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YOU AIN’T IN KANSAS
ANY MORE…
It was at the
celebration party for the opening of his seventh branch that Clem X
pulled me aside and gave me the news.
“I’m off to conquer
new worlds.” With a beer in one hand and a scotch in the other, I
wondered if that meant he’d be trying to find the way to the door. I
nodded and pondered how to get at least one of the drinks out of his
hands before he drank both of them.
“No, I mean it.
Seventh branch. Only took three years. We predicted ten years to get
this far, you know…”
“Yes. You’ve done
remarkably well. You’ve got the formula down pat. You planning to drink
both of those?”
“You want one?” He
pushed both drinks towards me, generous. Seeing my expression, he
laughed. “Hey, I’m a drinker but not that much. I’m holding the beer for
Mike.” He looked over my shoulder. “Mike, come here before our lawyer
here thinks I’m a drunk. And tell him about our next big move…” He
grinned at me, gave the drink to Mike, and patted me on the shoulder.
“You’ve done international right? You negotiate in other countries?”
“Sure. Just returned
from South Africa, remember?”
“Well, we need your
skills on this one…and this one is going to be exciting. Really
exciting…”
Mike was looking
around to see who was listening and Clem saw that. “OK, OK, we can talk
about it later. But this is the time to move beyond parochialism. Time
to show foreigners what these particular American businessmen can do.
Watch us go…”
He moved away to
greet a customer and Mike shook his head slowly, looking after him.
“He’s on a roll, now. Figures he can’t lose.”
“You think it’s a
bad idea?”
“The numbers come
out fine. But…” he grinned. “..it’s an alien world out there. We know
the Bay Area. We don’t know Brussels.”
“EEC, huh? Well,
lots of money to be made there. And you guys learn fast. Assuming…”
He raised his
eyebrows. I hesitated, but went on. “You can’t go into a market
intending to show them what American business can do. You have to go in
adjusting to what they do and learning their game and their foibles. If
you go there to show them how you strut your stuff…”
I stopped and
wondered why I was giving this lecture to Mike. Soft spoken, thoughtful,
he already knew that. It was Clem who needed to hear this and he was in
no condition to hear anything. Mike just smiled, nodded, and shrugged.
We both knew that Clem’s entry into Europe was going to be an
interesting time.
Clem may have been a
bit drunk that night but when sober he was a brilliant and effective
businessman. He had moved into a market already saturated with his
wholesale distribution products and out maneuvered, out thought, and out
sold some very big players. When one of the biggest offered to buy him
out, he just laughed and told them he would be making his offer to buy
them out in a year.
And did.
They turned him down
but a year after that closed their local outlet, conceding defeat. Clem
sent them a funeral bouquet and earned never ending enmity from their
local management.
Three branches
later, he had driven another big player from the market and expanded
into a related field of distribution, succeeding there within a year.
He was very good at
his business, hard working, honest and confident.
He was, in short, a
very good American businessman.
Who was about to
discover that California is not Belgium and Kansas is not Oz.
We helped set him up
to do business in Europe, using local counsel we work with and
incorporated him as a wholly owned subsidiary of his American company,
negotiated local warehouse space, found a good international CPA, and
negotiated some vendor contracts. During that time I bored him with
warnings about local methods, laws and customs and he finally
interrupted one of my many lectures.
“I get it. I ain’t
in Kansas anymore. The natives get restless. I risk being the Ugly
American. I talk too loud, drink too much, push too hard and work too
many hours. I get it.”
“Don’t mean to nag…”
He grinned. “No,
you’re telling me all the right things. That’s your job. You know this
locale, I don’t. And I do know what works here may not work in the
USA….but maybe, just maybe, these people should get some idea of why we
are getting rich and why they are stagnant…”
“Clem…”
“No, hold on. Just
let me finish. They have a good life. I see it. Work six hour days. All
medical paid for and the rest. But their economy is as flat as their
landscape, their growth does not exist and it’s a Brave New World. They
have to compete with us. The Chinese. And we work hard and know how to
make money. I think once they see what we can do, maybe even these guys
are going to realize what some hard work and sweat can do.”
“Maybe. Maybe. Just
be careful. They were in business when the USA was a group of Indians
eating acorns…”
He was impatient. “I
get it. I’ll be careful. But you just watch…”
I soon lost track of
how his business was going. With that set up “package” out of the way,
Clem’s European subsidiary was off and running and I did not hear back
from him for about a year. I knew he had had some problems with a local
vendor in Germany and had told Mike who called me on it to use a good
firm we worked with in Frankfurt. I had assumed that issue was long
resolved.
When I first heard
from Clem, himself, it was a long distance call which I was not happy to
get since it was midnight.
“Sorry to wake you.
I know it’s God awful late…”
“Clem? What are you
doing calling this hour?”
“I’m in London and I
am going to try to talk you into dropping everything to fly over here. I
know it’s last minute…”
I had been sound
asleep and was groggy. “Fly there? London? You mean tomorrow?”
“Not London. Wish it
were. Frankfurt. Tomorrow or the day after. I’ve just been told by my
lawyer that I am in real trouble and when he laid it out I can’t believe
it’s like he says it is. I mean, it’s unbelievable. Just nuts…”
“It’s the firm we
recommended?”
“Yeah..”
“They know their
stuff, Clem. If he says you have problems, you have problems.”
A long pause. “Look,
I’m a fish out of water right now. I know you warned me and all that…but
it didn’t come down quite like you warned me about. It’s different and I
need your guidance here and now.”
“I’m pretty tied up
now. Next week, maybe…”
”We’re before some
damned administrative committee on some damned law that makes no sense
next week and we have to know what to do this week or so he tells me
he…the lawyer… is upset because he wasn’t consulted before I signed the
joint venture and seems to think it’s all my fault…and the US government
will be pissed at me if I comply with what they say I have to do in the
joint venture and the customer is threatening to sue as well, so I’m
screwed no matter what I do…”
“Calm down. Let me
make some phone calls, let me talk to your local counsel and…”
“Can you be here if
you need to be here?”
“If I’m really
needed, I’ll be there…”
“I’ll pay for
business class…”
“You’re damned right
you will. But let’s see if I need to be there.”
I did.
Because if Clem’s
subsidiary, which had just entered into a joint venture with a Czech
entity, complied with a contract to sell a certain product to an Arab
customer, Clem would violate the
Export Control
laws of the United States and go to jail or pay a massive
fine and if he does not supply it, then he is in breach of the agreement
and his new Czech partner as well as the Arab customer will sue him for
damages.
The Arab was
outraged at Clem’s sudden refusal to provide the materials, pointing out
that most of the materials stemmed from European manufacturers and that
United States law would not apply to a European entity which is why he
was dealing with Czechs to begin with and what did the Americans have to
do with this in any event…etc.?
They were right that
the Czechs had signed the contract…but under our joint venture, we had
to supply the product. The Czechs faced no liability under American
law…but, sadly, Clem’s American company did since it was American owned
and subject to US law . The Arabs were threatening to sue. If they did,
the Czechs were threatening to sue Clem for violation of his obligations
under the joint venture to deliver the goods…and the United States
government was looking on with hard eyes. Clem missed Modesto.
“Who is this Czech
company, anyway?” I asked as we drank coffee at Heathrow.
“They came to me.
Heard about me, they said, liked the way I was aggressive in the market
place. Felt that with their contacts in Eastern Europe and mine in
America, we could both triple our business.”
“Right. Now, who are
they?”
He looked at me
steadily over his coffee cup. “A business. What do you mean?”
“You checked them
out? Found out who owned them?”
“I met the guys…had
some dinners.” He saw my expression. “Business dinners. Formal things.”
“Wining and dining
Americans is how many of these companies work. Go up to the local Castle
and have dinner overlooking the river, that sort of thing.” He blushed.
I grinned. “Don’t feel bad. All of us fall for that. Americans like the
exotic. They know that.”
“They seemed like
regular business guys to me. I liked them.”
“And confirmed that
they were the actual owners? Hired the right people to find out?”
There was a pause.
He was smart. “Who do you think they are? Think they are a front
company of some sort? Think they may be owned by the Arabs…setting me
up to get the product?”
I shrugged. “Doubt
it. Sounds too dramatic to me. And the Arabs don’t need to play those
games. They have better things to do than try to use you to buy export
restricted materials. A lot of countries do nothing but sell those to
them.” He looked relieved. “I just think you have to know who your
partners are…that’s what you used to do back home…”
He leaned back.
“It’s different here. I had good instincts at home…still learning my way
here. And how the hell do you check out a Czech, huh? I don’t speak
their language, know no one there..”
“With a single call
to me I could have arranged it.”
“But at considerable
expense.”
“Yes, perhaps…but
less than you are facing now, for sure.”
“For sure. Well,
you’ll get plenty of chance to judge for yourself. We’ll see them
tonight.”
But we didn’t.
Instead of meeting his partners in a restaurant near the train station,
we watched a tall and somber man with a brief case make his way to the
table. He was immaculately dressed as only a lawyer from Germany would
dress and silently opened his briefcase to hand me the petition he had
filed in Court a few hours earlier. He sat down and ordered some wine.
“We regret the need
to commence legal action but we are deeply distressed,” he said in his
perfect English. “Our client’s reputation has been besmirched by your
government’s imposition of their will on your client.” He nodded
towards Clem, kindly. “We do understand that he is in a …how you
say…”fix?” …but we entered this transaction relying on his professed
ability to deliver the product and it is clear that this will not be
possible. We have thus suffered grievous damage.”
I fingered through
the pages. It was in German. “Your clients had no inkling that this
might turn out to be a problem, Mr. Krause?”
He looked at me
blankly. “They are not Americans. They are a fine Czech company long
used to engaging in international business, yes, but not with a partner
who would unilaterally impose these restrictions.”
“Those export
restrictions have been in place for over a decade. They never
encountered this problem before? Never dealt with an American company
with American export controls?”
He flushed a little.
“I am not familiar with their entire business history. They are Czech. I
work here, in Germany…”
“Because it occurs
to me that they sought my client out. They sought out an American
company to do this deal. Yet, they did not know of the export
restrictions that would be imposed?”
“They chose an
American company precisely to obtain the expertise to avoid the export
restrictions, Sir.” he said stiffly. “If your client was unfamiliar
with his own country’s laws, do not blame mine.” He sipped his wine
which had arrived. “They might be willing to buy your client out and
resolve the problem that way. That, quite frankly, seems the only way
out of this problem.”
He saw my expression
and kept his face carefully blank. I glanced at Clem who had quickly
grasped the entire set up. I looked back at Krause. “We invested over
two hundred thousand in this partnership, Mr. Krause. What do your
clients expect to pay for our interest?”
He sighed. “I am
unsure. I do not have authority as of yet. I only mention it as a
possibility. Certainly with a lost profit opportunity of over five
hundred thousand Euros, you should not expect any return on your
investment, Indeed, my clients would expect some additional
compensation, I suspect.”
I said nothing. Clem
looked grim. Seeing that, Krause stood up, nodded at Clem, and left with
the same dignity he showed upon his arrival.
Clem was smiling
grimly. “I deserve this. Set up like a kid.”
“We aren’t finished
yet. We can claim force majeure. If the contract cannot be performed due
to an act of law, we cannot be required to perform it…”
“Crap. They got me.
Our deal is subject to Czech law, you said. The deal I was too stupid to
have you review before I signed it…”
“I didn’t say you
were stupid…”
“No, I said I was
stupid. So that means a German Court enforcing Czech law and us trying
to use an American export restriction to save me in that forum. Can we
win?”
“Yes, we can. The
courts here are good and fair. They don’t dislike Americans. The fight
will be uphill but we can win…we just have to explain how we committed
ourselves to do it despite the law that would stop us..”
“Have to explain how
we could have been that dumb…”
“Yeah, that’s going
to be a problem. But you certainly cannot try to evade the law…”
“Never, “ he stated,
voice hard. “Those restrictions are there for a reason. Damned if I will
send the Arabs these parts…” He shook his head looking at a train
through the window. “They got me fair and square.” He sighed. “I’m
learning the game, counselor. Learning the game. Some lessons are more
expensive than others.” He looked at me. “So, what do you think they
will settle for?”
They settled for one
hundred and thirty thousand dollars and full ownership of the company.
It took some huffing and puffing on our part, having to hire additional
local counsel and some letters from the local Embassy, but it settled.
The Arabs didn’t get their parts, the Czechs did just fine with the
aborted partnership, and six months later Clem and I were on a sailboat
in San Francisco Bay watching a sunset.
It was my boat and I
was always happy on it and was in a good mood. He was in a good mood
since he had just looked over his quarterly profit and loss and had made
five times what he paid to the Czechs in a single quarter. We were
feeling philosophical and pontificating to each other about truth,
justice and Europeans.
“I’m going back, you
know…”
I looked at him. I
was not surprised. “When?”
“This coming year.
Figure I’ve had my three hundred thousand dollar college education in
European business now and am ready to try again…” He grinned and lifted
his glass at the sunset. “They got me last time. I get them next time…”
“It’s not war,
Clem.”
“Oh, but it is. In a
way. It’s me proving that I can do this…”
“To who?”
“To me, maybe. To
you, maybe. To my bank account. Look, any real business is involved in
international business. You’ve told me that a dozen times…”
“Yeah, true, but you
go at it as if they were enemies and there to be conquered…”
“They’re not
friends, either.”
“No. The Chinese
have it right, I think.” He raised his eyebrows at me. “They have a
simple ethos. You are in business to make money. If someone makes a
mistake, or is a fool, you are a fool not to take advantage of him. If
he is as smart as you and does not make a mistake, then just do
business. Nothing personal. Those are the rules.”
Clem was silent for
a while looking at the darkening sky. “Well, that’s not too different
than ours, really…”
“I disagree. We see
it as honorable fighting, all in the open, two mighty knights hacking at
each other. A sneak attack or some maneuver behind the scenes is somehow
not quite right. The Chinese just think that’s plain nuts…and
hypocritical to boot. They think we are actually sneakier than they
are…but fake being fair and honest…”
“Wait a minute…”
“Just telling you
their theory. They are proud of their maneuvers, not embarrassed or
defensive. If a Chinese company had maneuvered you into that Export
Control trap, they’d be celebrating and feeling pretty good. I suspect
the Czechs won’t admit they are just as happy they could oust you from
the JV for next to nothing..”
We tacked and headed
towards the Golden Gate and worked the boat for a while in companionable
silence. It was full dark now.
“I like this…” he
said, suddenly.
“Sailing’s great…”
“No, I don’t mean
that. Though I like sailing. I mean learning the business approach in
different countries. Adjusting. Maneuvering like they do…only better. I
like that…it’s challenging.”
“Really? You looked
pretty grim a year ago…”
“Got to lose some to
win some. But this makes…makes life interesting….makes business
interesting again. We Americans…we’re pretty good at adjusting…”
“You’re right. I
think it’s our big advantage at international business. Self criticism
and adjusting to new realities.”
I couldn’t see his
face but I could see him nodding. “Yeah…yeah…I think you’re right. We’ll
just have to see.”
He started his
second European business the following year. That was nine years ago.
He lives in Tuscany
now, not far from a doctor I represented who made a fortune in new
medical devices.
I guess he learned
the new game. |
