Australian Biography

Victor Smorgon - full interview transcript

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Was the painting ever recovered?

Yes, the painting was eventually recovered through the police, international police, whatever you call ...

Interpol.

Interpol. They had actually found it in Holland. And that painting was then ... It took some time before it went to the court. The man denied it, but he was eventually ... he admitted or was accused of stealing it. The painting was taken away from him, and was given back to the insurance company that paid me for it. And the insurance company said, 'You can have it, but you have to go to auction to buy it', and at the auction at that time it was worth about three times as much. And besides that I said to Loti, 'I'll buy it back for you', she said, 'I don't want it'. She says, 'It's dirty. It was right at the time you gave it to me, but now that it's been stolen and gone through so much history, I don't want it any more'. So I said, 'Okay we'll buy another one'. The one that's in the other room is the replacement of the original one.

And which one, which Renoir did you buy then?

I don't know the name of it but it's in the next room. But Loti definitely didn't want to have anything to do with that painting because of its history.

Is it a problem about having beautiful, beautiful possessions that you have to worry all the time that someone might want to steal them?

It's not a problem if you accept it, like you accept everything else in life. If it's going to happen, it's going to happen. There's nothing you can do about it. And it's ... money itself doesn't mean anything, because you can't replace any of the paintings you see, any of the works of art you see here, you can't buy them again. You'd have to spend a lot more money than we paid for originally. And every time they go up and up and up. And besides that it becomes uncomfortable to ... you can buy other paintings but not the same one. So you go without it. You can live without them.

Going back now to your life as a businessman. How far for you has business and family been about the same thing?

How long, you mean?

Well you talk about you've had a family business, and the family has been quite a big concept. I want you to really tell me about how the relationship with the Smorgon family and the relationship ... how that relationship developed and changed, and how you handled it in terms of the business over the years that you operated as a family business.

Although it started off with the father being the leader, and my father was. About five or six years before he died, he lived in London. He remarried so he had two wives in Australia, so we didn't want him to have a third one here. So he stayed in London and he died in London. About two weeks before he died he came to Australia to visit us, and then he died from a stroke. He was very lucky, he died immediately. He didn't know he was dying. Usually people from a stroke suffer for years before they die. So in that sense he was very lucky. So I became automatically the leader. That was the time when the test came whether the family would survive without him or not. And it went on the same way because automatically - nobody said, 'You're the leader'. Nobody said, 'You are replacing your father', or anything like that. It just [went] automatically. You went on doing the same thing that you always did.

But you weren't the eldest, Victor. Why was it you rather than someone who was the eldest?

Because again it's a question of personalities. My brother, or any of the other cousins, they didn't have the leadership genes, if you like, which I had. Obviously I had them otherwise it wouldn't have happened. And you're not aware of it, you're not ... you don't say to yourself, 'I'm the leader, I'm going to do this'. You don't know that, you just automatically ... other people perceive you that way and so they look to you to lead. What are we going to do next day? What are we going to do now, and so on. Not quite in those terms, but ... so you become the centre of attention, centre of things happening, which it was natural for me anyway. I was doing it for many years before that. I was it together with my father, and then when my father died I did it, just went on doing the same thing. And business ... and again I must repeat that I didn't do it on my own. There've always the help, there's always people around me that were capable of doing other things, because business is not the result of one point of view, business is a really wide affair. It has many, many aspects of it. There's finance, there's production, there's engineering, there's information flowing, there's the administration and all those things. And family have all those abilities. But it's putting together that was important, that I played the most leading part in. In getting those thoughts together and pushing them into one way to make it happen. And that's how many things happen, together.

But you were the one who had to formulate the big picture.

Yes, I was always the one that saw the big picture. And I was pushing for that picture, and very often not knowing what ... used other people with the knowledge of ... like I told you before, about Charlie with the steel mill. I certainly created it, but he's the one that made it physically, or he and his son. So I used them to create it. I used other people to create it. So you use that as a painter uses a brush, to put it together. And you sit and you talk about it and you direct it, and you say, 'Well why don't we do it that way, why don't you do it that way?' And their turn and their particular field, they talk the same way amongst the ones that understand engineering, or understand the ...

Financial side.

Well, I was part of the financial group as well, but particularly where I was weak was in administration. It's too much detail. And I'm not a detail man. I'm the idea man. I'm a creator. I can create things, but I don't create it all myself, I have to have other people to create it with me. So it's ... I'm not like painter. He does ... that artist that did that is from his mind right down to the canvas. I don't do that. I use other people to help me to create what my ideas are. And a lot of their ideas come into the success. It's not just one man, it's always a group. It depends on the group, and it depends on the leadership.

Now there are different styles of leadership and there are different ways of organising a group. You remained a family company, not going public, for very many years, through many, many different projects. How did it work?

It worked very simply. The policy was that everything that's made stays in the business. If you were somebody who needs to buy a house, he was allowed to take the money out of the business and buy a house. Or if I want to buy my daughter a house and it cost whatever, I go to my partners and say I need so much money for my daughter's house, so I'm allowed to take it out from the accounts that are kept in relation to your percentage of ownership. But the rest of it stays in the business. With that money you keep on building up. And the other way is of course, is the banks always come to help you. You couldn't exist without the banks, because you need much more than you have. And they trust you, that takes years to create that trust. And because when you promise something you deliver. And you pay it back on time. If you can't pay it back on time you go and see them and you tell them what the position is, and they'll allow you ... they'll give you another few months and you struggle through and pay your debts. But basically the whole wealth was kept together in the family. That's how we built up business after business after business. And all owned together, 100 percent family owned. And seven families, but each one has different percentages. As it happened, my brother and I have majority interest in it. But we gave our word that nothing's on the paper, nothing is written, nothing is ... just by trust, we gave our word that we will not ... to our uncles when they became minority shareholders, that we will look after their children. We will never use the strength of shareholding as a means of doing ... overruling them. The policy became from that day on as equal, regardless of your age or shareholdings, you have equal say. In other words, you had veto rights. And anybody, regardless of age - you're seventeen, you had veto rights, if you're seventy you had veto rights. And the veto rights ... in other words it becomes a consensus. So if I have an idea and you're part of the family and you're working and you say, ' don't like that idea', I have to convince you that it's a good idea, which I've done many times. Or he has to convince me. Others have to convince me that it won't work, it can't work, we better not do it. So then I have to compromise and go through a series of compromises. But eventually it has to be 100 percent agreement, otherwise it's not done. We don't go on with it.

And how does ...

And that's what kept the family together, because each one felt important, because he had equal say. It wasn't a situation like the normal situation in a public company, where the chairman or the chief executive has the right and he tells - he's only responsible to the board and not to anybody else. And the board ... the board usually are not necessarily shareholders, so the board only knows what the chief executive tells them anyway. But in the family business, everybody knows everything, because you all ... we have a huge round table, always have a round table, because there's no head at a round table. Everybody's the head at a round table. And that satisfies everybody, not necessarily everybody, but somewhere, it wasn't always 100 percent happiness, quite a few of them objected and they weren't strong enough to express themselves and have their way. That's where personalities come into it as well. But basically it was run by about five or six people and two of them were outside people, not family people. And it worked.

The history of family companies in Australia is not good. I mean the Fairfax's broke up. There's been a whole history. The Myers broke up. There's been very few families that have stayed together as well as you have.

Yeah, but up to a certain point. We broke up too.

And why and how did that happen?

Well, that was very simple. The ... some of the younger people said we've got to modernise, we've got to bring in ... we became too big. And we couldn't handle anything. The same five or six people ... everything rather, not anything. But ... and the younger people were being neglected. Where before that you'd hold their hand and tell them, 'Why don't you do it this way', and teach them and take care of them. Push them up to a certain point of their ability and help them continuously. And that stopped because we just simply didn't have time to do that.

There were too many of them.

Too many of us, too many and too big. So somebody suggested to have a ... bring in consultants. And a famous man in London told me when I told him who we had - and I don't want to mention names - he said to me - and he was the chief executive of Rio Tinto - and he says, 'That's the kiss of death'. He said, 'Sack them'. I said, 'Well I can't sack them because I only have one vote'. So he knew all about us, about the family, because he controlled forty-eight countries. I said to him, 'How many companies do you control?' He said, 'Forty-eight countries'. Each country has about thirty or forty companies. And they had them, and a number of other people ...

These were management consultants to tell you how to reorganise.

Yeah, to my mind, a consultant takes your watch and tells you your time. Because they learn from you what you're doing and then they're trying to ... They never created anything themselves. They only advise people from what they read in a book. They are not practical. And particularly in our case. Certainly we were a very unusual company, working the way we did. And that was destroyed by creating four levels of management where there's only one level of management in the first place. And younger people wanted to ... said to us, to the older generation, 'You should resign and we'll run the company'. So we agreed to that. You know, you reach a certain age and you say, and a lot of the young people say they want to have a chance to be there, you have to get in and let them do it. But unfortunately they took the ... They changed the system from the system that worked to a system that didn't work. So then the family got together and decided, again by consensus, decided to sell out. To split up. Very nicely, very friendly. There was no arguments, there was no hurt, there was no ... we're still friends and help each other. And each on has gone a different way within their own families, and each one is doing very well on their own. Because they're free of that ... They create their own organisation. In my case I only have a grandson that was willing to come with me. The one that I told you, as I keep on saying, my eldest grandson wants to be a film producer. And he ... that's all he wants. And the other one wants to be in advertising. The third one wants to work with me, not his father. I said, 'Why don't ...'. His father wants him. He said, 'I don't want to work with him, I want to work with you because I can get on with you and I can understand you', and when he started he was about twenty-five. He's now twenty-seven, and we work beautifully together, because my relationship with him became, in reverse, the same relationship as I had with my father. I now have with my grandson. And so ... although we argue from time to time, and don't agree from time to time, but we compromise with each other. But he's gradually pushing me out, and he's taking over. And I love that because I know that. I'm a realist. I know at my age, however much longer will I live, who's going to look after all that. So he's very clever, he's very good, and he's the head of the family today, at twenty-seven. The same as I became head of the family at about thirty-two.

But despite your age that you refer to, with the break-up of the family only just a few years ago ...

About four years ago.

Four years ago. That means that at the age of eighty-one you formed a new family company, with a whole new idea and process.

Yes, yes, completely new.

Now would you like to tell me about that, and what your ambitions are for that.

Well my ambition was to keep my family together. And my daughters ... their grandfather left them a certain amount of shares of his. Not mine, his. And they're theirs. So they're full fledged shareholders. Not that their father gave it to them, it's their grandfather. I gave them other things, but the shares were given to them by their grandfather. So it belongs to them partly. So I had a responsibility of keeping it together. And my ambition was to create another family company, different to what it was because there's just not enough. The girls, my daughters, weren't particularly interested in business, although the only one who could be a businesswoman is the girl that you met, Bindy. And she could have been but she's not interested. She's doing her own things that she wants to do. And so I then had an idea to create a new family organisation, by the family itself [having] funds, to finance anything that any of the grandchildren want to go into. And the family holds fifty percent interest in equity. We'll lend the other half, either arrange a loan or lend them from the funds that we have, and buy them businesses. The example is General Pants. My granddaughter's husband wanted to be [?] and get some business. And this was an offer to us, or to him. He came along to start to talk about it and he has no money. And this was the first venture that we did that way. And so we said to him and the granddaughter, 'We will buy it for you. Half belongs to the family. Not any individual but the whole family group. And ... from the funds of the family all together. And the other half you have to borrow, which we will help you to borrow. Either we'll lend you or arrange a bank loan for you but you're responsible to pay it back. And you have to pay it back, and then once you pay it back it's yours'. So we become partners, equal partners in the venture. And that, as it happens, became very successful. This young man's very energetic and he's done a very good job. And he's about ... within two years he'll pay off his debt and he and his wife will own half of the business, which is becoming more and more important. And he's made a wonderful job of it. And another one is ... the same granddaughter's brother, who wants to be in advertising. We just ... I think the deal is being completed today, and we're going to be partners with him in advertising. And my grandson wants ... apart from being partners with me in some things, he's partners with me in the pallets. I offered him, I said do you want to buy half of me.

What's pallets? Is this a new scheme you've got?

Well, the pallets is an idea that I had very soon after we broke up, and if you want to see it on the film, we can show it here. [HE SHOWS A BROCHURE] And this is the product that we make for the food industry mostly. Which is hygienic. There's no way that there's any bugs can grow on this ...

So this is a pallet ...

... that they put boxes on and a forklift comes in, in here and it lifts it up and puts it ... stacks it up. Before, in storage they hang like this on edge, so that it takes less space. It's got to be strong enough to hold it straight. The way we designed our pallet it's strong enough, it's very strong. And as well, as good as wood is. And it's the only one that's been ever done that way. And we invented that ourselves, together with the Russian engineer. He's the main brain, but without me he couldn't have done it, and without him I couldn't have done it. That's our main job and that's going to be a very, very big business. And Peter, my grandson, I'm talking about, I offered him. I said to him, 'Why don't you buy half of me, because that belongs to me personally'. So he said, 'Okay', so now he's a partner to that. And he's working at it anyway. And he also has his own business. He invited me to be a partner in his business. And he's ... he has a friend, and he and his friend are concentrating on advertising on the screen. You can imagine Bourke Street Mall or in Sydney you'd have Pitt Street Mall or Martin Place, I'm not sure, and in Melbourne he has already arranged the home site. And the site is about a huge screen with constant advertising on it like video. Like on the television. It is television actually. So one of them's going to his partner, and he is partner with his friend and we're half partners to both of them. So we're creating a family with other families.

You're very excited about this pallet idea, aren't you? And you think that you're really onto a winner with it. Do you think you are going to make ...

I am certain that I'm going to win with it. It's there. It's just a question of just altering the machine. We've made part of it. And it's very, very strong, and it's very, very light. And you can imagine that that pallet weighs about nineteen to twenty kilos and the wooden pallet weighs about thirty-seven kilos. That's roughly half the weight, and double the strength. And our pallet that we're currently ... we're making now, we've been successful with and selling it to lots of people in Australia. And they love it. It works beautifully, except it's too expensive.

Now do you think that this clever new idea you've got is going to make your fortune?

I think so. I more than think so, I'm certain of it. In fact my ambition is to repeat the performance. Build up another company, if I live long enough. And ... which should take me five years. And ... but it won't be in Australia because Australia hasn't got the population, hasn't got the raw material, and we make all this from waste: from milk bottles that you buy, plastic milk bottles, detergent bottles and the wrapping that goes around the cases for all your ... Housewives usually use it for wrapping small things - the cling stretch, that stuff.

So it's all recycled.

It's 100 percent recycled. There's no virgin material in that whatsoever.

And environmentally friendly.

And environmentally friendly, because in the process when it goes through the heat of about 200-odd degrees, anything that is there that shouldn't be there gets burnt off. So it becomes completely clean. It's sterilised.

Do you ever, in business, have to do things that you wonder about ethically? Do you ever find yourself in business having to do things that disturb you a little bit on ethical grounds?

Ah, yes. But if it disturbs me I drop it because I'm not greedy enough to carry on, because it's wrong. So I just drop the idea and move along.

Could you give me an example from your own experience.

Well, there's very few things. Well, in the meat game for instance, if meat is bad, like you have occasionally, because it hasn't been taken out long enough, or because there's a strike on, or whatever - for whatever reason it gets spoiled, you just boil it down into tallow. You don't use it for food. We've done that many times like that. Obviously you can't do that in steel. But in the food products you can. And in steel there's nothing that can do any harm to anybody. But in food you have to be very careful. That's why I designed that pallet. It was my ideas of the pallet of how to do it from a hygienic point of view. From structural point of view, I put my bits in, but the hygienic point of view is all my ideas, to make certain that it's hygienic, because that's what the world wants today. That's what ... people are becoming more and more conscious about hygiene so you have to supply them with something that they can use to make it more hygienic. And this is one of the products that we're concentrating on. And it will be in big numbers, in millions of numbers.

Throughout its life, your company, your family company, was often called secretive. You didn't give yourself much publicity. Why was that? Why did you keep things close to the chest?

Because we didn't want to brag about what we were doing. We're not people that show off. We're not people that want to be well known. To me it's a surprise that I'm supposed to be important. I don't feel that way. And I don't think it's anybody's business what we have or what we don't have. We are doing, we're creating things, we're helping people, we're helping other people with our creativity in business. We create work for people. And all that is important to us. We think about it, and we are conscious of that. It's not just sort of money. It really has nothing to do ... after a certain amount, I'm not talking about at the beginning, but when you get to a certain amount of money, whatever that might be, after that the money itself is not important, it's creativity, what you do with the money that's important, both in charity and in creating new industries, like this one here.

What was your ... Can you remember an example of a time that was a bad moment for you in your business life?

You mean from financial point of view?

I mean overall. Something that you remember from your business life as being something that distressed or upset you.

Very seldom, I can't recall anything like that.

One of the reasons I'm asking that is that I've read at times when you had to close down whole factories, which presumably meant sacking lots of workers. Could you describe that?

Yes. They were economical reasons. We closed up the fruit factory. We were the fourth largest canned fruit factory. South Africa has very, very cheap labour. Australian labour kept on going up and up and up. South African labour went down, down, down. And we were both supplying English market. And all you do every time you put something in the can, and every time you buy a can, it's a definite loss. And so we decided to close up. And it was cheaper to close up than keep on working. It became a purely economical factor, and we pulled out of it. And there was nobody to sell it to. But very often we sell the business if we don't think there's any future in it. So you're sitting there, and again, it sort of becomes automatic. You sit round the table and you talk about it, and somebody says, 'What the hell are we in that for, we're losing money on that'. And we have a system where we know our profit every day on whatever we produce, because you can correct your mistakes on a daily basis. I'm trying to teach all my friends and all my relations to do the same thing. Very few take any notice. They still go on monthly. And I say the month's just passed but you don't get it every month, you don't get it until the second month. And that's our system today, the Smorgon's work under. Two months after, they know what happened today, because they're not using my system any more. It was actually my father's idea in the first place. He introduced that idea into to my life and I picked it up, and it's very, very important because you know daily what has gone wrong. Why it's gone wrong. And when you know, ask that question, 'Why has it gone wrong?' you get an answer. You work out the answer, and you correct it. You correct it and then it's straightened out again, and then you go on doing it, and that's part of the success of our life, our business life, our business activities, because we knew what we were doing. Particularly in meat. I mean very, very few meat companies knew what they were doing. They just kept on buying cattle, didn't matter what it cost, and didn't matter what they sold for. They just kept working all the year round. We kept the main staff, but the ordinary workers ... It's a seasonal business anyway, meat. Meat lasts for about - in Victoria - for about four or five months then you have to shut down. There's no cattle, there's no sheep, because it's out of season. Same thing in Queensland, where we have a meat works there. We could only work about four months of the year. And everybody accepted it, and if we didn't have enough labour, we picked up new labour and taught them how to do it. As I think I told you before, when we were very, very busy, and there was not enough labour in Australia, we used to pick them up - immigrants straight off the ship and bring them in, and give them a job and teach them. And we invented chain special sections to teach the people how to bone a carcass or how to undress a carcass. It's called dressed, but it's really undress. And within two weeks they become reasonably efficient. And so it costs you money, but you know that you're ... but you're saving a hell of a lot more by not working when it's uneconomical to work.

[end of tape]

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