The Frederick Chavalit Tsao Story
We are proud to present an excerpt from Quantum Leadership: New Consciousness in Business by Frederick Chavalit Tsao and Chris Laszlo.
IMC’s Origins
To fully understand my ideas of business sustainability and its stewardship of society, you have to look at the legacy I inherited. Each generation of my family evolved the business and shaped it to thrive in the particular era in which it found itself. But consistently applied across every era have been the three values of our founder, my great-grandfather: integrity, hard work, and prudence.
My great-grandfather Tsao Wa Chang was a sampan boatman in Shanghai at the turn of the twentieth century. One day, a drunken captain left a bag full of cash and documents in his boat. My great-grandfather could have kept it; it would have represented a fortune for such a poor boatman. Instead, he chose to seek out the captain, but his ship had already sailed. Months later, when the ship returned, my great-grandfather was waiting for the captain with the bag and its contents intact. It turned out that many of the documents were bills of lading and titles for cargo in a warehouse. The captain, a Westerner, was impressed with my great-grandfather’s integrity and gave him a large reward—a sum of money that would allow him to establish his own waterfront transport business. And so our family business was born.
With each succeeding generation, the business grew exponentially and often against all odds. Under my grandfather, Tsao Ying Yung, and my father, Frank W. K. Tsao, it expanded in shipping and real estate, through two world wars, and against the backdrop of China’s transition from empire to republic and thence to today’s more market-based socialist regime. As the Tsao family grew, members migrated from China across the globe—my grandfather died as a citizen of Brazil. By the time I was born, our business headquarters had moved from Shanghai to Hong Kong.
The story of the Tsao family business is one of rising to the challenges of the world around it, adapting to the changing needs of society while observing consistency in its three main corporate values. Among them, prudence has been key. It has prevented the family from becoming too embroiled in the past century’s turbulent events, and it continues to guide us now. Rather than fail during the third generation’s tenure, as family businesses are statistically prone to do, we have flourished. IMC was listed on the Hong Kong and Singapore stock exchanges, but in 2002 I made the decision to take that public part of the company private to give the family enterprise more freedom to evolve with creativity and imagination, answering to no one other than ourselves.
My Years as Head of the Company
In the years since I took over the business, it has gone from being a regional shipping company to an integrated multinational service-based solutions provider—a complex multi-billion-dollar business operating across many geographic markets. In the mid-1990s, China’s industrial development meant an increased demand for raw materials, and there was a tremendous shortage of cargo capacity to ship these raw materials into China. But markets are inherently cyclical, and at the height of the boom in 2005–2007, when the value of all ships was hugely inflated, I urged my managers to sell a few of our vessels. This was met with formidable resistance: “Why sell when the market is so strong?” While it is hard to anticipate a downturn when the market is hot, selling ships during peak times is what made it possible for us to expand once the market had cooled.
Over the past couple of decades, we continued to diversify our portfolio and add new ventures, from equipment and ports to marine offshore engineering services. We transformed our business model from ship owner to solutions provider through multiple industry supply chains. At the heart of it was the emergence of China as a trading powerhouse and the growing requirements of its booming market of more than a billion people. The China miracle forced changes to the shipping industry in ways never seen before.2
I shied away from speculative windfall deals, instead concentrating on the business’s long-term sustainability. Although some advised against it, in recent years I broadened the business beyond our core industrial and real estate activities by creating Octave, a division encompassing businesses that promote health and well-being in line with quantum leadership.
Today the IMC business is about evolution and creativity, which is a reflection of my own personal journey. IMC continues to practice an inclusive business philosophy of creating value for all stakeholders in what is still very much a dog-eat-dog world. I believe that this philosophy is what allows IMC to outperform companies who pursue short-term profit whatever the cost to society and the environment. The focus for us is on sustainability as flourishing.
What Is a Business For?
As my own journey progressed, I began to see more clearly that the role of a business leader is to serve human well-being while also creating wealth. And wealth in this case does not only mean profit for the owner but also prosperity for all. A resource without a social purpose is not wealth. Businesses have to add wider social value as they create enterprise value, through which they contribute to serving the needs of society. This is the essence of Adam Smith’s phrase “the interests of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer.”3 And in today’s world the continued evolution of business requires greater value integration and support from all stakeholders.
To understand business, one has to start with its purpose. Business is an integral part of society in which markets—at least in today’s capitalistic system—play a major role in meeting people’s needs and wants. It is the willingness of people to pay for goods and services that converts economic resources into wealth. Economics should be understood, fundamentally, as activities that satisfy human desires. But in the age of unbounded consumerism and materialism, human desires do not necessarily align with well-being.
Business is thus far the most efficient mechanism humans have devised for deploying resources to create value. It is a conjunction of people and institutions with two primary roles: to serve humankind and to generate wealth. A business that is well aligned is more than just a place to earn a living; it is also a platform for leaders, managers, and employees to pursue development, creativity, and self-actualization, individually and collectively as a community.
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Notes
2. Michael Zakkour, “The China Miracle Isn’t Over—It Has Entered Its Second Phase,” Forbes, March 30, 2017, https://www.forbes.com/sites/michaelzakkour/2017/03/30/the-china-miracle-isnt-over-it-has-entered-its-second-phase/#659be3b76635.
3. Adam Smith, “Conclusion to the Mercantile System,” in The Wealth of Nations, by Adam Smith (New York: Random House, 1994), 715.
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Posted by: David Martin | September 2, 2019 at 04:17 AM