Riches to Rags: What Sri Lanka can learn from business downfalls

By Shenali Waduge

We all take inspiration from rags to riches stories, but there are some lessons Sri Lankan businesses should take from riches to rag stories, to ensure they too do not end up in the same boat. Companies and people can succeed. Yet, they can also fall. Let us take a few examples and try to learn some lessons from these.

There are many reasons for people to rise and fall. First, is their inability to come to terms with the weaknesses of their system and even their staff. Second, is the sudden success tends to blind them and they think they have reached the zenith and close all doors to improvements. 

Company 1: Former Enron Chairman Kenneth Lay. In 2001 Enron went bankrupt. It was one of the greatest corporate collapses. On 25 May 2006, Lay was found guilty on six counts of conspiracy and fraud by the jury. Lay died while vacationing, three months before his October 23 sentencing. From 1989 to 2002, his political contributions totalled $ 5.8 million, with 73% going to Republicans, and 27% going to Democrats. He was one of America’s highest-paid CEOs with a $ 42.4 million compensation package. His political affiliations and corporate ethics conflicts. He departed leaving a legacy of shame and his actions resulted in major corporate reforms across the US. It is advisable for Sri Lankan CEOs to also read up on the ENRON story. 

Company 2: Theranos, a blood-testing company founded by Elizabeth Holmes in 2003 which rose to $ 4.5 billion is now according to Forbes just $ 800 million with allegations on whether the low-cost tests are actually accurate. US authorities are even investigating the company for stock fraud.  

Company 3: Nathan Tinkler was an Australian electrician and became the country’s youngest billionaire entering the coal industry. Where Tinkler erred was the money spent on accesses and extravaganzas. And now he doesn’t have most of what he lavishly spent on!

One of the commonest reasons for people and companies to suddenly fall after becoming successful is the urge to excessively spend. Statistics reveal that 70% of people who amass unexpected gains go broke within seven years on average.  Another reason for people and companies to fail is their poor investment choices. All these come as a result of lack of research, listening to wrong advice and links with bad business partners and bad associates. 

 The next factor is the tax debts and when you don’t keep track of the taxes, you soon realise that they are tracking you but you don’t have money to pay! Many celebrities and businessmen have fallen bankrupt from tax debt.  Everybody loves a rich businessman – and the moment you become rich a foray of personalities surround you from family, friends and a host of colourful personalities all pecking you to make this deal or that deal, spend on this or that. You are projected as the star/hero and this does wonders to your ego but then with time adding the money spent on dinners, shopping, gifts and freebies, you realise too late that you had been taken for a good ride. They all disappear when your pockets and bank accounts get empty. Hard as it is to accept, many Sri Lankan businesses can tap their souls and say ‘Hey this has happened to me too’. 

You can rise. You may fall. But you can certainly rise again. That’s the story of John Gokongwei Junior. He came from a wealthy Filipino-Chinese family, virtually born with a silver spoon. Upon his father’s death, creditors arrived to seize home, cars and business. He was just 15. To survive he sold roasted peanuts, soaps, candles. With time he set up Amasia Trading with his brother. There onwards he created his own empire – JG Summit Holdings. Of course he suffered ups and downs. But his will to succeed again never reduced. In 2016, he became the second richest Filipino according to Forbes Magazine. He is sharing his story to inspire others to be determined to bounce back and never quit. An excellent story for all Sri Lankan businesses.

Just as there is no model for success, there is no model for failure too. Ups and downs are always there in private lives as well as in business. The art lies in your ability to analyse, research, take advice, listen to your gut feelings and plan how your rise can be sustained. Everything in life is a risk. However, there are risks that you need to take and risks that should be taken with reservations. There are plenty of rags to riches stories and plenty of riches to rags stories as well. 

Reading about how companies failed and succeeded as well as how companies have succeeded and failed and then applying some of these lessons to one’s own business lifestyle is a good way to approach 2017.