For Brazilian investor, taking risks paid off

For Brazilian investor, taking risks paid off

By Michael R. Malone

For Brazilian investor, taking risks paid off

By Michael R. Malone
Businessman Jorge Paulo Lemann discussed his many hits—and a few misses—during the Miami Herbert Business School’s Virtual Distinguished Leader Lecture series on Thursday.

In a lecture hosted by the University of Miami Patti and Allan Herbert Business School, Jorge Paulo Lemann, among the world’s most successful investors and wealthiest people, celebrated the value of taking risks in business and in life and shared how his foundation is helping fuel an educational revolution in some of Brazil’s poorest cities.

A five-time Brazilian national tennis champion who participated in Wimbledon, Lemann said that the grit, competitiveness, and willingness to take risks that he exercised on the tennis court were the same qualities that served to make him one of the world’s savviest and most successful investors. 

Lemann is the founder of the international investment firm 3G Capital and a controlling shareholder of Anheuser-Busch InBev, Kraft-Heinz, and Restaurant Brands International, which owns Burger King, Popeyes, and Tim Hortons. He was listed by Forbes magazine in 2019 as the 35th-wealthiest person on Earth. 

“Tennis is a lot about grit—you learn that the results of your efforts don’t happen by themselves and that you have to practice and practice the right techniques,” he said. “Competing on the court helped me a lot in terms of taking risks.” 

Lemann participated in a moderated discussion with Dean John Quelch and Paulo Leme, executive-in-residence professor of finance, as part of the Miami Herbert Business School’s Virtual Distinguished Leader Lecture Series on Aug. 27. President Julio Frenk welcomed Lemann, saying “your insights couldn’t be more timely” given the current global economic disruption. 

Though he reached the number 10 ranking in Brazil, Lemann set aside his tennis racket to focus on business. He traveled to the United States and earned an economics degree from Harvard University, then returned to Brazil to found and become a senior partner of Banco Garantia. From 1971 to 1998, Lemann transformed the small Rio investment banking firm into “the Brazilian version of Goldman Sachs”—as described by Forbes magazine. 

In terms of his business success, Lemann highlighted two strategic pillars—cost-cutting measures that emphasize efficiency and hiring practices.

“We have always put an enormous focus on people and training and hiring young people,” he said. “We go out and hire the best possible, rate them carefully to find out who’s on a fast track, identify the really good ones, and give them a chance to shine. We take risks with people if they look good and have been with us and give them a big job that they might not get somewhere else,” he said. 

Lemann said risk-taking is a quality that’s especially pertinent in business, but one that not all schools encourage. 

“I’m a big believer in risk-taking, if you don’t take risks you don’t achieve much,” he said. “We like to hire people with grit, those that know how to hang on and who have a shine in their eyes and life in their teeth—the ones who really want to do something.” 

He shared one of his most memorable experiences in terms of risk-taking, describing how in 1989 he purchased a small struggling Brazilian brewery and returned to the office to tell his partners about the purchase. 

“A few with university degrees said ‘what, that’s a horrible decision’ while others—the traders in the group—said ‘great, let’s go for it.’ ” He reminded his partners that the richest firms in all the different Latin American countries were all invested in beer. “It’s hot here, there are so many young people who drink beer, this will work,” he told them. 

That investment evolved to become Anheuser-Busch InBev, today the world’s largest brewer, and Lemann is a controlling shareholder. He shared that the international group controls 17 percent of the beer market and is number three in China, the world’s biggest beer market.

Lemann volleyed questions about his investing strategies, his investing approach compared to that of Warren Buffett, and clarify misconceptions about 3G Capital that he founded in 2004. He recognized a few miscues that his firms have made in recent years. 

“We were very successful for many years, but the past five not as much,” he said. “We did not give enough emphasis to the marketing side, to the creating of products, and to innovation—we bought well-known brands and didn’t feel that we had to renovate.” 

As an example of changes in the marketplace, he noted that 15 years ago there was one ketchup—Heinz—on the shelves and that today there are 15 combinations of Heinz alone. 

As he looks ahead, he said, his companies plan to pay more attention to marketing and adjusting to the digital platform. 

“For us to be successful we will have to improve marketing, our innovation ability, our digital abilities, and to know our consumers better,” he said. “In the past, we were very focused on the production side and on efficiencies.” 

Lemann was especially gratified to discuss the impact of Fundação Estudar and Fundação Lemann, nonprofit organizations that he co-founded to provide scholarships and educational opportunities for Brazilians. 

“I had the opportunity to study abroad and to get a good education,” he said, referring to his degree from Harvard. “When I came back to Brazil and had some success in business, the first thing that caught my attention was that at the bank, we hired a lot of poor kids who didn’t have the best education—yet some of them did very well.” 

He created the foundation, which has offered some 2,000 scholarships to Brazilians to study abroad, many of them athletically gifted youth who hail from Brazil’s most impoverished areas. Many scholarships have gone to teachers. 

In Sobral, a mid-sized city in northeast Brazil, the Fundação began supporting an effort to improve the educational system. Fifteen years ago, the city was ranked 1,366 among Brazil’s five thousand school districts—last year it was number one. 

“Sobral is a city of 200,000 residents and very poor, but now they have a terrific record,” Lemann explained. “I was very impressed with what’s going on there—and it’s not a question of money alone, but also of attracting good teachers, ranking the teachers, and having big goals and developing results.” 

He explained that the foundation is replicating the approach in 25 other small cities in Brazil and will measure at the end of the year to see about expanding to another 50. 

“I think I can change the education system in Brazil,” he said, “and now we have the World Bank interested to help out. I’m trying hard, though what I am doing in education is just a small drop of what has to be done,” said Lemann, who celebrated his 81st birthday this week. 

“Still,” he added, “it makes me feel good, and I’m happy.”