Australian Biography

Victor Smorgon - full interview transcript

Tape of 12

Tape 1 2 3 4 5 6 7 8 9 10 11 12

Why is it do you suppose, that Australia has so many of its best entrepreneurs, [who] have been immigrants? What is it about being an immigrant that makes you into an energetic entrepreneur?

First of all you've got to be born to be an entrepreneur. And if you happen to be an immigrant as well, all immigrants have left wherever they come from, their country, because they had hardships of one form or another. And they suffered, and they [have] that need to succeed much more than a person that's born here in comfort, even though they have the same sort of entrepreneurial abilities. Therefore they stand out by trying harder, by getting there to the top quicker. It's a certain need that is there because you've been at the bottom and you want to get to the top. But most of ... take my children, or anybody's children, your children. They've not suffered, they've always had something to eat, they always had the comfort so to them it's not important that thing. They'll do it later. But I believe that entrepreneurs, not only the immigrants - immigrants might be a bigger majority because there's a bigger need for it. But it takes some people until their thirties and forties to become very ambitious. Well, take Peter, he's like that. He's very entrepreneurial, and he's twenty-seven. And he's wealthy. Privately he has an income from his grandfather automatic anyway. He doesn't have to work at all. Same thing with Jonathan. Each one of my grandchildren have a certain amount weekly or monthly or whichever you like to express it, but you've met Jonathan, you know how ambitious he is, and Peter. They're not all like that. Some of them just ... The one we're just buying a business for - he wants to be ambitious, but he's not. He wants to be entrepreneurial, but time will tell whether he will be or not. And he's about thirty-one. But his wife is very smart, and she's going into the advertising business, so she'll be pushing. That happens very often. But I don't believe there's a bigger percentage of immigrants. It is because they ... If they were naturally born Australians or [from] whatever country, they would have done the same thing later. If you're born with it, you have it. And then the opportunities come, you see them, because that's part of your nature, part of the thing that you want.

You often use the phrase 'I saw an opportunity'. It's very common in your speech. What do you mean by the phrase 'I saw an opportunity'?

Well, I'll give you an example. I went to America. And I always look at whatever happens around me. And I saw the ... I started talking to some people in the meat industry. Started talking about the hygiene, started talking about how wood was going to go out of fashion and it's going to be forbidden. There's an opportunity, an opportunity to do the pallets.

Because wood is unhygienic?

Wood is going unhygienic, and it's going to be - maybe it'll take five years or ten years - but it's going to be ... we've got to get rid of it from hygienic point of view, and people are getting much much more hygienic. And it's not enough yet. Not enough to ... generally people don't take much notice, but as the publicity about it goes on more and more, there's always something in the paper every day, just an ordinary housewife. You have a look next time you start cooking, if you're using a wooden board it's got cracks in it, and those cracks you can't get out the ... there's an opportunity. Make a board out of plastic, which has been done. It's there. We've got two of them in here. There's many things like that. So you see the opportunity and you start developing something like a pallet itself, and you see that you can do other things, not only a pallet, but there are other things. There's an opportunity again, to see that there is opportunity. Sometimes you come across a raw material, and you say, 'Something can be done with it', you say to yourself. And you start thinking about it, and you say, 'Well I know where I can get it, I think I can get this, and I think it could be very successful'. I just heard the other day about a friend of mine who has bought into the rights of producing feed for vegetables, you know, the compost. And the compost is made from worms, and they take the chicken manure or actually piggery [manure], and they buy the ... His business is to grow worms. I didn't do that, I didn't see it, but he did.

Now I want to cut across you, because I want to move on with your story. Because I'm interested in whether or not you think that as well as having to see an opportunity, you have to be the sort of person that gets a little bit obsessed with the idea.

More than that. Obsessed with the idea in a commercial sense. Because if it doesn't earn you, make any money it's not a good idea. What is the purpose of making something which you can't sell. That's a toy, a one-off. But if you want to be an industrialist like I am, I consider myself an industrialist, so I see it from the ... immediately I see how many humans would want it> What would be the market, how big the market would be for that particular thing that I see that something new? So it's just a mixture of commercial sense and ambition and innovation. So it can mesh several things.

What does money mean to you?

Nothing. Success means something. Money is only a means to create something else. That's after you have three meals a day and half a bed. I'm not talking about when you first start life and you want money and you want a nice house and you want nice things around you. But after that, as I told you, I love cars. After that it's just nothing to do with money. Money is a measuring stick of your success. And money, you take that piece of ... you're creating money and you take that money and start something else. You build something else with that. Create another idea with that. It's a means of proving your own ambitions of getting to a certain point. And the general public or public companies or even commercial ... thinks in terms of money. They don't think in terms of the product itself. [They think] How much money am I going to make out of it? And then it's not just money itself that you're after. You're after the success of making it. Now, on the other hand, if you couldn't make any money out of it I wouldn't be interested in doing it. Because there's no money, then so what? I can't move after that because that's all I have. And I have to have that profit. And the bigger the profit, the more pleasure it gives you because you're more successful. Again, nothing to do with money itself, it's just the ... instead of making say a dollar, you make five dollars. It gives you much more thrill than it does making less. And that's another driving force but not the fact of the money itself. Doesn't make any difference whether you have five hundred thousand, two hundred thousand, a hundred thousand, or a hundred million, or a hundred billion. It doesn't slightest make a difference because you can't eat more than a certain amount.

But would it make a difference to you if you lost it all?

Yes, definitely, it would make a big difference. Because then I'd have to start all over again from nothing. And starting from nothing is a lot harder than starting with something. And so, yes it would be a very bad experience.

Does money give you freedom?

No, in fact it ties you up.

How?

Because you, for instance, at the moment I'm doing this pallet and I'm waiting for [the] next four weeks to make it happen. You heard my discussion with Peter on that subject. And I don't want to leave it. I don't want to go anywhere, I want to stay to make sure that it's done. And it happens that every piece in place. It's made up of many pieces, and if my engineer forgets one nut, I'm lost. And he does, he forgets about small things and so I have to remind him. So we've put a system in where the draftsmen have to put a whole list of things, at every point. And Peter just told me yesterday that there's one particular point [that] was missed. The day after they looked through the whole thing. Without that one small little thing, it's not a pallet. So therefore I'm worried to go away. I don't want to go away. I went away to Sydney just overnight, and I went straight back to the factory when I arrived home.

But it does give you freedom to be able to pursue a new idea.

Oh yes, that it does. It gives you the means of pursuing and keep on spending the money that's necessary to spend to develop it. I don't have to go and look for money or float it, or beg somebody to put some money into my venture. I can afford to do it myself. So it cuts out a lot of hardship.

When you were a young man, did you dream of being rich?

Yes.

Why?

Just a need, just I always wanted to be rich, I wanted to be rich. I didn't want to be poor. I saw so much suffering, so much poorness. I wanted to get above that. And so I said to myself, 'I'm going to be rich'. Whatever rich meant. At that stage, at that particular point, a hundred pounds was probably being rich. Rich itself ... the word 'rich' itself means many things, from one to billions. It's still rich.

And so that was your dream?

The dream is to get rich. And after you get rich, when you reach that point of whatever you consider rich, then you have ambitions to get higher and higher and higher in achievement, in achieving the things that you're dreaming about. And you have to have a dream. You don't have a dream, it will not happen. Because you have to have a vision there or a point over there somewhere that you have to reach. It's like climbing the stairs. You keep on trying, doesn't matter how much it hurts, but you go for that thing that you want, that you dream about. And really, people that are successful always have a dream. My father had a dream of escaping from Russia. And he did it. He came here, he tried some other things. He changed that dream. He thought he'd be able to produce socks, but that disappeared. And I remember on the boat, when we were travelling, we talked about ... my father had a habit of talking to his children all the time, particularly to his male children, my brother and I. And there was no secrets, there was no ... Everything he talked about. And he wanted to ... He imagined how many factories he was going to have, because we were a large family, and each one would have a machine that will go like that and make a pair of socks. And each pair of socks meant a ... whatever, a shilling to ten cents, or whatever it meant. Then he started multiplying by how many people who could make them in a day.

Are there difficulties about being rich? Are there problems?

No, no.

What about the fear of having your possessions stolen?

Stolen? Well, I don't personally have that fear. If it's stolen it's stolen, it's gone, goodbye. It's sentimental. And I try not to be sentimental. You can't mix sentiment with business. It doesn't work. Because if you start bringing sentiment into it, you won't do the right thing. You won't sell or buy. Because you think - it's not ambition, it's sentiment. You can be sentimental and you can give it up, but that doesn't make business. And we sell a business ... Take the meat that we sold. It was very hurtful to us, to all of us, particularly to me because I was there from day one. And ... but you know that you have to do it because you'll fail in other things. You have to sell it for the particularly circumstances that happen at the time. In other words you think, well I have to give this up to get that.

Now you say you have to be practical and not sentimental in business. But you both talk about yourself as a practical person and a dreamer.

And also sentimental in certain circumstances.

How does being practical and being a dreamer go together?

Very well. There's no problem about it. There's no clash about practical and dream. The problem is to create your dream, to make it come true. Because the dream itself is just something, it's not an object, it's not something you can touch, it's something in your mind. And being practical is also something in your mind, because again you're born with that ability to think in terms of logic, of practicability, and ... but the main aim is to reach that point.

How much is the family part of your dream?

Up to this day, it's hundred percent family. Even though there's one part of the family life which ... well, there's been two or three breaks up in the family. And they're all peaceful, they haven't been ugly. They haven't been ... There was a certain amount of sentiment, but not if you look at it from practical point of view, it has to be done. And particularly when you create something yourself together with others, the others get hurt as much as you do, because each one thinks that he's done it himself anyway. You know, nobody thinks that they didn't contribute anything. They did, they in fact did. The problem is with a lot of people they don't think of it in the first place, they don't know how to start. They don't have those abilities or those gifts that they're born with that they know how to begin to create something. But then they're very good executors of your dream. You say, 'This is what I'd like you to do, if you like'. In our family they always had the option. If they didn't want to do it, they didn't have to do it, they could do another job. And so you suggest to them, 'Why don't you - would you like to do that with me?' And the person said, 'Yes', and then you start mixing your ideas together with his, and his ambitions and my ambitions. And then the rest of the family comes in with their particular input and it grows into a beautiful statue or whatever, business, or whatever you like to call it. It's art, in a different form.

Can I ask you now just to talk about your whole philosophy and the attitude you have to the general concept of family, what that means to you.

Well, what it means to me is really a togetherness, a friendship. You're part of a certain group of people, and whether you're a leader or you're not a leader it doesn't matter, but it's part of the people that you mix with, part of the people you live with, part of the people that you help to achieve their particular ambitions. And it becomes all one. And now that, as you know, I'm starting new life ... or started that about three years ago, and now I have a different family. The other family's just as important to me, but they have nothing to do with other family anymore, physically. We meet at parties, we meet at home, we visit each other but we don't talk business any more, our old business, except one, except the steel mill. And ... but that's a separate business now, managed by outside people anyway. So there's no direct contact, no physical contact with that particular business. But otherwise now I've got a new business, and a new family. And I'm trying to create the same thing as we had before in a different way, as I think I explained it, by putting the money into my family company, which belongs to my total family: my daughters, my grandchildren and great grandchildren, which they're all going to inherit. It's going to be theirs, it's theirs today if they want it. But the ... I own a very big piece of it and they are part of the same thing. They also have pride in that.

Why does it matter to you to be involved with people that are related to you?

It's not only people that I'm related to. I work with a lot of other people who don't have a share in the business, and I have exactly the same attitude to them as I have to my own family. And I give them exactly the same opportunities, but they're not shareholders, they're still workers. They might get bonuses but they don't get shares in the business because it's private, it's something ... We're not a public company.

Why not? Did you ever consider floating the company? Did you ever consider ...

Many times, and each time we rejected it.

Why?

Because you lose complete control, you're responsible to other people. An example I can give you is we started ... that question was asked many times. If I take a piece of steel from the steel mill, and some poor woman who has ten percent of the business, or ten shares in the business, I'm pinching a part of her property and I don't want it on my conscience, that I took something that doesn't belong to me. I don't need it, I don't want it, I hate it. I had a little bit of experience in the public companies. I feel very uncomfortable in those situations. Because from my family, if I take something I don't care, because they can take it too. But that poor old lady that I'm talking about, she can't. So why should I take something from her and feel guilty about it? So I'd rather not do it. It's really as simple as that.

You like the concept of only being responsible to yourself, and those who ...

Not only to myself, but to my own family with whom I share. And if I share with them, they can do exactly the same thing as I do. But when it's a public company, a shareholder can't come in and say, 'I want this'. 'I want to borrow it' or 'I want to steal it, I want to take it'. But I can do anything within the family company, not only I, every member of the family can take whatever they like. We account to each other, so if something that's worth something, money, we say, 'I'll take that, charge it to me'. But we can't do that in a public company, because you'll be accused of stealing.

So how important has mutual trust been to the family operation?

I think that was the most important thing in our success, is that mutual trust. We never, ever had any agreements in writing. It was always by word, by agreement, by saying, 'Yes, okay, let's do it'. Never, ever have we signed any ... even the original partnerships with my uncles, there's just a note about it, but no signatures on the note. It's just a memorandum rather than an agreement.

What would have happened if somebody had abused the trust?

If somebody had abused trust, I'd be very angry with them, and eventually one way or another they'd be out of the business.

Did it ever happen?

No. No never.

And with the various break-ups, and especially this most recent one, where everything changed, has that affected the personal relations in the family?

No, no, it's very similar to what it was, because everybody accepted it. It was by agreement. It wasn't as if the ... Normally, even though my brother and I are the ... have more than fifty percent of the company, we have no rights, because we agreed not to have the rights. So we are exactly the same as a person who has five percent of the company. So there's no problem about that.

When the management consultants came in, you're on record as having disagreed really with their advice. And you felt that it was undoing a very particular and precious way of operating that had been built up. Did you try to persuade the group not to take any notice?

Yes, yes, I did with the young people. The way the veto works is once you agree, which I did because I didn't know what it meant to have outside people advising you, once I agreed I have no right to change my mind. I have the right [but] everybody else has to agree with me, the seven families. [The] heads of seven families have to agree to do whatever they like. So ... but they liked ... the young people like it, they wanted that. The generation after me, they wanted to. You probably saw that in the movies that I showed you. But that didn't destroy our friendship, it didn't destroy our relationship. But then eventually after a few months of that unhappiness with some young people as well as the older people, we got together again and said, 'Well let's break it up'. And it was done.

How did you feel about that? Having spent a lifetime struggling to keep it all together, then to come together to make a decision to break up the sort of Norman Smorgon, your father's family group, how did you feel?

I felt very sad about it, but I'm a realist. In my mind it was a question of doing it, or ruining the whole business. It started going down and down and down because the outside people, the new team that the professionals brought in, they knew nothing about our systems, nothing about how we performed. And they introduced new people who knew nothing about our past or how we do things. They started doing things in a very heavy ... what's the word?

Authoritarian.

Authoritarian. And the young ... our young people were dictated by people they'd never met before. And they suddenly became senior people. They used to take notice of their uncles and cousins or brothers, and then suddenly somebody comes along and tells them what to do, and they know that it's wrong. And unless they have strong personality. And that happened to Peter. Peter worked in ... he went to work as an apprentice. He worked in the steel mill, through different sections of it. And then he went to ... he was sent to Tasmania for about two years. And he took - there was three plants there - he took, with his personality [he] took over the running of the three plants himself. And then he was sent to Sydney. In Sydney there was a man that was very happy for him to take over and do whatever he wanted to do. So he was very happy about that. Then he came back to Melbourne, and he came back to Melbourne because his girlfriend was here, who you met. And here he struck a man. In Melbourne he struck a man. [Peter] said to him, 'What job am I going to do?' He said, 'You go and do some simple little job sir, and in five years if you make that good enough, we'll see if we can promote you'. So then he took matters in his own hands and went above that man, and went straight back to the chief executive of that section, not the family member, and said to him, 'I want to do that job'. He said to him, 'Well put it down on paper and show me what you want to do'. So he did. And the chief executive said, 'Wonderful, go and do it'. But there's not many people like that.

What kind of a father are you to your own daughters?

Terrible. Terrible.

Terrible? In what way are you terrible?

They accuse me of not paying enough attention, not bringing them into the business. Not now, but when they were children, and when they were young. I love them and I spend a lot of time with them. But then Loti and I are away each year for about four to five months of the year. So they were spread around the relations or a nurse, and they were quite unhappy. At the same it was a wonderful experience for them, because they saw how other people live as well. So there were times that they thought they were ... I don't think they're angry. They're not now, certainly not now, because now they understand. And they do exactly the same thing, as we did, to their children. But I don't think that my children would consider me being a good father in the sense ... not in the sense that I don't love them or I don't cuddle them. We're a cuddly family anyway, but it's a neglect. I'm not always there when they want me. And that to them was very important obviously. To most people it is important.

Do your daughters think you're too interested in business?

They know that I'm too interested in business. We always joke about it. And I said to them, 'Well what do you like doing, would you give that up?' 'No'. I said, 'Well why should I give up what I like doing?' So then they begin to understand. And then when they get married, their husbands are in business usually. And then they start to learn. They understand what it's all about. So they have a happier marriage because they know that their husband's not going to be there twenty-four hours a day. He's only going to be there eight hours a day or eight hours a night, or whatever.

You said that you didn't encourage the girls to come into the business, that they were free to do it if they wanted to, but they didn't get the same encouragement that the boys got. Why was that?

Mainly because we were in a heavy, smelly industry, which women don't like. And particularly in meat, which was the first business, when the children were growing up. They loved going to the meat works and running amongst the sheep and all that sort of thing but not the slaughtering and the canning, and all that.

You didn't feel it was quite right for them?

No, I wouldn't have minded if they came in, but none of them said I want to come in. One did, one of my grandchildren did. This one, the one you just met today. And she said she wants to join the company. I said, 'Wonderful, come in'. But I said, 'I want to make a deal with you first. Three years, after three years tell me whether you want to stay or not so I'm not embarrassed against my other partners'.

You told me that story.

[end of tape]

Proceed to Tape 11