During the early 1920’s a Swedish engineer named Ivar Kreugar launched a plan to corner the matchstick market. He offered loans of millions of dollars to post-WWI rebuilding and cash-desperate European countries in exchange for the exclusive rights to sell matchsticks within their borders (remember, this was before electric stoves, disposable cigarette lighters or health concerns about smoking). Kreuger opened an American subsidiary to sell stock to investors, promising 20% returns and using that money to pay off his loans to European countries.
The plan – while highly secretive – was tremendously successful. Kreuger’s company came to control nearly 75% of the matchstick market in Europe and the United States, he appeared on the cover of Time in 1929, and was commonly heralded as the “Savior of Europe.” Kreuger was living a dream.
Eventually, however, financial reality caught up with him. Profitable as his company was, it wasn’t enough to cover his debts. His business soon deteriorated into a Ponzi scheme cover-up that collapsed in the early years of the Great Depression. Overwhelmed by the shocking evidence of his deceit and failure, Kreuger shot himself through the heart. Eventually his crime led Congress to pass US Securities Acts in 1933 and 1934.
But though he ended up perpetrating an enormous fraud, Kreuger might reasonably have generally considered himself an honest, if ambitious, businessman for most of his life. He had been a stunning success and the countries of Western Europe benefitted from his business plan. Kreuger’s real weaknesses were his obsession with secrecy and his belief in the media’s lionization of him. When asked about his formula for success he would quote, “Silence, more silence, and still more silence” and would ask prospective employees, “Can you keep a secret?” His excessive concealment left him living in a world of his own and the magnificence of his success overwhelmed him. He lost track of reality.
While most of us never imagine anything as massive as cornering the matchstick market (or any other market), we are still excited by the grand vision of it all. Likewise, though many of us never plan to join the CIA or MI6, we may still get giddy with necessary secrets that are occasionally shared with us at work. As leaders, we must always ensure that we and those following us remain grounded in reality despite successes that do occur. Losing track of reality opens the door for ethical transgressions that could destroy even the greatest of enterprises.
Lou’s Take Away: Whilst every company needs to keep certain information secret or at least well-guarded – some more than others – as an owner, leader, or manager, pay attention to excessive secret off-site meetings, use of codenames, and general excitement about being more “in the know” than others. Even if such behavior doesn’t lead to corruption by ungrounded employees, it will create an unwelcome division within your workplace. Keep yourself and your employees grounded in reality by advocating openness, honesty, transparency, maintaining and promoting an ethics hotline, and leading by example.