Books@DailyFinance: Turning Scrap into Gold in the Far East

There's a long tradition of Westerners going to the Far East to make their fortunes. British novelist Jane Gardam captures it the title of her novel Old Filth, which is both the nickname of her central character and an acronym for "Failed In London, Try Hong Kong."

A recent practitioner of the approach is Stephen H. Greer, who recounts his experiences in Starting From Scrap: An Entrepreneurial Success Story (Buford Books, $25). Like the character "Old Filth," Greer struck out in several attempts to land a Wall Street job, then in 1993 determined to make his pile in Hong Kong. There, he first considered becoming an importer of chicken feet, a much-sought-after delicacy in China.

But serendipity pointed him in the direction of the scrap-metal trade, of which he knew nothing. It's hardly the most glamorous of businesses, conjuring up images of auto graveyards and rusty E. coli-infected cans. But the upbeat and resilient Greer makes it interesting. He also is an engaging tour guide to the landscape of developing-world capitalism.

Talking the Talk

In China, Greer discovered that he was a good bluffer and talked his way into various company offices and deals. He also had the good fortune early on to meet and partner up with a shrewd Chinese woman, Mei, who would help show him the Asian ropes and in time become his wife. They first tried the "ornamental gift item" trade (toothbrush holders, anyone?), but quickly recognized the considerable opportunities available as a middleman in scrap metal.

Soon Greer's company, dubbed Hartwell International after his middle name, was deeply involved in purchasing magnesium ingots in China and shipping them to Japan and in acquiring stainless steel from various Southeast Asian dealers on behalf of a German recycling company. Within a few years -- dates aren't a strong suit in Starting From Scrap -- Greer's businesses were generating "a six-figure net income."

A piece of cake, it seems, although Greer was doubtless aided in his success by his daily habit of "kowtowing three times in front of a random deity" at a local Buddhist temple.

Wheeling and Dealing

Then the fun began. With four Southeast Asian scrap yards and operations in such far-flung places as Mexico, China, and South Carolina, he was hit by a plague of employee theft and gouging. His general manager in Guadalajara bought substandard metals, booked the shoddy stuff as expensive stainless steel and pocketed the difference.

Greer soon learned that another Mexican employee was strong-arming suppliers into giving kickbacks. In China, both his key operative and customs officials proved greedy and dishonest. In Malaysia, petty theft of inventory was a persistent problem. Even his German customer, he says, was underhanded, attempting to renege on contracts.

Such experiences prompt Greer to offer a number of conclusions: In China, "the contract is just a guideline for future negotiations" and nothing likely to be honored. In Southeast Asia, "Chinese family businesses" have difficulty making deals with outsiders, whom they see as "a threat to internal family stability." In Mexico, "an antiquated legal system, which is constantly under repair, simply makes doing anything productive extremely complicated."

In 2001, The South China Morning Post and DHL recognized Greer as the "entrepreneur of the year." Within four years, he had sold his company to Sydney-based Smythson Recycling, and by 2008, he was out of the business altogether. Initially stunned that his scrap-metal adventure was at an end, he concludes that "selling the business was in some way a great relief."

He doesn't tell readers how much he got for his company, but you can be sure it wasn't chicken feet.