World Changers

No one ever accused Brazilian energy entrepreneur Eike Batista of failing to think big. Already the wealthiest man in his own country, with a net worth estimated at $30 billion, he has made clear his intention to become the richest man in the world. His competitive instincts, honed for years as a top-class speedboat racer, have led him to openly warn Mexico’s Carlos Slim that he will soon speed by him. Considering his track record of high-class entrepreneurship in the past thirty years, achieving this goal won’t be a total surprise.

The good-natured bragging by Batista is understandable. Son of the country’s revered former mining minster, Batista is a self-made billionaire who best personifies his own country’s transformation from an economic basket case to one of the world’s economic superpowers. His most innovative projects in natural resources and infrastructure sectors are helping Brazil to generate wealth and infrastructure improvements for its population.

As Batista puts it, for years Brazilians hid their success. He wants to inspire a new generation of entrepreneurs to follow his example and embrace their country’s promise. So he keeps a Mercedes-Benz SLR McLaren sports car in his parlor as a decoration and puts the letter X in the name of all his companies as a symbol of wealth multiplication.

Batista surely is. A college dropout, he got his start by following the gold rush into the Amazon, buying a gold mine at the age of twenty-four. His mining operations led to some Indiana Jones—style adventures deep in the jungle. Today his EBX Group fortune spans shipping, mining, power plants, logistics, and—above all—vast oil and gas holdings.

A huge boost in his wealth occurred after he made a bold $1 billion gamble in 2007 to buy the licenses to explore for oil off Rio’s coastline. Batista discovered a bonanza, a massive oil find. He believes it will cost him no more than $18 a barrel to extract the oil, allowing for outsized profits from the resource for many years. That’s what led to his decision to take his oil exploration firm OGX public in June of 2008. At the time, the IPO was Brazil’s biggest ever, raising $4.1 billion.

Wheeling and dealing with wildcat gold diggers, he started an independent gold mining and trading company in 1980. Batista learned the business from the ground up. “In mining,” he explains, “you go to some crazy place, you set up a camp. You start looking for water and energy and this way you can build anything. That’s the mind-set. That’s my life. That’s how I started from zero.”

Parents always are disappointed, but after two and a half years at Aachen University in Germany I realized that I already had a grasp on the engineering part of the world, so I wanted to make money. Since I was very young I always had a great interest in engineering for the sake of making things better. I always loved cars. I liked mechanics, and I liked reading Popular Mechanics and Scientific American and research documents from universities in material sciences.

When we lived in Brussels for four years, and I was sixteen, I owned a motorbike that went 90 to 100 kilometers an hour. I spent hours trying to make it faster. I polished the spark plugs, changed the chain, and calibrated the tires. I was always trying to get some extra performance. In 1989, when I decided to race powerboats in Brazil, I became the Brazilian, the American, and the world champion because of two things: understanding how to build a team and smart engineering. It’s a very dangerous sport and a five-cent piece could make you lose the race or even die.

From the 1960s to the 1980s, my father was very busy building the international offices of Vale, the Brazilian steel giant. We moved from Switzerland to Dusseldorf in Germany to Brussels in Belgium and then I went to university in Germany. So I basically stayed in Europe from my twelfth birthday until my twenty-first. What my father taught me, what I learned from him, is to think big, because he built—there’s a movie in Brazil called Brazil’s Engineer, and it’s about him, because he built part of Brazil’s macro-infrastructure—railways, super ports for shipment of iron ore to Asia, back then to Japan. And so I learned to think.

But I was educated by my mother. I’m one of seven children, the second. And so my mother taught me discipline—she was German, from Hamburg—and so she taught me discipline and care, caring for others, which is very much what I got from her, which forged me in many ways.

I began selling insurance because my parents moved back to Brazil when I was eighteen and just going to university. My oldest brother was already at Aachen University studying medicine. When they left us there, they basically gave us an allowance that lasted not much more than fifteen days. We were brought up to be ashamed for asking for more money, so I decided after talking to friends that I could do a blitz course and sell insurance policies. This taught me how to talk to people. Some doors open and some do not.

It was a mixture of stress and a brutal desire to be financially independent. It was a very important stress period for me. I was never angry with my parents. I just took it for granted. I tell young people, especially middle-and upper-class youngsters, that parents should not make it too easy for them. We pamper them too much. The other thing that happened to me was when I was eleven or twelve I had asthma. My mother said I think you could cure this through swimming. And she kept throwing me into a swimming pool to the point that I solved my asthma problem. That was added stress in my life, and it makes you tougher.

Within a month, I made more than double what I needed by selling insurance. I bought an old Mercedes, so when I drove up to the doors I could show off. I sold insurance in Germany and Belgium because my father kept an apartment in Brussels. During the holidays when I went to Brazil to see my friends, we talked about financial independence. The idea came up about selling diamonds, basically being an intermediary between the buyers in Antwerp in Belgium and the Brazilian pick-and-shovel miners from an office I rented. I made commissions out of it.

After two and one half years in Germany and Belgium, I went to visit the Amazon in the northern part of Brazil, where lots of pick-and-shovel miners were producing lots of gold. It was like the old Wild West. I organized a visit there over ten days and my father had the army chase me there because he didn’t know where I was. What I realized was that a lot of gold was being produced and so my idea was to become a trader, to buy and sell the gold. I didn’t want to initially participate in the gold production because local owners who had planes and controlled the landing strips to move the gold out controlled it. The mules of the jungle were Cessna 186 planes.

I went to two jewelers in Rio and asked them to lend me some money. I said I would bring the gold to Rio and Sao Paulo from the Amazon. Somehow, they liked what I said and obviously it was gold, you know. I don’t think they would have given me any money if I asked them to buy chocolate. They charged me a 20 percent interest rate on the money and also wanted some of the product. So they wanted a double interest. But in eighteen months, I managed to buy $60 million in gold and, after discounting everything, I was left with a net of 10 percent. So I made $6 million when I was twenty-two years of age. What happened was that during that time other traders started to come into the area and I saw very clearly that my 10 percent margin was going to go sharply down to perhaps 2 percent or 3 percent. I said, “Well, it’s time to think about something else.” So looking at these pick-and-shovel miners producing gold very inefficiently, I decided I am going to buy one of these sites from an owner and mechanize the production of gold. So I bought a mine for $2 million and the first thing I did was I hired a Canadian drilling company that specialized in drilling alluvial deposits.

They came and measured the amount of gold I had there and put it in production. I was down to my last $300,000 because I had obviously underestimated logistics, diseases, and mechanical problems. I had to airlift the gold out. The closest road was 100 kilometers from the mine, so I had to make an air bridge over 100 kilometers long. At the mine site, I had to build my own camps. I needed clean water and food for the personnel. I needed oil and power. There was almost a military concept of logistics where you depend almost 100 percent on yourself. But I was going to produce a product that I had to ship out by plane.

It was very stressful, I must tell you. The thing started to run because the mine was so rich it was totally idiot-proof. It survived all my mistakes. In the group we have to this day a strong embedded culture of building only idiot-proof assets. When the mine started to produce, I was making a million dollars a month. The mine was so rich that I needed only 10 percent of the gold to pay for all the operations. I almost died in this process by flying around. I did it with my own hands. I know deeply the construction of these mines, and I ended up building nine mines around the world from scratch—five in Brazil, one in Chile, and three in Canada.

I always looked for rich mines, and I keep this culture up today. I arbitrage gigantic inefficiencies. We are building super ports to overcome Brazil’s lack of efficient ports. In the resource arena, somehow I have a pact with nature. Everywhere I drill I find oil, coal, or gold.

Yes, but it also brings arrogance because you can come to think that you can fly. It’s very dangerous. I went into a very interesting diversification phase in the 1990s when I started a Jeep factory in Brazil. As you know, every single man would like to build his own car. So there I was trying to build my own Jeep. That was a failure that taught me a lot. It taught me that it’s important to shut down your company when it’s not going well and close it down properly. So you pay all the bills and indemnify your workers. It was a humbling exercise. Failures only make you grow. It makes you stress even further.

In my Jeep story I failed to pay attention to networks. After people bought the car they had maintenance problems because the network wasn’t so large. You can’t have a success if your dealership network isn’t big enough to provide good service. If we had stayed at it longer, it’s possible that it could have been a success because I consider myself one of the fathers of the small sport utility vehicles. My Jeep in 1990 was a small sport utility. I was probably ahead of my time with one missing link, which was the network. I lost more than $100 million.

I learned in all these years to read people and one of my best qualities today is to get the best out of incredibly qualified engineers and geologists. I have the best of the best. This is probably my biggest strength today. That is why I consider myself today as a massive arbitrager of inefficiencies using state-of-the-art concepts and equipment.

I wanted to do other things, although I am on overload now. I’m spending $40 billion in ten years in natural resources and infrastructure sectors in Brazil, so there is a limit. If you look at the world through the eyes of an engineer, there are a lot of opportunities. America and Brazil have allowed the financial people to make money through money. We have forgotten to make things more efficient. In America, you should be driving electric cars today. So it’s coming at least ten years too late. If things had started twenty years ago, people would have looked for efficiencies. It’s incomprehensible that America doesn’t have high-speed rail between major cities. The European car fleet has twice the energy efficiency than America.

I know how to read geology. I have on my team many geologists from Petrobras [the Brazilian energy giant] and they have more than forty years of experience in these fields. I built these things so many times so when I read a document on results, I read it differently than other people. I know how to get the best talent around me and let them do their thing. You know our hit ratio is in fifty-eight wells we hit oil in fifty-three, and this story is still to be told. It is in excess of 90 percent. And then we are going to break a record because we are going to start producing oil by the last quarter of 2011. From the first well drilled into production, it will be a world record.

We are making a revolution in the speed that you can develop these things. Oil companies, especially the big ones, are normally state controlled. They go through so many procedures. Yes, some of them are justified for security and safety reasons, but some are totally wrong. They don’t use the maximum of efficiencies that you can get. These bureaucracies insist they had all this specific data and lack operational flexibility.

Yes, it was an international auction. All the big boys were there. Petrobras or Exxon could have outbid me. I paid the biggest price and it came right out of my pocket. You only win if you pay the biggest price and I paid $1 billion. Everybody laughed at me back then. They said, “Eike Batista is crazy.” I never worried I was overpaying because I felt strongly that it was worth it. I must admit that I didn’t know it was going to be so big. I knew I would have a very nice return on my money. Of course, you only know after you drill, but like I said before somehow I have a pact with nature and it keeps giving back to me. It will cost me $16 a barrel to extract this oil. We have ten billion barrels in our area today. It’s like a trillion dollars in the ground. It will cost me $160 billion to take out.

I was prepared by my father to think of a Brazil that would eventually work. Four of my brothers used to live in the U.S. and two now have come back to work for me. We had a military regime in the 1960s and 1970s, and in the 1980s we became a democracy. And we had incredible financial problems until the nineties. President Lulu says that he loves the animal spirits of the entrepreneur. Since then, Brazil has undergone a period of economic stability and growth, first during the administrations of Fernando Henrique Cardoso and Lula and now with Dilma. That is why Brazil opened up these auctions in the oil arena. The oil sector was denationalized from Petrobras in 1997. I was the first guy to hire talent from Petrobras and put $1 billion into this. With a few exceptions, the foreign oil companies were not successful in Brazil. Petrobras had an incredible pool of talent. So Brazil has allowed me to break the Petrobras monopoly.

Yes, I can. I have great management and technical people in every single company. We have frequent meetings to explore synergies, which are massive. I have fifty executive directors in eight companies. If I want to talk to a director, I walk into his office, sit in front of him, and let him tell me his story. Normally, I have eight CEOs who report constantly to me, but I see monthly reports from every director. Several times a week, I have a lunch with them and they push everything out. Transparency and openness are a big part of this culture.

First, obviously, you need to have this drive toward financial independence. This was a driver for me, a big one. I simply didn’t want to get money from my parents anymore. This was very powerful. Then I would advise young people to leave their comfort zone. Go somewhere and don’t say to yourself, “I live in Rio de Janeiro and so that is where I need to find a job or start a business.” This country is big. The fact that I went out to the Amazon gave me a new dimension, a new way to look at opportunity.

Entrepreneurs also need to take a long-term view. Projects that have quality take three to five years to be built. In my business, you can’t think in the short term because this is a tropical mentality. This country’s abundance has not helped investors or entrepreneurs to think longer term. I think of Brazil fifty to one hundred years forward. My advice to young people is start small and think long term.

We will now host the Olympics. Our economy is booming. It’s creating a lot of new jobs. And we’re proving that we are not only a country of soccer and samba. The entrepreneurial class in Brazil also has world-class leaders. If Brazilians are proud of having the best soccer player in the world or the most beautiful model, why not also be proud of having the best leaders in business?