went on buying. He tried to buy a Venezualan producer, but somebody was bugging his phones and the deal went elsewhere. He compensated by buying an iconic Chicago-based steelmaker, Inland Steel.
It was the wrong time. His company was by now loaded with debt. The Asian currency crisis and the post-millennial dot.com slowdown caused a slump in steel prices. The (fairly small) portion of Mittal company shares which were freely traded on the stock market slumped from their opening price of $28.50 per share to less than $2. To the outside world, this looked like a crisis. To an entrepreneur, it was a moment of risk.
For the Mittals – Lakshmi had now been joined at the family firm by his son, Aditya – the first years of the Noughties were the best possible ones. A global slump in the price of steel meant that there was also a global slump in the price of steel mills. Mittal acquired plants in Algeria, Poland, Romania, Macedonia, the Czech Republic, South Africa and France. The economics of these purchases was alluring. Because of the huge fixed costs involved in steel production, there is probably no industry more prone to huge cycles of boom and bust.* That means that the assets you pick up for a song in times of dearth stand to make huge amounts of money in times of plenty. And the Mittals were the only players willing to stack all their chips on red, and wait for the turn of the wheel.
Eventually, the buying spree reached its natural end. In 2006, Lakshmi Mittal made a formal offer for Arcelor SA, the world’s largest steelmaker by revenue. The company could boast world-class technology, a century of steelmaking experience, and had achieved its success in the heart of Europe, one of the world’s most sophisticated steel markets. (The company was headquartered in Luxembourg, but had recently been formed from a merger involving French and Spanish steel companies as well.)
The bid was one of the most keenly contested in financial history. On the Arcelor side, there was a tangible sense of who do these people think they are? This wasn’t the way the world order was meant to work. European flagship companies weren’t simply sitting in a shop window, waiting to snapped up by the first emerging market billionaire to take a fancy to them. There was no evidence of racism, as such, in Arcelor’s outraged defence, but – well – there was outrage. Arcelor had the history. It had the technology. It was the industry’s biggest name. It was European. Indeed, it was practically French! And the company was about to vanish because it had been out-thought and out-manouevred by the nobody-from-nowhere, Lakshmi Mittal.
Mittal won. The resultant company – ArcelorMittal – is the world’s largest steelmaker by any ranking at all. The industry that gave birth to the Industrial Revolution itself had finally been consolidated by a kid from Rajasthan, whose family continues to own slightly more than two-fifths of the resultant behemoth.
This story is astonishing and little known. When the British press talk about Mittal, it is largely in the context of his very large fortune, which has been as high as some $26 billion (and is, of course, down again in the midst of the current slump).
But who cares? Counting Mittal’s money misses the point almost as comprehensively as it would be to obsess over Napoleon’s medals or to count Einstein’s honorary doctorates. Those things – the money, the medals, the doctorates – come with the territory but they are, ultimately, inconsequential.
What matters for the purposes of our investigation into the heart of the capitalist Big Bang itself is what Mittal’s story exemplifies to a quite exceptional degree.* And the most striking thing about it is precisely its Napoleonic quality. Its speed. Its surprise. Its boldness and decisiveness. Few entrepreneurs have this quality to the degree that Mittal has it, but they all have it. You can’t create a business of any scale without it. If an appetite for risk is the fuse that ignites the entrepreneurial bang, it’s the Napoleonic appetite for conquest that propels it forward.
This might, in fact, be a good point to remind you of the millionaire mindset challenge with which I started the chapter. I left you with a drill bit stuck 1,500 feet down a drilling well and an oil crew hanging around with no oil to pump because they can’t get the drill bit out. You want to get restarted as soon as possible and you won’t make money until you do. Getty’s answer, the billionaire’s answer, requires Napoleonic thinking. Decision, speed, surprise – and force.
Getty wasn’t an oilrigger, he wasn’t a mechanic and he wasn’t an inventor. But he liked to get things done. So he commissioned a monumental mason – the sort of guy who normally carves tombstones for graveyards – to make him a granite spike. Six feet high, as wide as the drilling shaft, and pointed. Once he had his spike, he transported it over to the hole and dropped it in. Getty didn’t know what would happen when a six-foot granite spike fell 1,500 feet onto a jammed drill bit, but he knew that something would. And it did. The spike smashed the drill bit. The riggers got drilling again without delay. The device was known as a Paul Getty Special and it became widely used in the oilfields of the day. In the unlikely event that the entrepreneurs of the world come to form a trade union, then I’d suggest that they adopt the Paul Getty Special as their emblem. It might not be subtle, but by God you know when it hits.
And one last thing. A thing that lies at the heart of this book.
It’s all very well to call attention to the Napoleonic drive and will of entrepreneurs, but the comparison suffers in one enormous respect. Napoleon’s wars devastated a continent. They put back the industrialization of continental Europe by as much as fifty years. They left a legacy of illegimate rulers, aggrieved populations, and entire armies of the dead. Back then, Napoleonic drive had Napoleonic consequences.
These days, the reverse is true. Entrepreneurs are creators. They turn the unproductive into the highly productive. They take advanced technologies and make them available all over the globe.
Needless to say, you can’t do these things and make everyone happy. Mittal’s career has had its share of controversy. When he bought into Kazakhstan, he worked with some intermediaries of doubtful rectitude. When he buys up steel plants, redundancies often follow. In his coal mines and iron mines, there have been accidents which have cost miners their lives.
Call me heartless, if you wish, but my response to this kind of carping is more baffled than anything else. What on earth do you expect? You can’t buy the biggest industrial enterprise in Kazakhstan and not work with people who know the territory, and the business ethics of those people is bound not to be the same as you’d expect in London or New York. Likewise you can’t restore an ailing plant to health and not address its cost structure. In almost every case, that will involve redundancies. You can’t operate mines in Kazakhstan and not expect accidents that would be inconceivable in more developed countries. Kazakhstan is not Sweden. It is a place where even paying your workers constitutes a challenge, a place where you need to buy, mend, and operate a power plant if your workers are to enjoy any heating.
This isn’t to clear Mittal of these charges altogether. It’s possible – I just wouldn’t know – that Mittal should have put more effort into mine safety earlier and more extensively than he did. I’m quite certain that no one has ever built a global business on Mittal’s scale and done it without any errors or regrets along the way. Yet to focus unduly on any errors is to miss the point. Mittal did what no one else was prepared to do. He was prepared to buy one of the least attractive assets in one of the least commercially attractive countries in the world, and make a go of it. He took a bad thing and made it good. He did it in Kazakhstan, in Mexico, in the West Indies, and countless other places besides.
What Mittal did in these places represents the very essence of capitalist energy. It’s the energy that took the world of 1770 – poor, backward, illiterate, hungry, unproductive – and turned it into the world of today. It’s the energy that turns a rice field into a steel mill, a broken enterprise into a thriving one. It’s the energy that lies at the heart of every good thing about capitalism.
But the energy itself is an amoral one. It can be used for good; it can be used for ill. And the next chapter takes us into some morally ambiguous territory indeed, for it’s time to consider the art of selling.