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Grahamites
Grahamites
Articles (386) 

3G Capital: I Have Been Late to the Party

Summary of Jim Collins' 10 lessons learned from 3G Capital's 3 partners

September 25, 2017 | About:

At the urging of a good friend, I just finished reading the book on 3G Capital by Cristiane Correa “DREAM BIG: How the Brazilian Trio behind 3G Capital Jorge Paulo Lemann, Marcel Telles and Beto Sicupira acquired Anheuser-Busch, Burger King and Heinz.” The only regret I have is that I’ve read it too late. It is a fantastic book, and I highly recommend it to everybody.

Although you should read every page of the book, if you are a bit time-constrained, you can learn a lot by just reading the 10 lessons that Jim Collins learned from the three partners at 3G, which I’ll summarize below:

  1. Invest always  and above all – in people. From the very beginning, their primary investments have been in people, especially young and talented leaders. The No. 1 ingredient in their secret sauce is an obsession with getting the right people, investing in those people, challenging those people, building around those people and watching those people experience the sheer joy and exhilaration of achieving a big dream together. The type of people they look for are “PSDs” – Poor, Smart, Deep Desire to Get Rich.
  2. Sustain momentum with a big dream. They always resonate with the idea of BHAGS – Big Hairy Audacious Goals – and build a culture to achieve them.
  3. Create a meritocratic ownership culture with aligned incentives. The culture valued performance, not status; achievements, not age; contribution, not position; talent, not credentials. The three partners believed that the very best people crave meritocracy, and mediocre people fear it.
  4. You can export a great culture across widely divergent industries and geographies. The three partners have always held to their core values and distinctive culture while continually growing into new industries, expanding across geographies and pointing toward ever bigger goals.
  5. Focus on creating something great, not on “managing money.”
  6. Simplicity has genius and magic in it. On almost every dimension, the three founders exemplified simplicity. They have very simple dress; you would not notice them in a crowd. They kept simple office, never walling themselves off from their people in an executive suite. They used their increasing wealth not for opulence but to simplify their lives so they could focus on continuing to build the company.
  7. It’s OK to be a fanatic. The three partners are looking for fanatics. We live in an age when people want a quick fix, a shortcut to exceptional results. But there is no such easy path. There is only an intense, long-term, sustained effort. And the only way to build that kind of enterprise is to be fanatic. Such obsessed people do not become the most popular people, as they often intimidate others, but when fanatics come together with other fanatics, the multiplicative effect is unstoppable.
  8. Discipline and calm, not speed, is the key to success in a time of potential crisis. Understand how much time you have to make decisions, use that time to make the best decisions possible and maintain a sense of calm.
  9. A strong and disciplined board of directors can be a powerful strategic asset. The AB Inbev board pays constant attention to its own culture, disciplines and vibrancy, with as much fanatic attention as building and preserving the management culture of the company.
  10. Seek mentors and teachers and connect them. From early in his career, Jorge Paulo Lemann actively sought people he could learn from, and he would make pilgrimages to visit them: the great Japanese industrialist Matsushita, the visionary retailer Sam Walton, the great financial genius Warren Buffett (Trades, Portfolio). Not only that, he found ways to connect great people with other great people; he wasn’t “making connections” in the traditional way, but facilitating interactions among exceptional people and thereby stimulating an exponential level of learning for everyone.

The 3G partners used the above 10 “tricks” over and over again in their careers and have generated one of the most spectacular results in modern business world. From a humble start, they have built a business empire that includes Burger King, AB Inbev, and Kraft Heinz (NASDAQ:KHC). I am fascinated by what I have learned so far. In the next few weeks and months, I’ll write more about 3G capital including a few case studies.

About the author:

Grahamites
A global value investor constantly seeking to acquire worldly wisdom. My investment philosophy has been inspired by Warren Buffett, Charlie Munger, Howard Marks, Chuck Akre, Li Lu, Zhang Lei and Peter Lynch.

Rating: 5.0/5 (6 votes)

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Comments

fung9815
Fung9815 - 3 years ago    Report SPAM

I'm surprised, you must be on vacation when Warren recommended the book in 2014 (just joking). My biggest takeaway from the book was the power of incentivization and meritocracy. It is insanely powerful and--surprisingly--not many people are making full use of it.

Grahamites
Grahamites premium member - 3 years ago

Fung9815- Haha, I must have fallen asleep while Warren recommended the book during the meeting:) Saw it in the exibition hall and the bookworm and never bothered. You are absolutely right that if you combine meritocracy with the right incentive system, you get powerful results. Great lesson.

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