Episode 3 The Bottom Line

across Britain. Temperatures are expected to dip to as low as minus

eight degrees. Now it is time for The Bottom Line. You do not have to

be narcissistic to succeed in business but it helps - that is the

conclusion of a study which suggests a big ego is a catalyst

for innovation. We will also follow up on a comment from last week

which said Facebook could never have been created here. Why is it

the US does so well in business Anita Frew is chairman of a FTSE

250 company called Victrex. A global manufacturer of high

performance polymers. It is a British success story. We act

capitalised in the London Stock Exchange 1.5 million and produces

of thermoplastic polymers. They can withstand high temperatures, they

act chemical resistant and you would find them in the aerospace

industry where they're at engineering wait out of things. You

can find them in automotive components weather is a lot of heat

and fiction -- friction and also in a spinal cage. It is across

industries, it is a global industry and Britain is leading the way.

This was a company spun out of the old ICI? In 1993. My CEO is an

American and there are many businesses that still exist that do

come out of ICI, another one is IMI. We have seen the decline of ICI but

we have seen some start-up businesses emerge from that great

bays. The North West has a great tradition in Engineering. Richard

Farley is my Australian guest. One of the Dragons in the Dragon's den.

You're not a Dragon stand but I is still investing? I am. My

background is as an economist an investment banker and then manager.

I then wrote a book about risk management. I retired at 34 after a

healthily paid career in finance and since then I have a back about

80 small companies, nothing has because what Anita has got. It has

been my model, doing things with universities, particularly Oxfords

and other universities. Do you specialise? What is the category

you have an advantage in? generally back people. It is more

about the people. That is the defining variable. You can amazing

-- you can an amazing person. Dragons of them, they were

different investment styles on the programme you thought about the

proposition and the fundamental economics. It is interesting to see

that it is a personal issue underlining that? De Reggae Reggae

Sauce, who got the Investment, I realised halfway through that the

product was not the source but the product was him and suddenly I

looked at it completely differently. He's just an amazing, Lovely guy. I

had no idea about the source. You need to do it like hell wine-

tasting if it is about the source. Sometimes it is intuition. What

hands are you using? Women's intuition is now being recognised

as a powerful thing but underneath that there is a lot of logic and

intellect. My final guess is Michael Spencer the founder of ICAP.

What does it do? It is the largest wholesale broker in the world. We

have 50 odd offices around the world - Tokyo, Singapore, New York.

We facilitate financial transaction globally between big financial

in in. People may not be aware that there is a huge flow of

foreign exchange between banks in the City of London, Japan and New

York and government bonds and the cap -- capital flows across the

world are generally mind-boggling numbers. We have, for the past 25

years, become the biggest global broker in this financial market. On

a busy day, we do one a trillion pounds' worth of turnovers. That is

1,000 billion. We take very small commissions. What is it?

different products are different. If you took foreign exchange, which

most people have an understanding of, our average commission is

slightly over $1 per million dollars. We have to have a lot of

turnover for any reasonable amount of profit. Financial transaction

tax, the French want to introduce one, I cannot think of a company

worst-hit then something like your company? But I do not agree with

you entirely. There is no hope at all of a financial tax being

introduced worldwide. The US said they do not supported. I am certain

that he would not be introduced in the UK, apart from the fact that

our Prime Minister and Chancellor have said so specifically. It would

destroy the sit meek -- at the City of London not in the months and

years but in a matter of weeks. It would be an exercise and in self

flagellation to do it. Tragically, we would have to move our business

to New York or Hong Kong if it were to happen. Our business would

continue but sadly not in London. You each have some experience of

new business. The sad fact for the world is just how many of them seem

to have been created in in garages in Silicon Valley. Familiar names -

Facebook, Twitter. Somehow, some say, it was inevitable that

Facebook was created in the US? Having invested in tiny companies,

the big thing is that when we try to get a technology company in

particular, we look at expansion in the US because of the size of the

market. Already you have a disadvantage in terms of time zone.

We almost lost something. 35 years ago, we had a hub of Technology

Investment in Scotland. It was known for making technology

investment and we had people like Bill Gates and Scott McNealy come

into have their business funded by Scottish institutions.

happening now? Knows things have changed. The record of technology

has some great parts. Rolls-Royce. While we do not have an area where

we have outpaced the rest of the world. They have been a lot more

innovations in smaller businesses. I do not think the UK is a bad

place foreign entrepreneur but we do not have the same depth of

culture supporting it in the UK as the US. I cannot thank you can put

one finger on a single cause. you find setting up your business...

I remember starting the business with three other at Guy's. One of

these things I look back upon is that I took a view that the project

would probably fail but I would be more annoyed not trying at and say

in a steady job - I did have a steady job then - I basically took

the view that it might fail but I much would prefer to try. What has

happened in the services industry - we have lots of start-ups. Even

these days, we have small hedge funds breaking away from larger if

-- larger companies. The media sector is another one. In the 80s

and 90s... He that gives you a clue at what is going on. I've read out

a list of businesses which all have an to be SiliconValley businesses,

they happen to be in the same space, so to speak, they accosted him one

geographical area. When the -- when you go to other areas, they're not

in Silicon Valley. There is a heavy tendency towards being a critical

mass and a particular geographical area. The Industrial Revolution

started around the Derwent Valley, textile industry, everybody then

started moving into that. In generates an economy of scale,

economies of success competing with each other and eventually,

catalysts move into that place to build other businesses. You have

financial services. Perhaps we do not have it nearly as well

developed. You have north-west as a place of? As I mentioned it, it

comes out of research or a university tradition. There is a

hard out that we tried to sponsor. The same thing happening Cambridge

where hi-tech businesses come naturally. If you have an

apprenticeship scheme and all those sort of things, you can create a

geographical hub. Around the UK, there aren't as many of them.

you think about Hollywood, why doesn't the UK make more movies?

They will never make the quantity. I have been involved in... What

more do you think our current government should do to set up

businesses? What I have seen off government support is normally...

It makes me shiver. There is no process. I have failures and

successes have only so I have had some process. The staff there is

getting back, you just think, why are they doing that? It all add up.

Given the money to you, you mean? (LAUGHTER) the market forces aren't

there. It may be unfair on small government. They are Honourable and

sound nice but mostly it is a waste I think those were worthwhile. I

agree with you, most of the incentives are wasted. There's

specific targeted to specific industries, and if you want to

build manufacturing, making it specific. I think the key to that,

I do think Government can do less, but better. They tend to, I think,

microengineer it too much. What do you think - we talked about the

United Kingdom and Europe, and they are much the same. Do we think Asia,

the start up culture... Day India and culture in particular,

certainly in the material space. Entrepreneurial. Yes, if you

compare India and China to Europe, far more innovative and interested

in start ups, you have a Chinese professor, in the material space,

coming out of university, has a start up business backed by the

Government, that is sold to an international company. It's a

cultural thing there, a willing innocence toing -- willing

innocence to take and embrace risk. We take the middle of the programme

to talk about a topical issue. don't want to spend up talking

about the same bill, Stephen Hester's bill, the banks bashing it,

but let's talk about it. It is the issue du jeu, and. Michael, I know

you've been -- du jeux. And Michael, I know you've been a fundraiser, I

would like to hear your take on what is going on. I'm slightly

depressed about the debate in the UK. It seems to have been caught up

in a political frenzy. Compensation issues are important, but rather

than get into a debate about whether bankers are paid too much

money or not, I want to remind us all that if we beat up on the

financial services industry too much. If we turn this into too much

of a which hunt, we are in danger of damaging one of our greatest

exporters and businesses. The City of London, I had a lucky, wonderful

career which I enjoyed, is the most multinational financial centre. It

would do us no good at all if the debate resulted in international

institutions, the French banks, German banks, American and Japanese

banks, and the Chinese banks thinking that the environment is so

hostile that they prefer to make investment decisions elsewhere.

America wants to pay a Frenchman in London a lot of money, it would be

stupid to not do it. What about the rest? You are on the board, a non-

executive on the board of Lloyds. am, a recent addition. I think we

muddled a lot of issues, partly because public money supported the

financial institutions. When this happens there's a sense of

ownership amongst the public, that, "We want to change things, how can

this go on". The other thing we have not dealt with is reward for

failure. We haven't found a way to get around that. We have to pay out

contracts when you want someone to leave. There's no legislation

really that helps that. It's a fact of life. We have all probably had

to get rid of people in our lives, and you pay people who are

underperforming to go. Until that changes - I think that really

irritates the public. I do think the public - I think they are

surprisingly nuanced in their view. I don't find much public sentiment

from people like you Michael who create a business and make millions

out of it. I don't think people draw a huge distinction between you

and someone running a failing bank. Richard, you have some experience

in that. I think that the system is set up wrongly, probably. The banks

have to be protected. They are too big to fail. That protection

shouldn't allow them to engage in casino capitalism. I used to run a

desk for an investment bank doing that. I don't think they should be

allowed to use cheap capital, which is more or less guaranteed by the

Government, and take bets in the market. That needs a fundamental

look at it. Within a framework people, and you as an economist -

people will act in their own interest. If you have trade, if

that is working for me, traders will do what is in their interests.

Everyone will. Now, we have just a few minutes remaining. Let's devote

it to talking about your egos, you all succeeded in your fields. Does

that tell us you have big egos, which you grave attention are are

self-absorbed, talk about yourself and put your picture on your

company annual report several times. Can a quiet person prevail in

business. Anita, why don't you tell us whether you think a big ego is a

good thing for a person in business. I think a little bit of ego,

confidence, is a good thing. You will have a drive to succeed. I

think the ego is also for your company and business, as well as

yourself. That is the healthiest thing. We have all seen examples

where ego dominates, and you destroy shareholder value. If you

are self aware, matched by egos, it's a personal combination.

added competence. Big ego without competence... That's a worst

combination, absolutely. Ego without competence. I have thoughts

of an ego -- egotystical Mr Bean. For me my problem was lack of an

ego. When I think of mistakes I did, it was lack of confidence and

following through what I thought would be right. If you want to stop

supporting someone, or take an opportunity, I was risk averse and

nervous about things. I different ego into confidence, which you need.

Beside is about risk taking. If you have no competence, you never take

risks. You need a minimum level of competence. Ego can be arrogance,

and it can be worse if it's something where you want to pull

others down to make yourself feel better. I think your point on the

the Dom nearing ego. That comes from a place of deep insecurity.

It's interesting. A lot of people picture the businesses that you

need to have that kind of thirst to dominate. Ambition, you need. You

need drive. You have to have drive in business. There is a fine line

between an ego overinflated, and becomes destructive and arrogant.

You think, particularly in the US and brups sis, and Enron, -- brup

sis, Enron, Liaman. A number of ego tistical directors. You need some

degree of ego, so long as it's balance the with other skills as

well. In your case it's synonymous with your business. That is healthy,

you drive for the company, rather than the personnel of yourself.

It's a misconception among non- business people, where they think

business is cutthroat. I find 90% of business is getting on with

people and forming relationships, which people don't understand. I

think it's being ruthless. How ego tist tick are you, maybe if we --

ego tistical are you, maybe if we asked your employers. I don't know.

I look back to '86. Myself and a small group of guys, we were lucky

we were in the right place at the right time. We started well. After

nine months a colleague came to me and said, "Michael, you are the

worst manager I have come across", and I remember it so well. I did go

and sit and think about that. I learnt from that, actually. I

learnt a lot in terms from that about communication, bringing

people with you. Leadership, bringing people with you. You want

people to work for you. You can't be a boss who runs a business.

have ego, but self aware to take on board that criticism and advice,

that's a great thing. Exactly. you find that the correlation

between ego, big ego and male... you know, I don't think there is, I

think it's too much a generalisation. A lot of women have

ego, looking at the entertainment world. I'm sure you have had a few

people in the business world, females with egos, where it

manfests itself is in a behavioural thing, in board meetings. So you

find men grandstand and talk a lot. There's a Peacocky thing. Certainly

I have keen that. I think it's too much. Do you want to name names?

What I do when I see that - some people find it irritating. I kind

of feel sympathy for someone that does that. I think bless them. They

need calming down. And then sort of

and get them to change. I think it's - I think it's too much of a

generalisation. As someone once said the great thing about loving

yourself is you won't have many rivals for your affection. Let me

thank my guests. Anita Frew of Victrex, entrepreneur, Richard

Farleigh, and Michael Spencer, from ICAP. Next week I have three

entrepreneurs, 20 something, talking about their business