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Interview with Tom Tropp on Business Ethics and Corporate Culture

Thursday, September 28th, 2017

[This is the full interview with Tom Tropp which was published in our Kaizen newsletter.]

Tom Tropp on Business Ethics and Corporate Culture

Tom Tropp is the Vice President for Ethics and Corporate Culture at the AJ Gallagher Corporation based in Chicago, an international insurance firm with over $5 billion in revenue annually.

Kaizen: Thanks for being here to talk about how you do ethics and corporate culture at Gallagher.

Tropp: You’re welcome.

Kaizen: Insurance provides a valuable service to people, but is an industry that sometimes has a shady public reputation. What steps do you take at Gallagher to counteract that notion?

Tropp: The insurance industry has that image. There’s a joke about how solitary confinement for a month is punishment, but worse than that is to be locked in the cell with a life insurance salesman for a month.

Kaizen: It would feel like eternal punishment?

Tropp: Right. The business does have that impression because people don’t like to buy insurance, but they know they have to. And a huge percentage of people that buy insurance never claim, so they look at that money as going out the door and of no value.

The actual fact is no business in existence can operate without insurance. It’s not a matter of if you’ll have a claim, it’s when you’ll have a claim. Businesses simply always have claims of various types, whether it’s worker’s compensation or fire damage or liability suits.

One thing you assume in our business is that you will have some negative feelings toward what you do, but then it’s offset when the claim happens. If you have good coverage, and the broker has done a good job, and you’re brought back to whole again, then you appreciate it.

Kaizen: Absolutely. You work for AJ Gallagher, the third largest insurance brokerage firm in the world. Tell me about the company.

Tropp: The company is publicly traded, New York Stock Exchange. 25,000 employees in 34 countries. We have four divisions in the company. One division does property casualty insurance. One does employee benefits insurance, health insurance, life insurance. One does surplus lines insurance, which is a term that means secondary market, so insuring a dynamite factory. Normal insurance companies don’t do that. Surplus lines carriers do. Then, that group moves into things like Lloyd’s Coverage, Lloyd’s Brokers in London. We have about a thousand people in our London office doing nothing but Lloyd’s Brokerage throughout the world.

Then, the fourth division is a claim handling division called Gallagher Basset. Gallagher Bassett handles claims for captive insurance programs, for self-insured programs, very large companies that actually form their own insurance company and then hire Gallagher Bassett to do the claims. Structured in that fashion, 90 years old. Started in 1927 and still going strong.

Kaizen: About $5.6 billion in revenue?

Tropp: We’ll be five billion in revenue this year.

Kaizen: You threw out a market capitalization number.

Tropp: $9.9 billion market cap as of 3:00 this afternoon.

Kaizen: Moving into 10 billion.

Tropp: It’s going to need a couple more points and we’ll be there.

Kaizen: A couple of interesting things about Gallagher. One is Gallagher is unique in how it handles ethics within the corporate context. Another is that you are a unique individual. You came to Gallagher through the insurance business but you also have the formal ethics background. Tell me your insurance story. How did you get your start in the business?

Tropp: After college I taught school for four years and then went to work for an insurance brokerage firm for seven years.

Kaizen: In Illinois?

Tropp: Yes, Chicago.

Kaizen: You went to Loras?

Tropp: I went to Loras College in Dubuque, Iowa, as an undergraduate.

Kaizen: What was your major?

Tropp: Speech and Drama.

Kaizen: Ah, a natural fit.

Tropp: Yes. Works perfectly for the insurance business.

Kaizen: You can be a sales guy.

Tropp: Right. After teaching, I went to work for an insurance brokerage firm in Evanston, Illinois. I worked there for about seven years and then left in 1981 to start my own company from zero.

Kaizen: You were in your 30s?

Tropp: Thirty-five, I guess. I was at that company for 26 years and built it up. In 2007, I sold the company to  Gallagher, but five years before that, in 2002, I went back to school at the University of Chicago.

Kaizen: This is the ethics side.

Tropp: Yeah. I worked on a Masters of Religious Ethics from the Divinity School. I think it’s important studying ethics that you study theologians as well as philosophers because for so many years, in the Middle Ages, there were no philosophers. There were only theologians writing about thinking and values. I spent five years, part-time, at Chicago. I finished that degree in June of 2007 and, at that same time, sold the company to Gallagher. Pat Gallagher, our CEO and Chairman of the Board, and I had been friends for many years. We grew up in the business together. He knew the work I was doing, the writing and the speaking I was doing on corporate ethics, the work I was doing at the university.

He did not have an ethics officer. He had a legal officer and that’s where ethics was handled. He and I really experimented with this. We created the job that I have, but we didn’t know what it was going to do. I started out by just going around visiting some offices and talking to people about ethics and listening.

Kaizen: This is around 2007?

Tropp: Yes. By 2008 we were pretty much in full swing. What happened was when I would sit people in a room and ask them about ethics and are we an ethical company and then talk a little bit about what that means. All kinds of other issues were coming up. Things that don’t fall into the area of ethics.

Problems about our computer system: “You know what? The computer system, they didn’t give us good training on it so we don’t know how to use it,” or, “We don’t have good vacation,” or, “Our vacation packages are confusing. They’re difficult to deal with,” or, “My supervisor is incredibly rude to the other employees and that shouldn’t be.” These things were surfacing in these meetings in the offices. I would go back and sit down with Pat and say, “Here’s what’s going on out there.” It was intriguing because communication in a big company—vertical communication—is not good. There are roadblocks.

Here was an opportunity for someone representing the CEO to come and sit in the office and have people talk to me. The thing that tipped it over more than anything else was, at about that same time, we began a small backroom service operation in India to do backroom processing for various different parts of the company. That had just gotten started, and I began hearing in probably 50 to 70% of the offices people say to me, “I think it’s unethical that you’re sending jobs to India.” That’s not what we were doing. We weren’t sending jobs to India. We were enhancing the work that folks could do to raise the level of what they were doing, taking that processing stuff off their hands. As I would come back and share that with Pat, he would say, “Really? Unethical?” Yeah. What that told us was that it wasn’t being communicated properly.

Kaizen: It’s an optics issue.

Tropp: Yeah. All of a sudden, the things I was hearing in the field went way beyond what we originally thought they would.

Kaizen: May I interrupt you? In 2007 and 2008, you’re feeling your way around what the position might be, and what you’re doing is a lot of listening.  You don’t have a top-down agenda for how you’re going to do ethics. You’re exploring the territory, seeing what kinds of issues there are.

Tropp: Yeah.

Kaizen: That’s interesting.

Tropp: The job began to form itself. The first thing we realized was that people would talk to me when I went out. There are several reasons why they would. Number one, I’m not a hired person to talk to. Number two, I was coming from the Chairman’s office, so people figured this is a guy you better talk to because it’s getting straight to the top of the company. We determined this is valuable to have someone out there, and not just some person buried in the HR Department. Someone from the Chairman’s Office coming in and saying to people, “I want to hear what we’re doing well but I also want to hear what we’re doing poorly.” An interesting thing began to happen. The company was half the size of what it is now.

Word spreads quickly in companies no matter how big they are. I would go to an office in the early years and people would say, “Well, this is a real problem for us. Is there any way we can get this fixed?” I would say, “Let me look into it.” Two weeks later, it was fixed.

Kaizen: You’re an expediter.

Tropp: That’s right. Now, I’m scheduled to go to an office in Oklahoma City. Someone in Oklahoma City talks to someone in Boston who will say, “He’s coming out? Hey, when he was here, he fixed that problem for us in two weeks.” “Really?” Now, all of a sudden, credibility begins to build. Then you get a little bit of a backlash from certain managers who say, “Wait a minute. He’s coming in here and stirring up dust.”

Kaizen: A turf issue.

Tropp: Yes. As a matter of fact, I am coming in to disturb dust. If you don’t like it, call Pat. It began to build on its own.

The next thing we did was to try to see what other companies were doing. I started looking out to see what’s out there, resources that are out there, and began to find different organizations that were studying and publishing in the subject of corporate ethics. Your own Kaizen here, good example—Boston College for Corporate Citizenship, big resource—the Ethisphere Institute.

As I found these other outside organizations and began listening to them and reading their material, it did became obvious that we could do more in the business community than we were doing to reinforce what we were doing in-house.

Kaizen: The position was evolving. Initially you said that a lot of the stuff wasn’t necessarily ethics-related. It was computer system training, the vacation package, and so forth. The position you ended up creating was partly business ethics but also sounds a bit like cultural builder or troubleshooter.

Tropp: It’s an ombudsman. One of the questions on the Ethisphere survey that we complete every year, asks is: Do you have a corporate ombudsman? They always answer that “No, but yes” because we don’t use that title but it’s basically what I do.

I’ll give an example of this still moving forward from 10 years ago. We have an 800 number that employees can call and make anonymous ethics reports. We got about half-a-dozen calls a year in the beginning. After 10 years of doing this, I get somewhere between 20 to 30 contacts from people around the world every week.

Kaizen: Email?

Tropp: Emails from somebody. Emails that say, “Tom, you were here six months ago. You said if we have an issue, we could contact you. Here’s something I’m dealing with and I don’t think it’s fair the way I’m being treated.” When I’m in offices, I always tell people, “Anybody can contact me at anytime on any subject, and there’d be no political fallout. If you want it to be confidential, it will remain confidential.”

Maybe half of the contacts I am asked to please keep this confidential. Don’t tell anybody I talked to you but this particular manager is being rude to his employees. That’s something that then we need to look into. Someone says, “I have a very specific complaint about this, and it’s me and I don’t think I’m being treated fairly.” That’s something that I will go back to the person and say, “May I carry this further for you with your name on it?” They’ll typically say yeah, and then we get involved. If there’s something illegal going on, I bring in the compliance people. If it’s not an illegal thing, I may talk to the HR people in that area and try to orchestrate a solution to the thing.

Kaizen: Maybe a natural question here would be to say why is it not then just already handled through, say, the legal department if it’s a compliance issue or through the HR department if it’s a culture issue and so forth? They also get stuff directly?

Tropp: Very often it comes to me because the people don’t know who else to go to, and they know me because they’ve met me in their office and I’ve invited them to contact me. They will contact me and say, “This is a problem we’re having.” I’ll go back to them and say, “Look that particular issue, we need to talk to HR about this. May I have permission to bring this to them?” I will then bring it to the HR people and then step out.

If it’s a legal issue, we’ve had several examples just recently of something going on in the field that an employee or an outside third party will contact me. I had a contact from a competitive broker not long ago who said to me, “You’re the Chief Ethics Officer for Gallagher and your sales people here are selling a product that I invented, and they’re infringing on my rights there. They shouldn’t be doing that because it’s my product.” That’s clearly a legal issue so, in that particular case, I brought in our general council or head council, but I also then brought in the legal counsel from the country where that was taking place and monitored it as they dealt with it. When it was resolved, I stepped out of it obviously. It’s almost like being an air traffic controller in many ways, bringing concerns and sending them to the right department.

Kaizen: Routing and re-routing and so forth. It sounds like after a couple of years of exploring and lots of conversations and travel and meeting with people, you then formalized what is your current position. Explain to me the organizational structure at Gallagher and why you decided to have your position be positioned where it is.

Tropp: Well, one of the problems that I perceived in dealing with these outside organizations and how they handle ethics is the confusion between thinking that ethics and compliance are the same thing, and they’re not. They’re different. Compliance tells us what we must to. Ethics tells us what we should do. Very often, every complaint that would come in would go to the legal department in companies. It’s not that way in our company now, but I’m sure at some point in time it was because they assume that’s how it should be. If there is nothing illegal going on, the legal department should step back and say, “That’s okay. There’s nothing illegal about that.”

Kaizen: Discretion.

Tropp: Yes, or refer it over to the HR Department. The most popular thing and most consistent thing that becomes the crossover is a difficult manager—a manager who’s being difficult with people, rude to employees, insulting to employees, or those types of things. Is that a sexual harassment claim, in which case goes to legal department? Or is this someone who just needs some counseling as to how to be a better manager? That’s HR.

All those things in these other companies were going to the legal department and maybe to HR. No one exclusively looked at the concept of culture and values and the atmosphere at our company. What is our reputation in the market place? What do our competitors think about us? Do they respect us? That’s ethics. That’s a cultural thing. It’s a different layer.

Kaizen: We distinguish ethics from compliance. Compliance is just the law. It’s the things that you have to do. Ethics is broader and you are forming it into culture. Is there a distinction between ethics and culture?

Tropp: I think your culture demonstrates your ethics.

Kaizen: Culture is the embodiment of your ethics and your values?

Tropp: I think so. The type of company you are comes from your ethical stance. It’s demonstrated to people when they see your culture. What’s the feel when you walk into an office? What’s the feel when you work there? Is it a place that has a positive feel or a negative feel?

Kaizen: Companies make a commitment or not to follow the law, but you also want to create your own particular company with your goals, your values, and your kind of corporate culture. You mentioned, I think, a 25-point list for the Gallagher Way that identifies the key values of Gallagher. What is unique about that?

Tropp: You know, a lot of companies have these statements of values. If you look on their website, they all have statements of value. The thing that’s unique about the Gallagher Way, first of all, is that it’s specific. There are 25 items or tenets in the Gallagher Way, and it’s not all based on what we would call ethical issues. Number one in the Gallagher Way is we are a sales and marketing company. That’s what we do for a living. Number two is respect for each other.

Kaizen: Purpose or mission statement.

Tropp: Yeah. One of the tenets talks about giving absolute, great value to our customer. The customer is important, the person we must serve with excellence. They’re business goals and cultural goals. Empathy for the other person is not a weakness. That’s a cultural thing. That’s got nothing to do with the correct way to do business but certainly enhances business. The unique thing about the Gallagher Way is, first of all, it’s been around since 1984. Not one word has changed in the document since it was written … I take that back. One word was changed.

It was written in 1984. Somewhere in 1989 or ’90, Bob Gallagher, who was the son of one of the founders of the company, had a very smart executive assistant who walked into his office one day and said, “Bob, number seven in the Gallagher Way says ‘Empathy for the other guy is not a weakness.’ It’s better to say person.” That word changed. That was the only one, but it’s been around in its exact form since 1984.

The second thing is that it’s so broad. It covers many different things, not just what we would call basic values. Then, another other thing is it so successfully permeates the company. It hangs around every office everywhere in the world and, literally, every one of our 25,000 employees knows about it and could probably quote four or five of them. We use it all the time. We actually use it to run the company so that makes it a little different.

Kaizen: Of the 25, if you set aside the ones that are about business purpose and general mission statement. In your judgment, what would be, say, the top three ethical values?

Tropp: I think, number two, which talks about respecting each other and respecting each other’s capability is critically important.

Kaizen: “Each other” means what?

Tropp: Internally.

Kaizen: Internal organization.

Tropp: Yeah. Then, the one that I just mentioned, empathy for the other person is not a weakness, is critically important. Our people know that they can worry about each other. They know that we will reinforce that. If an employee has an issue, personal issue, other people will worry about that person and will care for that person, and we will reinforce that and support it. There’s another one that says ‘Never ask someone to do something you wouldn’t do yourself.’ I think it’s a simple statement but it says a great deal.

Kaizen: An integrity point.

Tropp: Yeah. If you read it, first of all, the grammar isn’t perfect. It was written by a guy who was a relatively simple man, who was pouring out his heart about the company that he and his brother created taking over from their father. When you read it, it reads that way. It’s just real. You know a journalist didn’t write it. There are grammar errors. The spelling is all correct, although my understanding is that initially there were a lot of misspelled words that they fixed.

Kaizen: Sure. An issue that sometimes comes up is corporate ethics statements can be ineffective. Even if they are not just meant to be pretty words on a web page but taken seriously, there’s a challenge of actually making a working donkey but making it a part of the culture. How, at Gallagher, do you take the words on a page and make it heart of the fabric of the culture?

Tropp: Well, it’s interesting. I like to say we use it to run the company, and we do. People chuckle at that. Sometimes they’ll say, “Well, it’s a cute document to hang on the wall, but you can’t run a five-billion dollar, publicly-traded, global corporation on that basis.” They’re wrong. We do. Actually, there’s not a decision that’s made by our executive team in that company unless that document is lying on the table. When people are told to execute a project, they are told to not violate that document.

I will get emails from employees who say, “Listen, number such and such in the Gallagher Way says this. I’m here to tell you we’re not doing that in this office.” Whoa! That’s a big deal. We jump about that. When people are arguing their position on something, if there’s a disagreement on whether to go this way or that way, you will hear them quoting the Gallagher Way.

They’ll say, “You can’t do that because number 17 says … ”

Kaizen: Also, when you have the arguments, the respect principle will then say we will argue respectfully.

Tropp: Yeah.

Kaizen: That will solve some problems. The empathy issue, that’s hard. Do you have examples of how you would, from a top-down document, get out to thousands of people around the world that empathy is a value and this is what it means?

Tropp: You have to work at that. You can’t just assume people are going to understand. First of all, top management has to buy into it, and there’s a selection process for top management. Most of the people that are running the company we promote from within the company. We generally don’t go outside to bring someone in unless it’s a very unique skill that we need, an attorney or IT people, that type of thing. But general management is usually promoted from within, so we know these people.

They get promoted because they buy into the culture and that field, but it’s very difficult. Empathy is a classic example of that. Just because we are all in the senior management and just because we all are conscious of being empathetic, doesn’t mean other people will understand it so you must reinforce it and demonstrate it. For example, we’re not always able to find this out but when we know that an employee’s spouse has passed away, the way we find out typically is they will make a claim under the Life Insurance with the Human Resource Department. HR Department is instructed whenever you hear of an employee who loses an immediate family member, a child or a spouse or whatever, to notify me that that has happened. Typically, I’ll send a letter or an email to the employee saying, “So sorry to hear about this. What can we do for you?” Pat Gallagher, our Chairman and CEO, sends a letter to the person, and in some cases, will call. We don’t always hear about this until sometimes three or four weeks later or a month later. If it’s later we’ll call. You don’t want to call the day after the lady’s husband died but a month later, we’ll call and say, “Hey, this is Tom Tropp calling from the headquarters. I know your husband passed away last month. How are you doing? Is there anything we can do for you? Is everything processing through okay?” The word spreads quickly when that happens. Now people get the idea. These people really care about me. It takes work to find this stuff out, but when an employee has a serious illness, same thing.

Kaizen: You mentioned to me one special case.

Tropp: Yeah. We had an employee, a 35-year old single mom with two children who was diagnosed with breast cancer. The treatment was going to be every other Monday. She would have to go in for chemotherapy and radiation. She would recover on Tuesday and then be back at work Wednesday, Thursday, and Friday. She could not afford to go on disability and had to get her full salary, so she sat down with our branch manager and said, “Is there anything we can do here?”

The branch manager didn’t know what to do so he made another appointment with her. In the meanwhile, he called up to the home office and talked to the HR people. The response he got was, “Why are you calling me with this? Can’t you work this out yourself there to help her?” He said, “Well, I don’t know how to do that.” The answer was, “Treat her whatever way you would treat her if she were your sister.” They worked it out. He sat down with her and worked out an arrangement.

Kaizen: Like she’s your sister.

Tropp: Yes. Assume she’s like your sister. They worked out an arrangement. She was going to work Saturdays to keep herself on schedule and a little shorter lunch hour and catch up. They agreed.

Kaizen: She was very proactive.

Tropp: Yeah, she was looking for solution. It turned out, during first week she was out she was out on Monday, and on Tuesday she stayed home recovered. Wednesday morning she came in, sat down at her desk, and all of her work was done. Her inbox was empty. All of her suspense list was finished. There was just one pink rose lying across her desk. Her fellow employees had come in early, stayed late, skipped lunch, and gotten all of her work done. That went on for six months. Every other week when she did that there was a pink rose, and no one would tell her who did it. It was obviously the whole office who’ was pitching in and helping her. That’s empathy, and it was supported and celebrated by us.

Kaizen: That story spreads around the culture.

Tropp: Absolutely.

Kaizen: That’s how you build a culture.

Tropp: Yes. When I tell that story in a branch office, almost without exception, the people will say, “Oh, that happened here. So and so had this happen to him. Yeah, we all just pitched in and helped.” When a top executive says, “That’s good. I’m glad you did that.” That means it’s okay to do it and you can keep doing it. If someday, someone wants to do that and a branch manager says, “Well, you can’t do that.” “Wait a minute! They did it here. They did it there. Besides, Tom Tropp said you could do that.” It just reinforces it.

Kaizen: Gallagher has grown significantly in the last ten years. You mentioned a lot of mergers and acquisitions. When you’re doing your due diligence ahead of time, you said you only acquire firms that you think you can change or make fit your sense of ethics and culture? How does that go?

Tropp: We’re very, very cautious. We very cautiously guard our culture. We walk away from five or six deals every month and not because the numbers aren’t good. We don’t even look at them if the numbers are good but the culture doesn’t fit. When our folks in the due diligence teams go in there, they pick up anything at all that they feel would be a problem.

Kaizen: What would be a problem?

Tropp: Well, the attitude in the office, a surly manager, employees who are obviously unhappy and complaining about things, certainly any sort of favoritism being shown to certain people and others. You don’t always see this in the due diligence, but if it’s prevalent you will pick it up in the due diligence. When that happens they put a hold on things, and they will ask a senior person in the region or beyond to come in and spend time in the office. They’ll go to dinner with the manager or with the owners, and spend a little time in the office, and, if they feel like this is not working, they’ll walk away.

Now, the other thing that happens is reputation in the field. The merger people, they bring us a new merger, say this is the one that we’re interested in and they are interested in talking to us. One of the first things we do is research that firm. It’s not hard to do. You call a few of the insurance companies and ask questions about that particular brokerage firm. You start to hear things about their reputation. If their reputation is negative, we’ll say no, we’re not interested.

If we do walk away from one after we’ve gotten into due diligence, which we’ve done, we tell them why we’re walking away. We say, “Look, we’re looking at your employee absentee. Your employee turnover is huge. You got 35% turnover in your staff. We see that as a potential problem.” There may be three or four things like that, say, “Because of these things, we really are not interested in proceeding at this point. However, if you can fix those, come on back to us and then we’ll see if we can talk about it.” From time to time, we get people to come back to us. They’ll say, “Hey, we talked to you guys three years ago. We had this, this, and this problem. We think we fixed them.”

Kaizen: It’s cultural consulting for them.

Tropp: Exactly, or you see things like their sales expense is way high off the charts. Well, what’s that mean? That means they’re probably taking people to the beach or to play golf, and they’re spending money on things that we don’t value. If we see those signals, we’re going to walk away or at least going to question them.

Kaizen: The way you do ethics at Gallagher, with your position reporting directly to CEO and the Chairman of the Board and no one reports to you and the autonomy that you have, to what extent is that unique to you as an individual, Tom Tropp, and to Pat Gallagher, who’s the Chairman? If, for example, you were to try to convince other organizations that they should do things this way, what things would you say? It’s not just your personal values that works for you, that this really is a valuable way to do ethics in any business.

Tropp: We’re in business to make a profit, and all companies, unless you’re a 501(c)(3), are in business to make a profit. That’s critically important. We believe that our margin has to be at a very specific point. If our margin gets too low our stock price goes down, and we could be gobbled up by somebody. If our margin gets too high, if we’re making too much profit, it means we’re squeezing somewhere in area that we shouldn’t be squeezing. The right margin for us to be at is somewhere between 25 to 28 points. That’s about where we should be. If, all of a sudden, we see ourselves at 35 to 40 points, something’s going on that isn’t right.

We’re in business to make a profit within that range. We believe that part of the reason that our stock price is as high as it is relative to earnings is the fact that we have a unique culture. Our culture didn’t start because of the arrangement we have with ethics but it is certainly reinforced, and it’s recognized outside the company as being a company of high integrity. The system we have clearly enhances that.

The fact that we’ve got someone who is completely independent of all departments and all divisions and yet reports to the highest authority of the company and has the ability to draw resources from any of those sources, puts us in a whole different position for transparency, for looking for issues and solving issues. It’s just a very effective way to do it. As I speak and interact with other companies on this, more and more companies are starting to say, “Well, that seems to make sense.” We know that because in many cases they’ve called and said, “Hey, Tom. I know you’re doing this. We’d like to, at least, look into setting up this way. Could you give us some time for that?”

Kaizen: Nice. I’ve got two more questions, one for you personally. Out of that long, successful business career, you mentioned you sold your business 10 years ago. Presumably you could have retired and done whatever it is that you like to do, but you are now, 10 years later, still working hard and circumnavigating the globe a couple of times a year. I know you enjoy the travel right up to a certain point and you enjoy the insurance business, but what’s motivating you to work so hard on this?

Tropp: I don’t look at it as work in the sense that I’m not building a career. I’m not building a business. I’m doing something that I enjoy doing, and I love doing it, and I believe I’m making a contribution. When I sold the company to Gallagher 10 years ago, it I hadn’t moved into the role that I’m doing working for Pat, I probably would have stayed a couple of years and then would have retired and done something else. My thinking initially was that, after I finished the Masters in ’07, I was going to then finish the couple of years with Gallagher and then go back to Chicago and do my Ph.D. and teach. That would’ve been fine; I would’ve enjoyed that. I would’ve loved it, but this is so rewarding and so satisfying.

I just came back from Australia as I mentioned to you, and I received an email. I get a lot of emails after I’ve been at offices, but this was one was just so sweet. This is from a manager in an office. “Hi, Tom. Again, it was great to spend quality time with you last week. I would like to thank you for leaving such a positive vibe in the office. Post your meeting, I sat down with each section of the business to seek feedback on your visit and to encourage any concerns to be raised. I got 100% amazing feedback on how normal and approachable and natural you are in the way you interacted and spoke with the team, et cetera.” I get these all the time.

Once in a while, I forward it to Pat Gallagher and say, “Hey, man, look at this. It was fun.” He actually saves them in a file and, every once in a while at a board meeting, he’ll bring a couple of these in. He’ll say, “Alright, let me just read you a few … ” Because the board says, “You spend a lot of money on this project. Are you really getting results?” He says, “Let me read you a few of these emails.” They’re just very, very sweet emails. That was a manager of an office. Someone sitting in a work station talking to insurance companies all day will say, “I’ve never felt as good about our company as I do now after you were here.” When you get that type of feedback on a regular basis, that’s a nice stroke. It makes it worthwhile.

Kaizen: Last question. We focus a lot here on students, undergraduate and graduate as well. Soon they’ll be starting out in their business career. You’ve just spoken about what has made your work in the last 10 years meaningful or worthwhile to you. To younger people who are just starting out, who don’t have a sense for what’s going to happen over the next 30, 40, 50 years for them but they want their business career to be significant, what advice would you give to them on how to approach that?

Tropp: My advice is completely out of date with what people are doing now, but I’m still absolutely convinced that it’s the right way to approach a career. I believe you should find a company that you … First of all, you should do something that you love if you possibly can. Then, people say, “Well, I don’t know. I love to play golf, but I’m not going to make it in the PGA.” That’s fine.

I give young people a couple pieces of advice because we have big intern program, and these kids ask me these questions. I say, “The first thing I want you to do is I want you to take a little notebook and a pen, and I want you to put it on the nightstand next to your bed. Every morning for ten days when you wake up think, if I could have any job at all today, what would it be—any job at all? I don’t care what the education requirement is. It could be a brain surgeon or a space pilot or whatever it is. If you could have any job at all what would it be? When you’ve made that decision, get up and write it down in the notebook. Close the notebook. Forget about it. Do that for ten days in a row. Then, go back and read the notebook and think about every day. Was there any consistency? Find something that, even if you don’t have a passion for it, you can develop a passion for it.”

When I was in that position, I had Vietnam to worry about. I didn’t have any option but to go get a job. Then, pick a company whose values you can trust. And how do you find that out? Well, two ways. The first thing you do is research the company before you go to the interview. If you’ve gotten an interview with a company, get on the internet and research that company. Look at Glassdoor. Find out what the employees are saying. Now, that’s going to be all be negative, so you got to be careful with that, but find out what the things are.

Look on their website. Read their corporate governance page. Do they talk about ethics? Do they talk about values? Do they say people are important to us? Then, in the interview, ask more questions than they do. Ask them about those things say, “I read on your website that people are your most important asset. What does that mean?” Listen to their answer and then when you pick a good company, and you will know this quickly after you go to work for them, and you have confidence in them, work for them for the rest of your life. Don’t move. Stay there. Grow in the company.

This moving from company to company, it changes your approach to your job. It makes you more important than the job because what you’re saying is it doesn’t matter what I built up here. I could go over there and I could move a step up. I’m there for a couple of years, and then I can move over to this company. Be consistent. Stay with a good company and work for it. We are retiring people today from our company. We retired not long ago a woman who had worked for us for 40 years as a receptionist.

Now, receptionists don’t make a lot of money, right? She worked for us for over 40 years as a receptionist. I won’t tell you the city she was in, but it was in the Midwest. She retired with well over a million dollars in savings between her 401(k) and company stock. She got into our stock-buying program through the years, she retired with over a million dollars, and she had never made more than $40,000 a year. She was long-term and consistent. She’s the sweetest lady. About twice a year I get a postcard from this lady. Nobody sends postcards anymore. She does.

She’s 70-some years old. I used to get postcards from her. She’s a widow, her sister’s also a widow, and they’re traveling the world. I get a postcard saying, “Dear Mr. Tropp,” she won’t call me Tom. “Dear Mr. Tropp, I’m having a wonderful time in Paris.” Then, the second sentence is always the same. “Still have a whole bunch of money left.” She signs it.

Kaizen: Charming.

Tropp: Yeah. Have long-term loyalty to a company if it’s good company. That’s the way to go.

Kaizen: That fits your values.

Tropp: Yeah. I really believe that.

Kaizen: Alright, thanks.

Tropp: Thank you. This was fun.

This interview was conducted for Kaizen by Stephen Hicks.

Interview with Roberto Salinas-León on Entrepreneurship in Mexico

Thursday, September 28th, 2017

[This is the full interview with Roberto Salinas-León which was published in our Kaizen newsletter.]

Roberto Salinas-León on Entrepreneurship in Mexico

Kaizen: To start, tell us about your schooling, please. Did you grow up in Mexico City?

Roberto Salinas-León: Yes, in Mexico City. I went to high school here and studied under a British system at a school called Green Gates, which still exists. It’s a very fine school.

Kaizen: What do you mean by the British system?

Salinas-León: Very challenging from an academic standpoint, with great teachers. O-levels and A-levels. When I graduated I was uncertain as to what I wanted to do. In my junior year my father interested me in the philosophy of freedom. The first book he gave me was The Epistemological Problems of Economics by Ludwig von Mises, and to this day I have yet to understand most of it.

Kaizen: Is there a business background in your family?

Salinas-León: Strong business background. We’re from Monterrey originally. My grandfather became a very important figure in Mexican business. He was basically the man who introduced popular retail here in Mexico through a chain store called Salinas y Rocha, with the Salinas and Rocha families.

He also happened to be interested in Austrian economics and philosophy, and he financed a center that was copied straight from Leonard Read’s Foundation for Economic Education. My father also became involved, as did my uncle, and they were able to discover an intellectual called Agustin Navarro Vasquez who was the equivalent of Manuel Ayau from Guatemala. He was close friends with Manuel Ayau and had the dream of establishing a university of freedom here in Mexico.

He was a very brave man—he ran a series of almost-secret seminars, because it was very unpopular in the late 70s and early 80s to be talking about these ideas when the banks were nationalized.

Kaizen: How repressed was the political environment then?

Salinas-León: It was the perfect dictatorship, because it was repression without seeming to be so—an indirect and sophisticated form of repression. If you said anything against the president or something they didn’t like, it could be anything from a tax audit—to being kidnapped for three days without knowing why—to outright violence.

Kaizen: So the political “Keep quiet” message would be sent.

You said your family was originally in Monterrey but you’re now located in Mexico City.

Salinas-León: My grandfather came to close one of the stores that was not doing well in Mexico City. Instead of closing it, he started opening a bunch more. He had  an out-of-the-box entrepreneurial spirit. Like I said, the idea of selling household goods to the popular levels of society seemed counterintuitive, but he was able to discover an important niche.

Kaizen: Let’s return to you. As a teenager, you had come from a family that was very intellectual and had a business background as well. Was your idea to go into the business?

Salinas-León: I had no idea. Originally I wanted to study Geography or History. My education was then geared toward the liberal arts. I didn’t want to leave Mexico, but I also wanted to enjoy the opportunities the USA afforded, or perhaps stay one more year and apply to a university in Britain. I didn’t do badly in my advanced level examinations.

I ended up applying only to two places, one of them because of my father’s  insistence. One was Hillsdale College in Michigan and the other was Colorado College in Boulder, and I got accepted to both. I wanted to go to Colorado, which was an outstanding school. My father wanted me to go to Hillsdale. He said to give Hillsdale one year, and if you don’t like it you can go to Colorado or come back to Mexico.

So I went to Hillsdale in 1979, wanting to study Austrian economics and political economy. Actually at that time Hillsdale was going through a slump in the economics department. A lot of turnaround but the lecture series was unbelievable. The only time I ever heard Tom Sowell speak was at Hillsdale. I was two weeks into my freshman year when I heard Bill Buckley debate Jesse Jackson on the Palestinian issue.

Kaizen: Wow, so it was a happening place in many respects.

Salinas-León: Oh my goodness. I got to see and meet Leonard Read. I stayed at Hillsdale not because of the Economics program but because their liberal arts program back then was spectacular. Their History program and Political Science program was taught by former students of Leo Strauss, so we learned politics through literature. Instead of James Q. Wilson’s American Government it was reading Shakespeare and Plato at the freshman level. Very challenging. And of course the teacher-to-student ratio was terrific. I was very much into studying and academic performance.

By my sophomore year the cultural shock had waned, and I became very fond of the institution. In my junior year I applied to the Washington Hillsdale Internship program. So in the winter of 1982 I went to work in Washington for six months as a part of my college credit with none other than Ron Paul, who back then was a freshman congressman. I met Rand Paul when he was just a teenager. It was a small office so it was terrific. I met Roger Ream, who was my actual boss. And I remember listening to Ron Paul having conversation with Friedrich Hayek and Henry Hazlitt and with the people at FEE. And for me this was a tremendous eye-opener.

This was the time of the Gold Commission in Washington, so I got to meet people involved in monetary policy when the Cato Institute first started its monetary policy seminars. It was an unbelievable experience to become involved with all of these institutions and the networking. This was during the Reagan years, which was a very exciting time to be in Washington. And I graduated in 1983.

Kaizen: So you had a solid liberal arts background, but you kept up your interest in monetary economics and broader economic policy?

Salinas-León: It was a degree in Political Economy and History. In my senior year I became very involved in Philosophy. I had the benefit of having a very good teacher.

Kaizen: You got your Ph.D. in Philosophy from Purdue University, Indiana.

Salinas-León: That was also an unusual episode. I wanted to go to law school, but I was never good at standardized testing. And despite having an excellent academic record, some of my targets did not accept me or put me on a waiting list. I thought I would give myself a chance since I was already involved in Philosophy. I got a scholarship at Vanderbilt and a scholarship at Purdue, which had a very unusual faculty. Purdue also had the benefit of being close to Hillsdale. I thought I would be able to still come back and forth during the weekends, but I later found out that was impossible with the academic load that they gave me.

Purdue then, and I believe still now, was a very unusual place because they had a young and upcoming faculty and they had outstanding Analytical philosophers and outstanding Continental philosophers. And the best part was that they actually got together. There was a camaraderie and a spirit of exchange. I ended up writing papers on Quine and Gadamer on the indeterminacy of translation. So it was a lovely place to be in. I had a professor that was a professed Sartraen Marxist, who gave a seminar on Rawls, Nozick, and Rorty. Rawls was accused of being a horrendous, ultra-right, capitalist pig, so I couldn’t imagine what I would do if I defended Mill  again. I just kept quiet. But people knew about my classical liberal background and my strong libertarian leanings back then, and I guess they were tolerated.

Purdue also had the great benefit that part of your training was not just to be a teaching assistant. After the first year, they assigned you an outright class. You were an instructor and part of the faculty, and you got paid as a part of the faculty as a graduate instructor. And my supervisors could walk into my class unannounced, so they kept us in check and I couldn’t just drivel my way out of a class.

Kaizen: So you were working hard on your teaching skills and getting a first-rate philosophy education?

Salinas-León: Yes. I had some phenomenal teachers.

Kaizen: Was your motivation just an interest in philosophy?

Salinas-León: I wanted to get a Masters and go back to law school. I was pursuing an interest. This was the time that Kripke had just shocked the world with Naming and Necessity, and there were these new theories and breakthroughs in semantics and philosophy of language. I became immersed and obsessed with these topics. And then later when I had to take Continental philosophy, my biases were quickly stripped away because I had such remarkable teachers who taught Heidegger and Sartre and Gadamer. And so it was a tremendous eye-opener. And I became obsessed with the topics. I wasn’t specializing though. I would go from one topic to another and sort of dance around. One semester it was the ontological arguments, another semester is was Rorty and Philosophy and the Mirror of Nature, and another semester it was postmodernism and its impact.

Kaizen: So you wound up getting a comprehensive education?

Salinas-León: It was like a liberal arts education. I applied to law school. I was accepted to Georgetown and George Mason, but I wanted to go to Texas because my family and my buddies were in Texas. After my Masters I was burned out. This was 1985.

Kaizen: So you had a Masters from Purdue at this point?

Salinas-León: Yes. At Purdue they were not happy that I had left. I went to law school in Texas. I was going to do one year at St. Mary’s Law School and then transfer to the University of Texas Law School, but my heart was not in it.

By a very unfortunate coincidence, this was the year of the Mexican earthquake in 1985. I went back home. I missed two weeks of law school, and I thought I might as well get my tuition back because there’s no way I was going to recover from missing two weeks. And so I took a year off and worked for my father. Purdue found out and called and said to come back. You’ll be 27 by the time you finish your Ph.D. You can still go to law school after that. I didn’t want to go back, and my parents actually sat me down and told me to go back and finish. And so I did, and again I did the same thing. I got involved in liberalism versus communitarianism, and I ended up staying only two years. I was offered an extra year, but by this time I was already published in journals.

Kaizen: What happens after the Ph.D.? Did you return to Mexico?

Salinas-León: When I finished I had not written my thesis, and I was offered another year to stay 1988-89 at Purdue and continue teaching. I would get help polishing some of my papers to try and get them published. I was given the red-carpet treatment.

At that time I was teaching critical thinking—basically logic—and the one class I had tremendous difficulty with was advanced symbolic logic. It’s curious that I had troubles taking the LSAT, and I wound up giving classes on how to take the LSAT because of the background in critical thinking. At that point I used to talk to my father about this idea that everyone would say there is nothing you can do with a Philosophy degree. Well, first of all, I would do what I wanted with it. I wanted to write papers on Kant and Hume and Rorty and naturalized epistemology or whatever. And I bet you that I could find a job in Mexico as a teacher in a Philosophy department.

And at that time Luis Pazos, probably the most important classical liberal in Mexico, had become a superstar because of his predictions about what would happen if you nationalized the banks and controlled the exchange rate and printed money. All of those catastrophes came true, and he became a source of wisdom. And he was an absolutely incredible communicator. He was the envy of many professional economists. The called him a supermarket economist because he is. That’s a title that I’m very honored to be known as. His retailing skills were amazing and still are. He had a think tank in Mexico, the Center for Free Enterprise Research, and he desperately needed someone to take the academic program and revamp and renew it and begin to do new things. So my grandfather and my father called me and asked me to come home. I hadn’t finished my thesis yet, but they said I should finish it in here in Mexico. So I went back just at the time that the Salinas de Gortari administration is coming into power, and instead of talking about nationalizing industries they were talking about privatizing industries. And instead of talking about regulating industries, they were talking about deregulation. And instead of protectionism, they were talking about NAFTA and free trade. I wasn’t prepared in economics at the time. I was a quick study, and I had to reread some of the stuff I read before and read all of the ideas on liberty and Friedman and all of the literature that was out there. But because the tide in Mexico turned, I quickly became very involved with the global think tank community—with the Universidad Francisco Marroquín, the Heritage Foundation in the United States, the Cato Institute, the American Enterprise Institute, and the Council for the Americas in New York.

But you won’t believe that what marked my difference was that I grew up bilingual. I was the only one at the institute with command of the English language. So NAFTA comes along and CNN and Time wanted interviews, and I was the guy. So my name started getting quoted in all these places, and I started getting all these interesting invitations to lecture in Dallas and Washington. It was a steep learning curve. With Cato I developed a phenomenal relationship with my dear friend Ed Crane, who has been an unbelievable supporter throughout the years. When Ian Vasquez came to work at the Cato Institute his very first job was to coordinate a massive conference that Cato and our center was putting together in Mexico City, and this was the last time Milton Friedman spoke in Mexico City. It was Friedman and fifty-three other outstanding scholars. The conference was called Liberty in the Americas.

Kaizen: What year was that?

Salinas-León: It was 1992. People still remember that conference.

Kaizen: So let’s pause at this moment. You had a number of strains in your upbringing and choices that you made that came together beautifully to position you for what you wound up doing after your Ph.D. What would you advise young people when they’re thinking about their education experience?

Salinas-León: I would strongly advise them not to predefine interests and to let the course of trial and error take place and learn what you like.

Kaizen: You gave us sort of a combination of advice from your parents, knowing people, following your own interests.

Salinas-León: It was very paternalistic advice. I didn’t have much choice. It was good advice, but if they were going to pay for it they wanted me to try what they wanted me to do for at least one year. And they were right. It was very good advice. But the reason for me going to Hillsdale was to learn Austrian Economics and the whole movement and the literature and what not. And actually what happened was that to me the great benefit of Hillsdale was that it had a very strong classical liberal arts program. At least two history professors were outstanding teachers. My English teacher, James King, is the best teacher I ever had.

Kaizen: The one who you learned Shakespeare from?

Salinas-León: Yes. That was the hardest class I ever took—and also the most fun class I ever took. An absolutely amazing intellectual experience. My philosophy professor was fabulous, an expert on the Parmenides of Plato. But the whole atmosphere was great. Even our accounting teacher was not mechanical. It was fun. I was very lucky to have these phenomenal teachers, and I was a very devoted student.

So my recommendation would be to try to broaden your horizons. If you want to be a doctor or a lawyer or be a professional economist, schools are going to take notice more of your broad-based background than they are of pre-law or pre-med. Broaden your horizons as much as possible. And enjoy the college experience. That’s something that perhaps I didn’t do.

I very much believe in the ancient lore that sports is an important part of your education. I told my kids that they need to engage in a sport. That’s part of their formation and their discipline.

Kaizen: Our center’s emphasis is on entrepreneurship. Is it fair to say that your advice is to have students think of their education as entrepreneurs?

Salinas-León: I would say that to be a successful entrepreneur today, you do have to have a broad scope. I have a son studying entrepreneurial science at Babson, and his focus is on managerial accounting and operations management and financial accounting and foundations of entrepreneurial sciences.

But I’ve got to say that a course on Shakespeare’s political plays can also teach you a great deal. A course on the philosophy of Lao Tzu can also teach you a great deal. Learning how to read Hume, whether or not you are a sympathizer, can also teach you a great deal because it broadens your mind.

Today’s entrepreneurial spirit has to be very out of the box and innovative. Think of the impossible. Think of the heroes of today, whether it’s Steve Jobs and the magic he created, or Elon Musk wanting to travel to Mars and everyone laughing at him. Those are the people who today are changing the world. And that requires not just an open mind but also an understanding, in my opinion, of the nature of an open society.

For instance, when studying Karl Popper at first I was adamantly opposed to his approach of scientific methodology and whatnot, but his whole idea of falsifiability that he talks about in The Logic of Scientific Discovery fits with, let’s say, Google’s fail forward philosophy. Many people think of philosophy as something that’s abstract and that you’re in another world.

Kaizen: For Popper’s abstract theory of scientific methodology, how would you summarize the falsifiability point for students who haven’t read it and connect it to the fail-forward philosophy?

Salinas-León: Well, you have an idea and the first thing you have to do is to refute it. It’s not confirm, confirm, confirm. It’s refute, refute, refute. The more I refute it, the more I learn that there was something that was flawed in my original idea, and I begin to polish it. And I refute it again, and how does it resist refutation? A business model is very much based on that philosophy.

Kaizen: Going out of your way to find a problem or flaw or weakness.

Salinas-León: It’s a problem-finding spirit. It will enhance your credibility.

Kaizen: Is this just a heuristic issue? Because we tend to come up with an idea and tend to follow up with our own ideas and then put the blinders on.

Salinas-León: I don’t think it’s just a heuristic issue. It’s both heuristic and substantive.

Kaizen: Is it about the limitations of knowledge, the fact that we don’t know very much?

Salinas-León: You have to be very humble. One speech I greatly admire was given by J.K. Rowling as a commencement address at Harvard in 2008, just before the financial crisis. It was called The Fringe Benefits of Failure. It was about failure and imagination. I think that’s what defines not just the entrepreneurial spirit, but a good part of the core of classical liberal philosophy: learning how to listen, keeping an open mind despite the idiocies and fallacies that surround us and day by day having to refute them and repeat the same old things over again—things that household mothers know better than any Ph.D. from MIT about the benefits of fiscal discipline and stability.

Kaizen: In formal education you unlearn some very good lessons.

Salinas-León: Yes, unfortunately, sometimes that happens. It’s the Keynesian pretense or the pretense of knowledge. I think Hayek’s Nobel lecture is one of the most magnificent pieces of classical liberal thought. Despite the zealotry of his other writings, I think he really caught onto something important that many classical liberals have underappreciated—the importance of a spontaneous order, little bits of knowledge lying all over the place and how they coordinate themselves. Sure you need the institutions and sure you may need the occasional helping hand and it’s good to have those debates, but the fact that there is no single mind that can amass all those bits of knowledge. I think the fatal conceit perhaps comes as too generous a characterization of that phenomenon that is so common in our politicians, whether it be Obamacare or our finance minister here in Mexico or Hugo Chavez who thinks he can erase history and start anew.

Kaizen: This highlights a difference between the way business leaders and political leaders run their organizations. Do you think it’s primarily a pretense of knowledge or a desire to control? Because if you want to control people you might pretend you know more than you do, or it might be that you actually think you do know and reluctantly think that you need to be in control.

Salinas-León: The character of a very successful businessman or businesswoman is difficult to appreciate. I think it’s a curious sociological phenomenon. Clearly you cannot contest their success. Despite the fact here in Mexico that Carlos Slim has been accused of running a monopoly, you have to appreciate his entrepreneurial genius. And he responded beautifully to incentives. The incentives of a fragile institutional framework were there, and he took advantage of them. So yeah it’s his fault, but it’s also the fault of our institutions. There’s a vicious circle here. But that doesn’t mean that being successful as a businessman or businesswoman entitles you to be the source of all wisdom and truth.

I’ve noticed this other sociological phenomenon in business leaders, and Donald Trump is the perfect example of this. All of a sudden they can talk about trade or the balance of payments or fiscal policy or even how to interpret Heidegger. There is a very strong element of hubris. You see this in Davos every year. It’s so pretentious.

Kaizen: The fatal conceit.

Salinas-León: That is the fatal conceit. You see these programs and they’re so pretentious. “We’re also experts in music and in the philosophy of life and how to take a yoga class.” Come on. The original was a semi-off-the-record exchange between leaders to contemplate what happens with the world and how we move forward.

Kaizen: What kind of conceit is it? Do you think it’s a pretense or genuinely held?

Salinas-León: Maybe a combination of the two. I think some people really believe it. Curiously enough, and you won’t believe this, but one person who denounced this was Paul Krugman. He wrote a book called Pop Internationalism before he became famous, a rock star, and was given a Nobel laureate for something he preaches against today. But in that book he even tells us that the end of trade is to import, not to export. So this whole nonsense with competitiveness he calls a dangerous obsession. And I completely agree with that. He even cited Frédéric Bastiat. If you really want to export the hell out of your nation, the easiest thing to do would be to generate a huge depression, and he has an article where he says that it’s a sorry state of affairs that businessmen think that because they can read a balance sheet, that means that entitles them to read a balance of payments or national income.

So many, like Trump today, tell us that America has a trade deficit and that’s automatically bad. Krugman himself plays with a nice idea. New York city imports everything and exports what? Entertainment, tourism, and financial services, for the sake of argument. That’s what New York does. Because of its special circumstances as a global city, if we take it out of the calculation of the balance of payments, our macroeconomics would look beautiful. People would feel a lot better even though nothing changes in the real economy. People would continue to trade the way they do every single day. I thought that was a very insightful example of how to demonstrate the miserable understanding that some business leaders show in terms of economics.

Kaizen: Even more so the politicians.

Salinas-León: Yes. And that’s not pretense. That can be genuine hubris. Even some free-market economists, Chicago trained or MIT trained. And I’m not an economist, but I do a lot of economic policy. Most people think I’m an economist here in Mexico. But in exchanges or debates I’ve been told that you can’t speak of this because you’re not an economist. My response is that I was a logic professor, and if you took a 101 logic class with me you’d get a zero for such a blatant ad hominem fallacy. Credentialism is the cheapest way to win an argument. And there’s a lot of credentialism among economists.

Kaizen: Let’s go back to the pretense of knowledge and motivation. In many cases people who express an interest in politics, and they recognize that they don’t necessarily know much about science or economics and so forth, but what attracts them is the idea of being a politician, which for them means being in control of things that are important. Do you find this also in the business sector?

Salinas-León: Yes, it happens. It’s what you may can an imperial design, wanting to micromanage every part. My grandfather was a little bit like that.

Kaizen: But he had the entrepreneurial chops to back it up to a large extent it sounds like.

Salinas-León: He did. And you didn’t have the right to question him because of his success. But there are also many others, especially younger generations of entrepreneurs in Mexico, where some of the people in the states at local levels, you would marvel at what they were able to achieve.

I almost think that Leonard Read was wrong in describing I, Pencil as a miracle because of the spontaneous order. I, Pencil continues to survive in spite of the worst institutional settings. I wrote an article about this saying that I, Pencil continues to thrive despite our labor and tax laws and our regulations that were made to extort.

You practically cannot survive in the business world today without falling prey to some form of corruption. Corruption becomes the price you pay to simply get ahead. It’s a tax.

Kaizen: Let me use that to transition to the Mexico Business Forum. You were president of that organization. What’s its function?

Salinas-León: The Mexico Business Forum was part of the Economist corporate network.

Kaizen: This is affiliated with the magazine?

Salinas-León: Yes, and the Economist Intelligence Union. I worked very closely with the Economist Intelligence Union. For thirteen years I ran their conference program here in Mexico. And the vehicle through which I ran it was the Mexico Business Forum. The corporate network before had the Estonia Business Forum, the Argentina Business Forum, and the Brazil Business Forum. In Latin America they all started dying down for different reasons. The business model was outdated. It was sort of like a corporate club. I was in television at the time doing a lot of media journalism. What I tried to do was use, let’s say, a powerful brand to open doors and plant the seed of classical liberal ideas all over the place. With the conferences we held, the president always came and the finance minister and central bank governor and all the business leaders. We got a tremendous amount of exposure. I had a chance to develop a session on simple rules for a complex world and a session on the benefits of free exchange.

Kaizen: So a certain amount of a healthy business culture has to do with political economy. It sounds like a large part of what you were doing was political economy.

Salinas-León: Back then it was political economy. Later I left the Economist. I got tired, basically.

Kaizen: So part of it is working toward a healthy political and economic environment.

Salinas-León: That was the idea, to basically use this as a vehicle to transmit ideas that would consolidate or fortify messages and themes that we wanted to permeate policy action, whether it was a flat tax being a good idea or a sound currency or central bank independence or a flexible or fixed exchange rates. We had these healthy debates and a tremendous amount of exposure.

Now, a lot of people mistakenly think that if you’re an economist that you’re a financial analyst. That’s one of the great fallacies. Many economists should learn a lot more about what traders actually do, and traders should learn more about economics. But I quietly started getting into being an investment advisor, and I found that I had a certain knack for it, especially in putting together the right team and dealing with the deal breakers. And you know what, that comes from philosophical training.  And today eight percent of my time is devoted to that. My policy and my engagement in the Association of Private Enterprise and Education and Liberty Fund and so on are very good public relations vehicles to be able to expand business opportunities. I’ve had to be a quick study and learn about finance and corporate law and tax law.

Kaizen: So you’re a Renaissance man.

Salinas-León: I don’t pretend to be, but it’s been fun. Some operations have been very successful, and some have been a disaster. There is a very steep learning curve. I can’t think that because the first three or four things I did were successful that everything I would do would turn into gold. The lesson in humility was strong, and it was not intellectual. It was financial. Ouch. You have to be a quick study.

Kaizen: So you go from high philosophical and political and economic theory to dealing with political and economic infrastructure in Mexico and abroad and then down to particular high-level financial investments, and so on.

What about grassroots entrepreneurship? Does the Business Forum talk about developing the entrepreneurial culture?

Salinas-León: Very much so. We talked about this much more in the past, especially the small-sized entrepreneur. One project I have for the future is to develop a whole series of cases and show anecdotally, not with a big theorem or whatever, why Mexico does not grow at the rate that it has the capacity to do so. We are a country that should be growing at seven or eight or nine percent a year on a sustained basis. We have that potential.

So part of the vitriol that we get from Trump and his supporters today is probably a little deserved because we haven’t done the full homework and we haven’t gone full circle. We started a program of structural reforms, but we didn’t do the second wave of reforms. You need to go back to the local property registry and make sure those titles are clear and easily available, because that’s what makes the difference between trading your property and not being able to trade it or it being caught in legal limbo.

So a deep capital market very much depends on the transparency and the reliability of your institutional framework that is governing. With banks today that is happening. Why? Because we’ve imported our laws. It’s an international banking system. We have HSBC, and this beautiful new building we’re in right now is a Spanish bank. It’s not a Mexican bank.

Kaizen: So you’re importing everything, but what about the homegrown?

Salinas-León: The homegrown still needs a lot of work. It’s gotten better, but in some places its gotten worse. I believe that Hernando de Soto with his work touched the tip of the iceberg of a much deeper and pervasive phenomenon in Mexico and in Latin America. I worked with him on the project that he launched here in Mexico ten years ago. Many of the young men and women here that go out into the streets and sell you entertainment, or if it’s raining sell you an umbrella, or if it’s September, the month that we celebrate our independence, they’ll sell you flags. Right now it’s Halloween so they’ll sell you masks of Donald Trump or Dracula or Batman or whatever. They’re extremely innovative and inventive, and they do it at the margin of the law. Even cars that park here and sell taquitos and cerveza, and in instead of going to the Four Seasons restaurant you want to come here and have a beer and a paper plate of taquitos.

But those people need light and water and police protection. The police protect them. The agent from the federal electricity commission will come and illegally make sure they have the electricity that they need. And, of course, everything is based on bribing those people. What are you doing? You’re taxing. And it’s an efficient form of taxing because you are getting the service that you’re expecting.

Now, the tragedy of an informal economy is that it’s incredibly innovative and has a tremendous entrepreneurial spirit, but it’s necessarily local. It will never expand from that immediate universe. You can’t capture economies of scale. And if you get into a dispute, you can’t have access to contracts or to the legal system. You’re always going to remain in that circle. There’s a real need, as Hume would say, for a system of justice.

Kaizen: So you say the entrepreneurial spirit and the ingenuity and the energy is there at the grassroots level, but what you need is reforms at the local political level—access to the legal system, accesses to the utilities.

Salinas-León: Something as simple as, for instance, why are the 3,800 local municipalities in Mexico the ones that have the right to issue construction permits? That’s become a medium of extortion. All of the stories that you’ve heard about Wal-Mart engaging in bribes here in Mexico are absolutely true. And it wasn’t just one, it was every single one of them. Otherwise you cannot get ahead. It’s pervasive.

Kaizen: It’s systemic corruption at the local level.

Salinas-León: It’s systemic. Construction permits should be issued by an independent and credible decentralized or non-profit organization with very specific tracking mechanisms. I know in the United States there are cities in Georgia today where you can go online and track permits like you can track a package being shipped. We need that technology in Mexico. And that’s just one example of countless examples.

There’s this program in the United States called American Horror Story. One day I’d like to publish Mexican Horror Story. And I can tell you from a real life point of view that I’ve been a victim of this in my business engagements. Time and time again the number one problem is the regulatory exchange with the powers that be.

Today I’m trying to broker deals with people wanting to come into the energy sector in Mexico because of the very ambitious, market-oriented transformation opening of the energy sector at long last. It will take many years, but the number one problem whether it’s a fund or a company or group of investors is the regulatory environment. They’re sick of it. They’re absolutely sick of it. You need to hire a first-class lawyer or somebody who is respected as a godfather-like figure that you won’t want to mess with. And, of course, he or she will charge you a large amount. That transaction cost inhibits Mexican growth.

Kaizen: It’s a lot higher than in places that have cleaned up the corruption.

Salinas-León: Like Chile, for instance.

KaizenOr Uruguay.

Salinas-León: Or Uruguay.

Argentina is another sad case in point. A friend of mine used to be the representative of a company that sells billboard advertisement. He would say that it’s amazing that there’s nothing that can get done here without a kickback or a bribe.

Kaizen: This is in Argentina?

Salinas-León: No, here in Mexico. And then he goes and lives in Argentina and he says that it’s worse here. It’s almost like it’s permeated in the system. So one policy challenge is: How do you get rid of that corruption? It’s not by pointing the finger.

Kaizen: You need case studies about how other countries have dealt with this.

Salinas-León: Not case studies but anecdotal examples. It’s happened to me, and I’d like to describe it.

Kaizen: So corruption certainly is an issue, and the regulatory environment goes hand in hand.

About Mexico’s ties to the United States: From our perspective we get a lot of entrepreneurial Mexicans who are ambitious and work hard and have good ideas. From the Mexican perspective, is that a brain drain problem?

Salinas-León: No question about it. A former partner of mine and former candidate to the presidency, Josefina Vásquez Mota, recently published twenty-four interviews with Mexicans who have crossed the border. It’s something similar to what I’d like to do with my Mexican horror stories, but hers are more positive.

Despite the odds and the hostilities and having to cross the border illegally and swim across the river and having to go through the coyote industry, which is extremely dangerous like the mafia that cross you over the border. You have the danger of suffocating in the 120-degree heat in the Arizona desert because you’re left alone inside of a truck when the coyote escapes to save his own skin. Despite all of this, there are these case studies of twenty-four Mexicans, and what would you want? You would want those people back home.

One of them took himself and the lore of his mother and grandmother’s recipes into the United States and he ended up in Chicago. I forget the details of the story, but he started off as a dishwasher. Chicago has a huge Mexican population.  Mexico City and then L.A. and then Guadalajara, and then the fourth largest Mexican populated city is Chicago. So he started off as a dishwasher and later on became a cook and discovered he has a flare for it. Years later he gets a group of investors and starts his own restaurant called Mexique, and it’s the only Mexican restaurant in the world with a one-star Michelin.

Kaizen: Wow. Nice.

Salinas-León: We have restaurants here that have one or two stars in Mexico City, but they’re not necessarily Mexican. This is the only Mexican restaurant with a Michelin star.

Another example is a man they call Dr. Q. He was basically a tomato picker who went from Mexico where he picked tomatoes to California where he picked tomatoes. Turns out that this man had an enormous knowledge of neuroscience and medicine, and today he is a globally famous expert at a hospital in San Diego where those same hands that used to pick tomatoes are now going into brains to operate and take out cancer.

Tell me, do I want that human capital in my country? We don’t need a wall. We need incentives to bring them back.

Kaizen: So the incentives go the other way. We get many of the best Mexicans.

Salinas-León: You go to New York on lower Park Avenue where a lot of the big banks are and a lot of the up and coming bankers there are Mexicans—extremely well trained, extremely hard working.

Kaizen: So they need the incentives to come back to Mexico or to not leave in the first place. That’s going to mean less crime, less corruption, and a healthier regulatory environment.

Salinas-León: Yes. I would emphasize a healthier regulatory environment. What we call derecho facilitador, derecho as in law. We need a more facilitating environment.

I love Richard Epstein’s Simple Rules for a Complex World. I think he hit it right on the mark. We tend to think of very complicated rules to try and make our lives more simple. That’s the hubris of a politician or an economist who wants to mold you and determine the future in accordance with the law. All you do is you end up making our lives miserable.

Now, crime is a different phenomenon. It definitely affects business decisions. A dear friend of mine has been very successful exploiting trade between Mexico and Canada, which by the way has gone up exponentially in the past twenty years. Canadians don’t know it, but the mangos and the flowers they buy come from ranches in Mexico. My friend has gone to all theses states that have basically been abandoned by the federal government and are fragile and have been taken over by either the cartels or by paramilitary groups that devote their lives to extorting you. Of course, all the municipal president does is steal the money from the coffers or use the permits to extort you, so their popularity is not great. So these people think of themselves as Robin Hoods.

Now, they come and they tax my friend. That’s money that could have been used for other things, but you know what, he’s still prosperous. That’s what’s so amazing about these stories. These people are still able to find a way to get ahead. At the end of the day it’s real cost reduction. You need entrepreneurial inventiveness and new technology for real cost reduction, but you also need the help of the government for real cost reduction. These people are able to do real cost reduction and remain competitive despite the setbacks of a very fragile and sometimes nonexistent institutional framework.

Kaizen: You talked about Mexicans going to the United States and Canada for business opportunities. What about business opportunities for young American and Canadian entrepreneurs coming to Mexico looking for opportunities? Do you recommend finding a local partner?

Salinas-León: Most definitely. I would say two things. Don’t listen to what you hear, and study the facts. Mexico is the second largest trading partner of the United States. Mexico is the number one supplier of auto parts to the United States in the world. Mexico trades more with the United States than Germany, Britain, and Japan put together. You can’t treat your second largest trading partner the way that Donald Trump wants to treat us. That’s just bad business. Probably the NFL would have to be abolished because NFL helmets are produced here in Mexico.

And instead of thinking of North America as three different countries, think of it as one integrated zone. That’s what NAFTA was supposed to be like. We could have an integrated energy corridor that today could supply the rest of the world energy for the next 150 years. Mexico is not just in oil. We have vast potential in shale gas. We don’t have the technology and we don’t have the resources and investment, but at least now we have the open regime that can invite that type of investment. Ford has this remarkable establishment in Mexico, one of the best Ford plants in the world. They depend on the intellectual knowledge that they get from Detroit and even from Windsor, Canada, so it’s going to affect the entire supply chain. You’re going to kill the entire supply chain.

So that mentality of integration eventually has to expand to all factors of production. It would be much more intelligent than calling us rapists and wanting to build a wall to think of a legal framework and forge cultural partnerships. We need leadership for that.

Now, you need to understand that there is this very close tie between the United States and Mexico vis-à-vis trade. It’s a vast amount of trade. Mexico exports one billion dollars of manufactured goods to the United States per day.  That’s more than China. And that involves a lot of transportation. So instead of having all of these bottlenecks at the border we should be thinking of bridges and technologies that could supervise and track the trucks and whether they are misbehaving or not.

Kaizen: So, in addition to all the market entrepreneurs, we need some healthy political entrepreneurs.

Salinas-León: Leadership and political entrepreneurs, but it’s difficult in this political environment.

If you want to come to Mexico, there are wonderful opportunities. There are opportunities in the service sectors, in technology, and tremendous opportunities in retail. The purchasing power here because of the stabilization of the currency is far better than it used to be. There’s been a decoupling of the exchange rate and the inflation rate, so despite volatility to the exchange rate people here still command very much of a dollar mentality.

But in some of the business ventures that I’ve done, I’ve known some very smart people who have come into Mexico without a local partner. That is a potential for suicide. I know of some of these horror stories where someone comes in and buys a lot of land and wants to develop it. It turns out that the same notary public that notarized that land in your name also notarized it in the name of his compadre. And his compadre is the compadre of the local state judge. So unless you have a local partner that can strong arm and get you out of messes like that, you’re going to lose.

Kaizen: So don’t be an idiot.

Salinas-León: It’s very unfortunate that in Mexico you have to do that, but you do need a strong advisor and especially a strong local partner.

Kaizen: So the transaction costs are going to be higher than you think.

Salinas-León: They could. You’re running an unnecessary risk. So why not share the wealth with your local partner? You can still retain a majority but you have someone here with the skills and the PR network. We call it the tropicalization of your business model because it really is a jungle. You need to know the ins and outs.

Kaizen: So you need the local knowledge.

Salinas-León: The local knowledge.

Kaizen: To bring things to a close, you’ve been working in the intellectual world, business world, and political world for many years now. Is there anything that has really stuck with you from your education time? Is there a lesson that you learned that has been useful to you over the course of the years?

Salinas-León: I guess I would come back to first principles. The mental clarity about economic principles, for instance, has been incredibly useful. Excuse my French, but it really sharpens your nose for bullshit, and you can detect immediately if this is wrong or right. Sticking to first principles, but not because I know more than everyone else. On the contrary.

Kaizen: It keeps you reality oriented.

Salinas-León: I like to say that taxi drivers, housemothers, and people from the informal economy know more about economics than the most highbrow, enlightened bureaucrat.

Kaizen:  In most cases it’s tacit for them.

Salinas-León: In most cases it is tacit but it is very responsive. It’s almost automatic. So that’s one. And then the value of trial and error and with it learning the limits of knowledge. And humility doesn’t mean silence. You can be very active and very engaged, but learning how to listen is key.

And I would say this to some of my dear classical liberal friends as well that sometimes do not want to listen to other points of view because it’s not 100% Austrian or 100% Chicago. Learn to listen to other disciplines, and recognize the fact that we don’t have a monopoly on truth. My father and I used to talk about this day in and day out. It was a common theme and not just a theme in academia or the policy world, but a theme in the real world as well.

This interview was conducted for Kaizen by Stephen Hicks.

Kaizen 32: Roberto Salinas Leon and Tom Tropp

Thursday, September 21st, 2017

The latest issue of Kaizen [pdf] features our interview with Roberto Salinas-Leon on the theme of Entrepreneurship in Mexico as well as our interview with Tom Tropp on the theme of Business Ethics and Corporate Culture.

Also featured in this issue of Kaizen are guest speakers Gregory Sadler and Laura Grube and our Entrepreneurial Education conference.

Print copies of Kaizen are in the mail to CEE’s supporters and are available at Rockford University. Our next issue will feature an interview with Krzysztof Jurek on the theme of Entrepreneurship in Poland and an interview with Laura Niklason on the theme of Entrepreneurial Biotech.

More Kaizen interviews with leading entrepreneurs are here at our site.

Kaizen 31: Lall Singh

Tuesday, November 29th, 2016

The kaizen-31-coverlatest issue of Kaizen [pdf] features our interview with Lall Singh on the theme of Entrepreneurship in England.

Also featured in this issue of Kaizen are guest speakers Robert Garmong, Douglas Rasmussen, and Piotr Kostyło as well as our Entrepreneurial Education conference and a conference we hosted with the Austrian Economics Center.

Print copies of Kaizen are in the mail to CEE’s supporters and are available at Rockford University. Our next issue will feature an interview with Roberto Salinas Leon on the theme of Entrepreneurship in Mexico.

More Kaizen interviews with leading entrepreneurs are here at our site.

Montessori in Chile — interview with Bernardita Jensen

Thursday, April 7th, 2016

Entrepreneurship and Montessori Education

Berna 1Bernardita Jensen is founder and rectora of the Pucalán Montessori School in Colina, Chile. Before founding Pucalán Montessori, Jensen studied at the Houston Montessori Center and founded three other Montessori Schools in Chile. We met with Jensen to discuss her passion for education and the Montessori method.

Kaizen: Where in Chile were you born?

Jensen: In Santiago, but I lived in southern Chile in my childhood and adolescence in Temuco. It’s beautiful and similar to western Canada.

Kaizen: Chilean Patagonia.

Jensen: Yes, near Patagonia. As a young child, I lived on a farm in a beautiful place with trees, volcanoes, and lakes. It was marvelous.

Kaizen: What was your education like?

Jensen: My schooling was traditional. Nevertheless, for me the farm environment was very important, and my mother had a significant role in my education. She gave me more confidence. She was a very creative woman. In my childhood I played a lot, read a lot, imagined a lot, and dreamed a lot.

Kaizen: Was it a small town or big town?

Jensen: It was a small town.

Kaizen: And so your formal education was traditional Chilean schooling?

Jensen: Yes, it was a typical traditional education; with very little space for personal initiative. However, in high school I had a very fantastic teacher who was Japanese. His name is Josuke Kuramochi. My life changed with this teacher.

Kaizen: What did he teach?

Jensen: Spanish literature.

Kaizen: And you were reading a lot, so you were the right student for that class and that teacher?

Jensen: Exactly.

Kaizen: You say it was life-changing. In what way? When you were a girl, were you thinking that you would become a teacher or go to university?

Jensen: My life was changed because he was a teacher who truly knew me and helped me to develop a deep sensitivity. He helped me learn to love reading and also brought out in me leadership skills. I learned from him to love what I do. I also learned diversity from him, being the open and accepting person he is.

When I was a girl, I liked education and psychology. I’m not sure, but I think I studied education because of the influence that my teacher had on my life.

Kaizen: And what age were you when you took the course with him?

Jensen: I was seventeen.

Kaizen: In that time, were you thinking about becoming a teacher?

Jensen: Though I wasn’t sure I would be a teacher, I had by that point begun thinking about teaching. My passion was always to work with people, even better with children or adolescents.

Kaizen: Did you go to university immediately?

Jensen: Yes, in Santiago at the Catholic University. I studied psychology for two years and studied education for four years.

Kaizen: And you graduated with a diploma that enabled you to become a teacher?

Jensen: Yes.

Montessori-School (16)Kaizen: Did you at this point have any work experience other than on the farm?

Jensen: I had, as a young adult, some experience working as a volunteer in areas of social work.

Kaizen: Did you immediately become a teacher after finishing university in Santiago?

Jensen: Yes, and I also began to study Montessori education in Santiago and then in Mexico. I was simultaneously working and studying: both in the field of education.

Kaizen: How did you first hear about Montessori?

Jensen: At the university. In a methodology course, I had to study a current pedagogy and, by happenstance, the topic that chose me was Montessori education. I had been intuitively drawn to Montessori studies and had even found a book by Maria Montessori in the library and had resonated with it.

Kaizen: Completely independently?

Jensen: Yes. I found that book and read it—and then I read all Montessori books in the library every day.

Kaizen: Were the ideas in Montessori similar or different to your formal education for teaching?

Jensen: Completely different. Despite amazing and sincere professors, my university courses on pedagogy weren’t true for me but Montessori changed all that.

Kaizen: So you wanted to be a teacher, but you didn’t like what you were being taught and you were looking for other alternatives.

Jensen: Yes. I loved the kids but not the curriculum in university.

Kaizen: You said you got some formal Montessori training in Santiago. Where?

Jensen: Exactly, I studied in Centro de Estudios Montessori Chile with Mexican or North American teachers who came to Chile to teach us. This would have been in the early ‘90s.

Kaizen: And then you went to Mexico for further training?

Jensen: That’s right.

Kaizen: There is a formal certification process for Montessori?

Jensen: Yes. In the United States I studied for three years. I travelled during my vacations in the summer program to the Houston Montessori Center. I studied in the middle- and high-school program there.

Kaizen: Your interest as a teacher was at the high-school level primarily?

Jensen: Somewhat. I did study the Montessori Method for elementary and middle school as well as high school students. My interest, more than a specific age, was to see the complete development of the child. I understood from this that Montessori is not just a method but an educational philosophy.

Kaizen: So you were working in Santiago and self-studying Montessori and then going for formal training as well. How many years altogether did this take from

university to the time you finished your training in Houston?

Jensen: I studied at university from 1984 to 1990. From 1990 to 1995 I worked and studied Montessori. I studied in Houston from 1999 to 2003.

Kaizen: That’s a long time. During all of that time when you were working were you teaching in a high school in Santiago?

Jensen: No, first I taught upper elementary, ages nine to twelve. And then I studied the adolescent program and worked with adolescents. Before the current Puculan School, I co-established three other Montessori schools in Santiago.

Kaizen: When did you start your first Montessori school?

Jensen: In 1991.

Kaizen: Soon after finishing university. Who were your partners?

Jensen: Elena Young. She had a solid background in Montessori for young children, after having studied in the United States. She was an important woman in Chile promoting Montessori education. Elena and I formed one of the first Montessori school in Santiago: Huelquen Montessori School.

Kaizen: Were other people involved?

Jensen: Yes, there were three other teachers. It was very small. There were only twenty students in a little house with no back yard for play, so we would go to the town square for recess and the children would climb the trees, play hide-and-seek and other games.

Kaizen: You said you founded three schools. Did the first one fail?

Jensen: No, it’s still operating. I took time off because I had my first child. And then I formed the other schools with other people: the second was formed in conjunction with the Boy Scouts. Are you familiar with Boy Scouts? Montessori and Boy Scouts—they have ideas that work quite well together.

Kaizen: Starting chapters and different troops?

21Jensen: Yes, with the Chilean Association of Boy Scouts.

Kaizen: So you started one in Santiago, and that was successful. Then you had your child and took a year off before starting your second one.

Jensen: Yes, exactly. I was also always studying and deepening my understanding of Montessori education.

Kaizen: Who were your partners for your second one?

Jensen: I started the second school with Paola Bianchi. She was another Montessori teacher, who had studied Montessori for elementary age children with the AMI in the United States.

Kaizen: Was this school similar to the first with just a few teachers?

Jensen: Yes, it was the same.

Kaizen: And how long before you started the third one?

Jensen: Three years.

Kaizen: Same story? The second school was also successful so you started a third one?

Jensen: Yes, pretty much. I moved from Santiago to a more rural area outside of the city. And there the parents knew me and asked me to start a new Montessori school there.

Kaizen: Did you have any special challenges with attracting students?

Jensen: Not really. Young families found Montessori attractive: connection with nature, an interest in healthy lifestyles, etc. Apart from this, most of these young families in this small rural area knew each other and were interested in keeping their community tightly knit.

Kaizen: Yet you were starting the first Montessori schools in Chile—what did they know about Montessori?

Jensen: Montessori is new in Chile. However, traditional education has been in crisis for some time and it has been a great moment to encourage and speak about the benefits of Montessori. Families are interested in holistic development, individual development, emotional development, in diversity and respect toward the environment: the fundamentals of Montessori, even if the name “Montessori” is new. The parents listened to me speaking passionately about this new model of education and, as they were also looking for something new, the response was overwhelming.

Kaizen: So you are a credible person and you are passionate about it and you speak about it well.

Parents also look at the expense. Traditional schooling is “free” because it is covered by tax money, and at your school they pay tuition?

Jensen: Yes, and it is not cheap. However, the system in Chile is such that, even traditional schools are not free. The public schools are the only ones covered by tax money and they are considered very low-level.

Kaizen: For young families starting out, it likely looks expensive. So you attract parents who are very committed to their children’s education, and if they think it’s good they will find a way to pay for it.

Jensen: Yes. We have even seen some families that choose the school and then decide to move here due to it being the right choice for their children.

Kaizen: So you now have started two schools in Santiago and one in Colina?

Jensen: I have actually started two schools in Colina. The name of the first school in Colina is Rayen Mahuida. I started this school with the other people for profit. It’s a beautiful school which we designed with an architect.

Kaizen: You designed it from the ground up? So you are not starting in a house now?

Jensen: That’s right. This was the first school where we bought the land, and worked with a team to design and build it. It was a fabulous project: the school was specifically designed for Montessori education. For three years I worked with these people, but then I broke away from this group because my vision was different from theirs. For me, education should be non-profit, and the school was for profit and, due to this, our relationship was broken.

Kaizen: Was the divide was solely about mission and money issues?

Jensen: Yes, exactly. I broke away from this organization, and the parents told me to start a new school again.

Kaizen: How would you describe the business organization of the new one? Is it a cooperative or a non-profit trust or foundation?

Jensen: Yes, that’s how Pucalan was founded; it is a private non-profit foundation. The board is made up of parents, and my work is with the parents, and sometimes it’s not easy.

Kaizen: As the rectora?

Jensen: That’s correct.

Montessori-School (13)Kaizen: The new school is called Pucalán and is north of Santiago. What year did you start it?

Jensen: Yes, it started in 2000 in a lovely building we rented in the area which had been a horse stable that we remodeled and used for 12 years.

Kaizen: You still have expenses to pay and a new facility. Is everything paid for out of tuition or did you have to do financing with banks?

Jensen: The operation of the school is financed by tuition. Three years ago, we bought a new space and built a new building, which was financed by a bank but is thankfully no longer a rented space.

Kaizen: How many students?

Jensen: 550.

Kaizen: How many teachers?

Jensen: 95.

Kaizen: About one teacher per every five students. How many administrative staff?

Jensen: 12.

Kaizen: You are the rectora, and your board is made up of parents??

Jensen: Yes, mostly parents.

Kaizen: Do you have other people on the board of other expertise?

Jensen: Different expertises but not in education. We have architects, lawyers, psychologists, and so on.

Kaizen: What is the cost of tuition for parents?

Jensen: 300,000 Chilean pesos per month, which is about $430.00 US Dollars.

Kaizen: And a school year is how many months?

Jensen: Ten.

Kaizen: So the cost for a year would be 3,600,000 Chilean pesos. What is the current exchange rate for U.S. dollars?

Jensen: Right now, the exchange rate is about 690 pesos per dollar. The annual tuition in dollars would be about $5,200.00 per year.

Kaizen: Did you have any problems with regulations starting a private school?

Jensen: Yes, especially in the beginning. The national curriculum is required for any new school. It’s a very strict and linear curriculum based on cognitive skills based on memorizing information, which is quite different from Montessori. Montessori is a holistic structure which is more concerned about learning processes rather than just information. The emphasis is not only cognitive in the Montessori model, but also social and emotional integration of the child. Breaking away from a very traditional system, we have had a great deal of success and have, over time, gained more respect from the community. In fact, many Schools of Education have requested to come and observe our school, as this new system is becoming more attractive.

Kaizen: You’ve done this several times. Did it get easier each time?

Jensen: No, it didn’t get easier. Of course, I had more experience but the conditions were still such that it was, each time, quite challenging. I learned to develop more confidence each time and understand the system better but the system hasn’t radically changed.

Kaizen: What challenges stand out aside from the amount of paperwork?

Jensen: One of the most interesting challenges of Montessori is that it is not only an educational system; Montessori requires a certain ethic, community involvement, a radically different paradigm than the individualistic society we’re used to. This can be difficult to sustain over time, as each member must commit fully to this paradigm in order for the project to work. Overall, this is the greatest challenge and beauty of Montessori: it is a way of life.

Kaizen: So when you are applying for the permits, it doesn’t translate well to what the education establishment is looking for. How do you get past the hurdles?

Jensen: To a certain degree, we haven’t fully overcome all the hurdles. We submit to the most essential regulations imposed by the educational establishment, but these regulations don’t necessarily impede our work as Montessori educators. In a way, we are still running risks by doing what we do, yet ultimately, the results speak for themselves.

Kaizen: So after you’ve done the Montessori schools and you have a track record and can show that it is working, then it becomes easier. But at the beginning you would have to be convincing government officials.

Jensen: Yes. The results we’ve had have been very positive. This is primarily because many of our students that we have by the time they are in high school have strong leadership skills, a critical awareness of their environment, and many of our graduates have gone on to entrepreneurial pursuits in the areas of their interest.

Kaizen: Are there any other kinds of regulatory challenges that you face?

Jensen: No, because the standard is higher in Montessori schools. Furthermore, we have generally had great results on the standardized tests that dictate the regulatory requirements, which is typically all that the government officials look at.

Montessori-School (8)Kaizen: When you are talking to parents, what do you tell them about why you believe Montessori is right for their child?

Jensen: I talk about freedom and educating the whole person—emotional, personality, spirituality, and the social aspect—not only cognition. This is an important point for parents. Education involves thought process and emotion, as well as spirituality, and our spirituality program is very significant in the school; not a religion program exclusively but a spirituality program. I also speak to them about the parallels between the Montessori Method and today’s scientific discoveries about how we learn as humans.

Kaizen: So you emphasize the freedom element—the uniqueness of each child—and being well-rounded. You grew up on a farm, and Montessori herself liked agricultural education. Do you incorporate that into your schooling?

Jensen: Yes, there is a lot of hands-on experience. We have a tree nursery which the children look after and will then plant those same trees around the school. We also have gardens cared for by the children which were designed by a permaculture team. Do you know permaculture?

Kaizen: Yes, that you can do anywhere. That must have been a challenge in Santiago, a large urban area, earlier.

The other issues about responsibility—learning household things, cleaning up after yourself, and these kinds of things—how do you teach that in your school?

Jensen: It is very important to teach responsibility for their actions. The students clean the school and put the materials in order. This is the first step to responsibility. And this idea is also very important to the parents. This is a revolutionary idea in the school because it seems a waste of time to let the child labor over cleaning up their space, but lost time is not lost time. They can learn a lot. When the children learn these skills and responsibilities, they feel more involved in the community – they feel a stronger sense of belonging. In fact, some of our high school students, in a community service program, will build a playground on our school grounds for use by the younger students.

Kaizen: I visited your new campus for Pucalán school in Colina last year. It was built in 2013?

Jensen: Yes.

Kaizen: It is huge and impressive. When did you decide to build the new campus?

Jensen: In 2008 I started thinking about it, because the rented campus was old and very expensive. I had the experience of seeing many beautiful Montessori schools in the United States, Mexico, Italy, Spain, and New Zealand which inspired me to consider designing our own school here.

Kaizen: So you chose the best of everything that you liked?

Jensen: Yes, I was inspired by the best parts of all that I saw and we then had to adapt to our reality. We chose a spiral form, relating to the cyclical development of the individual. This is comprised of 8 large modules. Each module is a space for each stage of development as described by Montessori as well as an additional module for Music and Art.

Kaizen: And with a successful school running and a supportive board you were able to build your ideal school?

Jensen: Yes, but it was not easy.

Kaizen: So you had more financing to do and an architect to work with?

Jensen: Yes, I worked with an architect from Sweden. The design of the school was very important. The students and the parents and teachers had input in the design of the school. It was a community project, really.

Kaizen: How did you choose this architect from Sweden?

Jensen: He is a Swedish architect but he has lived in Chile for some time. He is well-versed in indoor and outdoor space design as well as sustainable design. This was what we found most attractive about working with him.

Kaizen: The school’s land has several acres.

Jensen: Yes, five hectares, which is 50,000m². This translates, I believe, to just over 10 acres.

Kaizen: That’s substantial, and you have about eight pod-like buildings built in a nautilus-like spiral shape. It is very organic and flowing, and with a large central courtyard area.

Jensen: Yes, it is a peace garden, still under construction.

Kaizen: And then in the outlying areas you have a gymnasium and play fields.

Jensen: That’s right.

Kaizen: You had the idea in 2008. When did you start building?

Jensen: 2011, and the construction lasted two years.

Kaizen: When I saw it in September of 2014, everything was operational but you still had some landscaping to do. And you said over 500 students?

Jensen: Yes, well, 550.

Kaizen: You are still young, so what do you have planned for the future?

Jensen: I want to start a school of education to prepare Montessori teachers in Chile. If there is no preparation for Montessori teachers here, the whole Montessori system will be very vulnerable.

Kaizen: Will that be in Colina?

Jensen: Right, the idea is to be centered in Colina, as it’s absolutely necessary to teach by doing; to use Pucalan as a “living laboratory” of education. To be centered in Colina doesn’t necessarily mean disconnected from the rest of the world—we also want to link with other schools for Montessori teachers around the world.

Kaizen: Will this require new buildings and a new location?

Jensen: Not necessarily. This could possibly be an addition on the same school grounds.

Kaizen: You will bring them to your campus for on-site training?

Jensen: That’s exactly the idea. It is fundamental for teachers to experiment in different environments. They need to be trained by experience and not only theory.

Kaizen: Do you have relationships with the formal Montessori organizations internationally?

22Jensen: Yes, with the American Montessori Society. This is because my training was in the United States in a Montessori school for teachers founded by the AMS. Our school is not accredited by the AMS, yet we do have the connection to them due to my background.

Kaizen: I understand there is a split between different camps of Montessori.

Jensen: Yes, there is AMS and AMI. AMI is European, while the AMS is American. There are some differences between the two but I see these differences more in execution than principle.

Kaizen: You have been a serial entrepreneur, as we say, in the field of education. What has been the most rewarding thing to you about being an entrepreneur in education?

Jensen: I love creating jobs for other people—and significant jobs. It is very important. The people respond very well when working with big ideas. I love creating work for other people, not just for me. I also love creating a community, as I believe wholeheartedly in community work. Ultimately, though, the reward is watching children grow into confident, compassionate and peace-making adults.

Kaizen: Over the years what has been the most frustrating thing for you?

Jensen: It is not easy to work with the parents. Working with the children is very easy. The problem with the adults is because they are focused on results and not the process. Also, as I stated earlier, Montessori requires a lot of commitment. There are occasions where some teachers don’t want to spend the time doing inner work that will make them good Montessori guides. The commitment in doing this inner work is not a very popular idea in our culture and there can be conflicts on account of this.

Kaizen: So that is many conversations?

Jensen: Of course, there is much conflict-resolution every day, but it is vital. It is part of the community building. This involves the teachers and the parents, really the whole community, and it is important to sustain these conversations with everyone.

Kaizen: When people talk about entrepreneurship, there is often difficulty even if you are passionate about what you do. There are frustrating problems, you have to be able to visualize new things and have good communication skills to make your vision real to others. Also, you have to persevere. What character traits seem to you to be the most important to become a successful entrepreneur?

Jensen: There is not just one. There are many characteristics, but perseverance with confidence and balance. You have to believe in the idea and have courage and love. Finally, self-discipline is also very important.

Kaizen: When you say love, is that the same as passion?

Jensen: Yes, I use them synonymously and this requires an inner burning energy.

Kaizen: You have to master yourself.

Jensen: Yes. I must learn before I can begin to teach anyone else. I practice meditation and sometimes fight with my ego.

Kaizen: To return to your own education: In many cases, traditional education is rote-learning and uniform, and the students are disengaged. That doesn’t help them become entrepreneurs, so what made you different? Is there anything that helped you become entrepreneurial when you were a girl?

Jensen: Well, not everything can be explained in a completely rational way. But, things like autonomy are very important and believing in your personal characteristics and making dreams. My family always encouraged a high level of autonomy alongside taking good care of each other. I had a great deal of space to dream, as well. Dreams are not always logical and they are very mysterious. Nevertheless, the most important characteristics I was able to develop were autonomy, confidence, self-discipline and having room for mistakes.

Kaizen: Suppose you were to give advice to other teachers who are young and perhaps dissatisfied with their teacher training. Or perhaps they are working at schools and don’t find it fulfilling, and they are thinking of starting their own schools. What advice would you give to them?

Jensen: Create a community. Don’t work alone, work together. Develop empathy and listen. Again, most importantly, create community. It is not possible alone.

Kaizen: If you’re a teacher, does create community mean having relationships with people who have financing or parents or other teachers and people who will form a network and will help you start the school of your dreams?

Jensen: Right, any project like this, needs to be founded in community. Everyone is learning by growing together and working together. This must be interdependent work—everyone is contributing to the original dream.

Kaizen: Thank you, what a good story your career is.

Jensen: Thank you.

This interview was conducted for Kaizen by Stephen Hicks.

Read more Kaizen interviews with leading entrepreneurs.

© 2015 Stephen R. C. Hicks. All rights reserved.

Kaizen 30: Guillermo Yeatts and Bernardita Jensen

Tuesday, April 5th, 2016

Kaizen-30_Page_1The latest issue of Kaizen [pdf] features our interview with Guillermo Yeatts on the theme of Entrepreneurship in Latin America as well as our interview with Bernardita Jensen on the theme of Entrepreneurship and Montessori Education.

Also featured in this issue of Kaizen are guest speakers Carrie-Ann Biondi and Martin Coleman, High School Entrepreneur Day, the new entrepreneurship minor, and a new book titled Steve Jobs and Philosophy which was edited by Shawn Klein.

Print copies of Kaizen are in the mail to CEE’s supporters and are available at Rockford University. Our next issue will feature an interview with Lall Singh on the theme of Entrepreneurship in England.

More Kaizen interviews with leading entrepreneurs are here at our site.

Kaizen interview with Argentine entrepreneur Guillermo Yeatts

Saturday, November 29th, 2014

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.

Sports entrepreneurship: Three interviews (Snider, Reinsdorf, Checketts)

Sunday, August 10th, 2014

Here are three of our Kaizen interviews on entrepreneurship and ethics in sports:

51546099 Ed Snider, owner of hockey’s Philadelphia Flyers and basketball’s Philadelphia 76ers: “I think when you’re young you’re a bigger risk-taker than when you’re older. And I think when you’re young it’s not the risk as much as it is you have this idea and you feel like it’s going to work. And then you go for it. When I was a kid I was always doing things—selling magazines, I had a paper route. In college I hired all of my fraternity brothers because I had these lots I could get Christmas trees or Easter flowers from. In those days all of the kids in the fraternities would go to work at the post-office for Christmas. So I’d hire them, I’d pay them more and say, ‘We’re going to have Christmas tree lots.’ Stuff like that—I was always looking to do something.”

Reinsdorf webJerry Reinsdorf, owner of basketball’s Chicago Bulls and baseball’s Chicago White Sox: “First of all, if you want to be successful, you have to follow basic business principles. The problem in sports that keeps people from doing it is that every move is chronicled by the media. There are so many people who own teams who are afraid to be criticized by the media, so they make stupid decisions just to make the media happy. I, on the other hand, delight in doing what the media doesn’t want me to do. And that’s not a good trait either. You have to make your decisions without regard to what the media thinks. Sometimes they’re right, and sometimes they’re wrong.”

Checketts webDavid Checketts, owner of soccer’s Real Salt Lake and hockey’s St. Louis Blues: “I live by a standard that Steve Covey taught me, which is that a person will do more with their bad idea than they will with your good idea. So I try to hire real capable, competent people, put them in place, make sure that they have the right incentives and motivation, and then give them the freedom to do the job. The skill that I had to learn was to hold them accountable, regardless of my personal feelings about them. Because I am somebody who builds friendships and relationships quickly and who really wants people to succeed. So it makes it hard. I stuck with some people too long in some instances.”

Only in Argentina?

Saturday, July 12th, 2014

map-argentinaA fun and informative post about 20 things that only happen in Argentina.

Related:

* Two of our Kaizen interviews on entrepreneurship and ethics:
Enrique Duhau and Eduardo Marty.

* Business in Argentina — interview with Federico Fernández and Martin Sarano.

* A comparison of how resource-poor Hong Kong’s relatively laissez-faire free market has taken it from poverty to riches while resource-rich Argentina’s experiments in statism have taken it from prosperity to decline and semi-functionality.

* Stephen Hicks’s keynote lecture at the 2010 Austrian Economics conference in Rosario, Argentina, sponsored by the Bases Foundation, the Faculty of Economics of the Pontifical Catholic University of Argentina, and the Instituto Hayek.

Entrepreneurship in Latin America: 5 interviews

Saturday, May 10th, 2014

Here are five interviews with Latin American entrepreneurs we’ve published in Kaizen, covering the business areas of construction, agriculture, logistics, education, aluminum, and oil and gas.

map-latinamerica* Entrepreneurship and Infrastructure in Brazil: Interview with Brasília Guaíba president André Loiferman.

* Entrepreneurial Agriculture: Interview with Argentina’s Enrique Duhau.

* Entrepreneurial Logistics in Panama: Interview with Surse Pierpoint.

* Entrepreneurship in Argentina: Interview with Junior Achievement Argentina founder Eduardo Marty.

* Entrepreneurship in Brazil: Interview with Petropar S.A. board members William and Wilson Ling.

Forthcoming Fall 2014: Interview with Guillermo Yeatts on Entrepreneurship in Latin America.

More Kaizen interviews in entrepreneurship here.