27/09/2014 Talking Business with Linda Yueh

Mercedes and Ferrari spent hundreds of millions of dollars on their cars

and drivers each year but is this good business? Here in Singapore, we

are talking business. A warm welcome to the programme.

From the engine to the design of the vehicle, Formula One is a lot more

than just cars racing around a circuit. It is a multi`million

dollar business that depends on sponsors for revenues and selling TV

rights in order to fund the large investment in the cars that raged ``

race each season. I have been the CEO of Lotus Formula

One only since January this year. Looking at it from a business point

of view, it's interesting in that we only have two forms of income, the

money from our sponsors and the money from FLM, dependent on where

we finish the Championship the year before. In the current market,

sponsors and sponsors wanting to get as much money as they can are

declining, so it is a case of managing the between money coming in

and the budget going out. You have made cutbacks and tried to stem

losses in your business but you have also come down in terms of the

rankings in terms of fourth to eighth. How do you square that? I

can't speak for anyone else but I am trying to look at the sponsors and

talk to them and offer the more than just a sticker on a car. I get the

perception that within Formula One, in the past, it has been very much

about, there is a sticker on a car, leave us to do the racing, where as

I am tried to look a return on investment and different areas we

can offer something different and unique. I've racing companies are

spending big money. Is it tough for a smaller team like yours? It seems

as if the investment and spending on cars is like an arms race. It

doesn't that is the age`old problem in Formula One but the organisers

tried to curb that as much as they can. In previous years, teams could

test as much as they want and spend 24 hours a day testing cars around a

track. That has been curbed now. We only have four testing days a

season. Just this year, they have curbed the amount of time you can

spend at the factory, so only a certain amount of time to spend on

that. But it is an arms race and the people who have got the deepest

pockets will always find ways around things. They will spend 204I was a

day in the simulator. What are your ambitions for the team? Technology

has changed, engines have changed, hybrid power has come in,

aerodynamics have changed, so this year has been a difficult season. We

started off at a disadvantage and although we caught some of the teams

ahead of us, we remained where we are. It's fair to say we will finish

this season in a similar position to where we are now and we look towards

next season. What happened this past season? There were three different

engine suppliers and we have a long`standing relationship with one

of them. It's fair to say that Renault were behind in their

development. For the 11 teams have got Mercedes engines. At the start

of the season, they were superior to the other cars on the track. The

Renault engine was not as good as some of the other engines. It put us

at a disadvantage. Within Formula everyone is developing owning `` at

an incredible rate and if you are behind at the start, it's almost

impossible to catch up. Whilst we have developed during the season,

other teams have also developed. How much investment does it take to get

your car is ready? Our budget for 2014 will be... We will spend around

?130 million. And we are one of the smaller teams as well! The bigger

teams will spend more money. It's a constant race, constant development.

The car that finishes the season is not the same cover started the

season. So, how has that `` how has this changed over the years? We hear

from David Coulthard, who recalls how he started out in go`karts. I

started at 11 years old but nowadays, you can start at eight

years old. If you look at Lewis Hamilton and Rosberg, they started

when they were eight. I was not very good at the beginning but with hard

work, dedication and good support, I was able to progress through to

1989. It was the first step to enable you to make your journey

towards Formula One. It was a very difficult time to make a Grand Prix

debut. There was a lot of nervousness around the sport at that

time because of a couple of deaths but I was a test driver for

Williams. When you are young, you tend to focus on the next step going

forward. When I look back on it, I was given the opportunity. At 43, I

would probably not want to do it, but that gave me my start in Formula

One. Technology the sport has changed so much. When I started, we

had three batters on the steering wheel. Nowadays, they have maybe 35

buttons and dials on the wheel. The drivers are much more involved in

the engineering of the car as well. That has been brought on because we

have much better use of big data transfer and storage, software that

the cars are able to run and that enables more parameters to be locked

in data logging and also to then be adjusted by the driver. Technology,

like in life, when I look like `` when I look back to when I was born

in Scotland, we didn't have mobile phones and Internet back then, but

for the next generation, they embrace that as an everyday part of

life. The reality is, if you go back to the foundations of the first

motorcar, Mercedes`Benz created the first motorcar in 1880 something,

back then, someone walked in front of the flag `` in front of the car

with a flag to warn people because they were not very fast. But you

still need human and machine working together. The human aspect is very

important in designing the machine. The car doesn't move without the

driver. Although technology has improved, cars are more

sophisticated today, but you still need a driver and that's the great

news. You and I won't go out of fashion. How important is technology

in Formula One? Is it the man or the machine that matters? Here with me

to debate this are three people. Is that the man of the machine? Both.

Formula One is the greatest team game in the world and like some

sports where you can see the whole team on a soccer pitch all at once,

with Formula One, an awful lot of the team are away from the view

was's gaze. What do you think? Is it predominantly the driver skills?

From a technology company, I would say the role of technology over the

last few years has had a bigger influence in the sport. You just

look at the volume of data these cars generate now. On your average

lap, you are looking at 25 megabytes of data over a weekend, 50 gigabytes

of data for each car, and a big chunk of that has been transmitted

in real`time. You have guys making decisions about what to do next.

They analyse this data and make decisions of what to do in the race.

Technology is playing a bigger role. Is it the driver or the car for you?

It is clearly a combination of both. Both on the side of how the sport

runs, how you have a lot of analysts sitting back at the factory location

helping to make strategy decisions, and also in terms of how do you make

the sport more interesting for you make the sport more interesting are

doing on the broadcast side or enabling second screen applications.

That is what we are working on. It is very interesting to see how the

sport has evolved over the last few years. If you had the best car on

the circuit but you had so`so driver or the best driver in a so`so car,

which one would end up top in the game today? In reality, the job of

the driver is to drive the car as fast as it can possibly go and make

the fewest number of mistakes as possible. There is nowhere to hide

in Formula one. Nowhere at all. Certainly in the junior formula when

these guys are learning their trade, they can get away with mistakes and

people might not see it. In Formula one, 600 people see it instantly and

have an opinion. And so, it is the job of the driver to drive the car

as quick as they can go but if this of the wider team to make the car as

quick as possible. And that reality is the best driver in the world will

not be able to produce a lap time in a slower car. It is as simple as

that. Describe how technology permeates the sport. You have worked

a lot on making the sport much more accessible to global audiences. If

you see multiple aspects of it, there are now a lot of cameras which

are remotely operated. So, you actually have people sitting back,

6000 miles from where you are, and ensuring that you are able to

capture real`time stuff that otherwise you would not have been

able to. Starting from that, to how you take the data and create some

predicted stuff out of it. If you see now a lot of applications, while

you are watching the race, you can access on the second screen agreed

to understand what is happening. That is adding a lot of excitement

to the sport. You can't really participate, there are maybe 20

people who can drive it across the globe so it is something that

technology can get it closer to you as a fan. You can track it little

bit more. Jeremy, isn't there an aspect of this which is a little bit

unlike most sport, if you invest a lot in technology and you get the

fastest car in the circuit, doesn't that make it somewhat unfair because

you think of Formula one as the best driver wins the race. Yes, one of

the biggest trends in tech is this think all big data. The guys who

really believe in big data believe they can solve any problem, it is

just the matter of having enough data, enough computational powder to

punch through that data. And one of the biggest factors is the

aerodynamics. A lot of smart guys produced these models that can take

hours to run, generate about 100 gigabytes of data and out what, to

put that in perspective, Jock average PC at home, you will fill it

up in a morning. These guys run about 500 of these bills every week.

Think about the data collected, the competition or power required, if

that was unlimited, the pace of innovation would increase

dramatically. Way you are going to end up, and you start to see this

little bit already, there is limited use of wind tunnels, but you will

see the governing body limit the use of budget, number one, that is an

indirect way of limiting technology. But I think as time goes by, if

computational power comes free, they will have to limit that as well.

Because all that will happen is the pace of innovation will increase. It

has the potential to squeeze the driver so that is why you need a

governing body. There are some amazing things that have come out in

the last few years. Innovative things have actually made the sport

more exciting. We have more overtaking now than at any point. I

meant the `` remember watching the start and that was the finishing

result, and now, look at the overtaking, that is a result of the

technical innovation. You need both I think the governing body will step

in and start to limit budget and use of technology to try and level the

playing field. Where did you come in on this because as one of the

smaller teams, this has to be an issue? Yes, I think it is a very

good point. The danger in the sport is if the resources of the team can

engage are limitless, if you like, and if the rules don't restrict the

ability to develop the fastest car, if you like, then, we will end up in

a situation where the sport becomes predictable, the fans switch off and

nobody wants that. And also, the innovation actually goes... The

innovation reduces. What we believe in is a sport where they should be

really quite tight restrictions from the governing body in terms of the

resources you can use because then it'll be a reward for really clever

engineering. So, spending money is not clever engineering. Anyone can

do it and it can hide a lot of the innovation, if you like. The really

clever engineers, they come into their own when they are given really

tight restrictions and they have to come up with the best solution. The

restrictions can be technical but they can also be financial

restrictions that is when you see real innovation. What we would like

to see is a sport where there are really quite tight restrictions. The

best teams will still win because by definition, the best definitions are

but one that of the most innovative. But we think the racing will be

closer and more unpredictable. So, finally, if you were per head of a

racing team, which I know you are, and you got to choose, would you

choose the best car of the best driver? Jeremy? The car. Without a

doubt. The car. Graham. Both, please. Thank you.

The business of F1 is not just cars and racing it is also sponsorship,

branding and the after parties that draws in paying crowds. This party

travellers with the F1 to its glitziest venues and celebrities

mingled with racing fans at a price. I asked what the appeal of F1 is.

F1 is the most exclusive sport there is on this planet. And, remember,

there are only 22 drivers. Whenever something is so rare, people want to

be part of that. There is something sexy about Formula one cars. You

have the monocle race we have the boats of the cars, the F1 car is

driving in front of the boat. Here, you have a stunning backdrop, it is

a night race, it looks dutiful on camera, it is amazing. That is what

I think is the different eminent that `` element that F1 brings. My

brother was obviously an extra Rory driver and an ex`drag you `` Jaguar

driver. He bought me into F1 many years ago. I was a physiotherapist

so I used to be physiotherapy on him and on the Harare drivers and

whenever he went to Jaguar, I wanted a change. I had lost my passion for

physio. So, I decided I didn't want to do that anymore and life took me

in different direction and I have ended up running this company. But,

yes, I was lucky enough to be brought into F1 by him and he was

definitely a great character in F1. He said many things than he probably

shouldn't have said. He lived life to the full and he still lives life

to the full and I think that is how a lot of people perceive the F1

drivers. It is a big snooze. There is a lot

of elements, whenever people come to your face, you have the perfect

clubs and the parties as well. The majority of people who work in F1

are very passionate about it and I know I am very passionate about it

and about my company. If you lose the passion, that is the time to say

enough is enough. Fortunately, I am still as passionate about as I was

12 years ago when I started my company. I have been involved in F1

for 19 years. There is a lot of elements to putting on a race.

People just see that amorous side. There is an awful lot of hard work.

That was the founder of Amber Lounge. F1 is an expensive sport

where investment in technology and securing sponsors can be as

important as getting the right racing car driver. With growing

costs, the sport is increasingly dominated by a few teams than some

have left the sport altogether. For those who remain, F1 remains the

pedicle of motor racing and technology is also enabling global

audiences to see more and more of what lies behind the racetrack. That

is all we have time for. Check out our website and me on twitter and

join us next time for more talking business me, indeed you. `` Linda

Yueh. It has been another quiet day across

the country. Quite a lot of cloud around today. The best of the brakes

were confined to the Midlands and across to me don't hash East