Richard Branson: the interview.
Richard Branson, founder and chief of Virgin Atlantic Airways and head of a diverse $2 billion travel-entertainment-retailing conglomerate with tentacles on every continent, is dressed to the nines: in a $10,000 white silk bridal gown with a traditional veil and train and acres of lace. What other billionaire can you name who dresses up in women's clothes--at least in public?
The weirdest part is that Branson watchers in England--and they are legion--hardly raise an eyebrow. It's not that Branson is known as a cross-dresser, though he does sometimes parade down the aisles of Virgin Atlantic flights in drag, wearing a short air-hostess skirt. Instead. it's that Branson is expected to do the unexpected, even the bizarre--anything to publicize his latest venture. In this case, he's promoting the launch of Virgin Bride, a company that will plan weddings and honeymoons (by which point, Branson cheerfully notes, "the customers will no longer be virgins.")
The fact is, Branson's widely reported stunts seem almost staid compared to the unconventional way he manages his burgeoning empire. He owns 150 or so companies, but there is no centralized Virgin headquarters, not even a corporate boardroom. Instead, Branson works as if he's running a startup--albeit with three secretaries--out of his Holland Park office, a white Victorian with Tiffany lamps and sculptures, gilded mirrors, and a Plexiglas case containing a model of his Concorde. There are no flowcharts, no traditional management hierarchies. He doesn't even know how to turn on a ThinkPad, and associates Lotus not with Notes but with a very fast car (watching auto racing is a passion; riding in hot-air balloons--he crashed one last month during his latest attempt to circle the globe--is another). An anachronism in the world of international business magnates, Branson keeps his appointments in a diary and scribbles ideas on his hand.
It works, apparently.
In the movie Three Weddings and a Funeral, a character jokes that his friend must be the richest man in Britain, but the friend says, "Of course not. There's the queen. And that Branson bloke is doing terribly well." His personal wealth reportedly totals $2.7 billion, but it's hard to get an accurate tally, since his companies are private and are constantly dividing and multiplying, with Branson launching new ventures on what sometimes seems like a daily basis. During two weeks last winter. besides Virgin Bride. Branson announced Virgin Rail, a new inter-Britain railroad company; opened his latest Virgin Megastore in Vancouver, Canada; launched V2, a global music label; and broke a bottle of champagne on a jet to christen a new route of his European airline, Virgin Express.
He's been this busy since he was 18, when he founded his first company, Virgin Records (after working on such enterprises as a student magazine and a record shop and recording studio). Virgin Records became the largest independent label in the United Kingdom, with bands as diverse as the Sex Pistols and the Rolling Stones, before Branson sold it in 1992 to Thorn EMI for about $1 billion. Since then, a whole family of Virgins has grown: his two airlines, Virgin Atlantic and Virgin Express (with Virgin Pacific on the way), Virgin Interactive Entertainment, Virgin Radio, Virgin Studios, Virgin Hotels, Virgin Clubs, Virgin Cola, Virgin Cafes, Virgin Cinemas, Virgin Publishing... He owns a financial planning network and a blimp business, and he manages Eurostar, the high-speed trains through the Channel tunnel. In addition, there are more than 100 Virgin Megastores in major cities around the world. And then there's Branson's hotel business in the Caribbean: a private island that comes with a gorgeous villa and staff and rents for $8,250 a day.
Along the way there have been a few failures--the British government stopped his attempt, with TV personality David Frost, to take over ITV, Britain's independent television network--but most of his companies have proved quickly profitable. His most prized one remains Virgin Atlantic, and Branson spends the majority of his time at its helm. Most airlines, as frequent fliers know, are constantly cutting costs in this postderegulation environment. But Virgin is notable for its lavish upper-class service--including massages and lounges with hydrotherapy baths and a four-hole putting green (private bedrooms are planned for some first-class cabins). His was the first carrier to offer onboard videogames and seat-back movies in economy, and there are other frills, even some surprises. Kids are entertained by kazoo instructors and can participate in face painting, and ice cream is served during movies.
Entering the airline business in Britain meant going up against British Airways. To Goliath's chagrin, Branson masterfully played the role of David. In England, people began to fly Virgin as a political statement--Virgin became Apple Computer in its early days up against Big Blue. These days Branson is behind a campaign to stop the proposed British Airways-American Airlines merger, haranguing politicians and buying full-page newspaper ads.
When we caught up with Branson--no easy feat; he is a nonstop target--we planned to talk about travel in the age of the Internet. But the conversation took on a life of its own. We learned a great deal about one of the world's most fertile businessmen and his highly unorthodox methods.
DAVID SHEFF: You seem to be diversifying even more than in years past. Are you hedging your bets against a crash in the travel industry?
RICHARD BRANSON: It's good to be diverse, but we don't anticipate any crashes. The travel industry is growing, growing, growing. More and more people are traveling.
DS: But will that continue? Intel's Andy Grove said that he looked forward to high-quality video-conferencing, when the bandwidth has increased and screen technology has improved, because he'll no longer have to fly 10 or more hours for a one-hour, in-person meeting. That doesn't bode well for you, does it?
RB When videos came in, people thought cinemas would close down, but they didn't. In fact, people are going out to the movies in record numbers; it's a boom time in the industry. The same will happen with travel.
DS: Even business travel? What about the implications of Grove's point?
RB Our technology in the travel industry is changing, too. Better and bigger and faster jets will make travel easier and less expensive, and it will be more, not less, pervasive. Perhaps you won't have to travel to every one-hour meeting, but no technology will replace in-person contact. In some ways, technology makes people want to have one-on-one contact more. All the science fiction views of the future, where people end up isolated in front of huge screens, have proved incomplete. People travel to get out and meet people. It's in our nature to want to do that. So instead of shrinking, the industry will grow.
DS: In exactly which segments?
RB Business, first of all, and personal travel, whether going home for the holidays or taking exotic vacations. Air travel will continue to be more accessible.
DS: Driven by what?
RB Quality, innovations, and much better prices.
DS: Better prices, yes. But quality? One hears more and more complaints today from frequent fliers.
RB Not when they have experiences on the world's great airlines. People go out of their way to fly Singapore, Ansett in Australia, Virgin Atlantic, when they have tried them. Our upper class, which costs about the same as other airlines' business classes, has sleeper seats, great food, manicures, and massages on the flights. In first class, we're [planning to] introduce private bedrooms, 12 per plane, and, yes, showers and Jacuzzis; we'll have the first legitimate mile-high club. If you can do it on ships and trains, why not on planes?
DS: There's a frequent-flier bonus that hasn't been advertised.
RB The point is that people want and deserve to have a very comfortable, enjoyable flight. Next, we'll be the first to have the Internet available at every seat, in every class. By 1997--Virgin Net.
DS: On which you will offer exactly what?
RB Well, besides the things you can now do on the Internet, there will be in-flight shopping so that your duty-free will be waiting for you when you arrive at your destination. You can answer your email, do research, and conduct all sorts of business. Of course, you can also get information about your destination, make dinner and hotel reservations, book tours. These are things that you can do now, but may not have time for. But on a long flight, it could be a valuable service and provide fun.
DS: Besides in-flight Net surfing, how will the Internet affect the travel industry?
RB Obviously, if you're a travel agent, you're going to have to sell other products as well as air travel. Fewer and fewer tickets will be sold by travel agents. It's a fact of life. We're preparing our other industries for the changes. One example is our Virgin Megastores. We're selling records and tapes and videos, but there will be albums and videos on demand on the Net. Virgin Net will be doing videos on the Net in the not too distant future. So how do we keep our Megastores relevant? We are [planning to] have Virgin jeans, for example. They will be sold in our stores. If the Internet starts damaging our stores' business in music and movies, we'll be ready.
DS: But won't people be able to buy everything--jeans included--on the Net? Might your Megastores become albatrosses?
RB There will still be a market for people who like shopping--who like holding a CD, thumbing racks, browsing books, trying on clothes. But the amount of space that will be needed will be less. So what are we doing? If you make the experience of coming to a store more than just buying, people will still come. We plan to turn our stores into places where people like to be seen, where things are happening. Stores that just take your money are boring. They won't cut it.
DS: Technology will change Virgin. Has it changed you? Are you wired?
RB Afraid not. I write in a notebook, which is my bible. I write down my conversations and meetings and reflect back; it keeps me together. I can't use a computer. If I'd been brought up in the computer world, I would. But I'm too old to change. Still, I think I use this old notebook the way people use their computers--to organize themselves, to sort out their thinking.
DS: Is that dangerous, to be stuck in the old world when many of your competitors are presumably wired to the teeth?
RB I know the power of technology and respect it. Even if I don't have a the time to spend hours online, I have people who do. I make sure we're on the cutting edge.
DS: But do you leave yourself vulnerable when you rely on others?
RB But I rely on others in every aspect of this company! It's a big reason why people like to work here. And no one has ever accused us of lagging behind. In fact, I am willing to turn an entire company upside down if it's time to do that. We're in perpetual evolution--very quick though we're very big. The kinds of people we employ are not afraid of taking risks. If someone mucks up, they don't get a bollocking from me. They know they've mucked up and they redouble their efforts. DS: You've described the frills of flying Virgin, but most carriers, at least in postderegulation America, continue to cut costs by cutting services and stuffing more people in their cabins.
RB In the long run, at their own peril.
DS: Yet cost is the bottom line in this industry, isn't it?
RB It depends on the type of trip. For short-haul flights, cost is the most important factor.
DS: Even for executives?
RB Yes, for a short hour or two flight. All that's needed is the happiest staff and modern equipment. You make sure all the unnecessary costs are cut out. Remember that smiles don't cost anything. But over two hours, people want to be entertained.
DS: Even if it costs more?
RB The skill is to pull it off and make sure it's a great experience, and it doesn't have to cost more.
DS: How is that possible?
RB If more passengers fly us, it's profitable, even though we spend more for in-flight amenities. We are the most profitable airline in the world relative to our size.
DS: More passengers sounds like stuffing in even more passengers into already tight cabins.
RB We have fewer seats in each cabin than the others--to give people more space--but we fill the planes because our flights are popular. Three or four percent load factor pays for a lot of extra goodies. The in-flight massages are very popular. Now we've taken on 60 beauty therapists, including hairstylists, manicurists, reflexologists, and aromatherapists. People remember a flight with those amenities; they come back. We already have defibrillators on all of our planes; the law of averages says we're going to get our fair share of heart attacks.
DS: Why should American Airlines change when they have such control of the market?
RB Pan Am went out of business. Eastern, TWA [which reemerged in 1993]. Meanwhile, we made 84 million pounds [$142 million U.S.] profit last year [for the entire Virgin Travel Group]. That's whY The times are changing. The airline industry is an anachronism; other businesses have become completely customer-oriented. The airline business is not. But I don't think it will stay that way--as long as monopolies aren't allowed to destroy the industry to stop competition.
DS: Which leads us to your favorite pet peeve: the proposed British Airways-American Airlines merger. Why is it so onerous?
RB Talk about not being customer-oriented! The industry could die. Anytime there is a monopoly, innovation ceases. I'm not blaming the two Bobs--Ayling and Crandall--for trying to merge. It's one of the cheekiest commercial moves I've ever heard: trying to create a monopoly of that magnitude. But I would blame the governments for letting them.
DS: Soooo--you're an interventionist, and at a time when most Americans want government out of business.
RB I want governments out of business, too, except when it comes to controlling monopolies. They are not in the interest of anybody except the shareholders of those monopolies--and only in their interest for the short term. After a number of years, monopolies get flabby and fat and executive salaries shoot up to enormous levels. British Telecom was a monopoly. Its staff didn't enjoy working there. The public hated it. You had to wait five months to get a phone. The price of calls was astronomical. Competition came in. [Now] its staff loves working for the company; they dance to work. There is a challenge, each day, to beat the competition. Quality has improved, service has improved, the prices are much lower. Smaller is better. It's been proved time and again.
DS: Yet Virgin is Britain's largest private interest.
RB But we're structured as if we are 150 small companies. Each has to stand on its own two feet, as if they are their own companies. Employees have a stake in their success. They feel--and are--crucial to their company because they are one in fifty or a hundred or several hundred instead of tens of thousands. They indeed are all under the Virgin umbrella, but they are generally not subsidiaries. I'm over them to see if one company can't help another, but otherwise they are independent. Some people like the idea of growing fiefdoms--companies that brag about sales over $5 billion a year--but there is no logical reason to think that there is anything good about huge companies. History, in fact, shows the opposite. Those huge corporations with tentacles and divisions and departments become unwieldy, slow growing, stagnant. Some chairmen want them like that so that one division's loss can make up for another's profit, but we'd rather have a lot of exciting companies that are all making profits--as are all of ours.
DS: What happens then when one of your companies is successful and grows large in itself?
RB I will set up a new company. Same again, same again. I keep them spinning off. When I ran Virgin Records, we had 40 different companies under that umbrella. Each company had different managing directors, different switchboards, different offices. The benefit was that each managing director ran his own destiny with 50 staff. He was the managing director instead of the deputy to the deputy to the deputy. If you are a managing director, you will do whatever you can to excel. And each did.
DS: You give up the economy of scale, though.
RB That's right. Outside accountants would immediately look at our 200 buildings, 200 switchboards, and all that comes with them and say, You're bleeding money! But I say, Look at what you get! People who have worked for small companies and then big companies will tell you that it's not as much fun. In a small company, you can create a different type of energy. People feel cared for. If a girl has her period, becomes teary the same time every month, a manager can tell the signs--and suggest she go home.
DS: We won't touch that one. But how do you manage 150 companies? RB I'm quite sociable. With a lot of the managing directors, I play tennis, go skiing. We have weekends away where we all go off and spend time together. We have a drink in the bar. And I'm on the telephone a lot and pop by the companies occasionally.
DS: And you never have regular board meetings?
RB If things are going well, why? If a company is doing well, they may not hear from me for some time. If they need my helping hand--fire fighting--I'm here and they know it. We try to run the organization so that if my balloon ever went down, the people running their organizations could carry on running. We actually do have a rare board meeting, but they're an excuse to get together. We don't need them. Communication is much less formal and it works fine.
DS: Are you hands-off with every company?
RB Hands off unless they're needed. There is a major exception. I'm the chief executive of the travel business myself. It's quite a big part of Virgin and I'm very hands-on with its details. But still, we don't have formal meetings. I got off a flight this morning and rang people up with some suggestions and ideas I came up with on the flight. But one of the problems about formal meetings is that they lead to frustration. People who leave companies with formal structures don't leave because of salaries. If they come up with a good idea, they're told to wait until the next meeting. Then they're told they have to make another presentation to another group, then another. Then the board takes it on advisement. And he's gone off to another companY With Virgin, we make decisions on the phone. If you've got a good idea and I like it, you can get on with it.
DS: But is that practical? Can a reservation clerk really approach you with an idea?
RB They do all the time. In a chitty chatty letter, I write them once a month and report on everything that is going on. I pass along suggestions I've heard. At the end, I include my home address and phone number. It goes to 5,000 people in the airline and to some of the people with other companies, such as the Eurostar trains staff.
DS: It's not realistic for thousands of employees to call you, though. Do you really take their calls?
RB Most will write unless it's really crucial. I get 40 or so letters a day and make sure they get answered. People don't necessarily call, but they know they could.
DS: It seems as if you'd get lots of calls from people with petty complaints about their supervisors and the like.
RB I've found that people are very respectful, but they do call. I gently respect the role of the supervisors, but I will look at any problems that arise. The people in charge know that; it makes them much more caring as a result.
DS: Is Virgin at risk of becoming too diffused?
RB We used to think that. But now we have one of the strongest brand names in the world; it's getting stronger in America. We're at the point that we can get 100% of the funding we need for most ventures from external sources and yet keep complete control. We're back in the record business as of last November with a new label, V2; $100 million has been put up by investors in exchange for 30% of the company, but we have complete control and no financial commitment at all.
DS: Many people believe that new technologies will make brands less important. Do you disagree?
RB New technologies make them important! Let's say there are ten international brands on the Internet: Microsoft, Virgin, and eight others. The better-known, better-respected brands are going to be able to stand out amid the thousands of others. People will rely on brands they know and trust.
DS: Even in the travel industry, at a time when Internet travel agents such as Travelocity and Expedia can give you the best fare, bar none--regardless of airline?
RB If you are going to spend 12 hours on a plane, you want more than the cheapest price, especially if you are a frequent business traveler.
DS: How do you respond to the philosophy that businesses should stick to what they know? Are you at risk of getting into territory that requires expertise that you don't have?
RB I knew nothing about the airline business, financial service industry, soft drink business, any of them--until I started. The same thing applies in every business: It all comes back to your people. If you one company, you can run any company. You can learn the nuances of a particular industry in two months. And it's so great being in so many different businesses. That's the fun of it.
DS: For an antimonopolist, you sound like you want it all.
RB [Laughs] Well, who wouldn't? And I maintain that we'll do what we're doing with small companies that run independently and will not fall into the trap of conglomerates that self-destruct.
DS: Is your business philosophy all self-taught? In the past you've proudly stated that you've never read a business book.
RB I said it, but not proudly. I'm sure there are good ones that teach people a lot. But I've never read one and never took a course in management. I've been fortunate to learn by experience, by making mistakes, by trying. I've learned every day by doing things different and new. It's what has kept it fascinating--that it is so many different businesses. And every one of them helps me with the last one, from the record business to the airline business and now life insurance and credit cards and banking--learning, learning, learning, learning.
DS: Is there an overall lesson about how to keep a company vital?
RB Yes. It all comes down to people. There's nothing else that comes close. Motivating people, bringing in the best. The girl who opened what will be the best bridal shop in Europe was flying on the airline as an air hostess. She came to me with an idea and I said, Go to it. She did. Now it's Virgin Bride. By having the freedom to prove herself, she has excelled. Everyone you hire is so important. You assume that every switchboard operator will excel and they will. Often people make mistakes, but you allow for that, too. Praise people--like plants, they must be nurtured--and make it fun. Value them and give them the opportunity to contribute in ways that excite them. We're lucky because of the variety of places to go at Virgin. No one gets stagnant. When our people see an air hostess become the managing director of her own business, there is motivation. The people who are running the Eurostar trains are the ones who built the airline. Some are already talking about moving on to one or two of the newer ventures. Keep it vibrant. Everything comes back to people. Nothing else. You get loyalty, enthusiasm, and great service for your customers.
DS: What do you make of the trend in business to reorganize and reengineer?
RB Usually it means layoffs. What you do is demoralize the workforce.
DS: What would you do if you were losing money and had too many people on staff?
RB It happened. It was in the depths of the recession. We had 400 too many people. I went to the staff and explained the situation and asked for advice about what to do. Many letters came back with ideas. Many people--people who could afford it and for whom it worked for other reasons--volunteered to take anywhere from three to six months off as a sort of sabbatical. Six hundred volunteered. As soon as we could, we brought them back in when we were expending again. When they came back, they were rested, inspired, and very happy to return.
DS: But most people can't afford not to work six or eight months.
RB If you survey your company--In a secret, confidential survey that won't affect anyone's job--you'd find that 15% or 20% of the people could at times afford it and would love it. More female than male, probably. Certainly, many people with young children. But they would never suggest it themselves; they would be frightened that it would look as if they were less committed to the company. The truth is, it could make them more committed. And prove your commitment to them.
DS: We've discussed the travel industry in the near future, but where do you see it going down the road?
RB Virgin Space.
RB Quite seriously. I believe that there are enough people willing to pay large sums of money to be passengers on these flights to make it feasible in my lifetime. Eventually, Virgin Express will shuttle around space like we do in Europe. Mars ain't that far off. Who knows? It's virgin territory.