A Conversation with Robert Kuok, The Sugar King of Asia.
Last week’s blog reminded me of a conversation I had ten years ago with Robert Kuok (or RK, as he is known) in Hong Kong. I included it in my book, The Sugar Casino. Robert is still alive and well and, maybe, even still trading the sugar market. (Robert, if you are reading this, I wish you well.)
I thought my 2015 conversation with RK might interest some of my recent subscribers. So, here goes:
Born in October 1923 in Johor Bahru, Malaysia, Robert Kuok has long been a major figure in the sugar industry and was nicknamed “The King of Sugar”. He has been an extraordinarily successful businessman, and, beyond sugar, he is best known as the founder of the Shangri-La Hotel chain and the owner of the South China Morning Post. Like many successful Asian businesspeople, he is media-shy and rarely gives interviews.
I met RK at his new offices. He welcomed me and apologised for his terrible cold and cough. He had caught it on a recent trip to London, where he had been visiting the latest addition to his hotel chain, the Shangri-La in the Shard Building. I started by trying to explain my book project, but he seemed distracted by his telephone.
“I see I have four messages, but I don’t know if they are important,” he said. “Ah, yes, last night’s sugar market closed.”
“You are not still trading the sugar market?” I asked, astonished.
“I watch the market every day,” he replied. “I started in 1955, and this ‘topping up’ takes seconds; if I stop, I can never get back on it. I still trade the sugar market for my claret money so I can afford Petrus 1989. Otherwise, you would be mad to buy it. But if you are winning at the sugar casino, then why not carry on? And on the days I lose money, I look sadly at my wine and tell myself, “Tonight you don’t deserve it.’ I open the bottle and drink only one glass as a punishment for trading badly.”
I did a quick calculation in my head. RK began working in the Rice Department at Mitsubishi in 1942, the year the Japanese Army occupied Singapore and Malaya. That meant he had been involved in the commodity markets for 72 years and trading sugar for 60 years; that must be a record. I shared my mental calculation with him, and he smiled.
“Have the markets changed much since you first started?” I inquired.
“No,” he replied. “The main change has been the speed of information sharing and gathering, but you must adapt to that. So, my trading volume today is just one per cent of what it was. I used to trade 4,000 lots (200,000 tons) at once; now I trade 40 lots (2,000 tons). Today I am 40 lots long, but my trading covers the Petrus!” he said with a laugh.
“Let me tell you how I started,” he offered. “After the war, I joined my father’s business and worked for him for three years before he suddenly died. I continued the business after his death.
“When did you get your first big break?” I asked.
In the spring of 1963, I had a hunch and decided to fly to London. A Malaysian friend, who travelled with me, had access to an apartment at the Grosvenor House Hotel.
I asked RK whether he had been easily accepted into that world of English traders.
Quite easily. The monkey in me meant that I could pick up accents easily – many people thought I spoke good English. I enjoyed mixing with people. I am completely non-feudal. I don’t like social dos and don’ts. I can’t stand snobbery; I lived under colonialism and felt that was more than enough. Someone once said that I have half a Chinese mind and half a British mind. That opens doors. In business, you must succeed through intelligence, not gimmicks. If you rely on gimmicks, then you lose the essence of things.
But in early autumn 1963, the sugar market fell sharply, and you nearly went broke,” I prompted.
“I had enough cash, thank God, to meet margins. In the autumn of 1963, Hurricane Flora hit Cuba, and the market rallied; I was saved. August that year was very difficult. But somehow, I can always manage. I was 40 years old and at my best. Although it worried me, I never felt like jumping off a building. Still, the position was large for me — maybe 250,000 tons of sugar, part physical sugar and part futures – a huge position for me. Anyway, the market turned around. I took some profit and then more profit.”
“How did you know when to take profits?” I asked. “I find the biggest difficulty about trading is knowing when to take profits.”
“Not knowing when to take a profit is the Achilles’ heel for a trader. Take profits! Don’t wait. If you have a profit, you must take it. If you wait, it will be your downfall. Also, have the wisdom to realise that you can’t take it in one go, or you destroy the market for the balance. If you are a big trader, it can take 10, 20, or 30 days to unload, depending on how big your footprint is.
“If you are a big trader, you had better start, even if you are in minus territory, if the market is going up. You are long, and you have been suffering: a big minus, a small minus, and then a negligible minus. At that point, start liquidating. Even if you sell only 3%, you still have 97% to go. You must shed weight. Waiting to take profits is dangerous.
“What about taking losses?” I asked.
“Well,” RK replied with a sigh. “It is wonderful to take losses when you have profits under your belt. So, you need a bit of luck to build up some profits first. You must start on the right leg. And everything, including quantity, must be according to your size.
“In 1963, I took a big position,” he continued. “I was very confident. I felt that sugar was worth more than it was. But you know the sugar market. There is always overproduction. There is no point in hoarding sugar. There is always a bumper crop coming up.
“The early 1960s were wonderful for me in the sugar market. I was hunting in a lake just teeming with salmon trout. There were only three or five predators; these sharks could eat their fill. I would swim past them, and they weren’t even interested in me. Today you go to the same lake: there are giant crocodiles, giant sharks. There are not enough fish to feed these giant predators. You must think twice before swimming in the lake.”
“Some traders are arrogant,” I ventured. “They have big positions and have to convince themselves that they are right and therefore have to convince other people that they are right.”
“You must be humble because you are never always right. You don’t need to convince anyone. You can trade as a very humble man.”
“Is speculation and risk-taking an integral part of all life?” I asked.
“An emphatic yes!” RK replied. “When you get into your car and leave your home, you are taking a risk. In the modern world, there is no back-to-back trading where you can make a simple margin on a physical sugar transaction. Those days are long gone. Those opportunities, when they do come, are like golfing holes in one. I have been playing golf since 1947, and I have never scored a hole-in-one. So, where there is no back-to-back trading, it means you must lift a leg: you must sell before you buy or buy before you sell. You must take a risk. But you can still make good money trading.”
“Are you a businessman who started as a trader, or are you a trader who applied your trading skills to business?” I asked.
“I have been asking myself that question for the past 50 years. Let’s take soccer as a parallel. You can train someone to play football, but you never produce a Pele, a Ronaldo, or a Messi. You must have natural verve. We are not born equal. You either have that attribute in you, call it genius if you like, but of course, different degrees of genius, and then circumstance or fate gives you the playground to exercise your skills. If you are born in the wrong community and your parents force you into the armed forces, well then, how do you become a trader? But traders are born, not taught.”
“Footballers often have particular styles, as do traders,” I prompted. “What is your style?”
“When you play poker, the secret is never to let the other players guess your next move. I can adopt a contrarian approach, yet go with the flow. I even include superstition. In my early days, I would watch a fellow trader to see if he had a lucky glow on his forehead. If he did, I would spend more time with him that day.”
“Commodity trading is based on trust,” I said. “You must start a relationship by offering trust. But what do you do when someone abuses that trust?”
“Well, that is just too bad. You must cut your losses; you have no other choice. If you want, you can keep that person as a friend, but do so at arm’s length, no more business dealings. But it is better just to cut the cord and part company. If you bear a grudge, you are just hurting yourself; you are not hurting the other person. It is like throwing good money after bad. Keep your wits, keep your humour, and if you are a good man, luck will come your way again. You will see another opportunity, and you will grasp it. I have always believed that.
“But business is about taking and not just giving. I came up in a hard school. In an arena where no holds are barred, you must win.”
“You have known a few dictators,” I ventured cautiously, unsure of his response. “Does absolute power corrupt?” I asked.
“There is some truth in that statement. But do not rely solely on the word “power”. Enormous greed corrupts the soul even further. Anything excessive has strong, harmful effects. However, it is an oversimplification to apply this to every situation. It is obviously true if you use the word “corrupt” in its dictionary sense. But if you mean “takes bribes” when you say “corrupt,” then it is not necessarily accurate. Some political leaders I have known have never taken a bribe. Yet they became dictatorial, relentlessly pursuing their political enemies.
“One piece of advice: never hug the high and mighty; they can electrocute you. Keep them at arm’s length. And always follow moral practices, and nothing can stop you. If someone asks you for a bribe, you should say that neither you nor your company could do that. But stay very polite. Don’t stand on your high horse and preach morality at that moment. Just turn them down politely. If you get a chance later at a meal or something, you can pontificate a little, but not then – they are not in the mood to listen to moral truth.
“I have a simple motto in life: every single material thing I possess can be traded. It is for sale. The important questions are when, where, to whom, and at what price. The first three are more significant. If you like someone, the price becomes irrelevant.
“What is the thing that you are most proud of in your life?” I asked.
“I’ve never indulged in pride myself. I don’t understand that emotion. Truly, I don’t. I can see how some people delight in the thought that they created something. For me, it is always about work, a task that must be completed.”
If you are interested in learning more about RK’s life, I recommend Robert Kuok – A Memoir, by Andrew Tanzer
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