12 things I learned from Jorge Paulo Lemann

A few months ago, while reading Buffett’s annual letter, I came across 3G Capital and its principals, mainly Jorge Paulo Lemann, and got curious.

This article on him that made me more curious.


Now, Buffett is an astute dealmaker. And fantastic at picking partners in business – nearly all his partners are people with outstanding characteristics. Few examples are Charlie Munger, Tom Murphy, Mrs Blumkin, Albert Ueltschi and Ajit Jain. Even the lesser known people like Ted Weschler and Todd Combs are ones I’ve come to admire a lot.

Given that background, Jorge Lemann made me very curious. I thought I could learn a few things if I looked up Jorge and studied his life.  He is very reticent and little is known about him. Yet, I was able to find a few good pieces on him and put it together. Here’s a good book on 3G Capital and a script of a rare talk given by Lemann at some college. Seen below is a great talk by Brito, Lemann’s protege and CEO of Annheuser-Busch, a company where Lemann’s firm has significant stake.

Here are my lessons from Jorge Lemann.

  1. Identify hungry people and give them opportunity
    When Lemann started Garantia in the 70s, he looked for people with a certain trait. Poor, smart, with a deep desire to get rich. He gave them growth and opportunity. Good performers were aggressively rewarded and poor performers were shown the door. There was high pressure on everyone to perform. It was a self-cleansing system – the average ones got knocked out. And the good ones pushed the company to newer heights.
    However, opportunity can only attract people, but cannot retain them. Lemann managed to retain a lot of key talent for several decades. How? See points 2 & 3.
  2. Leverage the power of meritocracy and incentives
    Lemann realized the power of letting people decide their future through their own performance. People were rewarded purely on meritocracy. And he tapped into the power of incentives – people were paid low base salaries, but were rewarded with large incentives and bonuses and a lot of them turned very wealthy in the process.
  3. Culture of owners, not professionals
    The payouts and incentives to top performers at Lemann’s companies were always top of the category, but were done in such a way that it didn’t let these newly rich performers go overboard – the payouts were always structured such that though they created wealth for themselves, it was mostly locked ‘inside the company’ – and reinvested ‘inside the company.’ They actively encouraged ownership of equity by employees – esp top performing ones. At the same time, the vesting and cliff periods were often 5 years or even 10 in few cases. This turned top employees into owners, not merely professionals. That turned out to be great, because professionals build their resumes, owners build businesses. 
  4. Dream big
    Lemann was a big dreamer – always looking for the next big thing. He was once a national level tennis player who realized he couldn’t get to top 10 in the world and quit early from the professional circuit, to get into business and give himself a better chance at something bigger. He’s dreamed big at every step. He setup Garantia into one of the leading banks of its time. His team built Lojas Americanas into a top retailer and Brahma into a powerhouse now. 3G Capital has gone one step further and done bold things (acquiring Burger King, Heinz, etc)
  5. Stay lean
    At the core of all companies Lemann setup, there is a strong thread of frugality, super cost efficient operations and super lean structure. When you spend a $ less, its a $ extra you have for future investments either in the same business or other. They learned a lot of things from Sam Walton and others and then took it to a different level altogether.
    Sicupira, Lemann’s partner is often quoted saying “costs are like fingernails, you need to constantly trim them to keep them under control”. 
  6. Surround yourself with great people
    From very early days, Lemann actively pursued and surrounded himself with great people. Those who would challenge him and push him to better heights. He actively pursued and groomed partners – something that Buffett himself has done wonderfully well. He spent a lot of time on nurturing his relationships.
  7. Clone the best
    “Innovations that create value are useful, but copying what works well is more practical”,  Lemann quotes. He had this idea of learning from the best and copying what they did well. That’s the core of Sam Walton’s philosophy too!
    Lemann would assess where they were, identify the best player in the space and establish the gap between them. The work for his team was to now close the gap between the best one and themselves.  They copied investment banking ideas from Goldman Sachs, retail ideas from Sam Walton and even investing ideas from Buffett himself.
  8. Culture is important and it has to be uniform
    At the core of Lemann’s companies is the intense culture built and groomed over several decades. It is aggressive, fast paced, result oriented and self-cleansing. And it is not for average performers or for easy-goers. Brito does a fantastic job of explaining the culture – its not fun, but its exciting for a few and they only want such people in.
    Also, you cannot have multiple cultures within the same team – Brito explains that wonderfully well in the video.
  9. To coast is to fail
    Lemann had a stellar career, but not without downside. During the 90s, when GP Investimentos and other non-Garantia ventures took most of the time of Lemann and his senior partners (Sicupira and Telles), they didn’t spend much time at Garantia, the investment bank. That ship started sailing on its own course and diluted the culture at Garantia. Employees were no longer frugal like their bosses and even became daring in a risky business, taking more risks than they could chew. The Asian crisis came and hit the bank hard and harmed the reputation built over more than 2 decades. Upset, Lemann sold this business to Credit Suisse for 675 million $ – a portion of what it was worth a few years earlier. He learnt his lesson – in business, to coast is to fail.
  10. Concentrate on a few selective choices
    At GP Investimentos, Lemann and his team did a lot of things that didn’t work. The Garantia screwup also was a costly lesson. They realized the importance of not spreading oneself thin. And to have few selective choices and to go after them. That explains how 3G works today – no more startup related funding, no more investments in businesses where they cannot enforce their culture, no more investments in businesses where they cannot make an impact. Exactly what Buffett calls sticking to circle of competence.
  11. Recognize effort, but reward results
       I cannot explain it any better than Brito. Pls see 27:00 in the video above for explanation.
  12. Take calculated risks
     College (and even sheltered jobs) can teach you to assess risk mathematically and theoretically. But only life can teach you to assess risk practically – by doing and learning from it. Go out, take risks and learn from them!

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