Ricardo Amorim:


074 – After The Storm: The View From Brazil with Ricardo Amorim

Ricardo Amorim:


074 – After The Storm: The View From Brazil with Ricardo Amorim

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In this episode, we are joined by economist and entrepreneur, Ricardo Amorim. Ricardo is founder and CEO of Ricam Consultoria, a financial and investment consultancy, and recent startups AAA Academy and Smartrips. Ricardo is also the author of the best-selling book, After the Storm, is a host on Brazil’s leading news channel, GloboNews, and is a lecturer and keynote speaker.

  • Why Brazil’s market has been historically volatile, and what Ricardo believes are the solutions to this
  • Why Ricardo forecasts that despite a recent ‘economic depression’, Brazil’s economy is set to boom in the next three to five years
  • Why Brazil’s agribusiness is set to soar in the near future, and how available land and advancing technology is helping to bring investment to the country’s farmlands

Key Takeaways and Learnings

  • How the country is recovering from recent economic crisis by focusing on innovation and startups to rival South America’s smaller markets and the larger global markets
  • The challenges that Brazilian companies face in attracting home and foreign business investments, and why this creates hidden opportunities for potential investors
  • The role that culture and history have played in Brazil’s tendency towards short term thinking in business and the steps being taken to encourage more of an ‘owners mindset’ to to take advantage of the enormous opportunities in that market

Links and Resources Mentioned in this Episode

Summary

In this episode, we are joined by economist and entrepreneur, Ricardo Amorim. Ricardo is founder and CEO of Ricam Consultoria, a financial and investment consultancy, and recent startups AAA Academy and Smartrips. Ricardo is also the author of the best-selling book, After the Storm, is a host on Brazil’s leading news channel, GloboNews, and is a lecturer and keynote speaker.

Ricardo Amorim

Ricardo Amorim is the founder and CEO of Ricam Consultoria, and a co-founder of AAA Academy and smartrips.co. He is Brazil’s most influential economist and investment strategist according to Forbes magazine, who has been working in the financial market since 1992. Ricardo is also the only Brazilian ranked among Speakers Corner’s most prestigious global keynote speakers. He is one of the hosts of Manhattan Connection, Brazil’s most prestigious political talk show, with his ideas being frequently quoted by major television outlets, business newspapers and magazines worldwide.

What Was Covered

  • Why Brazil’s market has been historically volatile, and what Ricardo believes are the solutions to this
  • Why Ricardo forecasts that despite a recent ‘economic depression’, Brazil’s economy is set to boom in the next three to five years
  • Why Brazil’s agribusiness is set to soar in the near future, and how available land and advancing technology is helping to bring investment to the country’s farmlands

Key Takeaways and Learnings

  • How the country is recovering from recent economic crisis by focusing on innovation and startups to rival South America’s smaller markets and the larger global markets
  • The challenges that Brazilian companies face in attracting home and foreign business investments, and why this creates hidden opportunities for potential investors
  • The role that culture and history have played in Brazil’s tendency towards short term thinking in business and the steps being taken to encourage more of an ‘owners mindset’ to to take advantage of the enormous opportunities in that market

Links and Resources Mentioned in this Episode

 So, Ricardo, welcome to the show.

It’s a big pleasure to be here with you, Mark.

So, let’s start by talking about a topic which I know is dear to your heart. What are some of the challenges of doing business in Brazil?

Oh, there are plenty of. One of the things that I usually tell my clients and companies willing to do business in Brazil is that Brazil is not for beginners, and what I mean by that is that, yes, plenty of the challenges that you find elsewhere you also find in Brazil, but there are some specific challenges or some challenges that are bigger in Brazil. The first one is infrastructure. If we look to – let’s get transportation for instance. Based on a ranking by the World Bank, among 140 countries Brazil is not among the 100 best countries in infrastructure, neither in roads, railways, ports, air transportation, so that’s challenge number one. Challenge number two which again is not specific to Brazil  is red tape. I tease my Brazil friends quite often saying that Brazil has not invented neither soccer nor red tape, but we have improved both, in particular red tape. Our ability to make things that could be easy hard is unparalleled and that means that companies need to have a lot of patience and need to know that sometimes things that elsewhere would take much less time to get done, here, probably they will take longer. I think there are plenty other important challenges but a point that I want to make is exactly because doing business in Brazil is harder than in most other large markets, what that creates is a huge opportunity for those willing to tackle those challenges, because what happens is that in the end many companies give up and because of that for the most part competition in most markets in Brazil is not as big as elsewhere, and exactly because of that profit margins tend to be higher if you were going elsewhere. So, what I usually say is that, yes, it’s very hard to do business in Brazil but that’s exactly why in the long run, and with a lot of oscillationin the meantime, average profit margins in Brazil tend to be better than in most other markets and particularly in other markets that are as large as Brazil is.

Interesting, and it’s worth calling out, I mean, it’s the eighth largest economy in the world at the moment, isn’t it?

Yes, it is. Very likely it will be larger than that in the future. It was larger than that but in the last three years, Brazil went through the hardest economic depression, not recession, in its history. Just to give an idea, in three years the Brazilian economy actually contracted by seven percentage points. Again to give you a long term perspective, if you’re talking to US listeners for instance, the Great Recession in the US was not as bad as what Brazil has gone through in the last three years, so what we have here is the economy, if, and I think this will happen, Brazil actually resumes growing, which has already resumed last year, I think that the economy will accelerate this year and very likely next year again, we will likely have Brazil among the top six or maybe top five in three to five years.

Yep, yep. And what’s your sense, I mean, if this drag on the economy, the cost, the challenges of doing business, the poor infrastructure, the red tape, if those are resolved over time what’s possible for Brazil? Would profit margins expand or do you think that it would attract more competition and those would be competed away?

I think very likely if that happened, yes, it would attract a lot more competition but on the other hand we would have much more growth. So, if we compare Brazil to other emerging markets over the last decades, what we’ve had is despite the fact that the market is very large, it has not grown as much as other emerging markets which has been compensated from a company perspective by the fact that, again, average profit margins tend to be higher, and I say on average because the other important challenge is, as I said, that economic volatility here tends to be higher than which the last year has made very clear. So, let’s say that in ten or twenty years your average profit margin here is, let’s say – I’m going to exaggerate – let’s say twice as large as in other markets, but you have three years which depending on the market where you are, you might need to go through losses and in some cases some severe losses particularly in very cyclical sectors such as auto and real estate. Maybe your company is not willing to take this kind of a huge oscillation in results and earnings even if in the long term you’re going to make more money than elsewhere.

Yeah. I mean, it’s interesting because at Syngenta as I mentioned earlier on, it’s a huge company in Brazil and I remember that we developed a barter program to deal with this volatility that became a huge source of competitive advantage which other agribusinesses followed, but what’s driving this volatility? Is it the exposure of the economy to commodities or is it more growing pains? What’s unique about Brazil in this context?

The first thing as you said is the exposure to commodities. It’s important to keep in mind that Brazil is currently the second largest global agribusiness exporter just after the US, and in some important markets such as soybeans, Brazil is already larger than the US. Going forward, very likely Brazil’s market share is going to increase, and the reason is if we take into account available land for farming which as of now is not planted as of yet, 40% of available area for farming that is not planted as of yet in the world is in Brazil. So, not only there is a huge technological advancement in agribusiness going on in Brazil, but on top of it what it means is that productivity is increasing a lot and has increased a lot in the last two to three decades, but on top of it there is a lot of availability of land and also water. So, having in mind those two factors it’s almost impossible not to forecast Brazil’s market share in the agribusiness market to go further up. So, with that in mind, the point that I want to make is, yes, Brazil is already an important market in agribusiness and it will become more but that doesn’t solve the fact that agribusiness prices go up and down a lot, and actually they are going up and down even more than in previous decades because of, first, the increasing importance of China and India as consumers, but second, the fact that financial oscillations have also increased in the 2008 crisis, the real estate crisis in the US and the global financial crisis as an example. To be frank, I think that we might be relatively close to another in the coming years but in any case, that’s point number one. Point number two is that Brazil is quite an open economy to financial flows which change direction very fast when the global economy gets better or worse, and Brazil economy gets better or worse, but on the other hand it’s a relatively closed economy from a trade perspective. Brazil, the trading flow in Brazil, the sum of exports and imports only account to a little more than 20% of GDP, which even taking into account that Brazil is a large economy and usually large economies have a much lower share of trade flows as compared to the small dollar economies but if we compare it to large economies, it’s very small, it’s less than half of the figure in China, it’s smaller than in the US, and I’m talking about economies which are much larger than Brazil. So, that’s one of the things because trade flows tend to be less volatile than financial flows, and so that’s another point that brings volatility. And the last one which has been very important in the last three years, it wasn’t as important in the past is that Brazil has gone through a huge political crisis due to probably the largest corruption scandals in our history, so this brought even more volatility and uncertainty. Those things are getting fixed, but particularly the political one takes a long while.

Yep, yep, yep. So, you travel a lot and you’ve worked in the US and you’ve worked in Europe, Ricardo, I’m curious, what are some of the common myths and misunderstandings that Westerners, people in Europe or people in North America have about doing business in your country, notwithstanding – we’ve talked a little bit about the red tape – but what are some of the other misunderstandings?

I think that one particular reason presented is how complicated our tax system is. What I mean by that is that, yes, companies expect taxes in Brazil to be confused, to say the least, but it’s much worse than what people expect. To be more specific, again based on some World Bank research for the most part companies in the world tend to take on average less than 200 hours to fill taxes elsewhere. There are two countries which are big exceptions to that. The first one is Venezuela where the average time just spent by companies on filling taxes is 800 hours, and then you have Brazil where it’s almost 2000 hours, so yes, companies expect our tax system to be complicated, but they don’t have a clue how complicated it is. I would say that’s probably the biggest misunderstanding.

Yep, yep. OK. So, let’s get into some of the companies that are active in the economy which maybe haven’t really cropped up on the global radars of some of our listeners. Which of the companies or leaders that you see as being truly groundbreaking and innovative in some of the Brazilian markets that you’re aware of?

I would tackle that from two perspectives. The first one is startups. Brazil has gone through a huge increase in innovation coming both from established companies and startups. From a startup point of view, just this year we had three Brazilian companies becoming unicorns. It started with 99 which is a company that competes with Uber. On top of it – and by the way, there is a Fintech called Nubank, and we are seeing that in several different sectors and health care there are plenty of companies. Since they haven’t recently gone through any kind of major financing rounds we don’t really have current valuations on that but there are at least a handful of them which will become unicorns. The reason I’m saying that is that it’s kind of a weird thing but until last year there was no Brazilian unicorn which is a kind of particular weird if we compare with countries with much smaller markets. Particularly, there were a handful of Argentine companies, and the fact is that again because doing business in Brazil is harder, it took a little bit longer for that to come through, but on the other hand, because the market is much bigger right now there are plenty of companies which have reached this this level. And then on top of it, when we talk about established companies I think that the most interesting thing is that since this big economic crisis that Brazil has gone through in the last year, I would say that the word innovation has become a key for any company of any size. It’s almost impossible to talk to any important Brazilian business leader and to have a talk and not to come through the topic of innovation. So, you have companies such as – and you have companies that have always focused on that, particularly the 3G Group in its own sector and business model has gone through important innovative practice. We have Gerdau which is a steel company which also has always invested a lot in innovation, and several other local companies.

Well, I’m glad you mentioned 3G because this was one of the companies that I’m aware of, and a lot of our listeners because of some of our previous guests who are connected with Berkshire Hathaway will be aware of 3G, but the back story here, and feel free to add to this, but founded by three guys who basically created an investment bank very similar to Goldman Sachs, so I think they modeled it on Goldman Sachs which is, I’m going to get the pronunciation wrong is Garantia, is that how to pronounce it?

That’s absolutely right.

And then what they did, I think, was they copied Wal-Mart to create Lojas  Americana, so they copied a number of Latin American beer companies when they bought Brahma beer company, and then most recently they bought Anheuser-Busch, and Burger King, and Heinz, and people here in Switzerland I should say, Ricardo, were feeling the ripples of that acquisition alongside Berkshire Hathaway when they bought Kraft and merged with Heinz, because obviously there’s a knock-on effect in the whole food industry and there are some big food players here. So, I’m curious, because if you read the bio of these three guys behind 3G, they’re very explicit around how they went to the best in the world and just copied, and duplicated, and out-executed, is that what innovation means when you hear CEOs talk about it in Brazil or are there different definitions there?

No, I think there are different definitions, but I think that you’re absolutely right that one of the things that the three partners of 3G has always emphasized is that it’s always easier to copy what works and adapt than to create something new, and you’re absolutely right, and in fact, since you mentioned Berkshire, Buffett – one of the reasons why technology has not been his piece of cake is exactly because that has been, for the last decade, the sector where information is most present, and exactly because of that the moats that companies create tend to be more at risk. So, in a sense, the fact that there is less innovation in one particular sector, it means that that company and that sector, if the company is able to create a moat, is more human than in other sectors where innovation is much larger. But in that sense, I think that there is something  which is  very specific to the 3G Group, since its beginning since Garantia, which you’re absolutely right it was to mimic Goldman Sachs, but the whole idea was let’s bring the best people, ideally as young as possible, and ideally people who are willing to make what would be, let me call it a ‘Brazilian Dream’ as an American dream, someone who might come from an economic background which is as not favored as others might but who is really willing to work a lot to do his best and was bright enough to make things work, and that a business model that they have kept basically in all the business that they have done. On top of it, one of the things that they do a lot is to develop this kind of talent because what they say is that the big bottleneck for their expansion on a global scale as of now is exactly to have people which are better prepared and able to take and tackle larger challenges, and in that sense, and when I say prepared, they don’t want people to be ready. One of the things that they also emphasize a lot is that they want someone who is not ready, but who is smart enough to become ready in the way and who is willing to do the hard work which is necessary for that to happen.

Interesting. So, their model is around talent essentially? Finding talent who are hungry, who can stretch way beyond what they think they’re capable of, or have the appetite for doing that, and then giving them the opportunities to go and do that in these large companies that they acquire?

Absolutely, and to pay them accordingly. So, the whole idea is that you have people who are able to make it, have the prospects of making big money, and that’s where the incentive part comes from, and some of the critics say that they tend to be quite aggressive on that, both in terms of paying very well those who make it happen and on the other hand of letting go those who don’t have the performance that was expected for them to have.

Yeah, and that’s why them teaming up with Berkshire Hathaway was so fascinating because in many respects their model of what happens to an acquired company is completely opposite of what Berkshire Hathaway does, right? They do take costs out, they put zero cost accounting, zero-based accounting in, and it’s a bloodbath for many of the acquired companies.

You are absolutely right, but on the other hand what I think that they have in common is a long-term deal. That’s also something  Buffett has always emphasized how important it is to have a long-term perspective, how big a competitive advantage that has been for his companies, and that’s something that the 3G team also has, and I think there is another important and very telling story of how they look to business which is how they decided to move into the beer business. Basically, they were looking at a list of the richest men in the world and particularly in Latin America and they started to see many of them coming from the beverage business and the food industry, and the reason again is exactly because those industries tend to change much less regularly than some others, and they said, ‘Oh, there’s probably an opportunity,’ because the other thing that that creates is exactly because it doesn’t change as fast. Companies, for the most part, tend not to be as agile at this and they said, ‘Oh, given that we have been breeded on a culture of a lot of agility,’ – which is what investment banks are good at – ‘there is probably an opportunity.’

Yeah, yeah. So, we’ve talked about 3G. You also mentioned a steel company and these unicorns. Are there any other businesses or companies that you’re aware of that really have the opportunity to leapfrog the competitors in other markets? Is Brazil going to be exporting some big businesses that are going to dominate outside the region?

I would love that to be true. One of the things that I see happening which is quite sad from a Brazilian perspective is that companies that are willing and are trying to do that in a sense become much less Brazilian, and what I mean by that is the 3G Group is a good example. Because of some of the challenges of doing business in Brazil, what we have now is that their headquarters is not based in Brazil at this point, and again I mentioned other companies that have an important presence elsewhere. I mentioned Gerdau before, they are big in the US, but the fact is that we have much less Brazilian companies moving abroad and elsewhere, and again, to be frank, I think there is a business and a cultural reason for that. The thing is, and again I think that explains a lot when I was talking about unicorns, why we had a couple of Argentine unicorns before Brazilian unicorns because when a startup is born in Argentina, it already thinks in terms of a global market because the Argentine market is not big enough. In Brazil, for the most part the companies for quite a while they start looking at the Brazilian market alone because they say, ‘Oh, it’s good enough for a certain number of years and then, later on, we’ll start to think globally,’ and because there are a lot of the specificities in doing business in Brazil some of the things that make them strong in Brazil might not be necessary or a competitive advantage elsewhere, and that limits the number of Brazilian companies that make it on a global scale. On the other hand, exactly those specificities make them stronger as compared to foreign competition in Brazilian markets in many cases.

So, I’m curious, as you see foreign companies coming into Brazil, how did the incumbents tend to react? I’m interested, for instance, is there a sort of ‘not invented here’ syndrome that plays out in Brazil? Does everything have to be homegrown or are they very willing to take on board ideas that are brought in from outside?

No, they are better willing to take ideas brought from the outside, and in some cases, I would say that there is something which is quite Brazilian specific and quite sad which is kind of, I would call it an inverted prejudice. What I mean is that in many senses things that come from abroad are more valued in Brazil than the ones that actually were born here in Brazil. There is a certain sense, we even have a name for that here in Brazil which is, we call that the ‘poor dog syndrome’. The way that Brazilians look at what comes from Brazil tends to be more negative than in the way that they look from ideas, and products, and services that come from abroad.

Interesting. But I mean because of the enormous growth of the middle class over the last ten or twenty years, there are some remarkably, as you say, profitable and well run domestic companies, of course, aren’t there?

Absolutely, and let me give some perspective on that. Between 2004 and 2014, we had more than fifty million Brazilians moving to the middle class or higher or upper classes. What that means is that there was a huge increase in consumption in Brazil, but the interesting thing is that because of the huge economic crisis of the last two years almost twenty million of those moved back to the lower classes. What happens is as the economy is speeding up. I done some research on it and in the next ten years at least thirty to thirty five million people will move to the middle classes and upper, and what that means is that again, all the businesses related to consumption are likely to do very well in Brazil, and actually for the last fifteen years every single year with very few exceptions we had everything related to retail consumption and to services doing better than the economy in general, particularly health care and education have done extremely well, all the subsectors in those two industries have done very well exactly because people moving to the middle class start to pay more attention to what I call tomorrow, because when they are in the lower classes, unfortunately, the one thing they really can take care of is today, and then particularly health care and education tend to do very well.

Yeah, I heard these stories, as soon as people get a job the first thing they do is I spend money on their teeth, or on, as you say, preparing themselves for tomorrow, then they get the credit card, and they get the mortgage, the car loan, and commentators have talked about it feeling like where America was in the late sixties/early seventies, that sort of pent-up demand as the middle class expands very, very quickly.

Yeah, I think it’s a very good comparison, and there is one more point which you mentioned which I think it’s good to keep in mind which is credit expansion is something very new from a Brazil perspective. It is something that has only started happening in the last ten years or so, and the reason is that interest rates in Brazil were absurdly high and actually from a foreign perspective they still are, but from a Brazilian perspective they are the lowest ever. To give you an idea,  it’s good to keep in mind that until 1993, Brazil used to have hyperinflation and that had big consequences. One of them was there was no credit available. The second one, which I’ll come back later, is Brazilian companies start to have very short-term planning horizons, but coming back to the credit perspective, what happened with that is that there was no credit and since 1994, interest rates have started falling. The basic rating in Brazil in 1994 was 45% per annum. Now, which is the lowest ever in Brazilian history, they are still at 6.5% which as of now from a global perspective is extremely high, and when we get to credit to the consumer, because, again, there is a lot of tax in credit in Brazil, banking reserves in Brazil are at the level of banking reserves exactly because hyperinflation and financial pressures that Brazil had in the past are extremely high, and because of that what we have is the lending rates in Brazil are tremendously high. We have credit card rates at three-digit levels. So, what that means is as rates are going down there is a lot of room for a lot of expansion, also in terms of credit availability, and what that means is again an important boost to growth going forward. The level of a consumer indebtedness  in Brazil in absolute terms is one twenty-fifth of what it is in the in the US, even if we take into account that per capita income in the US is five times higher than in Brazil, on a relative term adjusted to income credit debt, consumer debt in Brazil is one-fifth of what it is in the US. But just getting back to the other point in terms of planning because I think it’s interesting and important, because of all this is economic volatility, political change, and changes in regulations, I would say Brazilians are out of the curve and probably on parallel in terms of the ability to adapt to changing environments. So, Brazilian companies tend to be much more agile and able to deal with, as I mentioned, a recession as big as the one we had last year. On the other hand, the negative part of it is that Brazilians are not good at all in terms of long-term planning and the reason is that they are not used to think long-term because they say, ‘I don’t have a clue what is going to happen in the long term. Let me try to look to the next six months where I have some more visibility, I have a better idea of what might happen,’ and that means that in companies and sectors where long-term planning is key, I would say foreigners which are much more used to this kind of planning, they tend to have an advantage. On the other hand, if you need to adapt very quickly, Brazilians tend to do well, and I think that’s another reason why Brazilian agribusiness is so strong because in agribusiness as you know well, the ability and the need to adapt quickly to changing environments is key.

Absolutely. So, I’m glad you touched on some of that. So, maybe we can just talk about a couple of leadership behaviors, and I’d just be interested where you think, how you’d characterize communicating in Brazil but let me just give you a frame here, Ricardo. One extreme, a very low context environment, let’s say the US or Holland, for instance, at the other extreme a very high context environment, Japan and China, where you need to read between the lines. Where would you put the Brazilian way of communicating on that scale?

I would say it’s closer to Japan than to the US. One of the things that I say to my Brazilian friends and particularly to foreigners that are coming to Brazil which are not used to the Brazilian culture is that quite often when Brazilians say, ‘Yes,’ what they actually mean is, ‘Maybe.’ When they say, ‘Maybe,’ that means, ‘No.’ Brazilians tend to have a difficulty of saying no which Americans don’t have at all, and which by the way the Japanese cannot do at all, and so I would say it’s closer to, it’s not as extreme as it is in Japan, but it is closer to Japan than Brazil. On the other hand, Japanese culture tends to be very formal and in Brazil, it’s actually the opposite. In that sense, it’s much closer to the US than it would be to Japan.

Yeah, so you’re touching on the next one which is leadership, egalitarian versus hierarchical. What’s the leadership model that you see most prevalent in large Brazilian organizations?

If we compare again to the US which is the one that I know the best having worked there for nearly ten years, I would say that for the most part, Brazilian companies tend to be more hierarchical than in the US, but in recent years, and I think that it’s a global trend, it has become less and less hierarchical compared to what it used to be. So, companies are trying to adapt and in order to become innovative, one of the things they’re trying to do is actually to make hierarchy less important than it used to be.

Super. A couple more of these because I think it is really helpful. What about disagreements? Israel, France very confrontational, Japan, Thailand avoiding confrontation at all costs. Again, where do you see Brazil and how is that evolving?

In that case, I would say we’re probably close to the Asian countries you mentioned than certainly to Israel, and again it has to do with confrontation requires the ability to say no which is something that Brazilians don’t do very well. So, Brazilians tend to avoid confrontation for the most part. I don’t think it is as extreme as Thailand, for instance, but much closer to that than certainly to Israel, even to France.

Yeah, and then, of course, deciding which is really important as well, right? I’m just interested in the consensual, I mean I get the sense it’s more consensual versus top down, is that fair to say?

It is fair to say. It’s even more fair to say if you’re talking to younger people, then it’s even bigger the trend and I would say that it is also trending to become more consensus-oriented rather than top-down as a trend in the country as a whole.

I’m going to get to the three questions I said to you to wrap this up because I know time’s tight, Ricardo, but one thing that’s interesting for me is you talk about this growth of entrepreneurs. How is failure looked upon in Brazil? Is it a badge of honor or is it a permanent sort of tattoo that you can’t reveal in public, and it’s a big setback? I mean, how do people look at failure?

For most of Brazilian history it was certainly a permanent tattoo of inability, and it has been changing and I would say it has been changing fast, and to a large extent because of this increased culture of fostering new business and startups, so this is moving towards a culture, and in certain industries, it is already certainly in the startup industry as is mostly elsewhere, there is no prejudice I would say at all in this particular industry. In other ones, it is moving towards, even in terms of changes in legislation that used to penalize much more companies and owners of companies that go bust, so I would say that’s a camp where there is a big cultural shift going on in favor of making failure something positive rather than negative, making attempting something important.

Yeah, yeah. Now, you’ve got a couple of startups one of which I guess is specifically designed to sort of foster and help entrepreneurs in innovation. Maybe you can just say a little bit about your startups?

Yeah, that’s true. Actually, last year with some partners in both cases I started two startups. One of them which is called AAA which is AAA Academy. The goal of it was exactly to help foster innovation and to keep people and companies aware of what is going on in terms of innovation on a global basis. It’s the same kind of message that you bring with your podcast. The only point that we try to keep in mind is that for the most part, people and particularly under the economic environment that we had last year that was extremely tough for business here in Brazil, most people in companies were focused on actually remaining alive and what that means in practice is almost all their time was focused on short-term and doing their best so that earnings would be enough that companies could survive, and with that in mind, the time, and energy, and focus that they had on long-term innovation was much lower than what I believe it needs to be as of now when many technologists that have the potential to change the way they really even do business are coming to the point of becoming life changing at the same time, because I think that most people misunderstand or don’t place the necessary attention to the cycle of innovation, is that when innovative technology comes for many years, despite the fact that it is a big innovation, the fact that they have both in business and in the way that people live, it tends to be much smaller because they haven’t yet reached a point where adoption is so big that it makes a big change, and then eventually it comes to that point, and if I look now I see many of those technologies getting to the point. That’s the case for blockchain, artificial intelligence, for wearables in general, for self-driving cars, and 3D printing, maybe a little bit later than some of the other ones that I mentioned, but my point is I don’t think that any company that’s going to be around for a long-term is going to be doing business in the same way in five years as it is of now,  and I don’t think that for them they are paying enough attention to this  so the way that we tried to tackle this problem was to offer the most important things that are going on so that people could know and based on that, innovate. Let’s say they get to know something interesting that a company is doing in Denmark and say, ‘Well, why not do something similar here in Brazil?’ or something that is happening in a different industry that they could bring to their one, but using very little time to get know that and then eventually saying, ‘OK, we need to go deeper than that.’ So, what we tried to do really was in a moment where the problem is not to have access to information but to sort in this huge availability of information what really matters and what is noise, that’s what we’re trying to do. So, what we’re trying to do is to give that in five to ten minutes the most important thing that is going on, so that maybe that is important to them in a sense that they need to act on that and that’s what we are doing with AAA, and the other one which is smartrips. It started at changing the culture of companies in a way that we have the people working at companies adopting an owner’s mentality, and what I mean by that is that for the most part that’s true not only in Brazil but that’s particularly true in Brazil, but that’s true everywhere. Most employees see companies money as free money. So, if they have the availability to spend companies money they say, ‘If I spend or if I don’t that doesn’t really matter,’ and we want to change, and the way that we are doing that, at least how we’re beginning to do that, is focusing on corporate travel where companies have their policies and for the most part employees spend the limit of the policy, and what we’re trying to do is to create an incentive and to change the culture. The way that we’re doing that is, let’s say based on your company policy you can come to Brazil in, let’s say, business class and stay in a five star hotel and you say, ‘OK, good,’ but what if you make different choices; you’ve lived in Brazil, you have friends in Brazil, so if you stayed out at a friend’s house instead of a hotel, why would you do that? You might think at first to say, ‘Oh, I would feel less comfortable in a friend’s house,’ we say, ‘OK,’ – it’s an option, you’re not forced to – but if you opt to make decisions that save money half of it, half of the savings are going to go to the company, half of them are going to go to the employee in an employee benefit program that they can change for whatever they want, so for instance, I saw very recently for a trip to the US in business class the cost was, let me make that in dollar terms, it was close to let’s say six thousand dollars and the one in coach was one thousand dollars. If the employee says, ‘OK. you know what? I don’t really care in that case to fly coach because I’m going to get there on Saturday when I can sleep, I’m going to be OK,’ or something like that. OK all right. And then this five thousand dollars that were saved, half of it the employee we will benefit in this benefits program, and in practice what this company is very recently it was launched, it’s less than a year old, but already there is over two hundred companies, big companies, and we were not doing any marketing at all until now, but there is over two hundred companies that have searched to start to implement some of our programs with them and it’s doing very well.

Lovely, lovely. Super. So, Ricardo, you’re a busy guy, you get to see all sorts of different businesses and sort of research lots of different trends, and I’m curious, what have you changed your mind about recently?

I think that probably the most fair way to answer that is what I haven’t changed my mind about recently. I keep changing my mind all the time, and I’m extremely curious. According to my wife, I probably spend 26 hours a day reading and listening to stuff and what that means is I learn new information, I change my mind all the time. I would say one of the interesting things that I change my mind is that a couple of years ago, I have, first of all, some background, when I used to work in Wall Street I was in charge of emerging markets in one of the banks that I used to work in and I had been looking at emerging markets for a long time, and I saw how important global conditions are to how well countries do, particular countries do, and that’s particularly true in emerging markets, it’s true in developed markets as well, and I haven understood that quite well, but I came to a point to believe that it was almost a self-fulfilling prophecy, and when the global economy is doing well, the emerging markets are going to do well, and when it’s not they are going to do poorly, and it is true for emerging markets in general but it’s not true to each particular country, and that’s a lesson that Brazil taught me quite well in the last years because despite the fact that the global conditions generally were doing very well, Brazil went through the worst economic recession ever, and what that means is that local policies, and I have always known that in the long term are what determined the success or the failure of a country, but even in short-term, in a couple of years, sometimes if countries do things wrong enough, they can do quite poorly even if the external conditions are supportive.

Yeah, yeah, got it, got it. Excellent. Now, where do you go to get your fresh perspectives to help you solve problems and make decisions, Ricardo?

I usually go for two things. A walk in some place in nature. When I lived in New York City, I used to live very close to the Central Park which is where I used to go walking when I needed to make an important decision. Here in Sao Paulo, I live close to  Iberapuera Park where I do exactly the same thing, and if I have some more time I actually go to the beach to take a walk. All of the most important decisions that I have taken in my life were taken under some kind of walk close to nature.

Lovely, lovely. Excellent. And final question, what’s your most significant failure or low and what did you learn from that?

Oh, there are so many, it’s hard to pick one, but one of them, just to get the point that I mentioned in terms of changing my mind, one of the things that I talked a lot in certain years, a while ago, a couple of years ago in Brazil, was that given how supportive external conditions were to Brazil, Brazil was kind of destined to grow for much longer than it actually did. In the meantime, I actually realized that things were getting worse and that it would change and change for the worse and much worse before it did, but the fact is that before I realized it, for a while I was expecting a positive cycle in Brazil to be much stronger and longer than it actually turned to be, and what I learned too is that long-term forecasting is much harder than it seems at first. We tend to get the short-term and for much longer than it usually continues to be as it used to. So, in the end, since then I have studied a lot of cycles. Actually, I’ve studied whole economic cycles in 180 countries since 1990, and what I’ve learned is that, yes, you can understand trends but if you don’t understand cycles as well as you understand trends, when those cycles even if short-term cycles change, you’re going to be in trouble.

Yeah, yeah. Where can people get in touch with you?

Oh, they can find me in all big social media. I’m on LinkedIn, Twitter, I’m @ricamconsult. Facebook and elsewhere. And also, if they want more information on me, my company’s website is www.ricamconsultoria.com.br for Brazil. That’s about it.

Super, and we’ll put it all in the show notes, but, Ricardo, it’s been great to have you on the show. I really did appreciate your insights into a market and a geography which I have a huge amount of personal and professional very, very positive experiences of, and it’s one thing, I don’t miss much about not being in the corporate world anymore but one of the things I do miss is my trips to Brazil, maybe that’ll change.

Mark, I can totally relate to what you’re saying for two reasons. The first one is that I have also changed my perspective and I certainly don’t miss being in big companies as well, and on the other hand, I totally understand where you’re talking about Brazil. As you mentioned, I used to live in the US and Europe and I loved both experiences, but I’m glad to be in Brazil, it’s a great place to be despite the challenges that I mentioned before.

Yeah, absolutely, absolutely. Well, thank you very much for your time, Ricardo, and look forward to meeting you one of these days in person, but thanks very much. I’m sure our audience will have enjoyed it as much as I have.

So, am I, I’m looking forward to that, and maybe the last point of contact, if someone wants to get to contact by e-mail my email ricardo@ricamconsultoria.com.br

Brilliant. Well, we’ll put that in the show notes. Many thanks for your time, Ricardo.

My pleasure.

Thanks. Bye.

Bye-bye.

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