When you think of shipping you automatically think of the Greeks. Afterall, why not? with 92 percent of the country hugging the water and its close proximity to Egypt, Italy, Turkey and Asia, shipping was a natural industry for the Greeks. One of the most fascinating people I interviewed in Dynasties was Nicholas “Nicky” Pappadakis. He is one of the most passionate people I know. His family’s history goes back before the written word. The way history was recorded back in that time was in folk songs. In 1963 Nicky represented his father at the inauguration of the port he donated and he was presented with a group singing a song about at least five generations of his family in the shipping industry. Below are some excerpts from his chapter.
The following excerpts of Dynasties of the Sea are under copyright of Marine Money
The Golden Rule
Pappadakis credits his father and mother for everything he has learned about life and business. “They were both very smart,” he said time and again. He even apologized for beginning each story with a lesson he learned from them, which only underscores his humility and passion for the subject. “My father taught George and me that one of the criteria of success is to be able to pass through a crowd and not be recognizable.” That was in 1956 and this golden rule has been Pappadakis’ North Star, guiding him through business and life.
“My father taught George and me a number of things,” Pappadakis continued, “one of which was ‘the most expensive things in life are free.’ So when I queried him and said, ‘Free and expensive don’t go together’ he said, ‘I’ll explain it to you this way: You can’t go into a store and say ‘I want to buy five pounds of friendship,’ because if you can buy it, it’s not friendship.’”
Because of his philosophy in valuing human capital, the qualities he looks for in a friend are the same ones he looks for when selecting crew members: honesty, integrity, ability, professionalism and the desire to be part of a family. “[The crew members] have to want to do this because, if you do your job with a happy heart, it shows,” he explained. “The same goes for the opposite.” Some leaders have to learn this philosophy from a human resources department or a management course, but it’s been part of Pappadakis’ family legacy. That kind of passion leads to the commitment and productivity Pappadakis looks for in his team.
Lending Culture Changing
Pappadakis represents the old world of shipping, one that understands the industry’s changes over time. This gives him a guarded view of the capital markets’ expansion through private equity. “The banks that had established themselves as shipping banks understood the peaks and troughs of shipping,” he said. “But private equity doesn’t know much about shipping. I think there’s going to be a learning curve for the private equity people.”
Pappadakis said, in traditional shipping loans, the shipping banks were lending to people they knew. The banks knew how the loan holders would act and, while there might have been difficulties in the shipowners trying to repay the loan, it didn’t matter as long as the people waited for the markets to improve. “Banks had to have belief in the people they were lending to,” he stressed. “As long as there is honor and integrity and you sit around the table with good will from both sides, problems can be resolved. The banks that did the best in previous busts were those that had backed individuals who they knew they could trust, and those who performed with honor and integrity in times of difficulty.” Pappadakis doubts private equity has this approach to deal making. “Private equity has different priorities than the traditional shipowners. They focus on the investment’s return on equity over the crews,” he explained. “Life is a compromise. The decisions you make affect your crew and, before I make any decision, I think about the outcome 10 times. This decision-making creates a lot of loyalty among your crews.”
Along with this change in lending, Pappadakis has seen a historical change in regulation. He said that when he first started working full-time back in 1961, shipping was an unregulated business. “Today, it’s totally over-regulated,” he explained.
“One of the biggest challenges for the industry”, Pappadakis continued, “is the myriad of conflicting regulations between the regional and international rules. Regional regulations will end up distorting the market and causing enhanced problems. There needs to be one set of rules to give clarity to the shipowners. I think that the regulator, which is the International Maritime Organization (IMO), has done a good job in difficult circumstances. Don’t forget, the IMO is like the United Nations – there are 186 countries in the UN and in the IMO, so not everything happens ideally, but at least it’s an international body representing an international industry trading internationally.”
With different standards, it is hard or nearly impossible for shipowners to plan and invest in certain technologies. Just like the capital markets, some level of certainty is necessary to make sound investment decisions.
Pappadakis cited the example of New York trying to make a water ballast requirement that was 1,000 times more demanding than the IMO’s. This could have resulted in a decision by shipowners to exclude trading to New York. “The regulations have to be international, so the ships can go to all ports,” he stressed. The world has become a much smaller place thanks to globalization, he said, so the rules and regulations need to reflect that.
Image of Shipping
As Chairman of Intercargo, Pappadakis said the industry shares his concern about shipping’s public image, which is either negative, or more commonly, non-existent. “In analyzing the image of shipping, we came to the conclusion that, unfortunately, the majority of people don’t realize the importance of shipping, because we are under their radar. Almost 90 percent of world trade is being transported by sea. All they remember are the very sad pictures of seabirds that are oiled, whereas what they don’t realize or understand that 99.9 percent of oil arrives on target, at destination, on budget, with no pollution.”