PLAY THE ODDS

From poverty to CEO of a $47 billion company: How Arnold Donald did it

All smiles now.
All smiles now.
Image: AP Photo/Mark Lennihan
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Arnold Donald loves to gamble, especially when the odds are stacked in his favor.

When he was younger, Donald was sent to North Dakota as an up-in-coming agricultural executive. While there, he met men training to be professional card dealers. (North Dakota has many casinos.) They taught him how to count cards and gave him a valuable tip: cruise-ship casinos used fewer decks and shuffled the decks less frequently than Las Vegas casinos. This makes in possible to count cards successfully. Donald became a lifelong cruise fan. On board, he’d usually win enough playing blackjack to pay for his family’s trips.

Taking calculated bets is how Donald beats the odds. The 63-year-old CEO of Carnival, the world’s biggest cruise company, since 2013, he is one of a small handful of black Americans to lead a billion-dollar company.

Donald grew up in New Orleans’s tough Ninth Ward, before the end of segregation, the youngest of five children. He grew up poor, he said he’d barely ever used a knife or fork until he was in a summer enrichment program at Andover, a posh New England boarding school. In every way, it seemed like the odds were stacked against him. So he formed a strategy that he applied to the rest of his working days.

“My philosophy in life was: ‘Maximize the probability of success.’ And so whenever I thought something out, I said how can I rig this, so that I have a greater probability of success,” he tells Quartz.

It helped that Donald’s parents were loving and extremely generous. They took in 27 foster children during his childhood. And despite the fact they were uneducated, they pushed education on their children; all five attended college.

Expect the best

Donald distinguished himself early as an academic talent. His older sister taught him to read before he started school, so he was used to being ahead of the class. In junior high, he was identified as academically gifted and went to St. Augustine’s, an all-male, all-black Catholic high school. The school set high expectations from its students. Three times a day, the PA system would blast the same message: “Gentlemen, prepare yourselves. You’re going to run the world.”

There, Donald was taught there was no limit to what he could achieve. “Our math team won the national math competition,” he says. “Our debate team was one of the national debate champions. National, not just Louisiana or whatever. Our band was, you know, the best band in the south.” Indeed, its alumni include Jon Batiste and the six-time Grammy Award-winning trumpeter Terence Blanchard.

“I grew up at the right time,” Donald adds. “It was the Sixties. You know, civil rights. Everything was possible. Barriers were falling down left and right.”

Don’t give people a chance to find fault with you

St. Augustine’s convinced their students that they could do anything they set their minds to. Donald embraced this message and decided what he would be: the general manager at a Fortune-50 science-based company. In today’s modern economy that idolizes entrepreneurship, this may not sound like such a bold ambition, but it was a world away from the Ninth Ward.

Donald also got the message that high expectations were not enough. Teachers at St. Augustine’s made it clear their students would have to deliver and be held to higher standards, especially if they were already disadvantaged as minorities. Donald recalls:

You have to prepare. And there are no excuses. And so we would do Mardi Gras parades, the band would. One day, we had school, then we had two parades. Now that doesn’t sound like a big deal, but that’s a lot of marching, because we marched, we didn’t walk.  And we did two parades, so everybody’s exhausted.

So the next day, in class, they were looking for homework. Of course, I had done mine. A lot of guys in the band hadn’t done it. They were exhausted, right? And the prof said, which was not good for me, “Mr. Donald did his. He’s in the band, he marched last night. So where’s yours?”

And one guy got really irate, and said, because it was a white priest, he said, “You’re picking on me because I’m black.” He said, “That’s right, I am. But if you’d done your homework, I wouldn’t be able to pick on you, would I? So do what you need to do, and people can’t mess with you. There are no excuses.”

Look and sound the part

After college, Donald worked at Monsanto, the agrochemical and agricultural biotechnology corporation based in St. Louis, Missouri. A mentor there he had, early on, gave him some advice. If Donald wanted to maximize the probability of advancing at Monsanto, he’d need to look and sound the part.  Donald told Maritime Executive:

I had a couple of guys who looked after me at Monsanto. One guy was great. He said, “Look, you’re going to go a long way, but there’s two things you got to change.”

And I said, “What’s that?”

He said, “One is, we have to work on your diction. It’s going to limit you. You’re not going to go as far.”

So instead of “Humble Earl Company,” it became “Humble Oil Company.” And instead of “I get the pernt, it’s “I get the point.” I was well-read, but much mispronounced.

He shed his sideburns and improved his diction. After a few years, Monsanto sent him to University of Chicago’s business school. By age 32, Donald was a manager, his childhood dream achieved.

Be adaptable

In 2000, after 23 storied years at Monsanto, Donald joined a group of investors and bought the company’s Equal sugar substitute—or “low-calorie, high-intensity sweeteners” as he calls them—and formed a new company, Merisant. He was CEO of Merisant for three years, before stepping down, and remained chairman until 2005. He had achieved his career goals and made enough money, so he retired young at the age of 51. (Merisant also declared bankruptcy in 2009; Donald, knows when to cut his losses.)

Several years later, after not doing much more than buying a minor-league baseball team for fun, his love of cruise ships came calling.

Carnival was in a bad place. First, the Costa Concordia, a Carnival ship, capsized off in Italy, killing 32 people. Then came the “Poop Cruise,” where a Carnival ship lost power, compromising sanitation. It took days to tow the ship ashore. The Poop Cruise captures the US public’s attention and gave ratings-hungry CNN a boost. By 2013, Carnival’s profits were stagnant, despite a booming economy where people are more prone to spend money on vacations, and its share-price growth was a tenth of the broader market.

Donald had been on Carnival’s board for more than a dozen years, but may not have seen like the most natural fit. A former colleague told the Financial Times (paywall) he was surprised when he learned Donald joined Carnival, “He’s a very ambitious fellow, but what does he know about running cruise liners?” But it’s precisely taking these kinds of bets is the secret to his success; he sets a goal and then finds the best way of achieving it. In fact, as different as the industries may appear, he manages risk in the same way doing cruises as he did in the world agriculture:

When I first took over my first big group at Monsanto, the guys all wanted to talk about the weather. And I said, “Look, shareholders don’t care about the weather. So we better assume bad weather. Now how we gonna make our numbers?” So you mitigate risk by anticipating things that are gonna go wrong, and organizing as if they’ve gone wrong, and then how you’re still gonna deliver.

In this business, every year, every year, geopolitical tensions. You can’t go somewhere. Every year. You expect to go to the Black Sea? No, we can’t. Chinese will go to Korea? Last year, they didn’t. We used to go to Turkey. Now, we can’t. Every year, you can’t go somewhere.

Since Donald took over, Carnival’s profits have grown along with the booming economy. Donald also explained that the economics of ship-building are so unattractive there is a limited number of ships but rising demand for cruise vacations. Demand continues to grow and grow. At the Chinese government’s encouragement, demand for cruises has been growing in China. Two ships are being built now for Chinese customers to take cruises in China. Growing demand and limited supply means cruise companies can increase prices. Carnival’s stock price has doubled since Donald took over; its market capitalization went from $27 billion in 2013 to over $47 billion.

Donald also strives to increase diversity “in the broadest sense” among Carnival managers. Still, he remains a rarity; while black Americans make up 12.2% of the US population, but they account for fewer than 1% of Fortune 500 CEOs. He says:

Diversity is a business imperative. The key to innovation is diversity of thinking. Having people from different backgrounds and different cultural experiences who are organized around a common objective is far more likely to create breakthrough innovation than a homogenous group.

One thing he didn’t have to do when he took over Carnival was make sure the cruise casinos shuffled their cards more. It had already been noticed and corrected. ”I definitely would have changed it, though,” Donald laughed.