The colour of money - Part3

One of the classic stories in the entrepreneurial canon involves the founder of Ikea, Ingvar Kamprad. In the early days of the company, other Swedish furniture manufacturers had been boycotting Kamprad, protesting what they considered his predatory pricing. His business was in a crisis: he could fill only a fraction of his orders. So Kamprad went to Poland, where manufacturing costs were half those in Sweden. There he struck a series of deals that eventually established Ikea as Europe’s premier low-cost furniture company, and vaulted it from obscurity into one of the biggest retailers in the world. 

Here is the entrepreneur at work: brilliantly resolving an obstacle to his own advantage. But the official Ikea history hardly considers the implications of when Kamprad made that trip to Poland. It was 1961. The Berlin Wall was about to go up. The Cold War was at its peak. 

 

Poland, like the other Soviet-bloc countries, was in the grips of a repressive regime. “Their visit lasted a week and can still be tracked almost step by step by step in the documents the Polish secret police drew up,” the journalist Bertil Torekull breezily writes, in the corporate biography he crafted with Ingvar Kamprad. And how did Kamprad set up shop? “At first, we did a bit of advance smuggling,” Kamprad recounts to Torekull. “Illegally, we took tools such as files, spare parts for machines, and even carbon paper for ancient typewriters. We bought nose and mouth protectors when we saw the dreadful environment, and we took a whole lot of secondhand machines from a firm in Jönköping [in Sweden] and installed them in Poland instead.” Because the Ikea history was written in 1998-long after the fall of Communism, when Poland had become a healthy democracy and the unpleasantness of the Soviet bloc had begun to recede into history, Kamprad’s trip to Poland has been treated as a kind of heroic pilgrimage. But what Kamprad did in 1961—cozy up to a police state, break the law—is not radically different from what Schueller did in 1940. 

 

Kamprad didn’t get too worked up about the moral consequences of collaborating with the Soviet bloc because he wasn’t interested in moral consequences. He was an entrepreneur trying to save his business. He was too much of an opportunist to risk engaging himself absolutely in favour of anyone. Kamprad was for Kamprad. Compare the Holocaust hero Oskar Schindler. Schindler was an entrepreneur as well. He came to Krakow, at the outset of the war, and realised that through the Nazis’ Aryanisation programme, he could pick up a fully functioning Jewish-owned enamelware factory for next to nothing —essentially for promising to keep the factory’s former owners employed. He landed a lucrative war-supply contract. At Emalia, as the factory was known, he began to produce munitions, which gave his factory and his Jewish workforce an “essential to the war effort” designation. In the first five years of the war, he made a huge amount of money. But when the Germans decided to shut down Schindler’s operation in Krakow—and ship his workers to the gas chambers—Schindler did an about-face. He persuaded the Germans to let him move his employees and machinery to Brünnlitz, in Czechoslovakia. Here is the business professor Ray Jones, in his article, The Economic Puzzle of Oskar Schindler:

 

Schindler used the money he had made (in Krakow) to pay bribes to acquire permission for the factory, to convert the factory into an armaments factory and subcamp, to transport his workers to the factory, to pay the SS for the prisoners’ labour, to purchase food for them on the black market, to acquire additional labourers, and to pay the necessary bribes to keep the Brunnlitz factory open. By the end of the war, he had literally spent all of the money that he had made at Emalia, his entire personal fortune.

Schindler is the rare businessman who resolves the ethical conflicts of wartime capitalism in a way that we today find satisfactory. But he does so by violating every precept of good entrepreneurship—by jeopardising his company and his investment and all his personal wealth for the welfare of his employees. Schindler’s moment of moral greatness was his recognition that the Nazi threat demanded more of him than that he be a good businessman. So at Brünnlitz, he kept countless people on the payroll who contributed little or nothing. 

 

He dragged his feet in getting the factory started, claiming—implausibly—that he was having startup difficulties. He sabotaged his machinery so that the shells he made for the German Army would be useless. He deliberately placed his company in peril. By 1944, Jones concludes, Schindler “had no serious industrial intentions.” Virtually every business venture he tried, during the rest of his life, ended in failure, which makes perfect sense. The war had cured him of his entrepreneurial obsession. Schindler was no longer for Schindler. One morning in May of 1964, thieves broke into Helena Rubinstein’s Park Avenue apartment. They posed as deliverymen, carrying roses, and tied up her butler at gunpoint. But when they surprised her, in her bedroom, she defied them. The keys to her safe were in her purse, and her purse was buried beneath a mound of papers on her bed. “Madame silently extracted the keys and, with characteristic presence of mind, dropped them in the one place she could be sure no one would ever look: down her ample bosom,” Brandon writes. “By the time the thieves noticed the purse, it contained only some handfuls of paper, a powder compact, five $20 bills, and a pair of diamond earrings worth around $40,000. The earrings rolled away as they upended it, and Madame covered them with a Kleenex.”

 

The thieves tied Rubinstein to a chair with strips of her sheets and fled with the hundred dollars. When she was freed by her butler, she told him to put the roses in the icebox, in case they had company that day. Brandon says that she calculated that the thieves, “after paying $40 for the roses . . . had made just $60 profit on their morning.” Rubinstein was 91 at the time, and still in full command of her business. She soon set off to Paris, Tangier, and Normandy—and then returned home to New York, where she died, following a stroke. “The Park Avenue triplex was rented, in a move that would surely have appalled her, to Charles Revson of Revlon, an upstart whose name she had always refused to utter, referring to him only as ‘the nail man,’”  Brandon writes. Her extraordinary collection of art, real estate, haute couture, and jewelry was dispersed, and the business she had spent the better part of a century building was eventually put on the block, passing from one owner to the next until finally, in the 1980s, it was acquired for a pittance by L’Oréal’s US affiliate Cosmair, whose chairman, Jacques Corrèze, was the former chief lieutenant to that Jew-hating Fascist Eugène Deloncle.