23rd May 2016
Martin Sorrell is the king of advertising and marketing. At the age of 41, he became CEO of Wire and Plastic Products. He has grown the company over 30 years, assembling a marketing services empire, and in the process has catapulted WPP into the FTSE 100.
Q: How well do you think advertising has adapted to the arrival of the Internet and social media?
A: I think pretty well, but probably not well enough. If you look at us, for example, it’s about 40% of our business, as best as you can measure it, because everything is morphing into one. It’s a bit like television advertising: when we had TV advertising for the first time, it was separate, and then it became more and more integrated into what we did with radio or whatever it happened to be. So that’s happening to digital. To some extent, saying something like 40% is an artificial distinction, because in a few years’ time, everything will become digital in some way, shape, or form, and it’s quite difficult actually to determine what is digital and what isn’t, even now. But I think generally what has happened has been in the right direction. It probably hasn’t been fast enough, and that’s natural in a way, because human nature is to be frightened of change. If you are someone like me, you don’t like to change your habits, and change is a threat rather than an opportunity. It is easy to say that it’s an opportunity but it’s very difficult to do it. People in various occupations have suffered job loss: try telling somebody on a car production line in Detroit that globalisation has been good for them, and they lose their jobs, which explains some of the political phenomena that we’re seeing on both sides of the Atlantic at the moment.
Also, we haven’t managed to measure media effectively, certainly not offline, because they don’t measure the changes in peoples’ habits. When you measure traditional television, for example, you’re not measuring it on what you call the C+7 basis, which is 7 days after airing, you’re doing it on plus 3 days, which means you fail to capture a number of the views. Secondly, online measurement is deficient because a three second view on Facebook – when 50% of the time the sound is turned off – can’t be as effective in terms of views as a 30 seconds, or 1 minute, or even longer TV commercial, and yet that has been the criteria. So the hurdle level for online is much lower than it is for offline. Time spent by consumers on various new media is significant and, certainly on mobile, the industry hasn’t caught up with that time spent and hasn’t managed to produce good enough creative on a small screen, or target it sufficiently accurately to make it contextual; i.e. make it relevant for clients to be investing sufficient time.
There is another thing that’s going on: there is some data on traditional media, such as newspapers and magazines, of the felling of trees and distributing variety, which quite clearly seems to indicate that engagement by consumers is greater in the physical world than in the digital world. So, broadly, the answer to your question is we’ve gone a long way, but the systems of measurement, validation and viewability have to be improved. There’s a long way to go.
Q: What would you say the fundamentals of advertising are, and how applicable do you think these are in the wider world?
A: I think it was it Franklin D Roosevelt who said that advertising raises the standard of living by making people aware of the opportunities around the world, and so creates the demand for improving their standard of living, which is important, and also shows people how they can fulfil it. So what we are trying to do is identify the tangible and emotional appeal of products and services, and there is nothing immoral in satisfying psychological desires as well as pointing out the physical tangible differences between products and services. When I was in Havana last week at a design conference with 250 or 300 Cubans, I showed them the blind tasting example, where if you put the same wine in two different bottles – one that says red wine, and one that says Chateau Touffou French vintage with whatever the date is – although the wine is identical, the clear preference is the bottle with the Chateau on it, and it fulfils and satisfies desires. It is effectively mimicking the placebo effect. The tangible differences in products and services are important, and the qualities that inspire different emotions are important. The world benefits by that demand being stimulated, the economies of scale being developed, and people being employed as a result, so it has acted as a stimulant to economic growth. One of the problems at the moment in a slow growth world is that people have tended to cut investment, both in brands and in innovation, and that can’t work. What drives total shareholder return is top line growth, it’s not cutting costs relentlessly where there is a finite limit to what you can do, Whereas on the top line, at least until you get to 100% market share, there’s no limit to what you can do.
Q: WPP already operates in 112 countries and employs almost 200,000 people. So what’s next for WPP?
A: Well, just to do the same and to do it better. We have the scale and we have the resources. We can always deepen what we do, but I think strong organic growth is the strategy of the day, buttressed by acquisition growth, and focusing on four strategic priorities: firstly, what we call horizontality, which is getting people to work together. Secondly, fast growth markets, which are almost a third of our business and we want it to be 40 to 45%. Thirdly, digital, which as I said is 37.5% of our business, and we want to increase it to 40 to 45%. Last but not least, data: we want it to be 25% of our business, and it is. So it’s really organic growth and growth by acquisition to fulfil that. At the same time, as we grow bigger, and in our first quarter reported revenues were up by 10%, the growth will be roughly half organic and half by acquisition. As we grow bigger and better we will improve the quality, and at the same time improve the margins. It’s not easy to do all of this at the same time, so there’s a lot to do. But I think that the objective is to make sure that if anybody, any client, any employee in the industry, any student leaving school or university or design school or film school, wants to go into the industry, they’ll think of WPP.
Q: In a world where people change jobs increasingly often, you’ve now been at the helm of WPP for 31 years. Do you think that this continuity has been a key factor for your company gaining an advantage over others in the industry?
A: I don’t know about continuity, but I do think that our business is about long-term brand building for clients, and we should apply the same philosophy more generally. The conventional wisdom is that you flit from flower to flower, and that you do better by going from one company to another. My dad said to focus on an industry which you like and enjoy, and build a reputation in that industry. If you want to go off and do something on your own, go do it, but you may not want to do that. So that’s broadly what I did: I waited until I was about 40 years old, and we started WPP. The conventional wisdom is that you move either from one job to another for career reasons, or for financial reasons. I don’t believe in that.
Q: To what extent do you believe that bonuses should be linked to performance?
Q: What’s your opinion on whether the UK should leave the European Union?
A: Well I’m an ‘Innie’ as opposed to an ‘Outie’, and if you look at the debate, it has three elements. The first is an economic argument, and I think even the ‘Outies’ acknowledge that the economic consequences, certainly in the short to medium term, are going to be pretty horrendous if we come out. I was talking to somebody who has retired from the civil service about the administrative consequences of coming out. He told me there are very few people, if any, in the UK who have the expertise on trade negotiation; there might be ten people. Also, we have lost all the infrastructure that has surrounded our civil service and government: we effectively outsourced it, so it’s going to take ten years to put that infrastructure back and renegotiate all of those agreements. So, I think it’s quite clear that the growth rate of the British economy would be lowered if we left. The second argument is one of sovereignty, and I have some sympathy with this: we may lose our sovereignty if we remain. Having said that, I think we’re better off being inside the tent trying to argue the case, rather than outside. We will lose more being on the outside than we will being inside. So, I would say that’s two ticks to the ‘Innies’. The third issue is extremely difficult to argue, and in fact people avoid arguing it; however, in the last day or so it has reared its head again with pictures of migrant boats capsizing and to some extent the French riots that were connected to the new labour laws. I am referring, of course, to the issue of immigration, and because it is emotional, it is a difficult thing for people to get their heads around. I’m quite clear on this: I’ve had two discussions with Iain Duncan Smith and Norman Lamont about the question ‘Do immigrants make a net contribution to the economy?’ They say no. I disagree violently, probably because I am a second generation immigrant and it’s an emotional thing. My paternal grandparents came from Russia; my maternal grandparents were from Poland and Romania, so I do think that immigrants make a contribution – this is actually demonstrated by financial analysis. So when I tot all that up, and I tot up the economics; when I tot up the sovereignty issue, and I tot up the immigration issue, I think there’s a clear case for staying in. A lot of older people don’t hold that view, and a lot of women I’m told from our polling remain undecided, just like we saw with the Scottish referendum. A lot of young people are in favour of remaining, but the question is: are they going to come out and vote for it? It’s quite clear in my own mind that the future of Britain is better inside Europe than outside.
Q: What are your thoughts about the scaremongering in the campaign that’s going on at the moment?
A: Well, I don’t think that the campaign has developed fully. It has become very ugly very quickly. I suppose that was inevitable. We’ve got one or two people in our own organisation who have got some pretty good and creative ideas, but I don’t think it’s really developed any momentum on either side. If you look at the polling, I think our latest poll was 39% to stay in, 36% to come out, and the balance undecided, so you have a heavy undecided vote. [However, their final poll before the referendum correctly predicted a win for leave: http://www.tns-bmrb.co.uk/press-release/leave-campaign-ahead-latest-tns-poll] Most of those undecideds need information or arguments or persuasion to make them vote one way or the other. I did a speech at a dinner last night of generally older people, and it was interesting that they were pretty split. I think there was a slightly greater number of people in favour of staying in, but there were still a significant number of undecideds. So I think that there’s a long way to go on the campaign; June 23rd is still a long way away. But I don’t think the campaign has really caught fire yet and nobody has delivered a decisive blow. There has been a lot of name calling and catty stuff, but I don’t think anything decisive, as of yet.
Q: Which books would you recommend to someone my age?
A: A book that made a big impression on me was The Economic Theory of Managerial Capitalism by a left wing economist at Cambridge called Robin Marris. I guess I read that when I was 18, and it had a big impact on me. But I would shy away from recommending a particular book, actually, and say that every day, just like Warren Buffett does, read a newspaper from cover to cover. It doesn’t have to be the Wall Street Journal, it can be the New York Times, or the Financial Times, or The Economist, or whatever tickles your fancy. Read it from cover to cover on a regular basis. Just spend at least an hour a day, maybe even a little bit longer, at the beginning of the day or the end of the day or both, just going through, because I think that is the most important thing. From that, you will develop interests or areas or subjects which you want to focus on, rather than me recommending one book. There’s also a great little pamphlet written in the 1930s by a man called James Webb Young, who was one of the founders of J. Walter Thompson Company, on the creative process and why and how somebody produces ideas. It has very interesting thoughts, for example, if you have a problem which you can’t solve, what you do is absorb all the information on that particular problem or opportunity, and you read everything which you have on it, you put it into your brain. And then you just forget about it. You’ll find that when you have a relaxed moment, the solution appears. I’ve experienced this frequently: any good ideas I have are when I’m in the shower! James Webb Young used the bath as the analogy: suddenly, you get an interesting idea or solution. I’m not sure if it’s because the brain is relaxed, or if it is continuously computing the impact of all of this data and its patterns. And so, there are a couple of ideas for you. But I would follow Warren, and not even because he is a financial wizard; I mean just generally.
Q: What life lessons have you learnt over the course of your distinguished career?
A: That’s a very difficult question to answer, but I think on balance, I probably had the best advice from my father. He said make sure you get as good an education as you can, and if you are able, go to university. I’m not one of those people who necessarily believes that you should rush off and do things, but some people differ on that. Do undergraduate in the UK. I think some of that some of the best undergraduate education is in the UK, and then probably go to America for postgraduate: do that as quickly as you possibly can after undergraduate. Find an industry which you enjoy – this is very much what my dad said – and then build a reputation in that industry. Get a reputation and get acknowledged, and then some people might think you know what you’re doing. Then if you want to start something on your own, go off and do it.
Q: What did you learn in your teenage years which you think has influenced your success?
A: As I have already said, my father was an extremely positive influence on me. He didn’t have the benefit of going to school past 13; he had to go off and earn money. There were six children in his family, and they lived in the East End, and obviously with his parents having come from Russia in 1899 with nothing, he had to go out there and learn a living for his family as a whole. He got a violin scholarship at the Royal College of Music; he could recite Shakespeare fluently to his dying day – and I’m not talking about one or two quotations, but a lot of it – he had a marvellous memory. So I think that’s what I was influenced by, and I spoke to my father while he was alive, maybe three or four or five times a day. This was before mobile phones, on fixed lines. So I would say those were the influences: spoilt only child in a Jewish family in North West London.
Q: Is there anything which you wish you had which you didn’t do when you were my age?
A: Open the batting for England.
Q: Who is the most interesting person you have met and why?
A: I would put my father there, so I wouldn’t have to have travelled. I could have stayed in the ghetto in Golders Green to see him. I would put him first, but then there were two other people I was heavily influenced by.
The first was a man called Sir Jules Thorn, who started Thorn Electrical Industries. He came from Vienna between the two World Wars and he started a fluorescent tube factory in Enfield, and then developed radio and TV. He did a deal with Sylvania Corporation, which was part of General Telephone to produce colour TVs. He knew my father well, because my father ran about 750 radio and electrical stores, and my father bought heavily from Thorn Electrical. Sir Jules was a lovely man, smaller than I was, but he had tremendous energy and ability, and he built a wonderful company. As I said, he arrived in the UK from Vienna as a persecuted Jew, and he built an amazing company.
The second person would be Arnold Weinstock, who ran the English General Electric Company. I think that he was the best industrialist of his time. I had lunch with him before he died, and he admitted that he felt he’d been a little bit too conservative, too cash orientated, and not enough investment. He favoured joint ventures rather than taking the risk of going in alone, and he acknowledged that joint ventures are not as good as they could be, because you don’t have control. But he started a company called Radio & Allied, which was owned by the Sobells. He married the boss’s daughter and became head of the company, and then built it into an industrial giant.
I’ve had the privilege of meeting a lot of interesting people, but those two people, still to my mind, have the greatest influence on me. When I was at university, it was ’64, I went to the Democratic convention, and I met Bobby Kennedy. His brother had been assassinated the year before, and he was to be assassinated not long after. So there have been people like that. Also, I would say Macri, who is the President of Argentina, Modi, all these people make a big impression on you, people like Bill Clinton, with all their strengths and weaknesses. But I would go back to those two as being the main ones. I spent a lot of time with them, more with Thorn than with Weinstock. I would say Thorn after my dad would be the one.