Bottom line: Alwaleed’s forty years of success as a master deal-maker and negotiator have come to a climax as he now negotiates for his empire and his freedom.
For 8-9 years, I worked for Prince Alwaleed in Riyadh. In Part 1, I outlined Alwaleed’s history as an investor and deal-maker. It is my explanation for how he has become so successful.
Which brings me to the subject of his current negotiation with the Saudi government, for his company and his freedom. It is arguably the negotiation of his life. And if the press reports are accurate, this is currently happening in some form. Here are my predictions.
Prediction 1: Alwaleed will be prepared to stay in prison for a long time.
If there is one business question I have heard Alwaleed ask more than any other it is “what does he need?” He would always look at any discussion from the other side. What do they want? What do they need?
In the past month, Saudi royals have been cutting deals with the government to get out of prison. So what did they need? They needed to get out. In this, time works in the favor of the government. If you agree, you can leave. If you don’t, you can just stay where you are.
I think Alwaleed will have focused on this time aspect immediately. I think his position will be something like, “I would certainly like to get out and will definitely work with you. But I am not in a hurry and am prepared to stay here a long time.” Time will not be a factor and he will be mentally prepared to stay for a long time.
And in any negotiation, you should never threaten or say things you don’t mean or won’t actually do. So it won’t be a bluff. He will be mentally prepared to stay in prison for a long time. I think he will have already turned his focus to creating a positive life for himself in prison.
Prediction 2: He will focus on his faith for strength.
If you asked Alwaleed to describe himself, businessman, investor and billionaire would not be the first terms. The first terms would almost for sure be “Muslim” and “Saudi”. Alwaleed prays five times a day. His morning prayers are usually the last thing he does before he sleeps day. Factoid: the mosque in his Riyadh office actually holds the Guiness world record for being the world’s highest mosque.
In prison, I think he will have turned inward to his faith. I think he is relying on this for strength and endurance, which relates to Prediction 1.
Prediction 3: He will not agree to any deal that implies corruption or other serious wrongdoing.
As mentioned, Alwaleed is a deeply religious man at his center. The media has always underestimated how central this has been to his business and his life.
And as part of this, he holds himself to a strict personal code of conduct and is protective of his reputation. He doesn’t smoke. He doesn’t drink. He doesn’t eat meat. He doesn’t curse – and he doesn’t like it when those around him do. And when he signs a contract, he keeps his word. Note: that is not particularly common among powerful people in developing economies like Saudi Arabia.
You can see this code of conduct in his business history. If you look at his +40 years of global deals, one thing that jumps out is that he has been involved in almost no lawsuits. You also can’t find many disgruntled ex-partners. To be involved in business at such a high level for so long almost guarantees legal and other disputes. Yet Alwaleed doesn’t have any significant history of such disputes.
So to accuse Alwaleed of a crime, such as corruption or money laundering, is to impugn his reputation and his honor in a serious way. I personally do not think he will ever agree to any deal that implies dishonorable or illegal behavior on his part – or by his company. I think his honor and reputation are paramount – and are a deal-breaker for him.
And the latest rumor out of Riyadh seems to support this. The report floating around is that he is willing to pay if it is classified as a “donation”, with no implication of guilt.
In truth, I always found Alwaleed to be a pretty tough boss. He’s a veteran deal guy and they tend to be a pretty hardened group of individuals. Although Alwaleed can actually be really funny at times. But what I liked about him as a boss was that he always treated you fairly and kept his word. Tough but fair. And that is also not terribly common in many places.
Prediction 4: The big question is control of Kingdom Holding Company.
Another rumor is that the discussion involves transferring some portion of his company Kingdom Holding Company (KHC) to the government. But Alwaleed has never given up much ownership, let alone control, of KHC. Even after the IPO, he still personally owned 95%. KHC is his life’s work and represents him personally.
I think this is probably the key question in any negotiation. Would Alwaleed be willing to give up some degree of ownership of KHC? Versus pay that amount in cash? Would he give up control of KHC?
There are actually lots of ways to solve this question. It’s pretty easy to separate cash, ownership and control in a deal. I suspect that is a lot of what is being discussed.
Also, keep in mind, KHC is a holding company with lots of foreign assets – including Citibank, Lyft, Twitter, and the Four Seasons. A foreign government seizing ownership of American and European assets would be problematic. Keep in mind, Alwaleed’s 1991 purchase of 10% of Citibank had to be approved by the US government. Expect a response if Saudi Arabia now tries to claim ownership of this ownership stake.
Those are my four predictions. I think this negotiation could go on for a long time. I think cash vs. ownership vs control of KHC is a key question. And I think an admission or implication of guilt by Alwaleed is a deal-breaker.
But I am really just guessing here. I have no information on what is going on. And all of this assumes that there is a negotiation happening in which both parties care about reaching an agreement. What does the government actually need in this deal? The answer could be “not much”. In which case, it wold be much harder to come to an agreement.
A final comment on how Alwaleed is different.
People often ask me why Alwaleed is so successful. And I do teach about his investment history at business schools. Most observers note his manic energy. Or point to his ambition or the fact that he’s really smart. And these things are true. But a lot of people are smart, ambitious and hardworking. That’s not what made Alwaleed “Alwaleed”.
In my experience, what makes Alwaleed different are his discipline and endurance. When he sets his mind to something, he is remarkably disciplined at it. For example, he always starts his day at the same time. His schedule is always back-to-back meetings, usually working +16 hours per day. He exercises every day. He does take a break to have dinner with his family but he then continues his meetings and reading until early in the morning. And everyone at KHC knows that if you put a report in his outbox before he leaves, you will likely get it back the next morning marked up in his green pen.
Alwaleed operates with a military type of discipline. I literally don’t know anyone who can keep up with him for more than a few days. His personal staff always look exhausted.
And this rigid daily discipline doesn’t just go on for a while. It goes on seven days a week, month after month, year after year and decade after decade. It’s “discipline plus endurance” that makes him quite different than anyone you will meet. Alwaleed is basically a marathon runner. He runs hard and fast every day – and over time he has slowly pulled farther and farther away from the pack.
That’s my take. Thanks for reading, Jeff
I am a Professor of Investment at Peking University Guanghua School of Management in Beijing. I am also an investor, best-selling author and former executive to Prince Alwaleed.