08/06/2016 BBC Business Live


08/06/2016

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This is Business Live from BBC News with Ben Thompson and Sally Bundock.

:00:00.:00:10.

Will shareholders take on Sir Martin Sorrell?

:00:11.:00:14.

He is the boss of the world s biggest ad firm WPP -

:00:15.:00:17.

Live from London, that's our top story on Wednesday, 8th June.

:00:18.:00:40.

How much is too much - that's the question facing

:00:41.:00:52.

The company's boss Sir Martin Sorrell is the highest paid

:00:53.:00:55.

He says he deserves over $100 million.

:00:56.:00:58.

Also in the programme, the world's second-largest

:00:59.:01:01.

shipbuilder Daewoo has had is offices raided in South Korea

:01:02.:01:03.

as part of an investigation into alleged accounting irregularities.

:01:04.:01:06.

The markets look like this. Not a great start for the markets

:01:07.:01:11.

across-the-board. Is this profit taking? Is there something more

:01:12.:01:14.

sinister going on? We will explain. We'll be getting the inside

:01:15.:01:16.

track with the boss Founded in 2003 in a spare room it's

:01:17.:01:18.

now worth more than $1.5 billion. We'll explain why the boss prefers

:01:19.:01:28.

to be called a rabbit, As one Harvard professor says

:01:29.:01:31.

we shouldn t love our flaws He says it can prevent

:01:32.:01:36.

you from succeeding. So is it time we ditched

:01:37.:01:40.

the self-confidence and learned to admit

:01:41.:01:42.

our weaknesses at work? Let us know, use the

:01:43.:01:44.

hashtag BBCBizLive. My weaknesses are displayed in a

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public way on this programme! Executive pay is once again

:01:52.:02:03.

in the headlines as shareholders seek to vent their frustrations

:02:04.:02:08.

at bumper pay packets Today it's the turn

:02:09.:02:11.

of Sir Martin Sorrell, the Chief Executive of the world's

:02:12.:02:15.

largest advertising agency, WPP. He'll face investors at the firm's

:02:16.:02:21.

annual general meeting. Mr Sorrell is the highest paid

:02:22.:02:24.

Chief Executive in the FTSE 100 and is in line for a total payout

:02:25.:02:26.

of around $102 million. He argues that his compensation

:02:27.:02:35.

packet is heavily weighted towards the company's share price

:02:36.:02:41.

and that "if WPP does well, WPP announced in March

:02:42.:02:49.

that its annual pre-tax profits rose 2.8%

:02:50.:02:53.

to $2.2 billion. But despite this the Shareholder

:02:54.:02:56.

advisory group ShareSoc has recommended its members to reject

:02:57.:03:01.

the package saying that they "don't think it will make him

:03:02.:03:07.

work any harder." Not all bosses believe

:03:08.:03:10.

in performance-related pay though. The Chief Executive

:03:11.:03:22.

of Alphabet, the parent company of Google, accepts

:03:23.:03:24.

an annual salary of just $1. Although it should be said

:03:25.:03:27.

that his 6.5% stake in the firm does With me now is Oliver Parry,

:03:28.:03:30.

head of corporate governance Oliver welcome to Business Live. The

:03:31.:03:39.

first question, is he worth it? If you look at what happened with

:03:40.:03:42.

respect to the shares over the last five years, they have more than

:03:43.:03:46.

doubled. Profit in that time is up at ?10 billion. The FTSE has only

:03:47.:03:52.

risen by 5.8%, shareholder are receiving significant returns. When

:03:53.:03:57.

he bought that company up, he lives and breathes the brand, I think he

:03:58.:04:01.

probably is, but the quantum is extremely We talk about large. The

:04:02.:04:06.

shareholder activism. We have seen a big upswing in the number of

:04:07.:04:11.

shareholders who are getting vocal about the pay to top bosses, the

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question is whether they have the power to change anything? They do,

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when it is a vote. I think it is really crucial that the board and

:04:20.:04:21.

the shareholders engage with one another. So yes, it is great when

:04:22.:04:27.

there is a majority shareholder vote against such as we saw at BP, but

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there needs to be regular engagement between the board and the

:04:32.:04:35.

shareholders. A lot of this is paid in shares to Sir Martin. As he said

:04:36.:04:39.

when the firm does well, he does well and clearly there is a

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correlation between the two, but is there a danger though that we see

:04:43.:04:46.

top bosses earning so much, that gap between what the normal worker is

:04:47.:04:50.

being paid and what the top boss is being paid gets ever bigger and

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actually this becomes a moral issue, not necessarily a financial issue?

:04:56.:04:59.

Well, there is a moral and ethical dimension. It is very much down to

:05:00.:05:03.

the shareholders. So you have seen local authority pension scheme this

:05:04.:05:06.

morning recommending votes against and that's right because they see it

:05:07.:05:10.

as a moral imperative to do so. The power lies with the showeders. It is

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crucial that the shareholders exercise their views as we saw with

:05:15.:05:17.

the Church of England and BP several weeks ago. Is there a brand or a

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potential damage to the brand as a result of this? Because yes, rightly

:05:22.:05:27.

or wrongly, Sir Martin sorle says he deserves the money, but does it come

:05:28.:05:30.

down to the reputation of the firm? Again, it is that issue, isn't it,

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the boss is being seen to be paid a lot, whether he is worth it or not,

:05:34.:05:37.

many people who are looking at the company will not get into that. They

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will see he is earning this bumper pay packet and everyone else isn't.

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How do they prevent that from being damaging to the brand? If

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performance doesn't match, you saw poor performance with BP and the

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Chief Executive is paid a large amount of money there, but for me,

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it can have an effect on British businesses as a hell and that's the

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real damaging aspect. Our average member earnings ?100,000 a year, and

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it affects them, the reputation of British business can be affected.

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That's the worrying concern. Oliver, it is really good to hear your

:06:19.:06:30.

thoughts. An Egyptian passenger plane en route from Cairo to Beijing

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has made an emergency landing. It landed in Uzbekistan and this was

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because, it is reported, there was a bomb threat. Now, Uzbekistan Airways

:06:42.:06:48.

said everybody has been evacuated. They are safe. It is not known yet

:06:49.:06:53.

which airliner it was, but Russian news agencies are saying it was an

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Egypt Aeroplane. That's what we know at the moment. We shall keep you

:06:58.:07:00.

up-to-date with any developments on that. We're told, more information

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coming through, 118 passengers on board. 17 crew, all evacuated

:07:05.:07:10.

safely. Security Services are currently examining that plane. As

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soon as we have anymore details, we will bring it to you right here.

:07:14.:07:17.

New Chinese trade data shows the world's second-largest economy

:07:18.:07:22.

Exports fell by 4.1% from a year earlier to $181.1 billion.

:07:23.:07:31.

That's more than double April's 1.8% fall.

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Imports meanwhile edged down 0.4% to $131.1 billion,

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an improvement over the previous month's 10.9% fall.

:07:36.:07:43.

Japan's economy is growing faster than we first thought.

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The official growth rate for the first-quarter of the year

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has been revised upwards to an annual 1.9%.

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But market in Tokyo fell in early trading because the higher GDP

:07:54.:07:55.

number could reduce the chance of more economic stimulus measures

:07:56.:07:58.

The FBI is warning banks about potential cyber attacks linked

:07:59.:08:13.

to an interbank messaging system called Swift.

:08:14.:08:19.

In February, hackers stole $81 million from Bangladesh's

:08:20.:08:21.

central bank account with the Federal Reserve

:08:22.:08:22.

The FBI message warned of a malicious cyber group that

:08:23.:08:26.

You may have been following the story of British Home Stores, and

:08:27.:08:38.

its demise. 11,000 jobs at risk. 164 stores potentially closing across

:08:39.:08:42.

the country. Today, the new boss is in the firing line. He will be

:08:43.:08:46.

facing MPs and they will be asking him about what happened, what went

:08:47.:08:50.

wrong and why he bought it for just ?1 last year? You'll know that it

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entered administration and liquidation after failing to find a

:08:57.:08:58.

buyer for the business as a going concern. That on the live page and

:08:59.:09:10.

full details across the BBC as Dominic Chapel gives evidence.

:09:11.:09:15.

South Korean prosecutors have stormed the offices of the world's

:09:16.:09:18.

second largest shipbuilder, Daewoo, as part of an investigation

:09:19.:09:20.

What do we know about the raid? 150 officials from the prosecutors

:09:21.:09:42.

offices went to Daowoo. An audit committee asked for a probe

:09:43.:09:53.

into the committee. Twonchts former CEOs are being investigated over

:09:54.:09:57.

potential mismanagement at the companiment Daewoo had a really

:09:58.:10:01.

rough time. They posted its biggest net loss last year of $3 billion. .

:10:02.:10:08.

This investigation is not going to help. They are affected by the fall

:10:09.:10:14.

in oil prices and the global slowdown meaning people aren't

:10:15.:10:17.

buying their tanker and container ships anymore.

:10:18.:10:26.

A mixed picture was emerging during the Asian trading session. Japan up

:10:27.:10:34.

by 1%. Japan's first quarter growth figure was revised upwards.

:10:35.:10:39.

We saw the market fall off the back of that news, but in general, it has

:10:40.:10:43.

been a mixed day and you can see the Dow, the night before, ending

:10:44.:10:45.

higher. Let's look at Europe right now. We have a sense of how things

:10:46.:10:49.

are going. You can see London down just a little bit, but let's not

:10:50.:10:54.

forget last night it closed at its highest since April, 6th.

:10:55.:10:58.

Across-the-board, we have losses today, maybe some profit taking

:10:59.:11:02.

going on, but there is a lot of concern about what is happening in

:11:03.:11:05.

the near future. The markets are jittery. Talking of which in terms

:11:06.:11:10.

of the things that might make markets nervous. The US Presidential

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elections. Last night, primaries, Hillary Clinton cementing her hold

:11:18.:11:24.

on the Democratic knoll nation. She will be racing ahead with Donald

:11:25.:11:30.

Trump for the big job at the House. With the economy expected to

:11:31.:11:35.

dominate this election period, we asked Samira to sum rise where

:11:36.:11:40.

voters stand. Investors are starting to pay close attention to what the

:11:41.:11:43.

presidential candidates plan to do in economic policy. There are some

:11:44.:11:48.

huge differences between Hillary Clinton's economic agenda and Donald

:11:49.:11:52.

Trump's. Mrs Clinton seeks to raise the minimum wage while closing tax

:11:53.:11:56.

loopholes for the wealthiest. Mr Trump see as need to abolish the

:11:57.:12:01.

national minimum wage altogether and wants the lower tax rates for all.

:12:02.:12:06.

On immigration, Clinton clearly supports reforms that would let

:12:07.:12:11.

illegal immigrants become citizens. Trump infamously wants to build a

:12:12.:12:15.

wall between the US and Mexico and deport 11 million illegal

:12:16.:12:19.

immigrants, but one area on which the two candidates may actually have

:12:20.:12:23.

some common ground is international trade. Mr Trump claims he would

:12:24.:12:29.

renegotiate all of the US' existing by lateral trade deals. Mrs Clinton

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makes no such claim, but notably is not a supporter of the two trade

:12:35.:12:39.

deals that are currently being worked on.

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Joining us is James Quinn, Group Business Editor

:12:44.:12:45.

James nice to see you. Samira running through the US elections and

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the politics and that's going to dominate the agenda as is the Fed.

:12:56.:13:00.

There is a lot of other stuff sort of in the mix. It is not really

:13:01.:13:04.

getting the attention that maybe it would otherwise? That's right, we

:13:05.:13:07.

have Spanish elections at the end of this month. Potentially,

:13:08.:13:11.

destabilising the eurozone and the rest of Europe. As you mentioned,

:13:12.:13:17.

the referendum, the Fed, the election in the US. We've got the

:13:18.:13:23.

oil price back above 50 suggesting some certainty about price following

:13:24.:13:27.

the Opec meeting last week. We had World Bank estimates for world

:13:28.:13:30.

growth out last night suggesting a retraction. From 2.6% was an

:13:31.:13:35.

original estimate for this year, now down to 2.4%, solid growth, but not

:13:36.:13:39.

as strong. What's your take on all of this? You know if you are an

:13:40.:13:43.

investor right now, what are you going to do? Are you going to head

:13:44.:13:47.

straight for a safe haven, is that your thinking? That's right. There

:13:48.:13:50.

is a lot of jitters and concern. People don't seem to know. There was

:13:51.:13:58.

data out yesterday suggesting a capital flight suggesting ?66

:13:59.:14:01.

billion left the UK. Bank of England insiders would point to the fact

:14:02.:14:04.

that the da is volatile and can change from month to month. But

:14:05.:14:11.

also, you know, the FTSE ended at its highest since 6th April.

:14:12.:14:13.

Investors are not sure. There is a lot of concern. There is a

:14:14.:14:16.

suggestion this month very much investors will stay out of the

:14:17.:14:21.

market. One that we will watch closely, it is hard if you are an

:14:22.:14:26.

investor or a normal person like all of us! What to concentrate on

:14:27.:14:30.

because there is so many conflicting things and it strikes me that one

:14:31.:14:34.

thing cancels out something else. Is there a thought by the end of it, we

:14:35.:14:39.

could be where we are now, the status quo maintains? There is a lot

:14:40.:14:43.

of variables, clearly the US elections and what happens there and

:14:44.:14:46.

what happens the Fed and the rate rise and whether it happens this

:14:47.:14:49.

month or next month is clearly key, the world's biggest economy and

:14:50.:14:53.

China. You can never second-guess these things? I think so in the same

:14:54.:14:57.

way we can't second-guess a referendum. It looks too close to

:14:58.:15:00.

call in the UK now. No one can second-guess what is going to happen

:15:01.:15:05.

in the US election. As investors, whether you're focussing on money or

:15:06.:15:08.

companies, you have to try and focus on what you know and put the unknown

:15:09.:15:12.

variables that you can't control almost to one side. All about a

:15:13.:15:16.

steady nerve, clearly? Yeah. Hold your nerve through most of this. You

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learn something every day! You do. Especially on this show.

:15:24.:15:34.

We are going to meet the boss of Skyscanner later on today. We have

:15:35.:15:41.

also been asking you for your weaknesses at work.

:15:42.:15:46.

I am showing all mine today. We meet the boss of billion dollar

:15:47.:15:50.

travel site Skyscanner and ask why he prefers to be called a rabbit

:15:51.:15:54.

and not a unicorn. You're with Business

:15:55.:15:56.

Live from BBC News. BHS is back in the headlines this

:15:57.:16:02.

morning as MPs prepare to question the man who bought the retailer

:16:03.:16:05.

for just ?1 last year. Dominic Chappell is being blamed

:16:06.:16:08.

by BHS' management for the firm's demise, leaving 11,000 jobs at risk

:16:09.:16:11.

and former staff facing Rob Young is in our

:16:12.:16:13.

business newsroom. What are MPs going to be asking

:16:14.:16:18.

Mr Chappell about today? MPs will be talking to the boss of

:16:19.:16:32.

retail acquisitions, the company that bought BHS for ?1 last year, a

:16:33.:16:38.

former racing driver, a man who had been bankrupt three times and who

:16:39.:16:43.

had no retail experience. The MPs will be asking him why he thought he

:16:44.:16:47.

could turn around BHS when the retail tycoon Sir Philip Green had

:16:48.:16:51.

not been able to. They will also look at the way he managed the

:16:52.:16:55.

company as well. The management of BHS wrote to staff yesterday saying

:16:56.:17:03.

there view was that the reason BHS went under was because it needed

:17:04.:17:12.

massive investment, but Mr Chappell had not done that whilst he was

:17:13.:17:20.

taking out money from the company. Sir Philip Green, the previous owner

:17:21.:17:26.

of BHS had pulled the sale of the retailer to Mr Chappell on the same

:17:27.:17:29.

day he had discovered he had been bankrupt. The MPs who will be

:17:30.:17:36.

questioning Mr Chappell today will be talking to his financial backers

:17:37.:17:41.

and one of those described him as, not the person I would ever consider

:17:42.:17:46.

lending money to. This is important for the historical record, but also

:17:47.:17:50.

because this is the biggest retail failure in Britain for the best part

:17:51.:17:54.

of a decade and up to 11,000 jobs are at risk.

:17:55.:18:00.

We will stay across that story on BBC News.

:18:01.:18:08.

BHS and WPP to watch. WHSmith have given us an update. Travel sales at

:18:09.:18:14.

airports and railway stations are up by 9%. That helped offset a 4% fall

:18:15.:18:21.

in the high street. A familiar picture once again. Like-for-like

:18:22.:18:28.

sales were pretty flat. Doing well in travel, but not so well on the

:18:29.:18:30.

high Street. Our top story: The highest-paid CEO

:18:31.:18:33.

in the FTSE 100, Sir Martin Sorrell, will today find out if shareholders

:18:34.:18:38.

have accepted or rejected his $102 The CEO of WPP, the world's

:18:39.:18:42.

largest advertising group, says that he deserves the money

:18:43.:18:52.

because of how the company has been performing,

:18:53.:18:54.

but others disagree, He built up the company from

:18:55.:19:05.

scratch. Send us your thoughts on that because it is a very hot

:19:06.:19:08.

Now, these days chances are if you book a flight,

:19:09.:19:12.

you do it online and that soaring demand for online bookings has been

:19:13.:19:16.

One of the market's largest players is Skyscanner.

:19:17.:19:21.

It was founded back in 2003 in a spare room and began life as

:19:22.:19:24.

Earlier this year five investor funds backed the tech

:19:25.:19:33.

firm with $186 million, which gives the company a valuation

:19:34.:19:36.

of over $1.5 billion and making it a unicorn,

:19:37.:19:42.

that's a start-up company valued at over $1 billion.

:19:43.:19:45.

The funding will be used to expand Skyscanner overseas and to sign up

:19:46.:19:48.

more customers to the more than 50 million who already use

:19:49.:19:52.

Skyscanner Chief Executive Gareth Williams joins us.

:19:53.:20:00.

Welcome. In terms of your company, there are many companies that do

:20:01.:20:08.

what you do, but you have been around for quite some time. Do you

:20:09.:20:13.

think that is why you are either success that you are? First mover

:20:14.:20:20.

advantage? I am not sure it is first mover, the trick we have pulled off

:20:21.:20:24.

is to still care about travel. Often you do a up and become a business

:20:25.:20:29.

person first. We, throughout the company, care about travel and the

:20:30.:20:33.

traveller and concentrate on the quality of the results. We do that

:20:34.:20:39.

worldwide. And we have kept doing that same thing. It has also come

:20:40.:20:45.

down to the technology. It is one thing to be able to search travel

:20:46.:20:50.

sites and find flights, you have technology you built up over a long

:20:51.:20:55.

time which makes it different? The single biggest role in the company

:20:56.:21:03.

is software and as an example with processing over 3 billion

:21:04.:21:07.

itineraries every day and storing that data and reusing it and making

:21:08.:21:13.

it useful, inferring things from that data. How do you make it really

:21:14.:21:19.

user-friendly in the sense that if you go on your site and search for a

:21:20.:21:23.

flight you are not put off by the hundreds of options that might be

:21:24.:21:27.

irrelevant to what you want. That is what puts me off. I start with great

:21:28.:21:31.

intentions of finding the best deal, but I go to an airline websites

:21:32.:21:36.

because it is easier. We put a lot of effort into that and it seems to

:21:37.:21:41.

pay off, but there is still a lot further to go. In an ideal world we

:21:42.:21:47.

would show you the three best results. The fastest, the cheapest

:21:48.:21:52.

and the best value of the two. We have to strike a balance because we

:21:53.:21:57.

want to make sure that people who use us occasionally trust the

:21:58.:22:00.

results we are giving. At the moment we show them in price ranking order.

:22:01.:22:07.

In the future and for regular users we will offer filtered results that

:22:08.:22:15.

are purely chosen on the basis of traveller convenience. We talked to

:22:16.:22:22.

a lot of bosses of tech firms on this programme and Sally mentioned

:22:23.:22:26.

that have done particularly well in that have done particularly well in

:22:27.:22:32.

their industry. You do not like that term. You preferred the term rabbit.

:22:33.:22:37.

Just explain that for me. You do not want to be a unicorn, you want to be

:22:38.:22:43.

a rabbit. The problem I have got with a unicorn is it is all about

:22:44.:22:47.

funding invents, investment and selling shares. That is not at the

:22:48.:22:53.

core of entrepreneurial growth, about building a sustainable

:22:54.:22:58.

business that delivers value and in particular to travellers. And what

:22:59.:23:05.

can go up in a hype cycle can go down. The interesting one, when I

:23:06.:23:12.

heard the term rabbit, and it stands for real actual business building

:23:13.:23:18.

interest technology, and it betrays my software engineer background. But

:23:19.:23:23.

that is what we are doing and that is how we can add value and make

:23:24.:23:29.

online travel a bit less of a leg ache for millions of travellers. I

:23:30.:23:34.

collectively hear everyone watching going, oh, yes. Thank you, really

:23:35.:23:40.

nice to see you, Gareth Williams, chief Executive of Skyscanner.

:23:41.:23:43.

So, rabbits in a bunny market. In a moment we'll take a look

:23:44.:23:48.

through the Business Pages but first here's a quick reminder of how

:23:49.:23:51.

to get in touch with us. We will keep you up with all the

:23:52.:24:01.

latest details with insight and analysis from the BBC's team of

:24:02.:24:05.

editors around the world. We want to hear from you as well. Get involved

:24:06.:24:13.

in our web page. You can contact us on Twitter and Facebook.

:24:14.:24:28.

We have got a lot of tweets from you. Many of you have sent us

:24:29.:24:34.

messages about the story in the Independent. A Harvard philosophy

:24:35.:24:40.

professor said you should embrace your failings. Clearly we are

:24:41.:24:46.

proving that this morning! This is because it holds you back in

:24:47.:24:47.

business apparently. He teaches at Harvard and he says

:24:48.:24:59.

there should be a constant re-evaluation of yourself, do not

:25:00.:25:03.

think you are perfect because you think you are, you should try and

:25:04.:25:08.

evolve and think of others. I wonder how backlashes or compliments

:25:09.:25:13.

Silicon Valley type philosophy? That is all about the power of oneself

:25:14.:25:19.

and belief. But not necessarily navel gazing at your weaknesses?

:25:20.:25:26.

Yes, that is right. To have an entrepreneurial spirit you have to

:25:27.:25:30.

have some drive and in America the focus on business is very much to

:25:31.:25:38.

look at those failures and build on it. There are so many tweets to get

:25:39.:25:48.

through. Phil says, if you do not acknowledge and admit it, how can

:25:49.:25:52.

you improve? Ian says it should all be in your appraisal. That is all

:25:53.:25:57.

from us. Have a really good day. Goodbye.

:25:58.:25:59.

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