to get into the oil-drilling rig business. So I went to the U.S. and visited 20 rig companies to see if they were interested in working in Argentina. None were interested. One of them had two rigs in Bolivia and they were bringing them back to Texas. I suggested that they leave them in Argentina because the rate here was US$ 30,000 versus US$ 8,000 in the States. They agreed and we (an Argentine friend and I in the oil business) set up Cadesa S.A. oil drilling. They kept the 49% and we held 51%.

Kaizen: They went for the deal?

Yeatts: Yes. We brought them to Tierra del Fuego and started drilling for the state company YPF, and other private companies. The main business came from YPF, and it was supplied by four drilling companies which now become our competitors. We sold the earth-moving equipment, invested in two oil rigs, and entered the government bids for exploration and production wells with 30% discount.

As a result of the collapse in the oil rig market, we decided to buy four oil rigs sold by banks in Texas at 20% of their value and brought them to work in Argentina.

A good friend of mine in the oil rig business said there was an opportunity to buy six horizontal drilling rigs as a package, since the seller was getting out of the business and there was opportunity abroad in countries such as Syria and South Africa, where U.S. companies could not work. We bought those rigs and set up a company abroad to work in the Middle East and Africa with Latin American staff.

Kaizen: What year was this now?

Yeatts: It was in the early 1980s.

In the late 80s I started to investigate why the Argentine subsurface was owned by the federal government and/or the provinces. In the United States, you own the surface and the subsurface. You can sell the subsurface for drilling. We found an Argentine company called Sol that had property rights including subsurface. That company was one of the first companies to find oil in Argentina. They went on the Stock Exchange in 1920 in partnership with the Anglo-Persian Oil Company (today British Petroleum). We started buying shares of Sol and sold the oil drilling companies, which gave us cash to buy 40 percent of Sol in the stock market.Yeatt-Four-Seasons

Kaizen: Who is the “we”?

Yeatts: I had a partner at the time we set up Cadesa, an oilman named José Esteves. Later, when we bought the six horizontal drilling rigs, we took on another partner called Peter Eberly who had extensive experience in finance and oil drilling business. We finally took on a fourth partner, José Estenssoro, who brought to the partnership extensive experience in the worldwide oil business, to buy a controlling interest in Sol. In order to raise cash to buy Sol, we sold both the domestic oil drilling and overseas horizontal drilling companies.

Once we bought Sol, we reach an agreement with ANCAP (Uruguayan State Oil company) to develop 350 service stations with the logo of Sol, acquiring gasoline to supply these stations from their refinery in Montevideo, Uruguay. Sol would issue shares to allow ANCAP to make a capital contribution to acquire 30% of the share capital.

After we bought Sol we knew that we needed to have a dependable supplier for upstream, so we decided to look in the domestic and neighboring countries where we could source energy demands

Kaizen: “Upstream” means?

Yeatts: Exploration and production. Exploring is looking for oil and gas which carries the biggest risks and production in bringing to the surface the oil found in the subsurface.

We heard from one of the partners that a U.S. company, Oxy (Occidental Petroleum Corporation) was getting out of Bolivia since they were not being paid for the gas they delivered to YPFB (the Bolivian state-owned oil company), so we went to talk with them and bought, together with Diamond Shamrock, all their operations in Bolivia 50-50.

We became the largest gas producers in Bolivia. The gas that we delivered to YPFB, the state turned around and sold to Argentina. So we negotiated with the Bolivian government that the gas that we supply to them and they sold to Argentina, we would get paid either by them or Argentina, since we were an Argentine company. The government agreed to pay us, and we operated the company for seven years and sold the Bolivian operation to a Dallas-based company

Kaizen: More political clouds?

Yeatts: We saw economic clouds coming, so that’s the reason we got out of Bolivia and started considering the same for Argentina. We offered the controlling interest in Sol to ANCAP, which held 30% since they had an interest in the Argentine oil market because of Mercosur. We established a price for Sol in year 2000 and offered to transfer our shares plus the board nomination for no down payment. In two years, the amount agreed upon had to be paid to the stockholders or return the company. All value added to the initial price we had agreed upon in 2000 would be theirs. If there was a lower price versus the net worth, we would absorb it, assuming good business practices had been followed during that period.

Kaizen: That was their value-added.

Yeatts: Yes. So we sold the company to them.

Kaizen: By now this is a very large operation; it’s been built up and vertically integrated. So this is a major transaction.

Yeatts: We would never sell a company without down payment and due diligence. We sold it under these conditioFundacion-Atlas-logons because it was ANCAP owned by Uruguay.

Foundation Work and Mentor Advice

Yeatts: So there’s the end. I’ve been involved in foundations since I arrived from the United States in 1972 as president of Massey Ferguson. At the beginning we were a group of eight trying to start free-market foundations. The first was ESEADE in 1978; I was a co-founder, treasurer, board member, and, later, Chairman. Later I joined Junior Achievement Argentina, where I was Chairman and member of the founders committee. In 1998 I was co-founder and chairman of Atlas, which develops ideas of a free-market society.

Kaizen: That’s an impressive organization.

Yeatts: If you are not involved in the general protection of individual rights, you will not have private rights to protect in the future.

Kaizen: Looking back onto your entrepreneurial career, you’ve been in some challenging businesses and had a lot of tough fights to make things happen. Is it part of your personality that you enjoy that rough-and-tumble?

Yeatts: Well, I wouldn’t say I enjoyed it.

Kaizen: But you could have had a successful career in a lot of places in the world, given your talents and abilities. But you did choose to go into Argentina, which is a tough business-government environment. And you chose fields that require a certain amount of tenacity and fighting, so it gets your adrenaline going. Is that just something you had to do, and since you had to do it, you made it work?

Yeatts: Let’s put it this way: The hail problem — it was something I had to do to get out of that, right? Otherwise, they would have kicked me out and I would have never gotten a job again because of making such a gross mistake. Massey Ferguson — the lesson was tenacity to get it through, because the ground rules of government were not logical.

Kaizen: The art of exerting the right kind of political pressure to get the changes so that the market opens up for you?

Yeatts: Yes.

Kaizen: Psychology at work.

Yeatts: Sometimes you get into a situation which you can lose, but if it happens you have a fallback alternative. You take on the challenge. This is what happened in New York where I had two job offers and I could play games. What would have happened if I did not have them? I would have acted differently.

Kaizen: But if the fight is brought to you, you don’t back down.

Yeatts: If I didn’t have a job offer, I would have had a very different personality. But I did have two job offers which would land me in Argentina, and this company was drilling for oil offshore, which is always a potential.

Kaizen: You said that in all of these battles and problems, when you are half-way through—that even when you don’t think it will work, you still fight on.

Yeatts: Yes. There is a saying in Argentina, “Never hang horses in the middle of the river.”

Kaizen: Why?

Yeatts: The trouble is that when I am in these situations, I don’t sleep well — I’m trying to think. The next day I am worse. Like I remember those 48 hours I spent on the goddamned hail. I went to see the general manager of the insurance company, who was also a stockholder, and I almost had the guy up against the wall because you’re telling me that it was the hail and you don’t know what the wind power was? But I had spent 40 hours without sleeping.

Kaizen: Your fighting spirit comes out.

Yeatts: Like when you get an animal in a corner. A cat, for example. Cats are usually very nice, but if you get one in a corner …

Kaizen: Right. Looking back again on the entrepreneurial part of your life, it sounds like you really enjoyed the wheeling-and-dealing, putting deals together, and spotting opportunities and the right people. Why do you find that as attractive as you seem to?

Yeatts: It’s like your brain’s game, you know. Like when the guys from the rigging company said, “We have no partners. We don’t want to deal.” But you have investors, right? What would your investors think when you could be making $30,000 instead of $8,000?

Kaizen: So there is an arbitrage opportunity for them and you spot that opportunity. You also know how to package it so that it is a win for you and also a win for them.

Yeatts: I try always to have a win-win for both. Because if it’s not, I don’t care how solid the contract is, you don’t have a deal — you have a headache.

Kaizen: And some salesmanship for you to put together the whole package.

Yeatts: Right. You need salesmanship and, also, what is the limit — the “deal breaker.”

Kaizen: In your career, you’ve had set-backs and challenges. You’ve also had to make some gutsy decisions; you’re always on the lookout for opportunities, you know how to package things to make connections, and you know how to talk to people and read psychology.

For entrepreneurial young people starting out, can you give them advice about how to best train themselves to be able to put that package together?

Yeatts: I would say Junior Achievement does a good job training youth (16-17 years old) to select a product and go out in the market and compete for the consumer’s dollar. You must be convinced that you are supplying a need or a desire, and then see who your competitor is and what he is offering on price, quality, delivery, assurance, etc.

Kaizen: Small scale.

Yeatts: Yes. You have different groups that are out to get the prize: the employees, the suppliers, the stockholders, the customers, the distributors, and finally, the government. No risk, just opportunity to share your ideas and profit. The entrepreneurship is a balancing act to make sure the ball does not fall.

I remember at NYU we had a course where you had an amount of money given at the start of the semester and you had to invest it in NYSE shares you picked. We would check them every week, at the end of the year, you were a winner or a loser.

Kaizen: So the actual boots on the ground, real-world experience is the best entrepreneurial training? Do you de-emphasize formal, business school education?

Yeatts: No. I would say that business schools should emphasize more courses connected to real-world experiences and help start-ups with mentors (entrepreneurs) to discuss, 15 minutes per month, their strengths, weaknesses, opportunities, vulnerabilities of their business, and receive an experienced opinion of their course of action.

Kaizen: But it has to include practical business education?

Yeatts: Practical. You make decisions and you make mistakes—practical. I remember seeing something like that in CalPoly, California, at an agricultural school there. Students would rent a plot of land and put tomatoes on it, or whatever. You lease land and pay, and when you harvest, if you have a profit you keep it but if you lose you pay. So it is a real-world experience, but very small.

Kaizen: About opportunity-spotting, you’ve been in a wide number of fields in different parts of the world. The cognitive ability to spot opportunities — is that something that can be trained. Or is it a matter of being a people person and talking to a lot of people? Or of reading a lot of stuff?

Yeatts: First, you need to pay attention. Why is this done here and not at home? That is absolutely key because human beings are all alike in the end?

Kaizen: So asking the right questions?

Yeatts: Observation. Yesterday I spent the day with sixteen startup companies. I’m in an organization, so I was seeing what they want to sell, what they are doing, what is their idea.

Kaizen: In a mentoring role or as an investor?

Yeatts: Mainly as a mentor, because they are very small. The first stage is $25,000 to get to the market.

I was talking to a guy from Colombia who had three days here. I asked, “Why did you come here?” He said, “Because the largest truck market in South America is in Brazil and the second largest is in Argentina. The third is Colombia. I don’t want to go into the lion’s mouth, which is Brazil.” I asked, “What’s the deal?” He said, “Twenty-five percent of the trucks in Argentina come back empty from whatever delivery they did. They bring wine from Mendoza and come back empty.” He saw an opportunity just like that and he had only been here for three days.

Kaizen: He wants to do a brokerage service for the return trips that are empty?

Yeatts: Yes, what he wants is to get a commission for getting business for the return trip.

I asked him, “How are you going to find trucks traveling without freight?” He wasn’t sure. I said, “Why don’t you go to the Rural Society in each town because people who have a farm normally have a truck — not their own, but the Chamber of Agriculture’s. So maybe the farmer who seeds corn can bring back an implement or whatever.” The point is that I was trying to test where he was getting his information.

Kaizen: When you are mentoring younger people, is there a piece of advice you find yourself giving to them most often?

Yeatts: Perseverance. And when you have a crisis, always look for the opportunity. But you need perseverance, and you need guts to continue to look when the wave is coming.

Kaizen: There is always an opportunity there?

Yeatts: I don’t know if always. But if you have guts and perseverance when things are about to fall, you find the best opportunities.Yeatts-sm

This interview was conducted for Kaizen by Stephen Hicks. For more information about Guillermo Yeatts please see his website.

Read more Kaizen interviews with leading entrepreneurs.

© 2014 Stephen R. C. Hicks. All rights reserved.

CEE Review: Crowdfunding doors open | Deregulation and the crisis? | Led Zeppelin | OLX’s Oxenford, and more

News and Opinion

Meet Alex Oxenford, founder of OLX: “the biggest Web company you’ve never heard of.” Fortune.

27-year old Russian immigrant to America became a millionaire the old-fashioned way. Yahoo! Finance. CORRECTION: “Since the publication of this story on Nov. 4, new details have come to light which have made Anton Ivanov’s claims of becoming a self-made millionaire highly suspect. On Monday, Ivanov admitted to Yahoo Finance that 75-80% of his wealth consists of an inheritance that was left to him by his parents, who died several years ago.email_policy Yahoo Finance regrets these errors.”

Company email: Who decides who can use it and for what purposes? “NLRB to Decide Whether Workers Can Use Company Email to Discuss Ways to Improve Working Conditions.” The Wall Street Journal.

Artistic integrity? Social friction? Led Zeppelin’s Robert Plant turns down £500 million offer from Richard Branson to reform the band. London Evening Standard.

How crowd-funding is opening investment doors formerly open only to government-approved investors.

Blamestorming: “Deregulation Caused the Financial Crisis.” Stephen Hicks at The Good Life.

Announcements

Business and Society issues a call for papers for a special issue devoted to Economic Inequality, Business and Society. Proposals due November 30.Philadelphia Flyers Banner

Blast from the past: Our Kaizen interview with sports entrepreneur Ed Snider, founder of the Philadelphia Flyers hockey team and Comcast-Spectacor.

Idea: “I love to sail forbidden seas, and land on barbarous coasts.” (Herman Melville, Moby Dick, Chapter 1)

See you next time with our digest of new and interesting items in entrepreneurship, ethics, and political economy. Here are the previous editions of CEE Review.

CEE Review: Firing honestly | Where jobs are created | Eminent domain | Mismatched socks, and more

News and Opinion

New technology developed in Australia helps nurses get the needle in your vein the first time.

Rockford entrepreneurs solve problem of lost and mismatched socks in the laundry. They’ve made it to the second round of ABC’s “Shark Tank.” Rockford Register-Star.socks-lonely

The perhaps not-so-surprising news about where job creation occurs: “over the last twenty five years, almost all of the private sector jobs have been created by businesses less than five years old.” Forbes.

Anna Prior on how aspiring entrepreneurs should use college. Whether the big-name matters, networking, student debt, seeking advisers, and more advice.

Judge says the city of Philadelphia can take an artist’s studio from him and turn it into a grocery store. HuffPo.

Honesty and public disclosure when a CEO is dismissed by a board: “You’re fired, and we really mean it.” The Wall Street Journal.

Announcements

The second annual interdisciplinary symposium on Entrepreneurship in Higher Education will be on March 13, 2015, near Myrtle Beach, SC.

Blast from the past: Our Kaizen interview with Anil Singh-Molares on philosophy and entrepreneurship, global markets, his time at Microsoft, and Echomundi.

Idea:sophocles “Wonders are many in the world, and the wonder of all is man.
With his bit in the teeth of the storm and his faith in a fragile prow,
Far he sails, where the waves leap white-fanged, wroth at his plan.
And he has his will of the earth by the strength of his hand on the plough.”
(Sophocles, Antigone)

See you next time with our digest of new and interesting items in entrepreneurship, ethics, and political economy. Here are the previous editions of CEE Review.

CEE Review: Science R&D | Body language | Asset forfeiture | Ethics and Business text, and more

News and Opinion

Are venture capitalists humanity’s last great hope? Christopher Mims on how private firms are significantly increasing science R&D funding. The Wall Street Journal.

On the other hand, surveys show that entrepreneurs’ confidence is slipping. The most-cited reasons: “Entrepreneurs surveyed pointed to government regulations as the greatest impediment and worry, followed closely by taxes.” Policy Dialogue on Entrepreneurship.

Gibson-E-and-BKevin Gibson’s textbook, Ethics and Business (Cambridge University Press). Stephen Hicks’s audio review at YouTube, or text version here.

Small businesses and the IRS: Federal agents seize restaurant owner’s account because her deposits were too small. “Their money was seized under an increasingly controversial area of law known as civil asset forfeiture, which allows law enforcement agents to take property they suspect of being tied to crime even if no criminal charges are filed. Law enforcement agencies get to keep a share of whatever is forfeited.” The New York Times.

Body language, listening skills, and more from an FBI behavior expert on how to get people to like you. Business Insider.

A business ethics history lesson from Roger Donway: “After FDR’s election, famed entrepreneur and investor Samuel Insull, now bankrupt and retired, was chased across Europe, kidnapped in the Bosporus, and dragged back to Chicago for the business trial of the century — only to be acquitted by the jury in two hours.” Atlas Summit.

Announcements

The George Washington University Regulatory Studies Center is holding a conference on Enhancing the Transatlantic Trade and Investment Partnership: Reducing Regulatory Barriers. Washington, D.C., November 19-20.Int-Trade

The First Annual Atlas Shrugged Crony Awards.

Idea: Pixar president Ed Catmull quoting Andrew Stanton: “People need to be wrong as fast as they can. In a battle, if you’re faced with two hills and you’re unsure which one to attack, he says, the right course of action is to hurry up and choose. If you find out it’s the wrong hill, turn around and attack the other one.”

See you next time with our digest of new and interesting items in entrepreneurship, ethics, and political economy. Here are the previous editions of CEE Review.

CEE Review: More dollars to entrepreneurs | Craft beer | Medical innovation | Tesla in Michigan, and more

News and Opinion

The 2014 data are good so far: More dollars are flowing to entrepreneurs. At Policy Dialogue.

Medical innovation and the supply side: Robert Graboyes on getting past our current “excessive aversion to risk and deference to medical insiders.” At Mercatus.Tesla-charge

Hurdles for entrepreneurial car makers: Michigan requires Tesla to sell through established dealers. USA Today.

Beer entrepreneurship: interview with Scott Smith on how he turned his hobby into a successful Pittsburgh-area craft-beer business. The Wall Street Journal.

Emberton on priorities: “If you’re not pissing someone off, you probably aren’t doing anything important.”

Two economists at Florida Gulf Coast University investigate: Does eminent domain for private benefit also raise government revenues?

Announcements

The first Angel Summit will be held in Dallas, TX in mid-November. “It’s an opportunity for startup and startup investing leaders to come together, share best practices and learn from others about angel investing across the country.”

Do markets promote peace? A nation-wide video contest for students, sponsored by the Hackley Endowment at Fayetteville State University, Arkansas. “Prize is $2,500 to the winners; $500 to the professor; $500 to the second place winners; and $250 to the third place winners.”

Stephen Hicks is in Buenos Aires, Argentina, this week delivering a series of five lectures on postmodernism, politics, and philosophy, in connection with the release of Explicando el Posmodernismo, la crisis del socialismo, which is the Spanish translation of Explaining Postmodernism: Skepticism and Socialism from Rousseau to Foucault.Alexander-Graham-Bell

Idea: “When one door closes, another opens; but we often look so long and so regretfully upon the closed door that we do not see the one which has opened for us.” (Alexander Graham Bell, 1847-1922, Scottish-Canadian-American scientist and inventor, most widely know for inventing the first practical telephone)

See you next time with our digest of new and interesting items in entrepreneurship, ethics, and political economy. Here are the previous editions of CEE Review.

CEE Review: Debug your brain | Prefer women leaders? | Conservatives against capitalism | and more

News and Opinion

Just try finding a parking spot in a busy city. Max Marty’s Volo app wants to solve the problem.

Women prefer male bosses even more than men do. Venessa Wong and Natalie Kitroeff at Bloomberg Businessweek.

woman-leader Related: A study concludes that companies with higher levels of representation by women in leadership “attain better financial results, on average, than other companies.” Catalyst.

Conservatives Against Free-Market Capitalism. Stephen Hicks at The Good Life.

Lock companies move to replace keys with your smartphone. “Smart locks can be safer than traditional ones because keys can’t be lost, shared or copied, and there’s a record of the comings and goings of keyholders. The biggest threat is old-fashioned lock-picking.” The Wall Street Journal.

Oliver Emberton’s amusing How to debug your brain and get stuff done. “Our brains are the most bug ridden pieces of junk since Internet Explorer.”

Announcements

The Index on Censorship announces that nominations are open for its 2015 Freedom of Expression awards.

Global Entrepreneurship Week USA’s line-up of activities for November 2014. Three major themes are National Entrepreneurs’ Day, Women’s Entrepreneurship Day, and Global Business Angels Day.

kindiIdea: “We should not be ashamed to acknowledge truth from whatever source it comes to us, even if it is brought by former generations and foreign peoples. For him who seeks the truth there is nothing of higher value than the truth itself.” Al-Kindi, Islamic philosopher (d. 866).

See you next time with our digest of new and interesting items in entrepreneurship, ethics, and political economy. Here are the previous editions of CEE Review.