Fears about the local economic consequences of the current low-price environment have once again sparked commentary lamenting our inability to diversify away from oil and gas. The alleged root of this problem, according to many policy-makers and other commentators, is that the private sector fears risk.
I often hear policy-makers implying that they have done all they can to make business opportunities available to the local private sector, and that the reason opportunities are not grasped is because the private sector is risk-averse. I also hear and read other commentators, especially Mary King, stating that because the private sector is allegedly risk-averse, the state therefore needs to take the lead in driving diversification, investing in innovation and working with the universities.
This statement that the private-sector is risk-averse has been repeated so often that it seems to have become an accepted fact, to be rolled out on demand to explain the failure of the government’s diversification plans. But I wonder if we have really examined this statement to determine if our private-sector players have a different attitude toward risk than private-sector players in other countries. And if it is true, have we tried to understand the political economy explaining why this is the case?
I have recently finished reading the fascinating autobiography of Anthony Sabga, “A Will and a Way.” One of the things in the back of my mind when reading the book was this idea of risk aversion. Certainly Anthony Sabga’s rags-to-riches life story does not suggest a man who was averse to taking calculated risks. Throughout his business career, Sabga showed himself willing to take a risk on doing something new, as he moved from simple retail, to importing consumer items, to importing and servicing equipment and then, when the time was right, into manufacturing.
His decision to take on the failing McAl Group in the depths of recession following the oil boom-and-bust does not strike me as the actions of a man averse to taking risk. Sabga deals with this issue directly in his autobiography.
And I do not think it is Sabga alone amongst our entrepreneurs who has been willing to take some big, though calculated, risks. I’ve also recently been reading another fascinating book by another local entrepreneur, this time a figure within the oil and gas industry. Krishna Persad’s “Energy and Life” is part autobiography and part introduction to Trinidad and Tobago’s oil and gas industry.
In the book, Persad interweaves personal stories about his experiences with a more comprehensive history of the industry, infusing them with a lot of commentary about energy policy and the decision-making among some of the major players. The book chronicles the successes and failures of a true energy sector entrepreneur who certainly never seemed averse to taking risk. Indeed, Persad chronicles three separate occasions when he “bet the farm” and used all of his accumulated family savings as collateral for loans to go after big opportunities. The first of these was in 1989, when he acquired the Barrackpore farm-out from Petrotrin — like Sabga, Persad made a bold move in the midst of a recession.
There are plenty of other local entrepreneurs who have been willing to take calculated risks during periods of economic downturn, including Shazan Ali, who established the very successful TOSL Engineering Services.
The 1980s oil industry downturn was also the time that our biggest local energy service company, Tucker Energy Services, made its first foray into the North American market. In 1986, Tucker purchased a company operating in Canada and the United States called Great Guns Logging, with the primary goal of this acquisition being to access the technology and intellectual property around open-hole logging. Again, this was an opportunity that arose in a downturn, but Tucker took the calculated risk that it would help grow the company.
While this anecdotal evidence does not really disprove the overall claim that our private sector is collectively risk-averse, I think that the individual stories do give pause for thought. Is our failure to diversify really because our private sector is risk-averse? Or do we need to find other explanations?