Blinded by Turbulence

Don Sull:

It was a cool autumn evening in 1999, and Lakshmi Mittal listened as a team of MBA students painted a grim picture of the turbulence roiling the steel industry. Mittal had agreed to judge a case competition at the London Business School, where teams of finalists vied to analyze the success of his steel empire (including the private firm LNM and a public corporation Ispat International), and make recommendations to the firm's founder and CEO.

Mittal's success was undeniable. Since starting with a single steel mill in Indonesia in 1976, Mittal had built the fourth-largest steel company in the world, by acquiring under-performing steel factories throughout the 1990s in countries including Mexico, Canada, Trinidad, Germany, Ireland, Kazakhstan and the United States. Founded by an Indian, incorporated in The Netherlands, headquartered in London and selling steel in 80 countries around the world, Mittal's group was the first truly global steel company. Industry analysts estimated Mittal's steel holdings were worth $2 billion, which secured him a place on Forbes list of billionaires.

Based on their analysis, the student teams implied (without quite stating it in so many words) that Mittal's success resulted largely from good fortune. They argued he could not ensure continued success in the face of industry uncertainty. And since luck is not a strategy, they advised him to take chips off the table while he was still ahead, by selling his steel business, for example, or diversifying into related industries.

Mittal didn't take their advice.