[Barrick Gold’s] Peter Munk: in conversation – by Kenneth Whyte – Maclean’s Magazine – July 27, 2011

Maclean’s is the largest circulation weekly news magazine in Canada, reporting on Canadian issues such as politics, pop culture, and current events.

On immigrant dreams, the importance of failure and why the future belongs to Canada

Peter Munk, the founder and chair of Barrick Gold, the world’s biggest gold miner, found a land of opportunity when he arrived in Canada as a teenager after he fled Nazi-occupied Hungary. But the 83-year-old businessman is convinced the country’s brightest days may still lie ahead. As the appetite for raw materials skyrockets in China, India and other developing countries, he argues that Canada has a rare, once-in-a-lifetime opportunity to establish itself as the world’s next big financial sector, rivalling the dominance of London and New York.

Q: Let’s talk first about your earliest impressions of Canada as an immigrant boy.

A: That day I arrived, it was a miserable, rainy day in early March ’48. It was like, terra incognita, like going to Mars. I know it sounds moronic.

Q: No. It doesn’t.

A: I arrived in Toronto, and I tried to talk to my Uncle Nick in Hungarian, I tried to talk to him in German. The last time I saw him was in 1938 when Grandfather sent him to Canada as a General Motors agent. He was my father’s young brother. When I arrived, Uncle Nick was a part-owner of the Ajax manufactory. He said, “We don’t speak here Hungarian. This is Canada, we speak English.” I took it in school and I never practised except for the five days in England when Dad shoved me on that boat in Liverpool.

Q: Was the idea that you’d come and do a year of high school and then go to university?

A: It was Grade 13, and number one, I never in my life could conceive, never heard, never read, about mixed-sex schools. In Hungary and Switzerland there were girls’ school, and if a guy went near a girls’ school he was in danger to be dismissed, okay? At noon the bell rings, and I don’t know why it rings, and then somebody takes me by the hand and says, “Come. We’ll go to the gym.” And we walked through—I’ve never forgotten that walk—and there’s a huge, magnificent gym, and there were trestle tables set up with doughnuts on one side, hamburgers, hot dogs, of a quantity that I swear to you could have fed Zurich or Frankfurt for a day. Meat, milk, chocolate milk already. Milk, butter, piled up. So we started eating hot dogs, and suddenly there was music playing, and I see guys dancing with girls like in a nightclub! I remember writing, that week, letters that said, “I think, guys—I may be in a dream—but I think I hit paradise.” You had to go to a prostitute nightclub—and there were plenty in Geneva and Zurich and Frankfurt—to have women dance with you cheek to cheek. By the end of the third day I was invited to two cottages; I didn’t know what a cottage was, and I went up to one of them. And the mother and the parents, the kitchen, the fridge—a fridge as big as me! I had this fantastic love affair, which has never left me, it was because the contrasts were unbelievably enormous. Oh, and then I blew my money.

Q: What did you blow your money on?

A: I fell deeply in love with a Canadian girl. We went to nightclubs. And I had to pay my tuition for university. So I went to Uncle Nick, I said, “Can you give me money?” He said, “I thought you went out every night?” I said, “Yes. Can you give me a job?” He said, “No, we don’t hire people like you.” I got onto a bus to Delhi, Ont. There were all these Mexican kids ready to pick tobacco leaves. No one picked me because they kept on saying, “Do you have farm experience?” I said, “Absolutely,” but then they would look at your hands. The last guy, he took me on as a runt. So in 20 days I came back and I had all the money: $300.

Q: Fast forward 65 years.

A: Now, I’m 83. That’s a long time.

Q: And you’ve been one of the most successful Canadian businessmen in history; now you’re the world’s most successful gold miner.

A: Oil and gas was a failure, and electronics was a major success but I was fired. You have to have failure to know about life.

Q: But you’ve had a great track record.

A: A great run.

Q: Why do you still see Canada as a land of promise?

A: Well, now it’s no longer about being kind to me and having beautiful girls and great schools and gorgeous Anglo-Saxon decency, all of which the Continent, believe me, did not have. You have to be European to understand. That’s why Henry Kissinger was a great pragmatist. You come from Europe, you know the difference in mentality. I mean, Anglo-Saxons generally, maybe because of Protestant ethics, I don’t know, but even when we employ people in our real estate business in Hungary, or our mines in Tanzania, nobody assumes that the Canadian will be bribed or will bribe. Everybody assumes that if they hire a Pole or a Hungarian or an Italian, chances are—not for sure—50 per cent greater that they will be bribed or will bribe. I happen to believe in integrity and ethics and honesty as the keystones of national evolution and civilization in general. To me it’s more important than art and culture. And Canada’s time has really come—by good luck, by the world around it, by the evolution as a result of predictable change in the last 30 or 40 years, the coming down of the Berlin Wall and so on, and us pushing forward with the free-enterprise system.

We thought everything was great, and what happened was that the free-enterprise system, without proper competition, deteriorated into a consumer society where everybody seems to be entitled, and the understanding that life is not about taking but also giving, which was totally engrained in the Western world by wars and by depressions—that all disappeared. The average American’s grandfather put up with this s–t, and fought hard, and that’s why they behaved like they did in the Second World War, that’s why they’ve done as well as they have and that’s why they’ve built our most successful global economy. But now America could be Greece. It’s just a matter of dimensions­­—I mean the debt ratios, the behaviour, the lack of particular will.

So Canada, probably because of geography, having all the advantages of the North American continent but not being really caught up in this U.S. craziness of building a totally unequal consumer society, I think that Canada has evolved in a little cocoon—and that’s the wrong word to use—but an isolated entity that, as a result of evolutions around the world, happens to have all the things that [put] it in a position of such uniqueness that I can’t recall [another example] in history except the British Empire during those hundred years when they ruled the waves, and the U.S. just after they became independent. But this is a rare opportunity. Whether it’s the lack of population in relation to land mass, whether it’s grain or whether it’s coal, whether it’s energy or whether it’s power, we happen to have more than what we need, and we have a country of such size and such magnitude and scope that we can grow into it for years and years and years and still never be threatened of running short of anything.

Q: Our wealth is far [in] surplus to our needs.

A: It’s more than wealth, and if you add to it our culture—I’m talking about the culture of living in one cohesive country with two nationalities—where does that happen with no conflict? Where do you have another country of this size with a border where there hasn’t been a shot fired in anger since the 19th century?

Q: It sounds self-congratulatory, but there is an innate decency that’s Canadian.

A: We have more foreign-born citizens than any other country, and it functions pretty well. Add to that the tolerance, how attractive that is to the world. So that’s one set of facts. Now, look at our banks. Today, all our banks are the healthiest, strongest. We have a stable government, we have a stable political system. You add a stability of social structure here that very few countries can be proud of. I mean, every country from Belgium to Italy, there are real tensions, as well as Greece and Turkey. So we come up as a shining, unique country, and our reputation is increasing day by day, whether it’s because of our banks or because of our national stability, because of our multiracialism, different constituencies in the globe love us for different reasons. Love us. Respect us. If you’re going to be a mining company operating in the world, and I’ve been looking at some major mergers for growing Barrick—if I say to them, let’s get together, you’re a $50-billion, we’re a $50-billion company, create a $100-billion company, they all agree. Ten years ago, you talk to an American, “Merger? You’re a minor company.” Today they all want a big Canadian company. Do you know what a fundamental change it is in mentality? They know that for a mining company when you go into Zambia, or Argentina, or Papua New Guinea, or China, having a Canadian flag around you is better than having a U.S. flag.

Q: Is this particular to the mining sector?

A: No. Canada is a better place to have your home office, it’s a better place to be represented as a multinational in Argentina, in Chile, in Russia, or in Patagonia. Canada has less enemies, has created less antagonism, and therefore has a better chance to be accepted. Our company operates in 20 countries. We employ thousands of locals, we deal with countries and governments all the time. We are dependent, totally, on the community’s approval and the government’s approval of us.

Q: And we have the infrastructure here now to support large-scale global enterprise.

A: Big time. Canada has a unique opportunity that Britain had beginning in [the Victorian era] when London became a financial centre for the globe. Canada, I think, should become—and could become—a financial centre for that one sector of the world that has the greatest need for capital, and that is the mining sector. I believe that it is inevitable that over the next two decades those 300 to 400 million Chinese who live in the same homesteads and same conditions as their grandparents on $3 a week, unless those guys are given a chance to either emigrate to cities—which is impossible because the cities are all overloaded—so the only alternative to keep them gainfully employed and give them a chance to improve is to move industry in there. Every factory needs power. The moment you have power, you need roads, you need railroads, you need proper transportation to take the raw material to them and take the finished goods away. The amount of infrastructure needed just in power generation and distribution is equal to the whole wiring system of the U.S., which is copper. To build buildings for the factories requires steel, to build roads you require cement, and all that needs energy, which is coal. So if you add it up, whether it’s zinc or lead or rare earth or agricultural potash to feed them, it’s all mining.

Q: Or if not coal, oil or natural gas where we’re also strong.

A: Because, let’s face it, the oil sands is mining.

Q: Fair enough.

A: The good news is that 90 per cent of these [resources] are not going to come from the traditional mines, because their lifetime is narrowing. So now you’re talking about a billion to a billion and a half people over the next 25 years who will be given a job. And the raw material required to do that, or the infrastructure, is staggering. When I started a great mine like we had in Goldstrike in Nevada, it cost $400 million to $600 million. Today you can’t build a mine for less than $2.5 billion to $4.5 billion.

For the rest of this article, please go to the Maclean’s Magazine website: http://www2.macleans.ca/2011/07/27/on-immigrant-dreams-the-importance-of-failure-and-why-the-future-belongs-to-canada/