Starting from Scrap

1. The Unplanned Leap into Entrepreneurship

It’s not as crazy as it may sound to end up in Hong Kong at the age of twenty-four, unemployed, having never been to Asia, and deciding to start a business.

Driven by ambition. In 1993, Stephen Greer, a 24-year-old American, arrived in Hong Kong with no job or concrete plan, fueled by wanderlust and the allure of Asia's economic boom amidst a Western recession. His initial experiences in the bustling city, from its pungent "fragrant harbor" to its dense, energetic streets, solidified his desire to forge his own path rather than climb a corporate ladder. This raw ambition, combined with a sense of adventure, set the stage for his entrepreneurial journey.

From job seeker to founder. After a brief, unfulfilling stint as a financial analyst in Germany and a failed attempt at Wall Street, Greer found himself networking in Hong Kong, cold-calling executives, and attending professional events. Despite a promising interview with Morgan Stanley Asia, he realized his true calling was not in a "back room" research role, but in transacting business directly. This epiphany led him to incorporate Hartwell Pacific, a trading company, marking his official entry into the unpredictable world of entrepreneurship.

Early steps and symbolic gestures. The incorporation of Hartwell Pacific was a monumental, albeit largely clerical, act for Greer. He secured a prestigious office address, opened a bank account (after an initial snub from HSBC), and invested in basic communication tools like a phone/fax and a pager. These initial steps, though small, were imbued with symbolic importance, representing his unwavering confidence and commitment to building something from scratch, even if the specific "what" of the business was yet to be determined.

2. Pivot or Perish: The Art of Relentless Adaptation

The obvious response would have been “It’s none of your business and I’m trying to enjoy the show,” but Daryl was generous and explained the ins and outs of chicken-foot trading.

Searching for a niche. Greer's early days at Hartwell Pacific were characterized by a relentless search for a viable product or commodity to trade. His initial ventures, such as "Consumer Product Arbitrage" with Levi's jeans and an ambitious attempt to become the "Frank Perdue of Asia" by trading chicken feet, proved either too burdensome or lacking in scale. These early failures, however, were not deterrents but rather crucial learning experiences that honed his adaptability.

Learning from the unexpected. A chance fax from Max Heinecke of Nickelmet, a metal recycling giant, redirected Hartwell Pacific's focus. Tasked with market research on stainless steel scrap in Southeast Asia, Greer and his new partner, Mei (formerly Ivis), quickly immersed themselves in this unfamiliar industry. This unexpected turn, born from a simple market study, laid the groundwork for Hartwell's future, demonstrating that opportunity often arises from unforeseen avenues.

From trinkets to scrap. The journey to finding their core business was circuitous. After a confusing experience at the Canton Fair, they briefly pursued "ornamental gift items" like toothbrush holders, even touring a factory with child labor. This venture, however, quickly proved unprofitable. It was the small, initial order for two containers of stainless steel scrap for Nickelmet that finally provided a tangible, scalable path, solidifying their commitment to the metal recycling industry despite their initial lack of expertise.

3. Mastering the Art of Cross-Cultural Business

In China, a contract isn’t worth the paper it’s written on.

Beyond the written word. Greer quickly learned that doing business in Asia, particularly in China, required a profound understanding of cultural nuances that often superseded Western legal frameworks. His experience with Chinese magnesium suppliers, who reneged on contracts when market prices rose, taught him that:

• Contracts were often seen as guidelines for future negotiation, not rigid commitments.
• Recourse in a nascent or corrupt legal system was often futile.
• Building sustainable, win-win relationships based on trust was paramount.

Navigating bureaucracy and social cues. From the "pigheaded communists" at the Chinese border to the formal, Confucian society of Korea, Greer adapted his approach. He learned to:

• Respect elders and divert eye contact in Korea.
• Use "thirty-something" to mask his youth to senior Korean executives.
• Engage in social rituals like banquets and karaoke to build rapport.
• Understand that direct conflict was often avoided, requiring careful interpretation of subtle signals.

The value of a local partner. Mei, with her Chinese heritage and street smarts, proved invaluable in bridging cultural divides. Her ability to navigate complex social situations, from dealing with arrogant border guards to outmaneuvering Madame Yuen, highlighted the critical importance of local knowledge and relationships. Greer's own chameleon-like ability to adopt local mannerisms and "Tenglish" further aided his integration and effectiveness in diverse Asian markets.

4. The Perils of Partnerships and the Quest for Control

In the developing world, if you’re not in control of a joint venture physically, your position and value will rapidly weaken.

The illusion of control. Hartwell's foray into China with Grand Metal, a joint venture with Madame Yuen, initially seemed promising due to her powerful government connections. However, Greer quickly learned that despite holding a majority share, he lacked true control. Madame Yuen's constant demands for "extra money" for customs issues and her unauthorized sale of inventory revealed the vulnerability of relying on a partner who controlled the physical assets and local relationships.

Family dynamics and resistance to change. Attempts to form joint ventures in Thailand, Malaysia, and Hong Kong with established family-owned scrap businesses repeatedly failed. These companies, deeply rooted in tradition, were reluctant to:

• Adopt an "American son" or external partner.
• Share control or integrate new ideas.
• Address succession issues or sibling rivalries.
  Greer realized that his rational business proposals often clashed with deeply ingrained cultural and familial priorities, leading to frustration and stalled negotiations.

The cost of misplaced trust. Even when partnerships were formed, such as with Lau Junior in Hong Kong, incompetence and financial troubles led to buyouts. In Mexico, Greer's initial trust in Miguel Calderon, despite high setup costs and later rumors of an affair, resulted in significant inventory losses and fraud. These experiences underscored the critical lesson that while trust is essential, it must be balanced with robust oversight and a clear understanding of who truly holds the reins.

5. Building Systems to Combat Chaos and Fraud

Trust in systems. Systems will protect the company, and the company will provide for all of us.

Learning from costly mistakes. After enduring significant losses from fraud and theft in China and Malaysia, Greer realized that relying solely on individual trust was unsustainable. The "wallet on the ground" analogy became a guiding principle: if systems are weak, even good people can be tempted. This led to a fundamental shift from an entrepreneurial, trust-based approach to a professional, system-driven one.

Collaborative problem-solving. To address pervasive security threats, Hartwell held brainstorming seminars with employees across all departments and regions. This inclusive approach empowered the team to identify vulnerabilities and co-create solutions, fostering a sense of ownership. Examples of threats identified included:

• Suppliers manipulating scales during weighing.
• Truck drivers altering weights by staying in or out of their vehicles.
• Internal conspiracy between suppliers and employees.

Implementing robust controls. The solutions developed were stringent and comprehensive, designed to protect assets and prevent fraud. Key systems included:

• CCTV monitoring of weight bridges, overseen by accounting staff.
• Night watchmen locked outside the premises, required to punch time clocks during patrols.
• A double-lock system requiring multiple keys from different teams to open gates.
• Strict checks and balances, requiring multiple approvals for transactions and financial matters.
  This flexible bureaucracy, though initially cumbersome, transformed Hartwell into a well-run corporation, demonstrating that collective wisdom and shared responsibility could overcome individual weaknesses.

6. The High Price of Overexpansion: The "Good Bank, Bad Bank" Lesson

Desperate people tend to be more optimistic, because admitting defeat is a tougher option.

The allure of global dominance. Driven by a "Risk" game mentality and a desire to become a global player, Greer embarked on an aggressive expansion strategy, opening seven facilities in seven countries across Asia, North America, and Latin America within 18 months. His vision was to conquer markets underserved by major competitors, leveraging Hartwell's low-cost model and POSCO's demand. However, this rapid growth stretched resources and exposed the company to significant risks.

The "Bad Bank" reality. The expansion into the US Southeast and Mexico proved disastrous. In South Carolina, an unforeseen market shift towards Pittsburgh, coupled with Hartwell's lack of railcar access, rendered the operation unprofitable, leading to a $450,000 write-off. Mexico, plagued by internal fraud, high setup costs, and a fierce price war with Nickelmet, became a "giant sucking sound," ultimately resulting in a $2 million loss and the liquidation of the business. These failures severely impacted Hartwell's overall profitability, creating a "bad bank" that overshadowed the success of its Asian operations.

A painful lesson in humility. The overextension and subsequent failures taught Greer a crucial lesson: unbridled ambition, unchecked by business realities, can be perilous. His initial optimism, bordering on desperation, led him to overlook critical warning signs and throw "good money after bad." The experience underscored the importance of strategic focus, controlled growth, and the need to cut losses decisively, rather than clinging to failing ventures in the hope of a miraculous turnaround.

7. Resilience: Surviving Personal and Business Typhoons

The only thing that matters is a boat coming your way.

Navigating personal loss. Amidst the relentless business challenges, Greer faced profound personal losses, including the death of his beloved grandfather. This experience, initially met with a detached, problem-solving mindset, eventually broke through his emotional defenses, allowing him to grieve and release accumulated tension. His grandfather's enduring wisdom, particularly "The best school is the school of hard knocks and its colors are black and blue!", resonated deeply, reinforcing his resolve to learn from adversity.

A brush with death. A near-drowning incident during a scuba diving trip in Indonesia served as a stark reminder of life's fragility and the true meaning of priorities. Helplessly adrift in the Flores Sea, with Mei by his side, Greer realized that all his material aspirations—money, prestige, possessions—were insignificant. The only thing that mattered was survival. This harrowing experience profoundly shifted his perspective, leading him to vow to keep life in perspective and cherish his relationships above all else.

The emotional toll of entrepreneurship. The constant stress of managing a rapidly expanding, yet often chaotic, global business took a visible toll on Greer. He battled anxiety, resumed smoking, and saw his youthful appearance fade, marked by deep circles under his eyes and prematurely graying hair. Despite winning the "Young Entrepreneur of the Year Award," he grappled with self-doubt and the fear of public failure. Yet, through it all, his resilience, supported by Mei's unwavering strength and the camaraderie of his team, allowed him to continually pick himself up and fight another day.

8. The Power of Relationships and Strategic Alliances

Don’t do business with friends unless you are prepared to lose them.

Mentors and early supporters. Greer's journey was shaped by key relationships. His father's unwavering support and his grandfather's sage advice provided a foundational belief in his entrepreneurial spirit. Early friends like Topher Neumann offered a couch and a vision of Hong Kong's opportunities, while Bernie McGuire remained a steadfast companion through thick and thin. These personal connections were crucial for emotional and practical support in the early, uncertain years.

Strategic partnerships and their complexities. While some alliances, like with Nickelmet's Max Heinecke, provided initial opportunities and valuable market insights, they also came with their own set of challenges, including exclusivity agreements and difficult negotiations. Greer learned that even with friends, business relationships could be strained or broken, as evidenced by his parting with Nick Peterson, his former roommate and COO, over differing expectations and the lack of profitability in their joint ventures.

Leveraging external expertise. Recognizing the need for specialized knowledge and capital for growth, Hartwell sought strategic partners. The pursuit of a deal with Oz Recycling, and later Smythson Recycling, highlighted the importance of:

• Identifying partners with complementary strengths (e.g., copper/aluminum expertise).
• Navigating complex corporate structures and legal teams.
• Understanding the motivations of potential allies, whether it was market expansion or competitive advantage.
  These alliances, though fraught with negotiation battles, were essential for Hartwell's evolution and eventual success.

9. From Trading Crap to Trading Equity

You don’t get rich trading crap or scrap. You get rich trading equity.

The epiphany of equity. An unexpected conversation with Peter Bentley of the KLM Asia Venture Fund fundamentally shifted Greer's understanding of wealth creation. When Peter casually asked, "how much of Hartwell would you give me for a million dollars?", Greer realized that the true path to significant wealth lay not in the laborious, penny-by-penny margins of trading scrap metal, but in the strategic valuation and sale of company equity. This insight transformed his perspective from a day-to-day trader to a corporate financier.

Valuing the "Good Bank." To attract investors and secure a favorable valuation, Greer devised the "Good Bank, Bad Bank" strategy. This involved:

• Separating the profitable Asian operations ("Good Bank") from the loss-making North American ventures ("Bad Bank").
• Stripping out one-off losses and write-offs to present a clean, attractive historical earnings picture for the Asian entity.
  This approach allowed Hartwell to command a higher multiple of earnings for its core, successful business, demonstrating the power of strategic financial presentation in the world of venture capital.

The art of the deal. The negotiations with KLM and later Smythson Recycling were a crash course in corporate finance and high-stakes deal-making. Greer learned to:

• Understand EBITDA multiples and comparative valuations.
• Negotiate fiercely over seemingly minor details, like the definition of "ROCE" versus "ROCCE."
• Leverage legal expertise (Charlie Compson) to protect Hartwell's interests against aggressive contractual terms.
• Navigate investor demands, even when they seemed unreasonable, as with KLM's demand for a $500,000 payout to approve the Smythson deal. This journey underscored that building wealth often requires as much acumen in financial strategy and negotiation as in operational execution.

10. The Entrepreneur's Journey: More Than Just Money

Your life may not turn out exactly the way you plan, but you’ll definitely have your own book to write by the time you’re finished.

Beyond the financial milestone. Despite achieving millionaire status at 28, Greer found the experience "wholly disappointing" and "a hollow goal." This realization led him to vow that future financial targets would not be pursued for their own sake, but rather as a means to enable growth and provide for his team. The journey itself, with its myriad challenges and triumphs, became the true reward, offering far deeper fulfillment than mere monetary accumulation.

A life of adventure and growth. From his initial arrival in Hong Kong, inspired by tales of exotic adventure, Greer's life became a whirlwind of global travel, cultural immersion, and relentless problem-solving. He embraced the chaos, the diverse foods, the unique customs, and the constant learning that came with operating in developing countries. This lifestyle, though stressful and demanding, provided an unparalleled education in business and humanity, shaping him into a "weathered entrepreneur" far removed from his initial corporate aspirations.

The enduring legacy of relationships. Ultimately, the book highlights that the most valuable aspects of Greer's journey were the relationships forged along the way. From the unwavering support of his family and friends to the loyalty of his diverse team across Asia, these connections provided the emotional bedrock for his resilience. His marriage to Mei, a partnership forged in the crucible of entrepreneurial struggle and near-death experiences, symbolized the profound personal growth and enduring bonds that transcended the pursuit of profit, proving that the richness of life lies in shared experiences and human connection.