Value Investing

3G And Beyond The Big Dream – People + Culture

As many of you probably know, this year, on Friday February 16 was Chinese New Year, also known as Spring Festival or Lunar New Year. It is, without a doubt, the most important holiday in Greater China and therefore we, in Hong Kong, enjoyed an extended weekend to celebrate with friends and family. It also gave me the opportunity to finish reading a great book, which was recommended to me, titled Dream Big by Cristiane Correa, published in 2013.

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Dream Big presents the story of three Brazilian business titans, namely Jorge Paulo Lemann, Marcel Telles and Beto Sicupira. If their names don’t ring a bell, you might have heard about them as the trio behind 3G Capital, the firm who has acquired three globally-recognized American brands: Budweiser, Burger King and Heinz. They also made further noise in the market by partnering with mega investor Warren Buffett on a few occasions. However, before these landmark acquisitions, the road to success started very humbly over 45 years ago. In short, in 1971, Jorge Paulo Lemann, a Harvard graduate born in 1939 who loves underwater fishing and is also a tennis champion, acquired the brokerage operating license of Garantia after having failed to buy control of Libra the year before.

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Telles and Sicupira then joined Garantia in 1972 and 1973, respectively, and started building what would become an amazing business empire. The three bankers made their first headway into the real economy in 1982 when they acquired the retail chain Lojas Americanas. They later purchased their first brewery, named Brahma, which would lead to many subsequent mergers and acquisitions, and ultimately to the creation of 3G Capital as we know it today.

Beyond the trio’s fascinating story, what’s even more noteworthy are the lessons we can learn from them in terms of management style, methods, and culture. The “Garantia model”, which is still used today, is based on meritocracy, efficiency, and the concept of partnership. In addition, as exemplified by their story, the model can be applied to different industries and geographies. Below, I highlight a few ideas which I strongly believe are worth exploring.

Forewords are not often worth mentioning, however in this case, the preface written by Jim Collins, is impressive. Collins, the well-known author of Good to Great and Built to Last, successfully summarized in 10 simple lessons what he’s learned from Lemann, Telles, and Sicupira. The review of the book below is structured around a few selected highly significant lessons.

Lesson #1: Invest always – and above all – in people. This is basically what every company would tell you in one form or another. However, in the case of the founders (Lemann, Telles, and Sicupira), they fundamentally believe in it and it translated into powerful and concrete actions. It’s not by chance that hundreds of people who have worked with the trio have become millionaires. Collins notes: “From the very beginning, their primary investments have been in people, especially young and talented leaders. Their philosophy: Better to give talented (if unproven) people a chance, and endure a few disappointments along the way, than to not believe in people.”

Lesson #3: Create a meritocratic ownership culture with aligned incentives. Again, meritocracy is often talked about, but very few companies enforce it. The partners are certainly not afraid of finding ways to enforce this idea. Great people are handsomely rewarded and poor performing ones are simply fired. In Collins’ words “The three partners believed that the very best people crave meritocracy, and mediocre people fear it.” – which is very true and can be observed every day in whatever organisation.

When Garantia started, Lemann needed an aligned team and as he was one of the main shareholders of the company, he could put the principles of meritocracy that he always believed in into practice. He was especially interested in people with “PSD” attributes – Poor, Smart, Deep Desire to Get Rich. However, meritocracy by itself is not enough to keep people motivated in the long run. Giving someone a carrot won’t keep them going forever. Therefore, another crucial component of Lemann’s philosophy is “ownership”. He believed it was essential that everybody, even those at the very bottom, felt like “owners” of the business. That’s also why people that made it to a partner position had to buy some equity in the company – Partner wasn’t only a fancy title. This ownership concept also had a major influence on how decisions were made and the level of freedom that employees had.

On the other hand, in more than one chapter it is noted how harsh and how big a sacrifice it could be to work at Garantia. “I worked a lot and did not see my children grow up” admitted former partner Diniz Ferreira Baptista. This is to be expected from a highly rewarding and competitive organisation. However, the author also highlights how much of a “pressure cooker” and how unpleasant and even embarrassing certain situations could become within the firm. Correa draws a parallel with larger American investment banks, which are often infamous for disrespecting especially more junior staff. I’ve personally always found these practices totally absurd and counterproductive. A quick, direct and transparent way of communicating is absolutely necessary, however attacks, which are often personal, will rarely bring anything positive to any organisation.

Dream Big also notes how difficult it can be to manage and keep partners motivated when they become increasingly rich. For the three founders, money became less important with time (not more) and building something significant has always been their top priority, which keeps them going to this day. Lemann once claimed that he would never have distributed so much profit in one go among the partners. Instead, he would have looked for other opportunities to invest the earnings.

When looking back at the issues faced by Garantia which subsequently led to its sale to Credit Suisse for $675 million, it’s fairly easy to see that the weakening of the firm’s culture was the single most important problem faced by the firm. At the time, the main partners were more distant and the younger partners were more interested in growing their personal wealth than building a stronger institution. It was basically an auto-destruction.

Lesson #5: Focus on creating something great, not on “managing money”. The trio focuses on the long term. They were once asked about what they learned about how to manage money during uncertain and inflationary times, to which they answered “When everyone else was spending their time managing their money, we invested our time in building our company. If we built our company, then that would be the very best way in the long run to generate wealth. Managing money, by itself, never creates something great and lasting, but building something great can lead to substantial results.” This might be somewhat confusing, especially if your business is actually defined as “managing money” – although I would argue that managing money is every company’s business. But what if you’re a hedge fund? What if you’re a private equity fund? Obviously, you want to ensure you can push your business through tough times. But beyond that, in the long run, what are you trying to achieve? As a starter, just go back to lesson #1 and #3 above…

Lesson #6: Simplicity has genius and magic in it. The three founders try to make everything as simple as possible. They dress simply, talk simply, and cut what’s unnecessary. Collins note that simplifying a complex world into a very simple idea, and holding to it for a very long time is what represents true genius. And for the trio it’s simply to “Get great people, give them big things to do and sustain a meritocratic ownership culture.” which became the backbone of their long-term competitive advantage.

Lesson #7: It’s okay to be a fanatic. Collins once asked: “What is the essence of the type of person you are looking for?” and the answer was: “We are looking for fanatics.” As it is noted, such obsessed people do not become the most popular people, but when they come together the multiplicative effect is unstoppable. In addition, I would argue that if you wish to create something great, by definition you’re looking to build something which doesn’t exist and change the current established equilibrium, which requires enormous willpower and so being a fanatic is absolutely necessary. You simply cannot compromise. If you start compromising, it’s game over.

The author gives the example of a marketing executive which was competing against Telles and his team at Brahma, who said: “Competing against them was really complicated. Do you know why? Because these guys had technology, science, discipline… They had developed this ability to attract and develop people and rely on the best brains…”.


During my time at Columbia Business School, I took an interesting course named Corporate Growth and Organizational Development taught by Professor Harrigan (an ardent cat lover). One of the main objectives of the course was to find out how and what value was the headquarters or controlling shareholder bringing to its subsidiaries considering different corporate structures. For our Brazilian trio, their core strategy can be summarized in three simple words: Dream + People + Culture. More than simply owning assets, they’ve built an efficient “people machine” with well-defined characteristics which brought tremendous and long-lasting results to its different stakeholders.

Sicupira once said that everything you do that is important in life needs to be institutionalized – if not, it’s as though you have done nothing.