- BuyBranson: Behind the Mask by Tom Bower
Faber, 368 pp, £20.00, February 2014, ISBN 978 0 571 29710 8
Richard Branson is the mirror image of a Russian oligarch. This is not to say that where they are bad, he is good. If even half the things in Tom Bower’s new biography are true, Branson is far from being good. He is playing the same game as his Russian counterparts, but it’s the looking-glass version. Where they do their best to avoid the glare of publicity, he thrives on it. The oligarchs who got rich by seizing the spoils of the post-Soviet economy sometimes have to pretend to be poorer than they really are, so as not to rouse public fury at the scale of their heist. Branson pretends to be much richer than he really is. He loves to flash the cash, often in the form of charitable pledges and absurd boasts about future profits. He once promised $3 billion over ten years to the Clinton Global Initiative in an off-the-cuff remark at a fundraiser. Clinton dragged him up on stage to give him a hug, many of his staff wept at his generosity and the papers reported the figure as if it bore some relation to reality, yet it was more than the earning power of all Branson’s businesses combined. Needless to say, nothing like that amount has been donated.
Where Russian oligarchs do everything in their power to keep journalists out of their lives, Branson asks them in, often literally, inviting them to his holiday homes and showing them a good time. He likes to brag about his drug use and his sexual appetites. He treats the personal space of the young women around him – constant props in his endless publicity stunts – with the sort of disregard you’d expect from a 1970s disc jockey rather than a successful 21st-century businessman. No one would mistake Richard Branson for Roman Abramovich, any more than they would mistake Joan Templeman, the second Mrs Branson, who has almost no public profile, for Dasha Zhukova, Abramovich’s current squeeze, who most recently appeared in the papers perched imperiously on a chair made to look like an inverted, near-naked black woman, an image published on Martin Luther King Day. Abramovich, with his dislike of unnecessary publicity, was not amused. In the Branson household, it’s the man himself who can be relied on to do this sort of thing. The photo on the back of Bower’s book shows Branson sitting on the steps of one of his planes wearing shorts and a T-shirt that says ‘Now Boarding’. A few steps higher up are two women in bikinis whose bottom halves are emblazoned with the slogan ‘Down Under’. Branson has a cheeky grin and a thumb pointed at each.
Still, it’s the same game. Like the Russian oligarchs, Branson has made little of his money in the white heat of market competition. He prefers to avoid competition when he can. His business strategy is to get as close as possible to the people with power and then exploit the connection for all it’s worth. As Bower reports, Branson’s record in launching new products and breaking into competitive markets is pretty lamentable. The Virgin brand has been attached to a wide range of things – from cosmetics to cola to Formula One racing cars to retail outlets to reality TV shows to alternative fuels – that have either failed to sell or failed to work or both. Many of these products were complete turkeys. Branson’s racing car barely got off the grid (his designers had come up with a vehicle whose fuel tank was too small to run at full speed for an entire race; his team finished its two seasons in Formula One bottom of the constructors’ table). His TV show, designed to compete in the US with Donald Trump’s The Apprentice, bombed because no one wanted to watch a smug, tongue-tied Brit pretending to be a serious entrepreneur. The programme was called The Rebel Billionaire: Branson’s Quest for the Best and the idea was to put contestants through a series of stunts to test their mettle. These included getting them to dance naked on stage and to walk on a tightrope strung between two hot-air balloons. All very Branson – it’s the kind of thing he does all the time – but viewers found it hard to see what any of this had to do with the real business of business. Trump relished the show – it made him look like a genius.
For Branson, business is a stunt. He has made his fortune out of the regulated parts of the economy, which he has milked to extract government subsidies, tax breaks, licensing agreements and protected income streams. Transport works for Branson – trains as well as planes – because it rewards the person who gets the routes. How do you get the routes? By persuading government officials and industry regulators to give them to you. Virgin Atlantic sells itself as a sexy new way of flying, but it’s all about the guaranteed profits that come from having the lucrative transatlantic slots at Heathrow. Branson’s modus operandi is to identify and target industries that he claims are being run as monopolies. He presents himself as the man who introduces competition by shaking the industry up with his innovations. For years he mocked British Airways as a protection racket. But once he has a foothold, he does everything in his power to exploit the closed shop he has inherited, suing his rivals, pushing up the barriers to entry, sucking up to politicians, cosying up to his former enemies.
Bower recounts at length what happened when Virgin Atlantic found itself struggling with rising fuel prices in the middle of the last decade. Its executives, with Branson’s apparent connivance, stitched up a deal with BA to pass on some of the cost to the consumer in the form of an agreed surcharge. When the authorities began to suspect that the two airlines, once at loggerheads, were now running a cartel, Virgin turned whistleblower, spilling the beans in the hope of getting preferential treatment from the regulator and escaping a massive fine. But when the case against BA looked like it would go to trial, meaning Virgin’s evidence would be tested in court, Branson’s organisation did what it could to wriggle out of the spotlight. Virgin’s immunity deal required its executives to give unequivocal support to any prosecution, but when it came to the crunch Branson suddenly became hazy over the details, claiming not to be able to remember what had gone on. By this time – 2010 – he was in the running to buy Northern Rock and didn’t want the publicity of another court case. The prosecution decided he couldn’t be relied on as a witness. Then Virgin Atlantic discovered a tranche of previously unseen emails that appeared to contradict the prosecution’s case, and the trial collapsed. In the aftermath, BA hoped that the scales would finally fall from the public’s eyes: the rebel billionaire had revealed himself to be a snitch and a turncoat. But he got away with it. His airline survived and it was the regulators who looked incompetent.
Branson’s strategy, his way of portraying himself as a plucky David in a world of corporate Goliaths doesn’t always work. Sometimes the charade is too transparent. Following the failed prosecution, BA turned its attention to alliances and takeovers to shore up its position, first with American Airlines, then Iberia, then BMI. Branson, as always, squealed in protest. ‘It beggars belief,’ he said when these deals were approved by the US Department of Transportation and the Office of Fair Trading in Britain. Of the BMI takeover he moaned: ‘You just wonder whoever’s working in the competition authority, whether they realised which department they were walking into the morning they made that decision.’ This would have carried more conviction if Branson hadn’t been trying to do exactly the same thing at the same time, notably in Australia, where he was working to secure an alliance with Air New Zealand. He was also looking to hook up with Etihad, the Gulf airline, and Delta in the US. When the regulator stepped in to compel BA to sell 12 slots at Heathrow following the BMI takeover, Branson was quick to try to seize the profitable ones, above all the lucrative Moscow route. Instead, that went to easyJet and he was forced to settle for loss-making routes to Scotland. ‘To Branson’s misfortune,’ Bower writes, ‘the regulators were weary of the special pleading from a company that had confessed to its involvement in a cartel.’
Sometimes, Branson gives the impression of being tone-deaf. Part of the reason he failed in Formula One was that his arrival in the sport coincided with an attempt by the big boys, like Ferrari, to break away from Max Mosley, the FIA regulator who was trying to impose a pay cap on high-spending teams in order to make races more competitive. Branson, an instinctive troublemaker, initially sided with the breakaway, on the assumption that his place in any contest was with the rebels. What he failed to notice was how much he needed Mosley to get his way, since by F1 standards Branson was far from rich. He couldn’t compete without help. The sport’s ultimate ringmaster was Bernie Ecclestone, who was quite happy to let big money do the talking. He had contempt for Branson and what he called his ‘nickel-and-dime’ operation. ‘Shit or get off the pot,’ he told Branson, who had begun to notice he was out of his league and was pleading for a spending cap. ‘Formula One was everything he loved,’ Bower says. ‘Speed, risk, glamour, beautiful women, parties – an extraordinary business enriching many people. He wanted to share the cake. How he hated raw competition. There was no place for an underdog punching above his weight.’ In a pleasing irony, he suffered a similar fate when he tried to muscle in on the Russian market, where he spotted the fortunes to be made in its oil-driven economy. He hoped to find partners for his telecom and internet businesses, as well as looking for new routes for his airlines. He pitched himself as the fearless outsider who would cut through the tariff jungle and complex bureaucracy that was holding Russian business back. Bower has a dry line on all this:
His script was identical in every country but, surprisingly perhaps, he attacked the oligarchs, his putative partners. ‘Having a large boat,’ he said, ‘isn’t going to give you a lot of satisfaction and it gives capitalism a bad name.’ Branson believed that owning private islands and a fleet of planes distinguished him from the oligarch’s gin palaces. Virgin made no progress in Moscow.
The looking-glass version doesn’t work in the home of the game.
Despite his tin ear for many business environments and his habit of speaking without thinking (on the assumption that words are cheap), Branson’s methods have often worked. He may not be as rich as he says he is, but he is still a lot richer than almost everyone else. How has he done it? In business terms, Branson likes to present himself as a child of the late 1960s, which was when he started out, achieving his first success as a long-haired, public-school dropout selling cheap records from his store in Oxford Street, before he signed up the unknown Mike Oldfield and built a record label on the astonishing success of Oldfield’s first album, Tubular Bells. In his own mind he is a creative free spirit, and that seems to be how much of the British press and public sees him too. But in reality, he and his wealth are a product of the late 1970s: his business model depends on a series of developments that only got going near the end of that decade.
The first is the slow demise of the trade-union movement. Branson talks about looking after his workers and no doubt being a part of the Virgin empire has its perks. But he has a deep antipathy towards unions and does everything in his power to dissuade his employees from joining them. In 2009, when his airline was losing money, Branson cut its workforce by 15 per cent. The working conditions for those who remained were not good, despite Branson’s repeated protestations that the test of any business is the way it treats its employees. In 2011, Virgin America’s flight attendants attempted to join the Transport Workers Union. The union’s director complained of Virgin Atlantic’s employment practices, saying that ‘promises regarding rest, vacation and benefits are often broken, and discipline for minor violations can be unnecessarily harsh and inconsistently applied.’ Branson was appalled, not by the accusations, but by the thought of the union muscling in on his territory. He resorted to his traditional strategy of accusing the TWU of being an outmoded and inefficient monopoly. He told his staff that joining would take their ‘independent spirit and uniqueness away’. ‘Say “no” to the old way of flying,’ he told them, ‘and say “no” to the TWU.’ He won a tight ballot and his business remained non-unionised.
In the absence of robust trade-union representation, Branson is much freer to strike deals at the top table of government and finance. He is able to spin his magic without having to worry too much what the people at the bottom think. One of the consequences of the demise of labour power has been that personal contact among the rich and powerful carries more clout. This is connected to the second trend that has worked in Branson’s favour: the progressive deregulation of finance and business since the late 1970s. There are still plenty of regulators, of course, often with increasingly complex and demanding responsibilities. But without the heavy artillery of robust social democratic states behind them, they have been put on the back foot. The new generation of regulators has turned out to be surprisingly easy to flatter and perhaps not so surprisingly easy to bully. Branson is skilled at both.
The third trend that has worked in Branson’s favour is the rise of offshore banking and its associated tax havens. In 1971, when he was getting going in the music business, Branson was caught evading purchase tax in the UK. Since then he has been very careful about when he pays tax and to whom. He owns property in a wide variety of locations, though his primary base is his ‘holiday’ home on the island of Necker. His wish to avoid being taxed by the British government means he cannot spend more than ninety days a year in the UK. Given his peripatetic movements few other governments can lay a hand on him either. His businesses are registered under complex schemes across a range of different jurisdictions, including the Virgin Islands, where the holding company for Virgin Trains (very much a UK business) happens to be based. Branson has spent forty years denying he is a tax avoider and for the most part his reputation as a carefree spirit, partying his way around the globe, has trumped the idea that he is just another cautious plutocrat squirrelling away his wealth.
As always, he has been keen to point the finger at others whenever he has had the chance. When public anger was on the rise against the big tech corporations like Amazon and Google for their tax-avoidance tactics, he tut-tutted along with the crowd: ‘If companies are trading in the UK, they definitely should be paying UK income tax. If they’re trading overseas, then they’d be foolish to pay UK income tax. People should just play by the rules that are set up.’ The fact is that Branson would not have been able to build the business empire he has today if the rules that applied when he was starting out in the 1960s were still in force. It has become much easier to shuffle money around the globe and then spin a line in order to justify it. In October 2013 Branson did finally admit that he was a tax exile of sorts, though he insisted it was simply an accident of circumstance. He was stuck out in Necker, he said, ‘for health reasons’. Moreover, he was not liable to British taxes because the bulk of his time was spent on charity work. A surprising number of people seemed to take this at face value.
What holds all this scheming and posturing together is the Virgin brand, which is the primary commodity Branson is selling. He works tirelessly to defend the Virgin name while simultaneously hawking it around to anyone who might be interested. There is something puzzling about this. We have got used to thinking of successful brands as requiring kid-glove protection in case some foolish mistake or momentary indiscretion should tarnish them. Consumer confidence, so the mantra goes, takes a long time to acquire but can be lost in a flash. Virgin doesn’t work like that. Its name has been attached to so many hare-brained schemes and so often associated with business failures that there hardly seems anything left to protect. Virgin Brides, Virgin Cars, Virgin Cola, Virgin Cosmetics, Virgin Digital Publishing, Virgin Fuels, Virgin Health, Virgin Net, Virgin Nigeria, Virgin Racing, Virgin Wines: you’d be hard-pressed to find many consumers who feel positively about any of these. Yet still the brand retains its magic. Branson seems to have arrived at a new formula for extracting value from a name. When he is looking for new partners to inject capital into his businesses, whether from government or the private sector, he tells them that his exposure comes from ‘risking the invaluable Virgin name’. They put in their money; he puts in his reputation. This has proved a surprisingly effective way of raising funds cheaply (Branson is often reluctant to contribute anything to a deal beyond the company name). Bower goes through a litany of business deals gone sour from which Branson emerges intact while his former partners get burned, and occasionally ruined. It seems that the people with money and power are so insulated from ordinary consumers that they take it on trust that the Virgin name is irresistible. Meanwhile, real consumers get the message that people with money and power are willing to back Branson, so he must have something going for him. A complete charlatan would hardly be trusted with an airline, a train franchise and now even a bank (Branson’s bid for Northern Rock was eventually successful, despite Vince Cable’s efforts to portray him as a man wholly unsuited to looking after other people’s money). It is, in its way, a brilliant smoke-and-mirrors operation, driven by the undeniable charm of the man himself, along with his occasionally breathtaking shamelessness. The rich believe he is beloved of the poor; the poor believe he is beloved of the rich. Virgin does nicely out of the confusion that results.
Bower’s telling of this tale isn’t pretty but it is effective. He covers the ground in bludgeoning, workmanlike prose, following Branson as he hops from project to project and territory to territory, spinning his inimitable magic while every now and then peering into the precipice of utter ruin. Branson’s line on Bower is that he got lucky a while back exposing the monstrous Robert Maxwell and is now trying the same trick on other prominent figures in the hope that lightning will strike twice. But Bower doesn’t portray Branson as another Maxwell. He never suggests he is a crook and he is almost admiring of the skill with which he works the increasingly intermeshed worlds of celebrity, politics and finance. He is in no doubt that Branson has been a ‘remarkable success’. It’s just not the sort of success that fits with the image of a trailblazer, an innovator and a creative spirit. Two stories from the many Bower tells are emblematic of the mismatch.
Both concern high-speed travel, one prosaic, the other fantastical. The mundane saga is the complicated and grindingly bureaucratic tale of how Branson held on to his rail franchise in 2012, despite the decision of officials at the Department of Transport to award it to a rival contractor, FirstGroup, which outbid Virgin in hard cash. Rail has been very good to Branson, in terms both of the profits accrued and the publicity he has milked from it as the man modernising a decrepit system. (He has traded on this publicity around the globe: his bid to build a $2.6 billion high-speed rail link between Orlando and Tampa was based on his self-proclaimed reputation as the man who rescued Britain’s railways; when he pitched for rail business in India he said: ‘I have the experience to upgrade a crumbling network. In Britain we took over a dilapidated part of the network about 15 years ago and transformed it.’) As Bower writes, ‘Branson’s self-portrayal as the good guy risking his personal fortune to modernise Britain’s railways was galling to officials who, since 2010, had cursed Virgin Trains for effectively negotiating a licence to print money.’ But when they tried to take that licence away from him they found themselves overmatched. Branson immediately went on the attack, protesting with mounting outrage that FirstGroup was another protection racket. His rivals, he squealed, had bamboozled the bureaucrats with inflated figures and empty promises that served as cover for their blatant profiteering. In breach of the rules binding all parties to keep the details of the bids confidential he wrote open letters to David Cameron complaining about his mistreatment. ‘I’m not in it for the money,’ he told a Commons select committee that was, at his request, investigating the bidding process. ‘The profit motive is not that important to me. I am lucky. I can afford breakfast, lunch and dinner the rest of my life.’ Awarding the franchise to FirstGroup was ‘completely ridiculous’ because ‘FirstGroup’s bid is absolutely preposterous. It is taking the system for a ride.’ At the same time, Branson’s people were taking advantage of their inside knowledge of the way the Department of Transport works to probe for flaws in the way the process was handled. Branson, as he always did in such circumstances, demanded a judicial review. As it prepared to defend itself against this legal challenge, the government discovered that the process had indeed been flawed. Inexperienced officials had underestimated the size of the cash guarantee FirstGroup needed to underpin its anticipated revenues and had then covered up their mistake. Branson was triumphant. His victory had nothing to do with innovation or providing a better service than his rivals. It was all about graft and an eye for the telling weakness. But Branson presented it as a vindication of the Virgin way. Virgin, he said, is not about size or revenue streams, ‘it’s an attitude and a way of life.’ The company ‘embraces life and seeks to give the customers something new’.
The other story concerns something that really is new. Since 1999 Branson has been pioneering the idea of commercial space travel under the auspices of his Virgin Galactic business. He has been taking deposits from would-be civilian astronauts for more than a decade, many of them paying up to $200,000 to secure seats on a flight into orbit. He promised these eager punters that takeoff would happen in 2007, then 2010, then 2012, then 2013; now we are told the first flight will take place sometime later this year or early next. The project is based in the New Mexico desert, in part because Branson was able to extract subsidies of more than $200 million from the state governor, Bill Richardson, who seems to have been dazzled by the Branson name. The ostensible reason for the delays has been a series of technological and practical setbacks, the worst of which occurred in 2007 when an exploding fuel tank killed three engineers working on the project. Critics complain that Virgin Galactic’s technology, far from being groundbreaking, is hopelessly out of date, and what is being proposed (a short flight above the atmosphere with a brief bout of weightlessness) is nothing that couldn’t have been attempted in 1945. Branson talks about the project as though it were something else entirely. In 2005 he told an audience that included Donald Trump (which may have sent him into overdrive): ‘My aeronautical engineers are designing a Virgin hotel to be built on the moon, or perhaps orbit around it, with glass-encased sleeping areas. You could be making love in these see-through domes and looking at Earth.’ Since then the rhetoric has been damped down a notch or two. Now the focus tends to be on the celebrities who have signed up for a trip: Brad Pitt, Ashton Kutcher, Justin Bieber all want to go into space on a Virgin craft. Branson’s children, Holly and Sam, will be on the first flight, to be screened live on NBC, which is already describing this future broadcast as something that ‘will go down in history as one of the most memorable events of television’. Maybe so, especially if something goes wrong.
Bower clearly thinks the whole thing is a vast and empty stunt, designed to draw attention away from the struggling parts of Branson’s empire, including his airline businesses. Yet it’s hard to see how nothing can keep happening indefinitely. Something will have to take off if the deposits aren’t to be returned. And Branson is surely right that at some point space travel, like everything else, will be commercialised. Not that he puts it like that. His pitch has long been that this is part of his commitment to environmental causes and that as the owner of an airline he knows that alternative means of transportation must be found. ‘With the end of the oil era approaching and climate change progressing faster than most models predict,’ he said in 2008, ‘the utilisation of space is essential to the logistics of our survival.’ In fact, this was one of Branson’s biggest strategic mistakes, since he invested heavily in alternative fuels in the belief that ‘peak oil’ had arrived, just before the dawn of the fracking revolution that saw oil prices fall and the bottom drop out of the ethanol business. ‘There’s too much sugar in the world – let’s put some of it in our planes,’ he once said, in perhaps the perfect encapsulation of his taste for blending self-interest with absurd grandiosity. It is easy to mock Branson’s environmentalism, which sounds like so much hot air. One reason some experts don’t trust his space venture is that he wants to keep it carbon neutral (a preference for experimenting with cheap but unreliable fuels – in this case nitrous oxide – probably contributed to the fatal explosion in 2007). But there is a limit to how far bluster can take you. In the end, it can’t propel you into space. Either Branson’s spacecraft will launch successfully or it won’t: there’s no halfway house when it comes to air travel. It is not a business for the faint-hearted. Whatever you think of him, it’s hard not to be curious about what happens next.