Episode 2 The Bottom Line

stem water supplies in the short- term and ration water supplies in

the future. Welcome to the era of expensive

commodities. When companies once thought they could waste a raw

materials, not any more. I will be asking us make guests on how they

plan to economise. We also report on the building tools that work.

First of all, let's spend a few minutes meeting each guest. First

stop, we have architect Gene Kohn from Kohn Pedersen Fox. Give us

some examples of your work. We have offices in New York, Boston,

Shanghai and Seoul, Korea, and Hong Kong. Some of our projects,

particularly locally in London, that are well known would be the

Haren Tower. There is a tower that is 1612 feet in Hong Kong.

But it is not all tall towers. Also with us, two supermarket

retailers, Mark Price, from Waitrose. By you on track to double

the number of shops as you predicted?

A I think so. If we keep on our track, we will double by next year.

Andy Bond, last on the programme, he was the chief executive of Asda.

Not any more. A I work part-time for them now. I

have taken on chairmanships on other boards. I have gone plural.

I was there for 16 years and developed through the business and

it is a great place to build your career.

Market position-wise, they feel like they are well apart but I know,

Mark, you are not as expensive as people imagine.

Her be it is about value, not cheapness. For me, it is about

providing the highest possible quality of the lowest possible cost.

Items like milk the same price as everyone else.

Somehow it feels like it is a more expensive store.

We also sell bread at 75p, milk at 35p, I could go on. Asda's Market

position is perhaps less clear-cut. Across a broader range of goods, we

think we ave best price-ranged supermarket. -- we have the. We

have a good range of clothing, broad range of non-food goods.

The let's get stuck into the topic of commodities and raw materials.

For years, we have often thought about cost control, the efficient

use of labour. Labour costs were the most important of the costs.

Are we now in an era where raw material costs are the most

important? After all, Schumann's are not in short supply but raw

material, natural resources are. -- humans are not.

A how far can you economise in the use of material in your businesses?

A will start with you, Gene. run to the issue is population.

The world population is roughly over 6 billion and by the year 2025

it could be as much as 9 billion. By 2050, 10 billion people. We will

have to look carefully at the materials we use and how we use

them because the demand for more buildings is going to be enormous.

It is a big problem for the world. Or on commodity I am aware of now

is cotton. I work for a clothing business and you look at Cotton and

it is an in -- it is an interesting dynamic between labour and

materials. As the overall commodity price increases as a percentage of

the price of the good, you find many factories migrate back to

close to home areas because Labour is less significant and equally the

shipment of goods from China is increasing. You could see a benefit

to the local economy of the increase in commodity prices.

I a localisation effect because the label -- labour cost factor is much

smaller than the material cost. I was on the phone to a friend of

mine in Turkey which used to be a big source of clothing for the UK

and that has diminished in the last few years. All of a sudden, they

are in a great demand again. Even in the UK, there are signs of a

resurgence in clothing manufacture in the UK.

Aid big issue for us is importing inflation rather than deflation.

People in China had been working for $1 a day at now they want $5 a

day to make handbags and trainers and that is a cost we have to bear.

The more intractable problem for us is a warming world where the system

and the consequences that brings. I look at food commodity prices now.

We have trout in the home base in China and which producing areas.

The worst droughts in Russia for 130 years, the second-largest

producer and Canada, weak prices and soy prices are going up. Crops

and South America have been affected by bad weather forced Bob

you don't think these are the usual temporary blips?

-- but you don't think? By think this is a long-term trend.

If you look at overfishing, the problems with cocoa in Africa.

There are a host of problems that are affecting our ability to get

commodities into the UK at low prices. The solution to the problem

in the UK is working more with British farmers to be more

sustainable in the UK, we are keen on the green agenda and we believe

we have to be a restorative retailer - put back more than we

take out. I heard we throw away over one-

third of all the food product that we buy, not just as a household but

retailers. Have you look at your systems to see if they can be

sharpened? It is a fair observation that

consumers and retailers waste quite a lot of food. We are all doing

work in making sure only sufficient product hits the shelves for those

that want to consume it. What is the waste amount?

What his produced and then what is sold to us and what goes to the

consumer, it would be inefficient to try and get rid of every last

ounce of weights. What is a reasonable target?

Every retailer has to set Bern target. We make sure our excess

food goes to charity. -- said their own target. There is a

consciousness we need to drive that. That alone will not be the solution.

We need to be much cleverer at how we produce food, get more from the

land and become more self- sufficient here.

I am interested in whether there is a trade-off between the labour

costs and the material cost. Thinking about how building is

constructed, do we over use material, physical material, in

order to economise on Labour? If you build with metal and glass,

you will reduce the amount of labour. It is more efficient to

build with metal and glass versus the manual way of laying brick but

there is a cost to it. You use natural resources to make these

materials. I would say, across the world, people are interested in the

Green Building, the sustainable building. China leads the world on

research in solar panels and windmills at this point back. For

me, it is finding other sources of energy that will be crucial.

I want to come back to solutions in using the resource constraint as

opposed to living with the food resource we have more efficiently.

Maybe we cannot. Maybe in buildings, if you build that much building,

you will use that much material. There is nothing you can do to

economise. I think people will have to live

more frugally and the market will detect that. If you look at Third

World countries, 70% of what people spend goes on food. On -- in the UK,

it was -- is 10%. It was around 30% ten years ago. We have changed

dramatically. I think people will spend more on food as our

agricultural land shrinks. It is more apparent and more upon

us in other retail sectors because when you look at clothing, you are

already seen the death of highly consumable clothing. People are

living more within their means and been savvy to having only three

pairs of jeans that last longer rather than 10 pairs that you throw

away after a couple of uses. We increasingly see that.

One of the things you see is buildings becoming simpler in their

design and use of material. Looking at all the great buildings recently

that get all the press, look at the quality of the detail and the

amount of material used to make them rich in their visual interest,

that will change because of the use of material. We cannot keep

building all these icons. If you want to learn more about the topics

in the programme and about our partner, the Open University, visit

Let's talk about buildings. At this point, I am interested in the

conflict between form and function. In modern capitalism, to we deliver

buildings where too much at that goes into fancy designs would do we

not put enough effort into the aesthetic of buildings? I am

looking at you, because Asda's supermarkets are quite functional.

They are designed primarily for a purpose. Some of a busiest stores,

80,000 people a week. They'd to need to be built for efficiency. I

don't think it's always the cost of form. The supermarkets and the

planning authorities are increasingly aware of the need to

design buildings that are somewhat attractive. Many of the

supermarkets that are constructed today are built as part of multi-

use facilities. There is an aesthetic viewpoint. You can find a

balance. But the big as the supermarket has to be designed to

be purposeful. -- Asda. It allows a lot of people to shop intensely and

to be served well. It is arguably not to everyone's taste to have a

linear design. Yet it is by far the most efficient way to design a

stall and if you change did, customers would be frustrated. --

changed it. For Waitrose, we think form is very important. Everything

we do we sympathetic with the environment. Sometimes, it does

look like a supermarket. Other times, we kept the facade of the

old building because that is right for that environment. Having said

that, there must be a balance in making sure what we build his fit

for purpose and efficient so we can be profitable but by and large, we

spend more on average on outbuildings because we think these

epics are important for the Environment and the community.

the customers respond to win more aesthetically pleasing building?

Are think they do. People enjoy being in our shops. It's not

primarily built for auction. It must be efficient. We think

creating an environment with wider aisles and a nice shopping

environment encourages people to come in and spend more money and

more time. We find that our customers are loyal to was because

they prefer that environment but the wrist a cost we incur. -- to us.

-- there is a cost. We found there has been no net advantage so we are

very committed to building beautiful buildings, working with

the environment in which we put them and making sure shopping is as

much of a pleasure as it can be. couple of points. One of my

favourite clients was Stanley Marcus. He told me his favourites

basis and buildings were ones that made him feel good about himself.

That was the test of Architecture. He said if you were a customer, you

walk into a space which is light and spacious and beautiful, you are

going to spend more time and more money. You stand tall, you're

confident. It works for me. I spend time looking for things.

Architecture is critical to society because where you live, the

environment of your home sets your attitude for the day. The place you

work, that environment, it affects you. If you're in a hospital that

is badly designed, you lose hope. If you wipe been one that has

thought about light and space, you can create hope. -- if you are in

one. There are so much about the environment that helps you achieve

the goal you want. That is what great architects do. It is blending

function and place. In a way, the question is just a bit simplistic

in trying to separate function and form because the function relies on

the form. And the form relies on the function. Before we get it to

lovey-dovey, it is actually quite important that people who don't

have large amounts of money can go to a fairly plain building and buy

something that is cheaper. When I haven't spent profits on the

building. I guess the point, and there must be a massive debate in

the whole fraternity of architecture, it is this dilemma

over whether beauty is more expensive. Is it exclusive and in

accessible to his single mother with three kids from Birmingham?

can say you can have a beauty that does not cost more. The general

point and I will come on to the specific Waitrose point. I think

simplicity of form can cost less. The second point is the wonderful

thing about Waitrose is that it is owned by all the people in it. We

decide about profits. We don't look to maximise profits, we look to

sustainability. You choose to make a nice

environment work. A nice environment to make it less

bothered as a consequence. You can't maximise profits to

shareholders and do the things that Waitrose does. I was really using

an example to get you to comment on the fact that we can use another

example, so many things when we did into the detail of architecture,

and we talk about beauty, it does seem to me that there is a lot of

occasions, the debate between cost and form. I do think simpler

buildings are better than exaggerated form or overly

materialised buildings. There are a lot of young architects doing

simple things. You should be able to design low-cost housing which

makes the internal environment and one that you feel good about being

in and speaking him. It's OK for business to say, we're not going to

make as much money but we are going to provide an environment that

provides joy and his special for our customers, the people who work

here. One last point I will make is that we worked with someone from

IBM. He wanted a new building despite the turmoil in the economic

conditions. He cared about the way people communicated and worked

together. So functionally, he created a building that people

started communicating, not just e- mails but verbally. They would

private rooms with people behind closed doors. People interacted.

The company took off. Buildings have a role because more than just

been icons, they have to inspire the users. The other point is if

you are going to spend more on your building, you have to look at are

the areas of your business were you can make efficiencies to somehow

compensate and I think one of the most shameful been in London, there

are lights on in every office building and we think we have huge

pressures with energy costs, it's terrible. Or ours, we don't work

with any new shot that doesn't automatically turn off at set times.

-- for us. We encourage everyone to be efficient with energy. One thing

businesses should be doing to compensate for those additional

costs, thinking smugly about how they operate those businesses.

What about the American supermarkets, Wal-Mart, for example,

big sheds. Do you admire their architectural style? I don't admire

them, to be honest. They are big boxes. They are about providing

economic goods for both approaches and for lots of people. They may do

the job and doing quite well. I have to admit, I have not been in

too many. And do they do the job quite well? The thing that binds

everybody to get that Wal-Mart is a single minded focus on cost. Every

aspect, an obsession primarily with low-cost. We've got to except that

they're not beautiful buildings were more focus has been put on the

form. They are extremely efficient to run. For consumers, extremely

efficient to stop there. What makes them efficient at to run? But you

can build them big? The layout and the linear shape means that getting

the shelves replenished is very easy. You need a lower labour

element in order to run at the stores. There is less energy

utilisation and they are cheaper to build. Should a bit more effort be

put into the design of them? I think you increasingly find it is.

Well Wal-Mart is entering other markets, more focus has been put on

design. -- where. The other aspect is the shop building. The kind of

thing you find scattered across the Middle East. They're not making a

statement of low-cost, than making a statement of high-cost. Exactly.

It is about image. They want to raise their image to be the very

best. Architecture plays a role in that. For the global architecture

sector, that must be hugely important. There are a lot of

places now what they are spending a lot of money. If you look at China,

a powerful image that can best and 20 years, they have built the

equivalent of a New York and added 8 million people. They have made

some very amazing buildings. Some very good, some not so good but

nevertheless, an image that, we have arrived, we are important, we

have Pala. Dictators have used architecture to express power were.

It is a very good note on which we should end. Let me think my guests.

Gene cone. Mark price. And Andy Bond. I will be back with more