Martin Varsavsky and Carlos Moncayo - Ideas Exchange - BBC

The Ideas Exchange in association with hsbc.

Business titans are shaping the modern world. They've revolutionized our lives with technological innovation. They forge new relationships between entire continents. Their decisions affect what we do, how we work, where we live. In the Ideas Exchange, top executives travel the world to question one another. They come head to head to reveal the challenges they face and how each of them has achieved success.

This was something I kept secret until recently.

Latin American Carlos Moncaio crossed the world to pursue a grand ambition.

We were taught by my father to always dream big.

He was only 23 when he devised his master plan.

We identified this opportunity to become the leading facilitator of business between China and Latin America.

Carlos Moncaio decided he was the man to represent Latin America in the world's most populous nation.

Every day, more companies were looking at sourcing products from China.

But no one was helping them negotiate the deals, check quality and resolve disputes.

We were the first ones to really connect these two regions.

That was just eight years ago. Now Carlos heads a company which operates all over Asia and Latin America. This extraordinary young man is on his way to meet another global business leader.

I think what is very inspiring about him, he's been able to identify multiple opportunities in the market and always be ahead of the Trend. And he's 20 years older than me, so he has 20 years more of experience to share.

He's traveling to Spain to see telecoms innovator Martin Wasavsky. Martin made his fortune building and selling companies.

I built ya.com for 38 million euros. I sold it for 550 million euros. I built Viatel for half a million. When I sold the company, it was worth $1.2 billion. Reflashing of the firmware of the fixed route.

His current venture is FON, an innovative Wi Fi confederation which allows members free Internet access worldwide. With 6.2 million hotspots, it's the largest WI fi network on earth. So what's he got to learn from Carlos?

I'm intrigued about the fact that at a young age he's achieved a lot. He's developed a platform that links two regions of the world which have been booming in the last 10 years. So I think this relationship of China and Latin America is something that's particularly intriguing to me.

Carlos has traveled 6,000 miles to meet Martin at his home outside Madrid. The two men are going to interview each other. They'll talk openly about their setbacks and achievements. They'll exchange ideas about how they made their millions. And they'll share their plans to make New fortunes.

How has entrepreneurship changed your life?

I'll be honest about this. A lot of people in my family thought when I was growing up that entrepreneurs were thieves. Took me maybe seven years of my life, between, I would say, 18 and 25, and maybe four years of therapy to understand that it was okay for me to be an entrepreneur. I come from a family where almost everyone is an intellectual, a professor, nobody's a businessman. And I have built by now seven companies, and four of these companies have gone to be worth over half a billion.

But life hasn't always been this fortunate for Martin. He was born in Argentina in 1960. When he was 16, a military junta seized power, crushing opposition in a murderous campaign. His family were targeted as dissidents. In 1977, they found refuge in the United States. The experience profoundly shaped his attitude towards business.

I undertake what for other people are crazy business risks, because after what I went through in my childhood, after growing up without knowing whether you would make it to the next day after seeing relatives being killed and buildings blow up 100 meters away from my home, I just have a different idea of what a business risk is.

Further tragedy spurred Martinon to prove himself as an entrepreneur.

What was the specific moment when you recognized that talent?

My father died when I was 22, and that was a shock. I mean, he was very young. He was 49. Completely unexpected. He died of a heart attack. When he died, a lot of members of my family needed, and I was the only person kind of close to have an income. But out of necessity came the joy of saying, hey, being an entrepreneur is great.

It was the early 80s and Martin had started a business pioneering the loft movement in New York. Originally, to pay his way through college, he converted industrial buildings and sold them as a fashionable residential apartments. Now making serious money, he gave up thoughts of an academic career. For Martin, working for someone else was always an unlikely prospect anyway.

I would go to job interviews and people would say, well, how do you see yourself in five years? And I would say, well, at least as your boss, you know. So being an entrepreneur is also an incredible desire to master your own destiny.

With his trendy loft business, Martin made his first million by the age of 27. In 1990, he founded US based telecom company Viatel, famed for pioneering cheap international calls. Before expanding rapidly as a challenger to established service providers. He sold his shares for $200 million in 1998 to help finance his next venture across the Atlantic. Taking advantage of telecom liberalization in Spain, he founded Jaztel to compete with the former monopoly Provider.

How did you choose to be based in Europe?

The same obsession with success that makes America an amazing country. It sometimes adds a lot of stress to personal relations or friendship. And I felt that Europe had a balance of work and a life after work. I had the idea to build Jazdel, which is now the second largest publicly traded telco here. And it really worked out. So then I said, well, this is a country where you can have a great time, but you can also build businesses. And even with all its problems, I think Spain has a charm that I fell in love with.

But for Carlos, there are limits to the appeal of Spanish charm.

What needs to happen to inspire more entrepreneurial innovation in Spain and in general in Europe in the future?

Europe is an egalitarian society by nature. The problem of entrepreneurs is that entrepreneurs are odd. People are people who are different, are people who become immensely wealthy many times, and that generates tremendous animosity in Europe. And that really has to change, because what makes countries great is the ingenuity of their entrepreneurs. Today.

Martin prides himself on the ingenuity of the Fon WI Fi network, his current venture.

I was in Paris and I was trying to connect to WI fi because I didn't want to pay a euro meg to roam and end up with a phone bill of €2,000. And so I saw that there was WI fi everywhere, but it was locked. We don't need to build a global WI fi network. We just need to open up the network that exists.

So fond subscribers share their routers with other members, giving them free Internet access across the world. The network makes money from charging non members. For Martin, the venture illustrates a fundamental principle in his approach to business.

But there's still a confusion. I see it on Twitter and especially I started phone because I needed WI fi and then I thought, hey, maybe everyone else needs WI fi when they move around the world. So my first advice for you to start a business is start a business that solves a problem that you have.

So what gave Martin the confidence that it would work as a business?

What I did is I went and I found a bunch of hippies like Sergey Brin, the founder of Google, or Jano San Nicolas, the founders of Skype, and a bunch of people who actually can think the way I think and they thought it was a great idea.

So it's like a reality check in some sense.

Yeah. Think getting other people's money is you get their money, you get their advice, it's a sanity check as to whether you have a good idea or not.

Fon was conceived as an independent confederation, but without sufficient individual subscribers. Martin realized that a plan B was called for. He forged alliances with big telecom companies like BT in Britain and SFR in France. They offered their subscribers access.

This partnership you built with bt, how did you approach them? How did you build the connection?

Google organized a conference called Google Zeitgeist in which they had me debate Ian Livingstone, the CEO of bt, in sort of an enemy position. I was the person who always built companies that kind of went against bt, and he was bt. When we were done with the debate, we went backstage and after half an hour, Ian said, hey, I think we should work together. And that's how it happened, because Ian is a guy that has a lot of vision. Not every CEO thinks like that.

Martin's successes outnumber his setbacks, but the road to riches has been far from smooth. He narrowly escaped personal bankruptcy when his Viatel shares crashed in value before rebounding in 2003. He lost 35 million euros on cloud computing. And four years ago, he was forced to rescue Fon with cash saved from previous ventures.

I don't think of business as sometimes I make and sometimes I lose. I think more business as sometimes I make and sometimes I learn.

So are there any other lessons which Carlos can learn from Martin's checkered career in entrepreneurship?

You're paid for the few ideas you may have in your life, but I know I'm terrible at execution. Like I'm not the person who's going to be there night and day making sure the execution works. I have remarkable people who help me. I'm very, very thankful to them.

Martin reveals perhaps the most surprising ingredient in his recipe for success.

So how do you keep a healthy balance between work and life?

Well, this was something I kept secret until recently. I take 12 week vacations every year and I work until 2, right? So I don't work in the afternoons. In Spain, you have lunch at 2, so I work until lunchtime. You know, I have five children and I couldn't have a successful happy family life if I didn't do these things like leave the office, be with my kids.

Carlos Moncaio is a crucial link man between industry in China and Latin America. He started Asham Business group based here in Hangzhou. Enlisting the help of his two brothers. The firm supervises contracts with Chinese manufacturers on behalf of Latin American buyers. Carlos travelled from China to Spain to meet Martin Vasavsky, a pioneer of the technological revolution. We've heard Carlos quiz Martin. Now Carlos will tell his remarkable story and exchange his Ideas. But first, Martin has a business proposition.

Let me tell you a business idea that I had for China once and you tell me since you're the expert and I just had the idea, if you think the idea is good or not.

Okay.

I was thinking my native country of Argentina, neighboring country Uruguay. Amazing quality beef. Do you think if you start a good advertising campaign that meets certain standards, it's packaged in a certain way and it's branded food. Do you think there is an opportunity for something like that in China?

The challenge in China is always building the brand because people want to buy things that they feel familiar with. You definitely can do it, but you will need to invest several million dollars on the process and you will only see the returns in probably 10 years from now.

So what qualifies Carlos to dispense advice? How did he become an expert on China? Carlos Moncaio grew up in Ecuador.

My father was a relentless entrepreneur. He went from selling handicrafts to home produced honey. And he always got us involved in this project from a very early age. Since we were old enough to sit on a chair, we developed an addiction for dreaming, for dreaming about building a better future.

Aged 21, he left home to study law in the United States. Then he got the offer which changed his life. In 2004, he was invited to China, a nation fast becoming the most important economy in the world.

I actually only see China in the movies and didn't have any idea about what to expect.

He accepted an internship at a Shanghai law firm. He only intended to stay eight weeks, but there was something about the place.

As soon as you arrive to the airport, you can feel a special energy and that energy is contagious. I could feel there was the right country for my big dreams.

Carlos worked on legal disputes between foreign retailers and Chinese manufacturers.

By reading cases of different clients, I could see that really there was a problem on the way that the entire system was managed from doing the right due diligence, later following up process as well as quality control. Nothing of this was taken care properly. So I could see a a very interesting opportunity to take advantage and create a service to serve that market.

But the young Carlos didn't speak a Chinese language and knew very little about manufacturing processes.

I think sometimes being young is an advantage and the fact that you are ignorant about some points really allow you to dream big and don't see the barriers. Probably if I would have evaluated the actual situation and the knowledge I had at that time, with the knowledge I have right now, I maybe didn't start the company in the first place.

With the exuberance of youth, he began a course in Mandarin and launched the company with $10,000 from his father's maxed out credit card. He soon identified the sector which most needed his services. Fashion houses in Latin America.

And why are your target companies demeaning your customers? Why are they in Latin America?

Latin America is special because it's. It has a very segmented market where each country has leading brands that are very strong in their respective local markets and they're competing with big corporations. But very few cases they go outside their borders. So they really don't generate the scale necessary for them to really set up their own infrastructure in Asia to manage these orders.

What are the personnel scale skills you had in order to understand and do business in Asia?

One of the key, I think, skills that was part of our success was really being willing to have a very flexible approach about where we were going. And we really knew that we didn't have the answer, but we wanted to figure it out.

The approach seems to have worked, so.

Those are also ready.

Carlos recruited experts and won contracts. His business grew rapidly and in 2011, he shipped $35 million worth of goods across the Pacific. But there are potential pitfalls in striking deals with manufacturers, as Martin has discovered.

One of the problems I have faced in sourcing the products at Fauna in China is corruption or bribery. How do you protect against Chinese manufacturers who want to win the contract at all costs and will try to bribe a buyer to get a contract?

This is an issue for us as well. I think it really depends on the type of employees and people that you have around you. What are the values that those employees have? We have inspectors all around China. When an inspector is at the factory and identified the problem, they also are offered gifts to keep quiet. But we have been very fortunate to identify the right people. And so far, I can tell you in eight years, we have never faced a problem like this.

But Carlos is facing another more fundamental problem. Economic boom has raised living standards in China. An attractive prospect for factory workers, but a challenge for foreign entrepreneurs.

Do you think China will continue to be the main sourcing country for you? As China's labor costs rise, a lot.

Of orders are moving out of China. China has experienced this amazing economic growth, but that has also increased the living standards of the people and therefore also the labor cost. So countries like Vietnam are right now receiving a lot of orders that traditionally were managed in China.

But Martin believes the Chinese will exploit new and better economic opportunities. At present, Carlos, Latin American clients are at the glamorous end of the operation, designing, marketing and selling the clothes. For Martin, it's only a matter of time before the Chinese take over the more enviable occupations.

What's going to happen to the rest of the world when the Chinese not only make everything we use, but design it as well?

Well, you just spot the business opportunity actually there. I think there are a lot of brands, Chinese brands, that are becoming very strong on the local market and they really have the quality and design to become international brands. We're looking right now at opportunities of these Chinese brands going internationally to partner with them because they definitely need local knowledge and they want to build networks of people that they could trust.

Martin and Carlos are also aware that China is increasingly becoming a consumer society eager to buy foreign goods.

So you think the last two decades were about buying from the Chinese and the next two decades may be about selling to the Chinese.

It's a huge opportunity. The market, I think it's the biggest market, the most attractive market right now for consumer goods.

But he has a warning for anyone trying to market goods to the largest population on earth.

It's such a complex country that you cannot build a China strategy. You can build a Shanghai strategy, a Beijing strategy, a Hangzhou strategy. Each province, sometimes each city has a different reality.

How do you see your company in 10 years?

There's going to be a transition of our business model to take advantage of the domestic market in China. I think it's such a huge opportunity that it's difficult not to be willing to participate. Traditionally, China has been doing business with the U.S. and Europe. But right now, China as well as other Southeast Asia countries are starting to look at Latin America as a market as well. So there's a growing connection between these two regions. It's south to south business.

Annual trade between Latin America and China is expected to double in the next five years to $400 billion. As developing regions look to each other for economic advancement, a process greatly assisted by entrepreneurs like. Like Carlos. There are striking parallels between Martin and Carlos. Both started their business careers while pursuing their studies. Both made their fortunes far from their homelands. And both have profited from great changes in the global economic landscape that they helped bring about.

Carlos, this was great.

It was really excellent. Great meeting you. Thank you so much. Martin is a very interesting person. I think his experience and his point of view of business is something from where I can learn a lot. Thank you for everything.

Bye bye. Good luck. Well, I certainly learned a lot about doing business in China and I think Carlos is very insightful, easygoing. I think we can be friends. The Ideas Exchange in association with HSBC.