For the last month I’ve gone on a bit of a cocaine binge. No, not the drug itself, running my startup, Pressboard, has enough highs and lows for me. My addiction has centered around the business models of the Medellin cartel, run by the infamous Pablo Escobar.
What hooked me was the incredible success that Pablo’s business achieved, in a relatively short amount of time. Sure he was locked up for years in prison, was shot dead by the Colombian army and spent most of his life on the run, yet the business that he ran was an undeniable success. Set aside the questionable morals and illegal aspects of his product for a minute and you can appreciate the exceptional rates of market penetration, product/market fit, profitability and growth that he achieved. There’s a reason Escobar made Forbes list as one of the wealthiest entrepreneurs of his time.
I believe that lessons can come from many places. Here’s what you can learn about business from “El Patron”.
Pablo’s early business forays involved smuggling contraband such as tobacco and liquor. While the profit margins were desirable, the risks increased substantially along with the quantity of product being moved. When Pablo learned about the drug trade he quickly realized that he could generate more revenue with 1 truck of cocaine than with 40 trucks full of booze and cigarettes.
Lesson: When a new business model presents itself, don’t be afraid to leave behind a marginally successful product for a potentially more lucrative one.
The production cost of a kilo of cocaine in Colombia in the 1970’s was $1,500. While you could easily double your money selling the cocaine in the streets of Colombia, that same kilo could be sold in America for as much as $50,000. Pablo identified a much more profitable market opportunity and directed his businesses efforts towards servicing that market. His initial American clientele included movie stars, musicians and models, Pablo may have been the first drug dealer in history to have celebrity endorsements.
Lesson: Look beyond your local market for customers. A large market, with little competition, may be worth the initial outlay in infrastructure costs.
A key part of Pablo’s success in the US was the shipping routes that he created. He went from renting planes and pilots to owning jetliners and building his own airports. He controlled routes through Jamaica and Mexico. These distribution lines would turn out to become major stand-alone revenue sources later on as even his competitors paid him to transport their own product out of Colombia.
Lesson: Never outsource your key competencies. Pablo knew his business was moving a product from point A to Point B and so he controlled every aspect of the supply chain, from the production facility to the end consumer.
Pablo made business deals with his competitors. In fact the Medellin Cartel was less of a Cartel and more of a loosely connected group of drug lords, with Pablo as their Chairman. Escobar united these competitors under a shared vision of prosperity and a common hatred for the Colombian government.
Later on Pablo would even negotiate business dealings with the Cali Cartel, The Medellin Cartel’s sworn enemy. The Cali Cartel became one of Pablo’s biggest customers. Escobar earned revenue from the Cali Cartel’s use of his trade routes as well as a “tax” he imposed for his role in helping to overturn the Colombian government’s position on extradition.
Lesson: In a growing industry you and your competitors can often work together to gain market penetration. A rising tide can float all boats.
Escobar wasn’t blind to the risks he was taking. He planned his routes carefully, bought strategic influence when he needed it and was aware of his enemy’s every move, whether that enemy be a competing cartel or the Colombian government. Pablo even planned his own incarceration by negotiating, as terms of his surrender, that he would be able to build and staff his own prison, affectionally known as La Catedral.
Lesson: Understand the risks in your business and plan accordingly. Careful planning and strong negotiating skills can make the best of a worst case scenario.
Escobar wasn’t without his faults, whether they be personal, moral or business. His childhood dream of becoming Colombia’s President often got in the way of his business objectives. He spent time on the campaign trail while his competitors ate away at his market share. His political battles put a spotlight on his drug operations, forcing the government to deal with him more aggressively. His reputation of dealing with his opposition through silver (bribe) or lead (assassination) made him the primary suspect when politicians went missing.
Lesson: Running a business is hard enough without splitting your focus in opposite directions. Stay laser focused on a limited number of key objectives that matter most.
El Patron is not only one of the most successful criminals of all time but he is one of the most successful entrepreneurs in history. He took an undervalued product to a new market, established production controls, supply chain management and distribution agreements to became one of the wealthiest men in the world. All while being repeatedly shot at by his competitors, the police and the government. Why shouldn’t we learn from Pablo’s business? After all, you’d be surprised at who you can learn from, even if they have an imperfect past.
Note: The author of this article does not condone the sale of drugs, only the use of Netflix to watch TV shows and movies about people that sell drugs.