The fall from mega millionaire to not and the lessons learned

The Fall of a Mega Billionaire – 3 Lessons to be Learned

The Fall of a Mega Billionaire – 3 Lessons to be Learned

August 14, 2013

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Eike Batista was a Brazilian business magnate who had made a fortune in mining, oil and gas. He is the CEO of Brazilian EBX Group. The group includes five public companies: MMX (mining), MPX (energy), OGX (oil and gas), LLX (logistics), and OSX (offshore services and equipment).
According to Forbes in early 2012, Batista had a net worth of more than $30 billion, making him the 8th richest person in the world and the wealthiest in South America. Back then he was listed by Bloomberg among the 50 most influential people in global finance. An elite group of people “whose comments move markets; whose deals set the value of companies or securities; whose ideas and policies shape corporations, governments and economies,” Batista has been known to have claimed publicly several times that he would overtake Mexican baron Carlos Slim to become the world's richest man by 2015. Instead, Batista's wealth decreased 99% between March 2012 and August 2013 to just €200 million, making him the world´s fastest destroyer of wealth.
What happened?
Business-wise, the reasons seem to be rather clear: The losses can be attributed to the downturn in the metals mining industry, an economic slowdown in Brazil and mismanagement that resulted in a collapse of Batista's flagship oil company OGX Petroleo & Gas Participacoes SA. Missed targets at OGX spurred selling of his group’s securities. Investors worried that Batista couldn't pay a $45 million short term debt coming due in October. Over the next 10 years, the struggling oil company owes $3.6 billion. Things got more complicated in July, when Moody’s lowered Batista’s OGX bond rating from junk level Caa2 to super junk level Ca with a negative outlook. The situation became really dramatic when some weeks ago Mubadala Co., the Abu Dhabi fund, converted a €2 billion investment in Batista's companies into debt, further eroding the value of his assets.
While there were economic and financial reasons to Batista´s epic fall, there were also leadership, management, and personal deficiencies that might be even more relevant. Even for those among us whose net worth is not even close to a billion:
Set meaningful objectives
That´s the undisputed starting point. Both as an entrepreneur and as a salaried manager, one should have worthwhile professional and personal objectives to strive for and to get motivation from. In a perfect world the two dimensions would match and complement each other. For example, in a business context you could decide to build the most customer centric organization in the world. At the same time, in a personal sense, you might want to determine to develop your personal services skills to a never-reached level of excellence. From such aspirations your customers, employees, other stakeholders and eventually you would benefit.
Aiming to become the richest person on the planet, however, might be somehow trivial; especially if you are already worth more than €30 billion. Whom do you want to motivate with such an objective? Whom do you want to impress? How do you add value to your organization and to society by just becoming the wealthiest person on the planet? Why not try instead to become the world´s number one charitable donator? Why not set up your own foundation to help others in need and to become an admired social leader? I bet you would inspire thousands and millions in assisting and following you. And, most importantly, you would have a much more fulfilled life.
Worship Humility
Stay humble during your whole career. Display meekness and modesty in your behavior, attitude, or spirit. Avoid becoming arrogant. Nothing wrong with being proud of you and your achievements. Never forget, however, that it was not only you who made you successful. There are many other contributors. Show them and others sincere respect.
Research suggests that humility is a quality of leaders who are successful in the long-term. For example, Jim Collins found that a certain type of leader, whom he terms “level 5,” possesses humility and fierce resolve. Humility is being studied as a trait that enhances leadership effectiveness. Research suggests that humility includes self-understanding, awareness, empathy, openness, and perspective taking.
Be trustworthy and credible
In the case of Batista, most experts would agree that key stakeholders lost trust in him. Credibility had been one of his most important assets, since he built vast parts of his conglomerate on debt. But he couldn't deliver on the results he promised when he listed his companies. Particularly in times when markets are highly sensitive and volatile, a loss of trust can easily be the beginning of the end. As a consequence, there was a vicious chain reaction: Once Batista has lost credibility in one area, very quickly he lost it in all of them.
As Batista fell from billionaire-dom, he expressed regret at having taken his companies public, saying that in retrospect, a private equity model of financing his ventures would have been more suitable. It seems that he´s still missing the point.
Batista might leave a legacy of having been the greatest Icarus of modern times. According to Greek mythology, Icarus attempted to escape from Crete with of wings that his father constructed from feathers and wax. He ignored instructions not to fly too close to the sun, and the melting wax caused him to fall into the sea where he drowned. The myth is usually taken as a tragic example of hubris.
Regardless, I hope – with €200 million remaining in his bank account – that Batista will very soon and very deeply reflect on his personal shortfalls. I strongly admire sustainable and responsible entrepreneurial success, and although it is currently difficult to believe in his comeback, I hope for Batista to gain back credibility, to become and remain "earthened," and to define meaningful objectives for himself and his future business endeavors.
Looking forward a lot to hearing your thoughts and how you see Batista & Co.
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