Many people outside of Norway may not have heard of Svein Stöle, CEO and now sole owner of Pareto AS, the holding company in the Pareto Group. We were lucky enough to be able to speak with him recently in his Oslo offices.
Pareto is one of Norway´s largest investment banks with over 600 employees and more than 2,5 billion NOK in yearly turnover. In Norway, Stöle is by far the most successful person in the finance industry. Together with his senior partners, he has been instrumental in building up the Pareto Group from its humble beginnings in the 1990s, and as pioneer of the Nordic high yield bond market.
Given Stöle’s impressive background, we were curious to understand the secrets of his outstanding performance. What is his business philosophy? What factors led to his success? What can we all learn from him?
We have summarized our meeting with Mr. Stöle, according to 14 valuable insights that we gleaned:
Family role models and environment - Mr. Stöle commences with stating that he was “lucky with his parents”. His mother owned and ran a small embroidery shop, and the young Stöle did the accounting for her. He saw how she was both owner and “captain” of her shop, the last person to leave the ship, every night. The shop was his mother´s domain. His father, on the other hand, was not a commercially orientated person; he was a high school teacher in languages. From him, Stöle gained a deep appreciation for reading and literature. His father was an intellectual, and taught Stöle the value of curiosity and imagination. Stöle learned how to appreciate the classics. His passion for reading started with “light” literature such as Jack London, the Hardy Brothers and Jules Vernes, and gradually progressed to Hemingway, Tolstoy and Dostoevsky. Through literature, young Stöle became exposed to an adult´s world and feelings. Looking back, Mr. Stöle sees that he embodies an eclectic mix from both parents’ perspectives and views on life. He developed an entrepreneurial flare from his mother and an intellectual´s curiosity from his father. He finds that this complementary mix has been one of the factors that best explains his career.
Positivity & work - From the days of childhood to today, Stöle has always enjoyed working. All his life, Stöle has worked for entrepreneurs – in the beginning for modest entrepreneurs like his mother and even for a bee-keeper (!), but for entrepreneurs nonetheless. From them, Stöle learned early on “what it takes” to start and run a business, what it means to have satisfied customers, to win customers and to retain them, and what it means to make things happen.
Seek entrepreneurial opportunities - From an early age Stöle was drawn to the dynamics of buying-selling. As a young teenager, he bought and sold bicycles, later cars and tiny leisure boats. He comes from the coastal city of Mandal in the South of Norway. Stöle discovered that he could buy cars in Oslo and sell them in Mandal as an arbitrage. When most teenagers were busy being teenagers, perhaps buying or receiving their first car or leisure boat from or with their parents, Mr. Stöle was selling these cars and boats to them.
Manage & understand expectations - There were never any great expectations or burdens placed on him. Seeing kids in Oslo today, he is struck by the very high aspirations and expectations many parents seem to have for their children. He believes there was more freedom for playtime and individual risk-taking in Mandal. So, why does Mr. Stöle mention this, one might ask? We think he is saying something indirectly: namely, that when an environment’s expectations run very high, perhaps too high, these same expectations may paradoxically lead to risk aversion, fear of failing and generally to negative performance. (Perhaps it was easier for Stöle to take his chances in life because he did not experience having so much to lose…)
Take some risks - Taking calculated risks and pushing the limits was something he did regularly. At NHH, the Norwegian School of Economics, Stöle enrolled in extra courses. It began with one extra course as an experiment, and this went well enough. Then, he enrolled in law school in addition to pursuing his business education. After three years, he finished his business degree one year ahead of schedule and had also taken the 40% of a five year law degree – which he finished after he left university by reading late evenings after work. He was willing to try, to push his limits and take some chances. Lesson: while he was trying, he was even willing to fail. He wanted to attempt something, even if it meant now and again that some exams did not go well. (This was obviously a formative experience, building his resilience for later in life.)
Cope with deadlines - When Stöle worked as a journalist in the magazine “Kapital”, run by media entrepreneur Trygve Hegnar (another entrepreneurial role model), Mr. Stöle learned more about delivering under pressure, and about leadership by hard work and example. Even if you were only, say, 90% happy, the deadlines had to be respected, and you had to stand for – and live with – your product in the public space after the magazine was out. This was a very valuable experience.
Get out of your comfort zone - After his career in journalism, he began to work for brokerage firm Sundal & Collier where he stayed for four years. However, even after doing very well at Sundal & Collier, and being a rising star, he went to the smaller, less known Oslo-banken. Again, Stöle thought of this move as a new chance; he had an almost naïve willingness to assume risk. Pareto was at that time owned by Oslo-banken. When the bank failed, Stöle was a part of an MBO together with three close colleagues.
Participate financially - Stöle used all his savings and took up as much personal debt as possible to participate together with his partners in the MBO of Pareto Securities. However, he did not take up more debt than what he would have been able to pay off by hard work should the MBO have failed. He had his education and reputation to fall back on, and could have taken up new employment elsewhere. Furthermore, he was 29, not married, no children and was free to take risk on his own. Thus, the founding partners took the chance that was given to them. They felt the odds were stacked in their favor. And they obviously had strong incentives to make things work in the beginning. Stöle and three other partners took over Pareto, and among them was Mr. Anders Endreson, who is now living in Switzerland and is a member of the Lorange Network. More on Mr. Endreson later in the interview.
Be resilient - Resilience matters. For Mr. Stöle, his career has often entailed challenges and adverse situations. He is and has been a decision-maker. He has never been burdened by “analysis to paralysis”. He is not impulsive, but is willing to make decisions, and he finds it paramount to get started, to commence, to take that first step. This means taking chances, making decisions, learning to live with 90% solutions when they are good enough all the whilst staying solid and grounded. The downside of being a decision-maker is of course that sometimes the decisions made may inevitably be less good. Stöle has had to dig himself out of challenging situations, and to be able to tackle adversity. However, a bad decision is normally much better than no decision. One may learn a lot from bad decisions, and it is often possible to dig oneself out of the problem, for then to find the right way.
Create strong work habits - Stöle enjoys getting to work early. He loves his work, and finds it enjoyable 97-99% of the time. He still has a high capacity for work. He has always been among the first to arrive at the office and last to leave. He now enjoys several weeks of summer holiday in Mandal each year, and wants his children to learn the values of seaside small-town Norway. These can be labeled as traditional values, if you like. During the winter, he enjoys skiing in Hafjell, just north of Lillehammer. You will rarely find Mr. Stöle on holidays outside of Norway. Thus, considering his wealth, he is extremely low-key. Considering his success, he is extremely humble. He combines his appreciation for holidays with his intense work drive and commitment.
Seek out chance and attract luck – In his career, Stöle has tried to place himself in a position to have luck. This is a tenet that many entrepreneurs share. This means trying to position oneself in a place where luck may come one´s way – but to make sure that one can survive if it does not, i.e., to make a bet, but to never make any catastrophically large bets – to understand and manage one´s risk at the same time.
Pick good investment mentors or heroes - We were curious about Mr. Stöle´s personal investment style. He has great admiration for Warren Buffet and considers himself a true value investor. He has travelled to Omaha a couple of times to attend one of Berkshire Hathaway´s annual meetings. He has read most of Buffet´s writings and also Graham-Dodd. His personal stock portfolio outside of Pareto shares consists mostly of blue-chip stocks, with strong brand names and “moats”. He loves good companies that are out of fashion. They often sort things out and come back stronger.
Build freedom and responsibility - As mentioned before, Stöle took over Pareto in the 1990s together with three partners, among them Mr. Anders Endreson. Over time, Stöle became CEO, while Endreson became Managing Director, and next in command. (Endreson sold his 13% stake in Pareto AS last year.) It is Stöle and Endreson together who over time developed what can now be called the Pareto system.
The Pareto system is based on decentralization and local freedoms. Each unit in the Pareto system is a semi-autonomous profit center. The founders chose not to pursue synergies to the maximum, on the contrary, they have aimed for a clear picture of the profitability of each unit: accountability and responsibility for one´s results are valued. They find that motivation increases, and that the method also avoids the cross-subsidizing of business units. To achieve this decentralized strategy, the structure of Pareto system is generally as follows: Pareto AS owns a minimum 2/3 and up to 100% in each daughter company. The remaining minority stakes are generally owned both directly by key employees and through a partnership agreement, in which the partners gradually change over time.
Business model: Pareto has a generous profit sharing structure, and when the banking is performing particularly well, key employees are among the best paid in the country. Thus, high performance based remuneration is a part of the model. The other part is outstanding operations. High performance is expected, and anyone who is underperforming will obviously not receive high bonuses.
14. Adopt a niche focus and do not lose sight of your customer - Based on general business principles, focus on niche. One can almost say, the more niche the better. (In the beginning, oil service was such a niche that Stöle and his partners identified. At the time, the oil sector was not as big as it is today, but Pareto gave it a shot and became highly skilled at analyzing and serving it.) Customer service is another mantra. Creating high returns for the customers, working for your customer, and having enthusiasm at work are important tenets. Cherish the joy for working and cultivate a passion for your field of endeavor. Customers, colleagues and stakeholders will over time value such energy and dedication.
Some concluding remarks:
Toward the end of our interview, we asked Stöle if he considers Pareto AS a family business? He thinks that it is difficult to say, and to know. Mr. Stöle has three children, the two eldest are now at NHH. He has time to think about it. He is still young and in the full prime of his energy, and his children are also still in their youth.
His offspring have learned the value of hard work, and thus also the value of money. However, inheriting Pareto might perhaps be compared to inheriting the Nordic branch of McKinsey. How to inherit an organization with so many competent employees? It would be difficult, demanding and involve a lot of risk. The expectations would be different. Pareto believes in meritocracy and in leading by example, and nobody gets a free ride in an investment bank, especially not children of founding partners. Thus, it would take a lot, and it is perhaps easier and more fun to build a company than to inherit one.
Given the fourteen lessons above, and Stöle´s amazing career and humble personality, it is fair to say that we left our encounter highly impressed. As a business leader and entrepreneur, we find him to be an outstanding role model. We hope you have found the insights from our interview not only informative but also instructive, and hopefully also inspirational.
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