Sam Zemurray – The Banana Man – represents the best and worst of the American dream. A Russian immigrant who came to America with nothing, he created a vast business empire through insight, determination, and shrewd business practices. But there are unsavoury parts to his story as well, which finds him personally spearheading a coup d’etat in Honduras so his empire could grow unimpeded.
As Rich Cohen describes in The Fish That Ate The Whale, Zemurray’s legacy doesn’t represent what most of us would think of as a “business hero”. But as Cohen points out, the lives of “great men” rarely do.
But buried in the story of The Banana Man are leadership and business lessons that we would all do well to incorporate into our daily practice – especially for entrepreneurs who are just starting their journey.
Here are 4 of them.
Lesson #1: Find value where others see waste
As I’m writing this I’m staring at a bowl of bananas, and completely taking it for granted. They are yellow, and are just starting to get the little brown freckles that let you know that when you take the peel off you’ll be sinking your teeth into the world’s most delicious fruit.
Back in 1895, moving bananas from the Caribbean to the United States was a little bit of a hassle. They arrived by boat and were loaded onto trains that would deliver them – very slowly – to their intended destinations. They would then be loaded onto cart and buggy, taken to a warehouse, where they would then be sold to local stores.
Back then, the appearance of those brown freckles by the time they got to the port meant that they wouldn’t survive to the end destination. Zemurray would watch in astonishment as up to 25% of the entire haul was set aside to rot in landfills in Mobile Alabama – the port city closest to his home in Selma.
He knew that if he could figure out a way to get the “ripes” (what they called the freckled bananas) to the end destination sooner, he could carve out a niche for himself and be successful.
This is exactly the path that Clay Christensen describes in the Innovator’s Dilemma – Zemurray was coming in at the bottom of the market where the big boys didn’t want to play – where the margins are small and the work is difficult.
This was Zemurray’s first step to becoming known around the world as The Banana Man.
He bought the bananas that the fruit company was going to throw out, and figured out a way to sell the bananas directly from the train as it was passing through the numerous towns on the way to the final destination.
Lesson #2: Find your way with what you have
When you are starting out like Zemurray did, you don’t have access to the capital required to compete with the big boys. In those days, you needed to own the land, pay the labourers, have ships to transport your crops, and own railway cars to get the crop to it’s final destination. None of which Zemurray could afford.
But if you flip this around and look at it from Zemurray’s perspective, it seems like he’s getting into the easiest business ever created. The fruit was grown for him, harvested and shipped for free. Everything else he needed could be rented as required, so there were no on-going capital costs needed for him to start.
At the same time, he did whatever he needed to do in order to help grow his business – including finding other jobs when there were slow periods at the beginning.
The lesson here is that being a leader and entrepreneur often means making the most out of what resources are at your disposal. The successful ones don’t wait for adequate resources to show up at their front door – because they know that they never do.
Zemurray used this scrappy “can-do” attitude to become a millionaire by the time he was 21 years old.
Lesson #3: Act quickly and creatively
Eventually, Zemurray had squeezed all of what he could out of the “ripes” market. He had become one of the world’s largest traffickers of bananas, and turned his sights on competing with the big boys by purchasing his own land and producing his own crops.
By far the largest company in the banana business at the time was United Fruit. It grew and shipped over 90% of the world’s bananas.
Zemurray and United Fruit both wanted to purchase a piece of fertile land that was on the border of both Honduras and Guatemala. They discovered during the process that there seemed to be two rightful owners of the land – one of them in Honduras and one of them in Guatemala.
This seemed to make things confusing for United Fruit, who had their lawyers working overtime to figure out the best way to approach the situation.
While that was going on, Zemurray purchased the land twice – once from each of the owners.
This story is a reminder that no matter how large or successful you become, that thinking like a creative entrepreneur will always leave you one step ahead of your competitors.
Speed and creative thinking matters.
Lesson #4: Stay close to the action
Zemurray got his start in the banana business because he was close to the action and paid attention to the details. And that’s exactly how he liked to operate his business as well.
For instance, when he finally got into the banana growing business, he moved to Honduras and worked the jobs his regular labourers worked so that he would know everything about the business.
This approach helped him succeed in running a much larger company as well. In 1930 he sold his company to United Fruit for $31.5 million in stock (worth about $428 million today), and then retired. But as the Great Depression raged on, the company’s stock took a nose dive and lost nearly 90% of the value it had at the time Zemurray sold.
That obviously didn’t sit well with him, so he bought up a controlling stake in United and made himself the President of the company.
The depression was ravaging the company, and the board of directors hired a slew of consultants and economists to try and figure out what to do to turn the company around. Rather than listen to the economists and their projections, he instead went down to the docks in New Orleans, where he grilled the captains of his ships and the workers who understood what was happening on the front lines.
Finding the answers he needed to turn the company around, he promptly fired the board of directors, decentralized decision making and made the company profitable again.
The lesson? You can’t run your business unless you understand the details and stay close to the front lines.
So what are you going to do today?
Zemurray was a man of action, and if we want to follow in his footsteps, we need to be as well.
So before you head off with the rest of your day, think of one thing that Sam Zemurray would do differently if he were doing your job – and then go ahead and do that today.