Interview: Alan Sugar - "I've made loads of mistakes, trust me"

Lord Sugar and Evan Davis from Dragons' Den clash over greedy bankers – and why Whitehall must buy British to get us out of the slump

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Interview: Alan Sugar - "I've made loads of mistakes, trust me"
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Evan Davis: So, The Apprentice series seven. Both our programmes have their critics, don't they? The argument goes that they present a brutality in business that is not realistic; people are nicer than the "I'm out" and "You're fired" culture…

Lord Sugar:
We have to accept that in order to produce a programme that is interesting, there has to be a certain amount of drama. What really sickens me is when journalists talk to other leaders in industry and ask them, "Do you ever watch The Apprentice, Mr Chief Executive of Large Supermarket/Large Fashion Store?" and they say, "It's rubbish. If I did things like that I'd be fired! It's not real business, blah blah blah…"

Those comments are really, "Why didn't the BBC ask me to do The Apprentice?" Because yes, that is my style you see on TV. I'm not an actor, that's the way I do business. And the point I would make is that if you look into my companies you will find people who have worked for me for years - there is one bloke who has worked for me for 44 years.

But this is what I'm saying. You're not that bad. So the question is, whether you have let yourself become a kind of two-dimensional caricature of your real personality.

That's down to the editing really, isn't it? Everybody knows that the boardroom sessions last for far longer than the 15 minutes shown on TV. So, what I would call the soft or sensitive side of me ends up on the cutting-room floor. It doesn't put bums on seats.

No one would dispute that it has to be entertaining in order to have impact, but you would at least agree, that there are other ways of doing business in which people make mistakes, and you give them another chance, and you encourage people as well…

Have you ever watched The Apprentice? I know it bothers you quite a lot that you haven't won an award yet and we keep winning them all, but that shouldn't preclude you from watching it! If you look across the course of the 12 weeks, people who have made mistakes survive, learn and go on, and in some cases win.

The prize is different this time, isn't it?

Yes. Basically, I've changed the format so the winner enters into a business of their choice with me on a 50:50 basis. I'll inject £150,000 to kick-start it.

Will it change who you fire each week? A good employee could be very different from a good entrepreneur.

It's all down to how you select the candidates first of all. They have to be the right calibre. I wanted to send a message out to the young and enthusiastic, or any person aspiring to be in business, to get away from the "expectancy culture" that exists at the moment. The young kid who invented Facebook - an anomaly. The guys who came up with Google? An anomaly.

Unfortunately, a lot of people think that life's all about getting some venture capital funding, £10 million, £20 million, £30 million, they want to leapfrog the real way.

You mean the hard work at the beginning?

The hard work at the beginning. Successful businessmen and women of this world started from the bottom. So, every single task in The Apprentice this series can be achieved by an individual. There's no fascinating big investor or anything like that.

It's Monday morning, 9am, and here's £250. This is what you've got to do. Get out in your white van, come back and show me that in the course of the week you have made £1,500. And what I say to the winning team is that they have demonstrated exactly what I'm always banging on about - you don't need to go begging to the banks.

There are other business models out there. You might have a brilliant idea but no capital, or you need a little bit of start-up money. You'd need the money for the white van…

Where I come from, you start businesses in the way I am talking about. Your "dragonettes" all did it the same way. No one wrote them a cheque for £10 million.

What influence do you think programmes such as Dragons' Den and The Apprentice have had on our entrepreneurial culture?

Dragons' Den is very inspiring and I think the BBC, with our programme and yours, do a great job in promoting an entrepreneurial spirit. And making it entertaining at the same time.

Let's talk about business nightmares…

I've made loads of mistakes, trust me - it's just that they have not been that popularised. I've made products that bombed.

What has been your worst mistake?

My big mistake was not recognising that the early successes were not representative of the way markets normally go.

When you make a word processor [Amstrad introduced their first mass-market home computer in 1984] and bring it into the market place, and you look at the statistics and the market says only 20,000 a year of these things are selling, and suddenly you start selling 25,000 a month, and you sell 300,000 pieces in a year, you go on to believe that every single product you sell is going to do the same.

When I brought out my equivalent of the iPad [the Amstrad PenPad, launched in 1993], we manufactured 200,000 of them straight away - but the market was about 1,000. So that was it, get rid of it. Are we going to develop the next model? No. Ditch it. Out. That was a mistake. And look what happened? Apple, BlackBerry…

What about the product considered your biggest failure, the Amstrad E-m@iler (a digital home telephone with email access)?

I think the mistake was that it was slightly too late - we're going back maybe ten years or more. The explosion of the broadband market meant the demise of that product. We sold 450,000 but we subsidised them because I wanted to get into a business where I was no longer on the treadmill of expecting to make a profit on hardware.

There was a cost each time a person sent an email and that was where our revenues were coming from. But they are still out there - I think there are 150,000 people still using them and I think someone told me Amstrad now has broken even and we have actually recovered all the costs.

Hooray! Ten years on!

Ah, so it does work, you see! It does work! It's a bit like the current Government's policy of how they forecast in 2025 or 2045 the deficit will be gone. It's just slowly, slowly.

Are you optimistic or pessimistic about the British economy? We know it's going to be difficult for the next couple of years, but what about the next five years?

We got into this mess because of greed started by our American cousins. It was total, absolute madness. Greed and madness. I'm annoyed that our stiff-collar, traditional banks, which we saw as the Rock of Gibraltar, the rock of England - Lloyds, Barclays, NatWest - forgot their basic principles. There's a lesson to learn - don't detract from your basic principles. They went out and played - and they shouldn't have played.

Obviously the deficit has been a big priority. It's the debate in economic policy at the moment. Do we pull that band-aid off the wound in one very, very painful go, or do we peel it off more slowly?

I went through some bad times back in 1989/90, when we had too much inventory, too much stock and we owed the banks too much. That was something like the current financial crisis. I was able to be mercenary and say, "That's it. Cuts."

Regretfully, we had to close down places, shut down things abroad, reduce inventory and reduce overheads and I turned the whole thing round. I'm realistic - cut, do it, get out of it.

It is a bit difficult to apply that same thing as far as the country is concerned. It is blatantly obvious that they employ God knows how many million civil servants, and if you spent the time that I spent in Whitehall, you do have to ask yourself sometimes what half of them are doing.

When I compare it to my commercial organisation, we have people who multi-task, and if you applied that multitasking philosophy within the civil service you would cut the labour force by half, but then…

By half ?

Oh yes. Easy. The problem with that is that it's out of the frying pan into the fire. Making that cut and hypothetically disposing of those people would mean large redundancy payments – and on top of that, many of them would go onto benefits. So I don't know. It's difficult. I know what I would do in government.

What would you do?

What I would say is, "Look. We've got to cut some costs." I would start first of all by accepting that the government is the biggest customer in this country. It spends God knows how many billions every year on everything from staples to nuclear missiles. They are the big punter. When you look at those in charge of procurement, with the greatest respect to them, they are not very streetwise.

I would have the balls to take [ex-Tesco CEO] Terry Leahy or [former M&S boss] Stuart Rose and say, "I'll pay you £3 million a year of taxpayers' money and you bring in another team beneath you of another 100 people and pay them £150,000 a year." Nice headline for the Daily Mail: poor people on the dole up in Newcastle and Terry Leahy getting £3 million.

But here's the point, that little team could save £1 billion a year. Now, that is common business sense. Buying from the same people we are buying them from now, just doing better deals. If you look at Philip Green's Efficiency Review, he uncovered things like one department paying £73 for a box of paper that you can go into a shop and pay £8 for.

Why aren't you putting your CV to the coalition? Because you sound like you are speaking their language completely.

The problem is I'm a Labour boy. I was born in Hackney. They would love me to be on their side - but they don't like me at all.

Not applying for a job over there, then.

No.

You have recently become a non-executive shareholder of YouView - a set-top box that will essentially integrate the television and the internet…

You get everything you've got on Freeview, plus you connect it to the internet and streaming channels can come in. But the biggest thing is that you've got a seven-day go-back, so you can be sitting in front of this thing with your remote control, watching TV then you go into iPlayer, go down the menu, find The Apprentice that you missed two days ago and play, very simple.

I seem to remember that this was going to be in the shops in 2010.

That's not my problem. I've only been in position for two weeks! It's another challenge and it's another great product that is going to go down in the history of electronics. And the reason I'm excited about it is that I've spent more than 40 years in this business. If I don't know what motivates and turns consumers on then I should give up and go away.


Will we see it in the shops this year?

I know I'm a miracle man, but…it'll be next year.

Here's a question. When you look back at how much money you've made over your career, what proportion has been made by real business and what proportion has been made by having property at the right time in the right place?

Oh, 90 per cent from real business. Property is boring.

That much? You do a bit of property speculation, don't you?

Not speculation. What I do is I don't trust anybody else with my money. I don't give my money to some fund manager p***k who, if he knew what he was doing, would have his own private jet and his own yacht in the south of France, right?

And I learnt a very good lesson early in life. When I first floated my company back in 1981 and I had £2 million in my hand, I gave some feller from Nomura bank £200,000 because he's the genius and he was going to play with it. He blew the lot. Great lesson.

You saved yourself a lot of money with that £200,000.

I say to youngsters, "Yes, go and visit a casino by all means. What I want you to do is lose - and you'll never go back. The worst thing to do is win." And you never go back.

So, from that day on, I said, "My business is about gambling. Gambling on products, ideas, innovation. Make a load of money doing that, but once I have made that money I need to stick it into something boring, like buying up half of Bond Street because that is never going to go wrong."

And you reckon most of your money has come out of real business? Because your profits on Amstrad were like a few million a year, weren't they?

About £160 million a year, I think. Back in 1986, that company was worth £1.2 billion. That's when I sold a load of shares, and then we went on to make petty amounts like £20 million, £25 million in the last ten years. I know it's just small fry for people like you. Then of course I sold the company, which I own, to BSkyB for another £135 million, and I also sold Dancall Telecom that I bought for £6 million for another £90 million.

Do you think we need to start manufacturing more in the UK? There has been a lot of talk about the need to rebalance towards exports…

Yes, I do. I've been saying that in the House of Lords, but it has fallen on deaf ears. Why can't we have a "Buy British" culture here? Even Gordon Brown never agreed with me on that - he had this globalisation thing in his head.

But what annoys me tremendously is things like these contracts that are dished out for, say, wind farms. We as Britain get about 11 per cent of the business for making that stuff. The rest is some Danish or German or Japanese firm - it's a joke.

They can do it cheaper?

No, no - it's nothing to do with cheaper. And even if it was cheaper, it's nothing to do with cheaper. The fact of the matter is, apart from the turbine itself, the rest is metal-bashing. We've got metal works and shipyards up in the North East of England which are being mothballed.

By all means, if Siemens or someone is much more ahead on technology, what you say to them is, "Yes, you've got the £500 million deal to do that, but here's the bad news: all the material you are going to need to do that is going to be made in England and you have to set up a factory and build a dock here."

Not ship the bloody thing over from Germany. Do it here. We've got workers up in the North East who could make all that metalwork with their eyes closed.

Let's face it, we haven't had that kind of economic nationalism in this country for quite a while now.

Why not? We need it. You walk around every single office in Whitehall and the place is littered with Siemens Nixdorf computers, right? Now, I've got a small computer company in this country. We tender for that business. We employ 250 people.

I tell the minister, "Give me an order for half a million computers and I've got to employ 1,000 people." Why can't they, say, give a British computer company a bit of business? We're not the only one, there are a few of us around. We need a bit of nationalism. The French have got it built in them. It's in their stomach.

You walk around France and they all drive Citroens, Renaults and Peugeots.

Yes, and you walk around the government offices there and you see computers and equipment made by companies you have never heard of: Sagem, Alcatel…

Oh, come on! You don't want a computer company that only exists because it sells its computers to its own government.

Why not? Do you want me to employ 1,500 people or 250 people?

I want you to employ 1,500 people in something that can have a durable, sustainable advantage, something you are not only going to sell to the taxpayer, but to someone else's taxpayers.

You get something called economy of scale. When you've got economy of scale, your prices are lower, you can invest more in research and development and then you can get into business properly. It's as simple as that. But it's falling on deaf ears.

How are you enjoying the Lords? You're a Lord, a politician, a Labour peer…

I think it's a great honour to be a member of the House of Lords. There are some very knowledgeable people in there, be under no illusion. I think of myself as the people's peer, because it needs a rough diamond like me in there to ruffle a few feathers. When you sit and listen to some of the debates, the content of the speeches is very high-level overview material. I tend to be more detailed.


Down to earth.

Practical detail rather than the more general overview stuff. And you can tell…no-one falls asleep when I'm speaking!