An Interview with Sir Michael Smurfit, KBE

The warm autumnal sun glistens softly on the still shores of Monte Carlo harbour. The escarpment of the Maritime Alps looms dramatically overhead. A kingfisher struts elegantly along the marina in search of its prey. It is perfect. How fitting a place to interview a man of such magnitude: Sir Michael Smurfit, KBE.

Born in St Helens, Lancashire in August 1936, Michael Smurfit joined his father’s business, Jefferson Smurfit & Sons Ltd. in Dublin, straight from school. Two years after the company floated on the Irish Stock Exchange, Michael and his brother Jeff became Joint Managing Directors, as Jefferson Senior took on the role of Chairman and Chief Executive. Then followed by 30 years of acquisitions, the Jefferson Smurfit Group became Ireland’s first multinational company and the largest packaging company in the world.

In 2002, Dr. Smurfit took the Smurfit Group private, retiring as CEO but remaining Chairman. In this role, he steered a merger with Kappa Packaging BV, which successfully refloated in 2007 as Smurfit Kappa Group. Dr. Smurfit now resides in Monaco and our interview begins with questions about impossible - because having a yacht like this is something to retire to, so it’s not all bad. But in terms of actually visiting the factories, motivating people, and making regular speeches: I miss all that,” he says.

Dr. Smurfit admits however that he doesn’t miss it as much in the last 5 years or so since he entered his 80s; but that, “between my 70s and my 80s, I had a good 10 years left in me – productive years,” he adds.

NS: Was retirement a shock?

“The first shock I had about retirement was when I left Telecom Éireann. I remember walking down the stairs at Telecom Éireann and one minute you were in total power - then you leave the boardroom, take your sign off the board, walk out to the front door and you were gone. And that was the first time I retired from anything. I remember my final moment walking down the stairs at Clonskeagh – now I knew I’d be going back to Clonskeagh to see my son or to see old friends -but, when you walk down the stairs and get into your car – you’re gone. You’ve gone from all powerful to just another shareholder,” says Dr. Smurfit.

Entrepreneurship

“I’m a major investor in many things. I invest a lot of money in start-ups. I helped some of the next generation of people behind me. Denis O’Brien, for example, was one person I was able to help with both advice and with capital and some other people like him over the years. And I would hope that that generation is now looking after your generation because we need risk-takers and entrepreneurs.”

“Entrepreneurs are what drive any economy. [For example,] just growing a pharmaceutical company is not the way to go. We need more Kingspans and Smurfit Kappas –indigenous Irish companies that are growing on a world basis.”

Ireland as an investment location

NS: What do you think of Ireland as an investment location and a place for doing business?

“I think Ireland has many stresses on its system, particularly in the housing market. I know there’s a huge shortage of accommodation for students. So Ireland is uniquely placed in Europe because we are part of the EU; Britain is not anymore. But how much industrialisation do we want? Ireland’s a small country with a growing population and I’m not sure if it was wise for us to take on so many refugees filling up our hotels when we have homeless people in our society: it seems to me to be a mismatch. But, I say that from afar because I haven’t been back in Ireland for a few years. Ever since I sold the K Club I haven’t really come back,” says Dr Smurfit.

his retirement and current life.

Current Life and Retirement

“I hated retirement,” Dr. Smurfit says. “I was totally unsuited to it. I retired probably 10 years too soon – and I’ve told my son Tony [CEO of Smurfit Kappa] the same thing: work as long as you can. The old 65 retirement age is all gone. Modern medicines, particularly statins, give people with heart problems [a] much longer active life.”

“I found retirement difficult - not

“For every nine failures, you get one success and that one success can often make you more than the nine failures. I invested in something yesterday for example. And next week I’m investing in something else - people from Ireland are coming down to see me. I’ll probably end up investing a million or two. And [with investing] you can make 20 times your money, or you can lose it all,” he adds.

Character Traits

One of the key themes of Smurfit’s book, A Life Worth Living, is the importance of reputation, integrity and doing the right thing. These values permeate throughout the book and I believe is eloquently summarised by one line in the book which reads: it all goes back to my father’s simple code of honesty and the all-important reputation.

NS: What traits do you look for when investing in people?

“The first thing I look for is integrity. When I’m interviewing someone for an investment: are they honest, straightforward, call a spade a spade and not corrupt. There’s certain parts of the world I won’t invest in because of demi-corruption –even though you wouldn’t be part of it yourself, you could be associated with it. And we had to be very careful with our investments in Russia, Venezuela and Colombia,” he says. Dr. Smurfit adds he “couldn’t wait to get out of Nigeria,” in reference to the failure of the Nigerian government to pay money it promised the company for it taking over 60% of its interests by decree.

He continues: “You can afford to lose money, but not your reputation. And therefore, that’s the first thing I look for. I can afford to lose the money I’m giving you, but I can’t afford to have my reputation besmirched by being part of something that’s corrupt or not ethical.”

The Underdog

When Smurfit first began acquiring companies, he was oftentimes met with stern opposition from Protestant-run firms who were not enthused at the prospect of a Catholic like Smurfit seizing power. Time and again Smurfit prevailed. This doggedness and determination is evident throughout the book and I feel is encapsulated perfectly in his mantra-like motto: “I must. I can. And I will.”

Personal Growth

The personal transformation Smurfit underwent is also apparent in the book. In his own words he had gone from being “a shy and retiring boy” into a confident and prolific dealmaker in his 30s.

NS: How did this happen?

gets.”

Smurfit notes that the influence of his father was “massive”. He continues: “I only got to love my father in my 30s when I started having children of my own. I began to realise just what he’d done for me. That all those tough times and all those tough meetings with him and tough moments; they were all part of his scheme to mould me into what I became. So I’m a product of that upbringing,” he says.

“I instil the same ethics in my kids, but I didn’t bring them up the same way because they were different times. My father wasn’t a huggy-huggy type of guy, we shook hands now and again but that would be about it. Whereas, I am a very huggy-huggy type [of guy]. I remember walking into his office on one of the proudest days of my life, if not the proudest day and saying we’re now the biggest company in Ireland,” he says.

Smurfit’s father was from England and “had a very tough time when he first came to Ireland,” says Dr Smurfit. “He was considered Jewish, or possibly Jewish,” Smurfit says. This is in reference to a number of golf clubs who turned down Smurfit’s father’s application for membership.

“The name Smurfit was an unusual name, still is unusual. And if we were a Smith or an O’Brien and our name was in the headlines anywhere, we would be anybody. But if it’s a Smurfit, it’s a standout name. I never encountered any other Smurfits in the world,” he adds.

NS: Did this give you an extra source of motivation and determination?

“Absolutely,” Smurfit affirms. “We took on the establishment and then we became the establishment.”

“One of the things I learnt early on from the acquisitions that we made (the first takeover in Irish history) was that I could run any business. Didn’t matter what it was. The problems were the same: you had sales, you had costs of production, you had gross margins and so on and so forth. And I found that I could run any business, so that began to give me a growing confidence in myself. Now we still had a base business which was growing very strongly, but we had all these peripheral businesses particularly after we acquired [the] Hely Group. We were in television sets, we were selling golf clubs, we were in printing, we were in carton making with Irish carton printers for cigarette packages, etc, etc. – we were involved in all sorts of things,” he says.

“All sorts of different opportunities came up with different problems and I found I could handle them to my surprise. I surprised myself I suppose. I was always very numerative and I had a head for figures. So I could read a balance sheet in 5 minutes and tell you how good a company was and what to do about how to fix it,” he adds.

Dr. Smurfit was diagnosed with tuberculosis at age 20 and confined to a sanatorium for 9 months. I put to him whether his business acumen was honed during this time spent reading financial journals.

“It was very important,” Dr Smurfit says. “It’s where I learnt about takeovers from reading the Investors’ Chronicle. Remember people don’t sell you good businesses. When things are going well, it’s very hard to buy a business. It’s when it goes badly – it’s easy to buy a business. And we bought the Hely Group because it was going badly – confidence had collapsed in the board. They tried to find a white knight, but they couldn’t – I had 25% of the company. It was a gamble: I gambled the company, I gambled Smurfits,” he says.

NS: Is gambling important to success?

“You need risk,” Smurfit affirms. “I was spending over 100% of our equity. I was buying a company that was twice our size.”

Investing

In terms of buying the right company, Smurfit mentions in his book how “the worse it is, the better it

“When you are attacking a market -- and Smurfit [Kappa] has now reached such a height that they can’t do it anymore. Smurfit couldn’t take over number 2, 3, 4, or 5 in the market because they’re already number one in Europe by far, so they wouldn’t be allowed by the competition authorities. So Tony no longer has that opportunity that I had. I was such a small peanut guy, that I was picking up all these guys who were making mistakes and turning them around and making them better - and I had plenty more to go at. So I’d just wait for the next downturn, move in, clean up the mess, get a lot of cash in the bank and then get ready for the next one,” he says.

NS: Is the current investment climate such an opportune time?

“Yes it would be a very good time,” Dr Smurfit says. “But unfortunately as I said Smurfit [Kappa] can’t do that.”

As for current industries which Smurfit would be looking to invest in, he cites an energy company he is currently looking at investing in. The business involves “buying electricity at night-time, storing it and then the electricity releases during the day when it is used. It seems to be a no-brainer if you can get into that kind of industry because the energy crisis is not going to go away – it’s going to be here for a long time to come,” Dr. Smurfit says.

“Germany taking 45/50% of their energy needs from Russia was leaving themselves wide open for exactly what’s happened. And they were warned about this 10 years ago. I remember when I was on the board of the European Round Table that [came] up and [we] discussed that Europe was becoming too dependent on Russian gas. What they say about Russia is: the Russian bear is either at your feet or at your throat; he was at your feet, now he’s at your throat. That’s a good quote by the way,” Dr. Smurfit adds laughing.

Advice for Young People

Smurfit highlights in his book that aspiring young business people should invest time in honing their IT skills, finding a niche and filling it and to never give up.

I put these to Smurfit who adds: “The first thing is never be afraid of failure. It’s going to visit you in your lifetime a number of times. If it happens just get off your feet and start again. Don’t be afraid of setbacks – they’re going to happen in life: could be a medical setback, business setback, personal setback. Just don’t let it bother you. If you can’t fix it, don’t worry about it. There’s no point worrying about something you can’t fix. I think we sometimes go around like headless chickens worrying about things we can’t fix.” In summary? “Never give up, don’t worry about it if you can’t fix it, be prepared to have a go.”

He continues: “Everybody should have a go at something in life and not become a me-too guy working in an institution. That’s 99% of people – you just join the herd. I was lucky to have a job to go to. My father had a clear[ly] defined path that was to the future, but when I started at 16 I had no idea I was going to be where I ended up in my life. I pinch myself sometimes to look back at my own career and think ‘by God, how lucky was I’.”

Good habits

“Knowledge is power. And you don’t get knowledge from nowhere,” Dr. Smurfit says. “You get it from somewhere else: either in written form or in spoken form. So I would be saying try to study CNBC and get to know about markets and watch the trends. Spend an hour or two a day reading things like the Financial Times and Fortune or news magazines and stay up-to-date with trends particularly on corruption and things like that.”

“Stay well informed, it’s very important to be well informed. You can ask me about any subject and I’ll give you an opinion on it. Do I think Liz Truss is doing a good job in the UK? I think she’s had a disastrous start [Kwasi Kwarteng was duly dismissed as Chancellor the following morning] and I think Boris Johnson for all of his faults was a far better prime minister,” Dr. Smurfit says.

NS: What if Johnson were to return?

“I hope so,” responds Smurfit.

Legacy

Smurfit believes over his lifetime he has created “€10 to €15 billion of net worth for Irish shareholders and pensioners.”

He continues: “All the original employees, 220 of them in Clonskeagh and in Walkinstown, nearly every one of them were millionaires when they retired if they held onto their shares. Some of the guys sold shares straight away – my father gave most of the workers shares straight away. And a lot of them put their kids through college [due to their shareholding].”

Smurfit recalls the shop steward coming to him and saying “thank God for you Smurfit, all my kids have graduated through college now and they were able to do that from the dividends on the Smurfit shares.”