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A tale of an Italian recycling business in China. The psychology of the entrepreneur

On Thursday of last week, the German Finance Minister Wolfgang Schäuble announced that tax revenue in 2018 is expected to exceed the previous forecast by 19 billion euros. Instead of indulging in triumphant tones, like one might expect of a politician might in any corner of the world except Germany, he added swiftly that the government must observe “strict spending restraints” to ensure a budget without new net borrowing in 2015. Despite an estimated GDP growth of 2 percent in 2015, Germany, according to Schäuble, doesn’t have any “additional spending leeway”. This comes as no surprise. Schäuble’s tight fisted manner is rooted in the country’s financial culture and psychology, characterized by a deep-seated aversion to debt and a great emphasis on responsibility. Admirable traits indeed, but risk-averse individuals hardly become entrepreneurs, and the same may be true of nations.

As we are approaching a new era of automated work that systematically reduces the need for human contribution (the Race against the Machine foreseen by Brynjolfsson and McAfee), this may not be the best approach in the long term. As always, there are two sides to the one coin. The road to failure is paved with good financial statements, and an excess of confidence often leads to overspending. This is true for individuals, states and businesses alike. In good years, you plan investments, reach out to new markets and start with new product developments. In short, you create the conditions for growth. But overstretching your capability makes you vulnerable and less resilient if there happens a downturn. Sure enough, financial prudence – and in the end all decisions will inevitably be financial ones – need not be your primary reference when taking action. While business is not tantamount to gambling, willingness to take risks lies at the heart of true entrepreneurship. As a successful entrepreneur you should be prepared to lay something on the line, albeit with planning, persistence and the wisdom to avoid the battles you can’t win.

Success can be also a matter of fate or timing. I learnt some of these lessons the hard way around the turn of the century, when I joined an Italian market leader in waste management, Isola Spa. Recovered material trading is a tough job in a highly competitive environment. Like many good things in life it just happened by accident. I was in Shanghai with an EU funded management training programme when a local trader asked me to help him and meet one of his business contacts, an Italian entrepreneur who was in town. Not thinking much of it, I agreed and we found ourselves knocking at a door of a hotel room somewhere on the Bund that week. A tall man with a Roman nose opened the door and a few months later I was setting up a trading office in Hamburg for his company. I worked with Isola for several years, commuting between Germany and China, mostly trying to grow their export capacity by acquiring clients and suppliers. I left in 2005 to join another, bigger player in the same industry.

That year, the Italian company had decided to pull back from a pet project of mine. We had been working hard and had planned to set up a waste material sorting facility in Beijing, which at the time was uncharted territory with only a handful of small, inefficient competitors and immense potential for growth. Beijing was bidding to host the 2008 Olympic Games and had committed to implement a modern domestic waste disposal system as part of the deal. According to a White Paper the Municipality would release a little later, at the end of 2006 the Chinese Capital had only 23 domestic disposal facilities yet the annual production of domestic waste was a staggering 5,85 million tons. The Chinese badly needed help and we were there to serve it and reap the rewards. I had been lucky and had found what I believed to be the ideal match: the subsidiary of one of the main national publishing companies, in charge of distributing newspapers and magazines. They had the power, the capability and the political backing we needed. I was way too keen to go for it, as I saw it at the time, that was my chance to make a difference and do something big. Unfortunately, although they had genuine interest in the project – and yes, they saw how big the opportunity was – my employers thought it would have been too risky for them. As they were focused on strengthening the company in their core market in Italy, mostly via a round of bold acquisitions, they believed they already had enough risks on their table. It was not even the numbers that called for caution. Set up by two hardcore self-made entrepreneurs with no MBA background, the company, a real success story, has always been on solid financial footing. Today it enjoys a shiny AAA rating and yes, they eventually made it to Shanghai, albeit through another project: an accelerator for European business in the paper and recycling industry, several years later. I am proud to see they successfully implemented many of my ideas – the ones I would discuss passionately for hours with my boss during flights or monotonous road trips – and somehow I still feel I am a part of it. If I were asked for the secret of their success, I would say resilience and vision. The founders, Mario Puccetti and Luigi Isola, are two very different men who run their company with an unexpected mix of conservative ideas and audacious moves that are genuine reflections of their personalities. While I regret that in the end we did not set up “my” recycling facility in Beijing, I am also aware that it was simply a matter of bad timing for them. In retrospect, I wonder whether I should have tried to find investors – I am sure we would have been successful. Maybe I was too young and inexperienced. Maybe I was just too impatient. But I remain convinced, that success in business is an impossibility without risk, especially in a fast moving world such as this.

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