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Foreign Affairs Asks the Experts
A native of La Paz, Bolivia, Marcelo Claure graduated from Bentley College, in Waltham, Massachusetts, in 1993 with a degree in economics. His first job afterward was with the Bolivian Football Federation. A year later, the Bolivian national soccer team landed a spot in the World Cup, and Claure, back in Massachusetts, landed a partial stake in USA Wireless, which he built into a leading wireless retailer in New England. Three years later, he struck out on his own and founded Brightstar, a Miami-based cell-phone distributor specializing in the Latin American market. By 2013, it was the 55th-largest private company in the United States. Then the Japanese telecommunications company SoftBank took a majority stake in Brightstar, and SoftBank’s founder, Masayoshi Son, installed Claure as CEO of another one of his properties, Sprint. In November, Claure spoke to Foreign Affairs deputy managing editor Stuart Reid at Sprint’s headquarters, in Overland Park, Kansas.
You got one of your first jobs through a chance meeting on an airplane. I was flying back down to Bolivia, just like any other Bolivian student who went to school in the U.S. who’s not allowed to stay. On the plane, I met the newly elected president of the Bolivian Football Federation, and we hit it off. He told me about his project of wanting to take Bolivia to the World Cup, and by the end of the trip, he had offered me a job.
It was the lowest-paying job I would get. But it exposed me to a world that very few other people ever have a chance to see. Going to the World Cup was the biggest entrepreneurial dream that Bolivia has ever had. It was like starting a business from scratch and making it the biggest business in history. And we opened the World Cup back in 1994 in Soldier Field. People always say, “Hey, Marcelo got lucky.” The way I look at it is that entrepreneurs have a higher return on luck than anybody else—because we all have this lucky moment in life; it’s whether you know how to leverage and take advantage of it.
How did you get into the mobile business? I saw very little opportunity in my country, so I came back here. I was dating the woman who became my first wife, and I wanted to be back in Boston, where I went to school. I went to apply for a job at Merrill Lynch, and I told the interviewer the whole story about the World Cup, and he said, “You have to meet my boss. Give me your cell-phone number.” I didn’t have one, so I said, “It’s in my car. I’ll call you on it from there.”
So then I went with a friend to find a cell-phone store. The first one we went to was closed, so we went to another one. We passed the store. You’re not allowed to reverse on a highway, but I told my friend, “Please reverse.” I met the owner, and he told me that he was tired of being in the business, and he invited me to buy in. I didn’t have much money, so I gave him all I had and got him to finance me for the rest. He had two stores, one on Route 9 and another on Newbury Street. He handed me the keys and said, “After your story with the World Cup team, you can probably do a better job than me running this.” So a few weeks after arriving back in the U.S., I was a proud owner of my own little business.
What did you do that was different from what he did? A lot of things. I figured out that if you had only two stores, you were pretty much irrelevant. I realized that if I wanted to grow, I would have to open 100 or 200 stores, which would have been very difficult. When I was in college, Domino’s Pizza claimed, “Order a pizza, and we’ll deliver within 30 minutes or it’s free.” So I put in a 1-800 line and took out a full-page ad in the Boston Herald offering to deliver phones for free.
That first day, we were so excited, because we were betting everything we had on the ad. Our staff of six or seven went in at 6 AM. We had our phones lined up at a table—no call center, no fancy operation. And from the window, I could see that the seven lines were all lit up. I was like, “Wow!”
We sold so many phones that day that at 7 PM, we just shut it down, because it was crazy. We only had about five or six drivers, and it was impossible. So I called all my friends, my wife, everybody that I knew, and I said, “I need a favor.” We delivered the phones from 7 to 11 PM. The following day, the cycle started again. Then, realizing that people called 24 hours a day, we made our call center be open 24 hours, and we got a bunch of drivers spread all over Massachusetts.
And in 1997, you founded Brightstar. I used to always get my phones from two companies—BrightPoint and CellStar—and they offered such bad service. Sometimes they never delivered the phones, or shipped to the wrong address. They were huge, publicly traded companies, and I figured, if these guys are so bad in the U.S., I can only imagine how bad they must be in Latin America. So I said, “Well, I’m just going to call myself Brightstar, and I’m going to start Brightstars in Latin America. I’m going to buy phones and resell them to customers and offer a better service.”
What opening did you see in Latin America? The complexities of the market. In the U.S., it’s easy to do business. Federal Express will deliver phones everywhere. You just call an 800 number, and a truck shows up. Latin America is a different game. If you were a carrier in Latin America, you had to forecast ahead of time, open a letter of credit, buy the phones in the U.S., call a trucking company to take them to Miami, fly them into your home country, clear customs, and exchange currency. I thought, “This is so complex. I can simplify this for my customers.”
That’s when I learned a huge lesson: that companies that are easy to do business with will always win. Simplicity is the key attribute of winning businesses. If you were a carrier in Colombia, you could buy your phones from Motorola in a very complex way, or you could buy them from Brightstar, where we took care of all the complexities. We had a distribution center, and we would deliver straight to your stores. You could forget about one of your main problems, which was inventory. That worked in Colombia, in Bolivia, in Brazil, in Chile—we just kept opening one after the other.
Then came probably the biggest challenge. One of my partners back then, Motorola, said, “Do you think you can replicate what you’ve done in Latin America in the U.S. market?” That doesn’t happen a lot for Latin American companies, especially service companies. So we came to the U.S., did the same thing, and became the leading cell-phone distributor and supply-chain company in America. I remember I was so proud when a tiny little carrier in Bolivia called Telecel let us manage their supply chain. But I was prouder when Verizon came in the U.S. and said, “Hey, manage my entire supply chain to all of the national retailers—the Walmarts, the Best Buys—and to all my dealers.” I wondered, “Should we tell them no, because we don’t have the capability?” But then I said to myself, “In Colombia, I had ten people calling each store and saying, ‘Hey, what did you sell the day before?’ It’s a lot easier here; we can just ask Walmart what they sold.”
Do you think companies and investors are still overlooking Latin America? I call Latin America “the almost region.” We’re almost there, and then something happens. Brazil has all the potential, but it’s very hard to make money in Brazil if you’re not a Brazilian company. The government makes it so hard—the tax system, the lack of logistics. Mexico is similar. Central America is similar. You have these countries that have great potential, but there’s always a reason the countries never explode into the growth that’s expected. Brazil and Mexico should be leading the world, because they have everything that you need to be successful: a huge internal market and amazing natural resources. But then protectionism comes into play.
What are some of the obstacles you encountered in developing countries? When there’s more risk, there’s more opportunity. Where the rules of the road are not there, then there’s a tremendous amount of opportunity for entrepreneurs to bring in their innovation and their different way of thinking.
For example, Argentina is a country where a lot of people didn’t want to invest. One afternoon, I got invited to have lunch with President [Cristina] Fernández [de Kirchner]. She said, “I have a vision: I want to build a cell-phone manufacturing plant in Argentina, but I want to build it in the Patagonia. The reason is that everybody’s coming to the city, because there are no jobs.” And she said, “In exchange, I will give you some economic incentives.”
You can rest assured that she probably went first to a lot of more sophisticated, factory-like companies—unlike ours, which had never manufactured anything. So we did our first factory, and it ended up being the largest cell-phone factory in Latin America outside of Brazil. When I left Brightstar, we were doing eight million to nine million phones a year. We created thousands and thousands of new employees, who stayed within the Patagonia. When the rules are really clear, traditional companies will occupy that market. When the rules are not written, that’s where disruptors come in.
Did you find it easier operating in certain countries as opposed to others? Easier equals less risk and lower profitability. The U.S. is probably the easiest country in the world to operate in. Most of the time, there are clear rules of engagement. The laws are clear. There’s transportation. There’s logistics. What mature countries, like the U.S., offer is a platform for a different type of innovation. But the new entrepreneurs today are emerging in different types of economies. In places, like China, that are very complex to do business in, that’s where you have the creation of Alibaba. That’s where you have the creation of [the electronics manufacturer] Xiaomi. So even though there are certain markets that are easier to operate in, that doesn’t necessarily guarantee that you’re going to be more successful.
Did you ever encounter any problems with leftist governments in Latin America that weren’t friendly to foreign businesses? We did. I met with President [Hugo] Chávez at one point, because he was very concerned that Brightstar had a 70 percent share of the Venezuelan market. He said, “Explain that to me, when you’re an American company.” I said, “No, we’re not an American company. We are a Venezuelan company, with Venezuelan employees, with a Venezuelan leader, owned by an American company, and that is very different.”
Is creative destruction always a net plus for the economy, for society, and for employment? It depends what side you see it from. Mobile phones have made sure that other industries almost disappear. You don’t find cameras anymore, unless it’s for high-quality professional photography. The mobile phone is eliminating video cameras, and it’s going to continue to eliminate a lot of other things. There are no more photo albums. Everything sits in the cloud, thanks to a mobile phone. Has this been productive for the most important part of the economy, the consumer? Absolutely. Now, if you are on the side that is creating, it’s great for you. If you’re on the side that’s being attacked—if you’re Kodak—it’s not. But net-net, it is always going to be a positive for the economy as long as the consumer benefits.
What can governments do to increase the scale and quality of entrepreneurship in their countries? There’s a lot that can be done with policy. Some countries have done an incredible job attracting entrepreneurs. There’s a reason there are pockets of innovation in Israel: it has a pro-innovation, pro-entrepreneurial government. When you put entrepreneurs together in a certain place, it’s amazing the level of innovation that takes place.
There are also a lot of countries that close their borders and don’t foster innovation, and you never see great companies come out of them. I’m very opinionated about immigration. In the U.S., we are doing ourselves tremendous damage by having such bad immigration policies. We have built the best educational institutions on the planet, and we educate the brightest minds from all countries, and then we kick them out when they want to stay here. I think well-planned and well-executed immigration reforms, especially for students, would be one of the biggest drivers of entrepreneurship and innovation—something as simple as allowing the bright minds we’ve educated to stay and contribute to the American economy.
Has your experience as an immigrant helped you? It gave me a huge advantage. Being an immigrant is the best of both worlds. You’re programmed two different ways. You’re bringing the best from your culture—and Hispanic culture has so many great things—and mixing it with the greatest country in the world. That gives us an advantage in comparison to somebody who was born in the U.S., went to school here, and the U.S. is all they’ve seen. We’ve seen the other side.
What values did you bring from Latin America? The family is perceived differently there. It’s the most important foundation. My father invested all his life savings into making sure his kids went through education. In comparison, my [American] friends all had loans from universities. In the American family, most of the time, at age 18, the responsibility ends—not the parenthood but the support. In Latin families, the responsibility never ends.
Latin America has very few success stories. I wanted to make sure that I won. I wanted to make sure that I became the most successful Bolivian immigrant ever. I felt that I could be an inspiration to my country. The results have been amazing. When I go to Bolivia, people say, “Wow, if you can do it, I can do it.” And believing in yourself is probably one of the most basic things that allows advancement.
What are the most important qualities for an entrepreneur to have? You’ve got to have a passion for what you do. If you love what you do, you’re going to do things that others don’t do. You’re going to work harder than the rest. You’re going to set lofty goals that others wouldn’t. You’re going to learn how to take calculated risks.
You’re now the CEO of a large company that you didn’t found yourself. Is it possible to manage such a company entrepreneurially? Leading a company of this magnitude is very different from leading a company that you founded. Your ability to influence change is very different. As an entrepreneur and a founder, you are automatically granted the respect and authority that you need to make decisions, and people follow. Here, you need to earn that from your employees, who don’t know you. And the speed at which they react is completely different. You have to influence change through your management team, and your management team influences change through the third layer, and the third layer influences change to the fourth layer. When it’s your own company, you influence change from you all the way down to any layer you want. Everybody knows you, and everybody has seen your growth.
I think I bring to Sprint the ability to make decisions from an entrepreneurial perspective. In corporate America, you’re paid not to take risks, because if you take risks and you fail, you get fired. An entrepreneur looks at it completely differently. We’re able to advance by taking more risks than a normal corporate CEO would.
Entrepreneurs ask the question, why not? I came here and said, “Our pricing—it’s completely out of whack. We have lost relevance. Nobody wants to buy a Sprint phone.” I said, “Why don’t we do leasing?” My whole team said, “We’ve got to test it in the market, make sure our systems work at 100 percent,” etc. And I said, “We’re going to launch it in four days with no testing, and we’re going to figure it out as we go.” You follow your gut. You know that if you can make it cheaper for consumers to have the latest iPhone 6, consumers are going to jump. It doesn’t need to be analyzed by 100 people 50 times over. You can launch things being 70 percent right. They don’t need to be 100 percent right.
That’s the entrepreneurial approach that I’ve given to Sprint. We have changed our pricing and made it attractive. And we’ve just had the first month in the last few years in which we have more customers coming in than leaving.
You’re trying to bring a soccer team to Miami. Why? Soccer is David versus Goliath. Soccer is the only sport in the world where the rules of size and scale don’t apply. A small country like Uruguay, which has less than four million people, can beat a country that has 70 million people. In basketball, if the best players in the U.S. play against any other country in the world, they will win 99 times out of 100. In soccer, the underdog pretty much has the same odds as the really, really big teams. That’s why I bought the largest team in Bolivia, and why we almost became champions of Latin America last year, when we weren’t supposed to.
I see soccer as being the most important sport in the U.S. 20 to 30 years from now. Miami doesn’t have a soccer team. I met David Beckham, and he invited me to be his partner. The team should have a lot of value in the future. I see it as a great opportunity to co-invest in that team and do something that I love.
Note: This interview has been edited and condensed.
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