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In this episode of all about business, James Reed is joined by Luke Johnson, the serial entrepreneur who spotted some of the UK’s most popular food brands, including Pizza Express, The Ivy and Gail’s Bakery.
They discuss how to spot a winning investment, what the UK should be doing to promote entrepreneurship, and Luke’s five tips for reviving the economy.
About Luke
Luke Johnson is an entrepreneur known for expanding the Pizza Express brand. He also founded Signature Restaurants, which owned notable restaurants including, The Ivy, and Le Caprice. Luke is currently Chairman of Risk Capital Partners, a private equity firm. From 2015-2021 he wrote a regular column for The Sunday Times where he shared his business expertise.
02:11 who is Luke Johnson?
06:36 the traits entrepreneurs need to have
07:23 Pizza Express beginnings
11:36 being a projector
13:40 the British business climate
23:19 Risk Capital Partners
26:03 Gail's Bakery
27:33 Luke's business formula
31:56 how we can encourage entrepreneurship in the UK
36:09 Luke's book and weekly column for entrepreneurs
40:56 television and the arts
46:04 future projects with Risk Capital Partners
49:05 Reed interview round
Get Luke’s book: https://www.amazon.co.uk/Start-Up-Running-Business-Easier/dp/0670920479
Visit Luke’s personal website: https://lukejohnson.org/
Check out Risk Capital Partners: https://riskcapitalpartners.co.uk/
Follow Luke on LinkedIn: https://www.linkedin.com/in/luke-johnson-07a845b0/
Follow James Reed on LinkedIn: https://www.linkedin.com/in/chairmanjames/
V08 - Luke Johnson - AUDIO PODCAST
James: [00:00:00] Welcome to All About Business with me, James Reed, the podcast that covers everything about business management and leadership. Every episode I sit down with different guests of bootstrap companies, masterminded investment models, or built a business empire. They're leaders in their field and they're here to give you top insights and actionable advice so that you can apply their ideas to your own career or business venture.
Luke: Today's guest is Luke Johnson, a serial entrepreneur who's led the expansion of some of the UK's most popular food brands, including Pizza Express and Gail's Bakery. I thought it'd be interesting to start with your sort of foundation story. How did you become an entrepreneur? What flicked the switch that made you set out in that direction?
Luke (2): It wasn't part of a master plan at all. I went to university to study medicine and I was all set to be a medic, and I discovered business by accident because I was, uh, hosting parties in my college and the gentleman in charge of [00:01:00] discipline there said if I carried on making a noise, et cetera, they'd kick me out.
So my. A friend and I located a local nightclub who was shut on a Monday evening. And, uh, we persuaded them to open for us and our friends every Monday evening. And we hosted this club, which we called the Era Club. And in theory, we were meant to do a different era each week. So one night we'd have a Bowie night, the next night we'd have the next Monday, we'd have a Motown night, et cetera.
And there was a defining moment for me. Uh, we'd. This is obviously pre-internet and so forth. We had done loads of work publicizing it by sort of putting stickers up and posters and word of mouth. And I arrived about half an hour on the first Monday evening before we were due to open our doors, and it was already a queue of people outside.
And I think I can honestly say that I knew in that moment this was the most exciting thing I'd ever done. And I wanted to do more of it, and the whole idea that it was really just parties, you know, frankly, we wanted to meet girls. It wasn't about making money or business at all. It turned into a business because we agreed to take money on the [00:02:00] door and keep it.
And the nightclub took the bar money. And, uh, it was a success and we went on to do it in two other university cities and did one, one summer in Hollywood. And, uh, it changed my life.
Luke: Have you ever
Luke (2): thanked that
Luke: gentleman in charge of discipline for sort of encouraging you outside? Yes, Dr. Ralph Walker, it's straight.
Some people have a pivotal I know Yes. Effect on our lives. Yes. By accident. Very much By accident, yeah. Yeah. There's a story I read that you went to visit Richard Branson on his houseboat. Yeah, my friend. So tell me about that. That sounded interesting. My friend
Luke (2): came up with the idea actually that we should go and interview this bloke who in 1980, I think it was, wasn't very well known, relatively speaking, the bloke being Richard Branson, right?
Uh, not certain. And he seemed to have his all in the, he was running a very successful, fun business. He seemed to be leading a very glamorous life. So this was Virgin Records? Yes. When you
Luke: were doing your nightclub.
Luke (2): Yes. So sort of aligned to you what you And he wasn't that much older than us and what he was doing looked [00:03:00] to me incredible fun in a way.
It was inspirational and uh, I think seeing role models like that, or just knowing about them and their life stories, I think for wouldbe entrepreneurs is very important. I remember meeting an expert on entrepreneurship once who said the single most important. Influence he felt in terms of breathing.
More entrepreneurs in the society is at the kitchen table. If you grow up in a house where either of your parents or both, or friends of theirs, or relatives, siblings, whoever are running their own business, then this will encourage you to think in terms of seeking that freedom and independence you get by being your own boss and seeing self-employment as a completely valid.
Alternative to just getting a job, which is what most people think about when they leave school or university. You know, who am I gonna work for? Yes. Instead of thinking like that, you think in terms of, I'm gonna work for myself. Was your home environment
Luke: like that?
Luke (2): Well, it was to an extent in that, although, uh, my father didn't employ anyone.
He [00:04:00] was for most of my life, self-employed. He was a writer and journalist, freelance. And I think he realized, you know, probably in his thirties or forties, perhaps early forties, that he wasn't suited to having a boss and he wanted the flexibility and, uh, the luxury, but also was, had the stamina and the self-discipline to be self-employed.
I was talking to someone earlier who works themselves, who was saying they were chronically ill last week, but of course you can't afford to be ill if you work for yourself. That's one of the downsides of being self-employed. You don't get sick pay, but on the other hand, you get the fulfillment of controlling your own destiny to a degree and building your own world, which is I think, what entrepreneurs do.
You used the word
Luke: stamina and self-discipline? I mean, is that something that's sort of. Possible to develop? Or is it something that's intrinsic in your view? I mean, where's that come from?
Luke (2): Well, I think good health you can cultivate through exercise and, you know, leading a healthy lifestyle. But if you are unfortunately, unlucky [00:05:00] enough to get ill, which you know, obviously affects some people, uh uh uh, that makes it much harder.
I think willpower and self-control is paramount. I don't think, just in terms of being your own boss, I think in terms of how successful your life is likely to be. I look at those people who've achieved things and those who have troubled lives, and the single defining characteristic that separates them more than anything, more than intelligence and many other personality traits is self-discipline.
Well, that's very useful to hear,
Luke: Luke. So your ERA nightclub obviously got going, you know, you are doing. Gigs in Hollywood and stuff. So pretty early on in your working life. And then as I understand it, I mean you fill in the details please, but you were not long after that. You bought into this company Pizza Express.
Luke (2): That's right. I mean, it was a while. I didn't do that. How long after
Luke: was it? Yeah,
Luke (2): uh, I suppose nine years. I graduated when I was 21 and I did Pizza Express with the same business partner.
Luke: The same guy you did here in
Luke (2): I country? Yes. Uh, when I was 30, we were both 30.
Luke: And had you been partners throughout that decade?
Yes. Yes. [00:06:00] So what had you done between here and Pete? Um, well,
Luke (2): we'd pursued slightly different but parallel paths, so he had never worked for anyone. Wow. I did work for various people. I became a stockbroking analyst for a few years in the city and things like this. It was about when I was 27, I think I gave up working for the other people.
Yeah. And, but I was freelancing because my partner. Then partner Hugh and I were running various businesses, which were initially at least offshoots of our nightclubs from Oxford days. And then we broadened out and we, um, got involved in some pubs and various other different businesses. But Pizza Express was the.
Turning point through luck and we managed to, um, with partners take control of that business. And we took it public. It worked incredibly well, and our timing was very fortuitous and that gave me the platform to do other things.
Luke: As I understand it, when you bought into Pizza Express, it had 12 restaurants, and from what I've read, it went to 200 or something.
It owned
Luke (2): 12. It had about 40 franchises, right? Over time, we bought in all the franchises. So the entire [00:07:00] chain became company owned. Right? Well, it's grown in the many years since to, um, a hell of a lot more than 200. I think it has at least 600 now. But while I was involved through the nineties, we grew it to about 200.
Yes. What was it
Luke: about that company that you saw? What, why did you see that as an opportunity? What, I mean, 'cause you scaled that with spectacular success. Yes. I
Luke (2): mean, to be honest, what were you looking for? It was already there. Formula. Why make good pizzas? It wasn't just good pizzas. They were better than the competition.
A pizza restaurant is, in some respects, a very simple model. You have an oven, you don't do grilling or frying, so the kitchen is very simple compared to a lot of restaurants. Pizza is a universally popular product. It's quick to cook. The margins are good, the ingredients are. Generally pretty cheap. And the formula that Peter Bozo, the founder, had hit on in Pizza Express was a sort of high, low formula in the sense that the fundamental product itself was not an expensive product.
So it wasn't a fancy night out, but at the same time, pizza Express had marble tables. It had real flowers on the table. He played jazz music or classical music in the [00:08:00] background. It was classier than the then competition, which the two other main players were Pizza land and Deep Pound Pizza. Pizza Hut or so, and Pizza Hut.
Yeah, I remember. You know, they were closer to fast food, whereas Pizza Express was aspirational. We were more attractive, for example, to more educated people to come and work for us, which again helped. So, you know, we were popular with middle class customers always. As I say, I think we made a. A better, more authentic product in many respects.
But how
Luke: did you do that? What was it about the pizza? Because they were, they were better. I mean, I, well, I, I'm, as I say, they had so many meals in Peter Express, and I agree with everything you've said, but what was it about the pizza?
Luke (2): It was all there. It was all there. The ingredients were all there. It's simply that for various internal reasons, as much as any others, the business hadn't expanded as much as it might have.
And we are very fortunate in that. Early 1993 when we took control, the economy was on the up, suddenly come out of a recession. Yes. And so property was available, demand was there, and we had the right formula. I think [00:09:00] great business formulas are rare. You know, if you manage to get a hold of one or invent one, then you need to go for it and not.
Hang around. Great. Formulas are rare.
Luke: So yeah, I remember the Dobles really good. I dunno who thought of them with genius. And, and, and you also had those really nice vanilla ice cream with chocolate sauce. So lots of sort of add-ons around the edge that tempted customers spend a bit more money. Yeah, and I
Luke (2): think Peter was a brilliant in that he didn't diversify or get carried away.
It was founded in 1965 when I was only three. He'd taken decades to perfect the business, and all it needed was executing more. You know, the whole country was waiting for this proposition and we were happy to give it to them. And you rolled it out.
Luke: You've described yourself as a projector, mean the, the word entrepreneur is well known to us, but the word projectors less common.
But, um, could you tell me what that is? Because I think it's quite useful to explain all the things you've done subsequently.
Luke (2): Well, I think projector derived from something like the 18th century, and it's an English word that I guess means what we now think of as an [00:10:00] entrepreneur. And I suppose it's a man or woman who deals in projects and they start things, they make things happen.
Fundamentally, every business that's ever been invented. Indeed, arguably every organization had a founder or founders who started the thing who created it. And these initiators are the bedrock of any civilization. They are not just the wealth creators, but they're the inventors. They're the experimenters, they're the risk takers.
And without those vital people who have the ambition and the hunger and the uh, get up and go. The ideas and the persuasive abilities to live out their dreams and create new products and services and, and, you know, nonprofits and charities and other forms of ventures, projects, they are utterly paramount in the success of any society to rely on government or to expect inventions and innovations to happen by themselves.
He's foolish in the extreme, and I think one of the more [00:11:00] disappointing aspects of the. Economics profession is that these individuals who are the initiators of every form of business are more or less neglected. They're very rarely researched or written about, and when they do study them, I don't think economists get it right, generally speaking, and yet without them, there'd be nothing.
They are, you know, the core of society and any society that turns its back on the entrepreneurs by overtaxing them or overregulating them is, or, or failing to encourage them and indeed capital to come together. The men and women who make things happen, and then the money that allows them to make those things happen.
Societies that don't do that. Don't succeed, and, and you are a great
Luke: advocate for that. Um, the more projectors, the better. And I would agree with what you've just said. Where do you think we are at the moment in the UK and Britain as a society in terms of that
Luke (2): balance? Well, I think there are some very worrying statistics.
So for example, for the first time in modern history, the number of companies incorporated is falling [00:12:00] net, the number of startups. Is declining. I don't think that's happened for at least 15 years or longer. So these are new statistics. I haven't heard this before. Yeah, yeah. Uh, so there are fewer
Luke: companies now in the way last year.
Yeah. This
Luke (2): is not a thing that's been long running. This is in the last year or two. Right. And I think that is a very worrying sign. And it suggests that what they call the animal spirits are in decline. New ideas, new businesses that ultimately tend to create most of the jobs. And they also generate obviously, tax and exports.
Pay for the public services. And I do worry that there is a tendency now to crowd out the private sector IE the entrepreneurs and the wealth's creators with more and more public spending, higher taxes. And if you, uh, listen to, for example, the BBC, then you would think the entire economy is composed exclusively of the public sector.
There is nothing else, but in fact it's all paid for. By the private sector, and if you culturally neglect the private sector, if you demonize [00:13:00] wealth creation, if you burden those risk takers who put their house on the line and their entire career to follow a mad idea of some interesting new product or service, and you tax 'em too heavily.
If you tax capital too heavily and if you wrap it all up with red tape, then eventually you know the talent will go and the wealthy will leave and tax collection will fall and obviously job creation will decline and unemployment will go up and we will all be poorer. That is the inevitable outcome of the politics of envy.
And I do worry that, um, that's what we are seeing in action and that is, you know, very unhealthy. What would be your sort of
Luke: approach to sort of improving this ecosystem? You've mentioned a number of levers there, but if Luke Johnson was in charge, what would be the sort of top five things you'd do? The
Luke (2): very first thing I would do was completely scrap the 300 page employment [00:14:00] rights bill, which is in its final stages, which given the precarious.
Conditions of the UK economy is not what the job creators and the world's creators need. The very idea that small and medium sized businesses can afford big-ish HR departments to, uh, make sure that a boss and a company are following every rule and scrutinizing a 300 page new bill with all sorts of extra employee rights and other conditions on.
Creating a job, what it will mean is that fewer people want to start a business where they're creating jobs. People will outsource, they will automate, or they won't bother, and they won't bother growing either. You need to create the conditions that actually encourage growth and this government. Talk a good game about growth, but the reality of what they are doing, it's the opposite.
Unquestionably, this employment rights bill, and I've spoken at a select committee about it, will destroy [00:15:00] jobs and will inhibit job creation and will lead to the reverse that Angela Rayner and Stan and the rest of the government are proclaiming, is their principle objective. So that's number one. That's number one.
What else is on your list, Luke? I'm keen to hear the rest Well. I proven agree with them as regards planning reform. I think as a single area of law that holds growth back more than any other, I would go much further than I think they are suggesting, and I would do some sort of shorter term set of exemptions such that I would make.
Compared to the current, very heavily policed and very drawn out, a very expensive set of, uh, bureaucracy that surrounds property planning. I would make a window of a few years at most and say, we'll, fast track planning permissions. You've got to use the planning within a few years, or it will lapse and you can't just reapply and hope to get it straight back again.
So in other words, this planning [00:16:00] has to be used within, say this parliament, you've gotta start investing and building. I really agree with that.
Luke: There's a sort of derelict piece of land opposite my home that's been like that for five or six years. And the person's got planning vision, haven't done anything.
Luke (2): Yeah.
Luke: And so no jobs are being created. No work is being done. I think that should go to auction or something so that someone else can come along and have a go because they're just sitting there not doing anything.
Luke (2): Well, I've been involved with. Some building projects. I'm not, you know, a house builder or professional developer, but I've done enough to know that, you know, for a medium sized project, you may well have to prepare 20 different specialist reports, including reports about newts and bats and water and access and all the rest of it.
It, it means only larger developers and builders can often afford. To go through that drawn out, expensive bureaucratic process. It means that getting permission to build is possibly harder in this country than any comparable country. And I think that's a disaster for people who wanna own their own home, [00:17:00] but also for people who wanna move a business to wanna grow a business, start a business.
So space is too expensive and building construction in itself actually generates a lot of economic activity. And of course there are big challenges. For example, we lack, as you would know, all about the craft skills, the brick layers and electricians and carpenters and uh, and so forth, roofers to build millions of new homes.
And so we will also have to start training more people in those. Building skills, but I think, you know, you gotta start somewhere and unquestion me. I believe that if the planning regime, which is very destructive, were significantly liberated, then I think it would unleash a lot of investment and create a lot of employment.
And create hopefully a lot more homes so young people can get a proper stake in society.
Luke: Yes. Well, I agree. Do you have any other things on your list, Luke? Yes.
Luke (2): Uh, what would, what would be number three? Scrap net. Zero completely. [00:18:00] So that's quite controversial all together. So tell us why all together, why, yeah.
Because Britain now has the most expensive. Energy costs of any developed nation, it's utterly destroying our manufacturing. Virtually all serious manufacturing is what they call energy intensive with energy costs higher than anywhere else. Our energy costs, for example, on average, are about four or five times higher than they are in America.
Within five to 10 years, there will be no energy intensive manufacturing in this country. Already, we are seeing the very last of the Virgin Steel works closing. We've lost a huge chunk of our chemical industry. We don't make fertilizers. These are bedrocks of any advanced economy. And, uh, you know, it, it seemed more depressing that we initiated the industrial Revolution in this country and invented the manufacture process as a foundation of Virgin Steel.
And here we are thinking someone else can do it because it's too dirty and energy intensive. [00:19:00] Uh, and that's one of the fasts of this whole Net zero policy is that we're simply offshoring the activity to another country. So we are losing our industrial independence. We are offshoring jobs, but the idea that it's generating less carbon is a fantasy.
And anyhow, we have less than 1% of the world's carbon. And production in this country, whatever we do is gonna make no difference whatsoever. The idea that the world looks to us to be a green environmental leader is delusional. And I'm sorry to say, you know, this is a policy that's been in law for some years now, but this government are doubling down on it.
And it interestingly, some of the blue collar unions are seriously opposed to the net zero policies because they see the job destruction it involves, and they realize that the Great Green Revolution of creating thousands of thousand, each one of these jobs. Costs, it's estimated cost of a million pounds every [00:20:00] year to subsidize Well, the new green jobs we're talking about.
Yes, yes. The mass doesn't even begin to make sense. Virtually all the job production or or job creation involved in green technologies is taking place in China. So listening
Luke: to your list of three things I. I mean, I wouldn't put, I wouldn't bet a lot of money on those things happening anytime soon. Who knows?
Who knows? But I mean, the, the, the employ, a lot of people wouldn't bill going through net Zero's. Ed Milli Band seems to be doubling down on them. The, well, the planning might improve. You gotta hope isn't you that, I mean, look, two policies
Luke (2): in life, aren't they? You can either sort of give up. Mm. Walk away and, you know, defeatism or you can hope that things will get better.
And obviously the entrepreneurial mindset is you've gotta be optimistic, you've gotta think positive, and you've gotta believe that those in charge will come to their senses and realize that things like their energy policy are, are economic suicide, which they are. I I, I do think as it happens, for example, on net zero, more and more people, when they're facing [00:21:00] now these massively higher energy bills and are being told.
Of new technologies that they've gotta use to heat their homes and all the rest of it. And it's just, it's all stupid. And they're realizing that it's unaffordable and it's a, we're gonna be colder and poorer. And is that what people want to be virtue signalers?
Luke: No, they don't want that, I'm sure. No, no. So you are sticking with the entrepreneurial optimism here.
Well, I'm making a case strongly. That's where we are. So Luke, risk Capital Partners, that's your business. Tell me a little bit about that. What is
Luke (2): it? How does it work? Well, risk Capital Partners is really just. A brand. At one point I had a fund, so I managed money on behalf of institutions, but that ended some years ago.
And now basically I only deploy my own capital. I do co-invest with other people by general sounds of private equity, venture capital industries that, you know, I'm a tiny player. I tend to specialize in. UK consumer businesses, often areas like hospitality, leisure, entertainment, et cetera. Partly I think that's, 'cause [00:22:00] that's what I know and I've done in the past.
I can't pretend they're the easiest sectors, you know? I think probably software and things like that. I was wondering
Luke: about that. 'cause I mean, you've done hospitality for a long time. I mean, actually very successfully. Have you done software or you tried tech, or have you just decided that's not for you?
I've
Luke (2): almost never done tech. I guess I've done things that I thought were enjoyable in the heyday. For example, the nineties when Pizza Express was going, these were booming markets and the overall eating and drinking out market is a large market. In the UK it's a hundred billion a year. So it's not chicken feed, but uh, it's facing its challenges now.
You know, it's labor intensive, so things like the national living wage hike and national insurance increases are hitting the industry hard, obviously. Also, it's. Energy costs and property costs and other things. And it is, yeah, highly competitive. A lot more so than it used to be. So it's, you know, margins and returns are lower than they were.
Uh, but then again, that's true of lots of industries. Recruitment, for example, [00:23:00] isn't business. I have been involved in a bit tiny amount compared to you. You would probably agree it's a lot harder business than it was 30 years ago.
Luke: Yeah, it means it's a lot harder business than it was three years ago. Yeah, actually.
So no. But
Luke (2): surely that's the cycle rather than structural changes. Yeah, I think potentially, yeah. In hospitality, there've been serious structural changes that are meant right. Whereas I think you could have expected to make a return on capital of 35% and margins of 15% plus on revenue. Now could well be half that.
Luke: Right. How many investments would risk capital have live at any one time? Uh,
Luke (2): probably 10.
Luke: 10 the are material. So one of the ones I'm aware of that is substantially is obviously Gale's. Yes. There was some from when you were talking earlier about Pizza Express, there was some similarities in a way. On there you took an idea, there was seems to be quite well established and, and then grew it rapidly.
How many Gales are there now? 168. 168. And and was it just one when you started? Six. [00:24:00] Six. So quite similar. Yes. In that sense. So what is it? I mean, I went to Gale's for breakfast 'cause I thought, oh, glad he hear I, I knew I was meeting you Luke and had a nice cross. Alright. It was very good. And Portobello wrote lovely.
I can recommend it to our listeners, but yeah, so I, it was, I was sort of observing the concept. Lots of bakery.
Luke (2): Yes. Lots of choice. It's a hard and artisan bakery. Yes, you're right. We do have a lot of choice and we serve people all day. So from breakfast through Elevenses lunch, afternoon tea, and then. You know, an evening snack.
We don't serve alcohol and we shut generally at seven. We open mostly seven days a week from seven till seven, sometimes 7,
Luke: 7, 7.
Luke (2): Yeah. And you know, many branches open almost every single day of the year, and we are a neighborhood. Staple, but we think we are high quality and we are premium. And I think we try to be innovative.
We try to come up with new and fresh recipes and, you know, seasonal items. So is
Luke: there, is there something new you wanna tell us about that's coming soon or you've just
Luke (2): launched that? [00:25:00] Our mouths watering. Well, we're already, would you believe working on ideas for, I was hearing today a Christmas cake coming up this Christmas, right?
Because we have four launches a year of, and it's Easter. Just a reminder,
Luke: we're talking now. So, yeah.
Luke (2): Um, we, we have both sweet and savory items, obviously, and we have bread and we have coffee and other hot drinks. People like the idea of something new and different. And I think it's important to develop your own interpretations of dishes and, and drinks and so forth.
Yes. Uh, I mean, for example, we have this new popular Muscovado Coffee. Cold Coffee is proving very popular, especially amongst younger people. You know, as tastes change, you try and move with those. Changing tastes. You've got a formula here.
Luke: Mm-hmm. Once again. Mm-hmm. The, the sort of landed. Mm-hmm. And it is doing well.
What are you looking for in terms of demographics? The type of location?
Luke (2): Well, it's partly science, so we do actually have quite a sophisticated in-house. Developed program that looks for certain characteristics of a [00:26:00] neighborhood, what would they be? All sorts of things from, whether there's, uh, nice schools nearby to, uh, is there a transport hub nearby?
Is there a park nearby? What sort of homes are there nearby are there are sort of customers. And then obviously there is no substitute for the local walking the streets. Looking at whether, you know, you think it's suitable in terms of the car, and obviously it's also then about is there an available property?
Is it an interesting property? We like unusual buildings. We like classical period buildings often. And are the terms to rent that property? You know, appropriate. Can we agree a deal with the landlord? I suppose
Luke: again, rather like the early nineties, the property market's quite suppressed,
Luke (2): is it? In many respects, a lot of things are not moving in our favor.
You know, coffee prices are much higher than they were. Labor is obviously much higher in national insurance, uh, energy. But property is probably on our side. Yes, I would [00:27:00] say rents are, if anything, going down not rapidly, but they're certainly not inflating the way they were. Five, 10 years ago. This is a
Luke: consequence of all the other things you're just saying, right?
Yeah.
Luke (2): And we all know that the high streets of Britain are embattled and a lot of retailers are downsizing. A lot of banks and others are shutting, and we are a newcomer in many of the places we open, and a lot of landlords and council see us as part of the solution to create a vi, a vibrant. High Street, you're not having to face sort of planning appeals and things like that.
Uh, we would normally go to appeal because if we can't get planning first time round, then um, you know, we won't bother. I mean, we almost never build something from scratch, though we take on existing premises, right? They frequently don't have permission for what we want to do, which is baking and so forth.
But normally the sort of properties we pursue, there's very high likelihood of us getting permission. Sir, I
Luke: also
Luke (2): believe Luke.
Luke: Correct me if I'm wrong, that you are quite big in Brighton. Yeah. [00:28:00] So Brighton Pier, is that yours? Are you all It's part of
Luke (2): a group that I'm chair of and Parton. Yes. It's called Brighton Peer Group.
Right.
Luke: And then you have other businesses in Brighton? Yes, I've got one or two other interests. Brighton, what was also thinking around Brighton and why, why do you love Brighton? So it's, it's a city
Luke (2): I've loved. I've got a sort of great affection for it and um, its accessibility from London. The fact that I think it is.
In my opinion, the best seaside resort in the country. So I think it has a great deal of charm. Like a lot of holiday places. It has two seasons 'cause it has Christmas and it has the summer. So I think that's an attraction. So it's busy at Christmas, is it? Yeah. I mean, most places I. All enjoy higher consumer spending at Christmas, but Brighton gets that as well as obviously the summer months.
Luke: So is the pier, I mean, is it still the sort of slot machines and stuff? Is that the business? Uh, it's more
Luke (2): than that. So there, what is there on the pier? There are three elements to it. It has rides, it has arcades, and it has food and drink. So it's about a third, a third or third, and it's been going since 1899.
Luke: So that's when it opened. 1899. I mean, how do you [00:29:00] innovate there? Or do you not worry too much? Yeah,
Luke (2): and to a degree, I think you are partly selling nostalgia. You're partly selling tradition. But no, I think I. One of the challenges for us going forwards is how do we get people to come back to the pier, come to the pier more often, come to the pier in the off season.
The pier has suffered very badly from example, you know, our insurance costs have T troubled in the last seven years. They're enormous.
Luke: Why is that?
Luke (2): Well, because there's almost no one, they insures peers because there are only 60 seaside peers left, right? And quite a lot of the others burnt down.
Luke: Well, there's one in Brighton that burnt down.
Is it?
Luke (2): Uh, yeah, that's true. So insurers, there are very few insurers that cover them at all, so it's difficult to get cover at all. Right? And so that is a cost and also health and safety as regards things like rides is higher than ever and that's, you know, labor burn, so that's expensive too.
Luke: You talk very passionately about the importance of.
More projectors, you know, more [00:30:00] entrepreneurs. Why, why they're so crucial to society. And then, and then you sort of express some concern that that was going in the wrong direction. What, what could we do at the sort of earlier stage in terms of education, young people to encourage entrepreneurship more, to give people a sense of what the opportunities might be so that more young people think of this as an option rather than.
Other alternatives?
Luke (2): Yes, it's a good question, and I don't think there's a simple or easy answer. I don't think you can teach entrepreneurship personally, least of all in sort of classroom setting. I think bluntly, classic school teachers are not the ideal people to teach. Someone now to be an entrepreneur because teachers by their nature, tend to work in a highly structured public sector setting.
Mostly. Yes. Uh, so it's almost the opposite from the entrepreneurial
Luke: freewheeling world. Quite a lot of the entrepreneurs I've spoken to on this podcast series of not done well at [00:31:00] school or struggle with Yeah, exactly. Struggle with a conformity school. Yeah. The, the
Luke (2): hierarchy and the, yeah.
Luke: And they're sort of flourished afterwards.
Interesting. Yes. Well, they're
Luke (2): taking orders, you know, they don't like it. No. Uh, I think it's about mentors. It's about, uh, the culture. I do think organizations, for example, like the BBC, are, uh, not great at encouraging business and self-employment and entrepreneurship generally. I don't think they see it as a priority or as, or as something they are interested in An awful lot of the.
Brightest and best go into the classic high status professions like the law and banking and accountancy and so forth, and I think in a way. That's a shame because those very clever people should be out there building things, real businesses. No one can pretend that being your own boss is the easy option.
And I wouldn't necessarily encourage everyone to do it. And of course, many, many entrepreneurs either [00:32:00] fail or they never grow beyond first base, which is no tragedy. But there is this belief amongst. Economists who do write about entrepreneurship, that there's a sort of magic 7% who are the ones who are responsible for the bigger, higher growth businesses.
A lot of them who do then attract, you know, institutional venture capital, and those are the ones that are really innovative and generate the tax and exports and make the economic difference. And so it's particular the most talented, most ambitious. Most innovative entrepreneurs that I think are the game changers.
And so in a wider societal sense, those are the ones we must try and encourage. Of course, we need entrepreneurs of all different stripes, and you can never tell a young man or woman of 21 who decides to start a business, whether they may be the next James Dyson. You don't need a thousand James Dysons completely transform.
[00:33:00] Are living standards. And you look at Silicon Valley and other successful parts of the world where, um, they produce outsized success stories. And the difference it makes is astonishing. It is capital, partly, uh, it is very much the environment, but it's also the individuals and it's, you know, are the role models.
Is there a legal and cultural background that. Promotes entrepreneurship and. Sees it as a desirable thing and a possible thing. As I say, I think learning at the kitchen table that this is, you too can start a company and make it work and have the satisfaction that goes with building something is utterly crucial.
And of course you can't manufacture that and government in of themselves aren't. In a positive way gonna create more businesses or more entrepreneurs, I think they can get in the [00:34:00] way and they can inhibit it. And that's probably what in recent times I think we've seen governments do more often than not.
Luke: So in a sense, it's up to the sort of entrepreneurial community to sort of do all we can. I mean, behind you is your book started up and you've been doing this for a long time, encouraging entrepreneurship. I wrote, wrote a weekly
Luke (2): column in first the Sunday Telegraph, then the the financial times, and then the Sunday Times for 20 years.
Every single week. Yeah. A million words. I reckon. Essentially every single column was saying the same thing, which is we need more entrepreneurs and entrepreneurs. The answer, of course, I exaggerate, but that was the single theme, and I used to, and you're still saying it? I'm still saying it, and I used to feel that my audience were the entrepreneurs.
Right. I didn't wanna address the financiers, I didn't wanna address public servants. I wanted to talk to the entrepreneurs 'cause I,
Luke: which is what you're doing right now. Yeah. I was an
Luke (2): am practicing entrepreneur, but I could also write and was interested in writing about it, which very few other entrepreneurs are.[00:35:00]
And I felt there is a lot to say about it and I think there still is. I think this is a never ending journey. I think societies lapse, I'm afraid to say. I think things like lockdown were dreadful for the economy and our culture, and I think policies like furlough were a catastrophe. They didn't just help rack up hundreds of billions of debt, but they encouraged people to stay at home and do nothing.
And they're the sort of opposite of the whole entrepreneurial mentality and this very idea that you can sort of depend on the government, that no one needs to take the the initiative and. Create their own entity and their own fortune. I think that's part of the reason why we are seeing this decline in people working for themselves, taking risks, and you know, safety is, I think is a very negative impulse and I.
I think it's powerful in society now of risk aversion. We want people who embrace measured risks and [00:36:00] take the plunge and go for it and see what they can do with their lives. You call it safety is, yes. It's a sort of, what is that Culture of safety first? Uh, the precautionary principle, that's a sort of.
Core element of that,
Luke: I wouldn't do that. It might not work sort of thing. Yes, yes. Best not
Luke (2): risk
Luke: it. Well, that's the ver yeah, that's the, that's, you know, there's never
Luke (2): an entrepreneur in the world who's taken that approach to life and their, their business. No. Of course, mistakes happen. There are cockups.
I've had many failures and many mistakes. You hope you learn and you try again. But you know, failure is very much part of the journey of life. And embracing adventure and seizing the day. This, to me, is the essence, a society that is overly focused on safety, which is what happened during Covid. Massively exaggerated threat to everyone except the elderly and the ill produces a sort of [00:37:00] cowardly, inhibited mindset.
It's not a progressive advancing society that has new inventions that solve our problems. It's one that's in retreat, and I suspect that at the root of all great civilizations that have fallen apart, a lack of that spirit of adventure is possibly at the root. Is that reversible? I mean, do you think that's gonna correct
Luke: itself or is
Luke (2): anything's reversible?
James: Yeah. You know, that's gonna take
Luke: some doing, isn't it? Of course, yes.
Luke (2): Yeah. I don't think we've, you know, made any form of progress in the last. Five to 10 years, I think I'm afraid the same. On many measures, things have been going backwards and unquestionably. Socialism is not the answer. Socialism is definitely the wrong solution.
What we need are free markets, strong property rights, rule of law, proportionate taxes, limited government, the encouragement of the entrepreneurial spirit, and embracing change, and encouraging effort and encouraging people to take the plunge. [00:38:00] It still feels to me that there are a lot of opportunities. Of course, there are always opportunities
Luke: and so for those that are prepared to do that, yes, and you know, feel a sense of adventure and are prepared to take the plunge, they can do, they're 8
Luke (2): billion plus people in the world.
They could do really
Luke: well. It's not, markets
Luke (2): are bigger than ever. Of course it ist easy. If it were, everyone would do it, and it's not for everyone. But at the same time, I do think that we have a. Tremendous heritage of brilliant inventors and innovators and exporters and entrepreneurs. And as I say, we originated the industrial revolution here in this country.
And so we have the ability, it's down to us. And you look at tiny countries like Singapore and. How they've succeeded in the last 60, 70 years of nowhere. Yes. Yeah. They were one of the poorest countries in the world. They now have almost the highest GDP per capita in the world, higher than ours, as has the Republic of Ireland.
Well, that's distorted because of particular, that's a bit of an accounting trick. Is it? I I don't think that's comparable. I'm not sure the standard of living reflects their IGD paper. Yeah.
Luke: But it's [00:39:00] interesting that they do. So, um, though you've also sort of done. Things more widely in your career. You know, you, you were the chair of Channel four, the chair, chair of the Royal Society of Arts and Chair of the Alameda Theater, which I happen to know is a fabulous theater in North London.
What took you in those directions?
Luke (2): Um, firstly, I was asked and flattered and thought it'd be interesting in educational. Uh, secondly, they were all things I was interested in, and. Believed were useful elements of Shar. Uh, thirdly, I think having nonprofits, charities as part of your life is healthy. And, you know, you learn how different organizations do think differently, and I think it helps balance out.
If you think only about business all day, every day, I think you become very dull. Uh, so I think it makes you a more rounded person. For example, for nine years I was the chair of the Institute of Cancer Research, which is the leading, um, such laboratory in the whole of Europe. It's the sister organization to the Royal Marsden Hospital.
That goes
Luke: back to your medic sort origins, which is good. Sort of, sort of, [00:40:00] and you know, I
Luke (2): learned a certain amount about how. We are gonna cure cancer and so forth. And I think that was very interesting for me and very educational. And you hope you do some good. And I think many of these sorts of organizations from, you know, schools to universities, to hospitals, you name it, require more entrepreneurs and more business people on their boards to make sure that they are running in a commercial fashion as far as they can, as a, as a nonprofit.
And to bring that experience that those people have to bear to help that side of society. You would urge people to consider that, you know, they're in business or, yeah, definitely entrepreneur. Yeah. It's a different pace and there are in some respects, frustrations, I think different cultures. Yeah, definitely.
And, and for entrepreneurs who are used to just sort of, you know, a sense of urgency in doing things promptly, charities and so forth don't always react on the same time scale, but nevertheless, I think to achieve variety is more satisfying, isn't it? So that's partly what it's
Luke: about. Could you tell me a little bit about your time at Channel four and.[00:41:00]
Channel four has an unusual remit, doesn't it, Scott? Sort of, yes. So status, that's different.
Luke (2): It's a public corporation, which is essentially owned by the government slash the taxpayer. However, it, it doesn't receive any tax directly, so it doesn't benefit from the license. No, it generates its entire income through a spot TV advertising essentially, and other forms of sponsorship, commercial income.
So it's got many respects. Of a business, uh, and it competes very directly with businesses like ITV. It's a traditional television broadcaster, which obviously is in recent years under threat from streamers. And in certain genres, like for example, drama, it's really tough. The numbers are mind blowing. So for the very top series I saw the other day, the biggest US streaming drama series, now spend between 20 and $50 million per hour.
Severance, for example, on Apple tv, $20 million an hour, each episode costs. That's more significantly [00:42:00] more than historically the BBC or ITV or channel four would spend on an entire series, right? They might spend half that or less. So competing for talent and ultimately eyeballs in categories like drama, which is very expensive and very competitive now is really tough.
I don't agree with the, the request that I've seen for more subsidy. 'cause the BBC already gets 3.6 billion pounds a year and I don't think channel four should be subsidized because I think it's very re is the fact that it's self-sustaining, but they're gonna have to be very fleet footed to remain relevant and prosper.
There was talk, I think about it being sold, isn't it? Yes. I think it should be sold actually because I think it would get more freedom that way. I think it's shackled by being owned by the government. Right. But I'm afraid governments have been too cowardly. They're are vested interests. They don't want the money.
Yeah. They, it's not that they're vested interests that are opposed to privatizing it, and so they will be hard
Luke: to keep it. State owned. You've been quite critical about the BBC's sort of take on business, especially. Uh, what do you think, how, how should the BBC be run in the future? [00:43:00] Do you have any views on that as you've worked in television?
Luke (2): Well, a lot of experts think it should be a subscription basis. I do think it's sort of monstrous that through the license fee, which only ever goes up, there are an awful lot of people who are pursued, who don't pay the license fee. These end up in the courts and people get fined and some people go to jail for nonpayment of those fines.
I think that's wickedness in extreme and I don't think it should be happening ever. It is a regressive tax and I think ideally it shouldn't exist. I see that the 3.6 billion would be very hard to obtain from elsewhere, from general taxation, say Um, so I guess it will have to remain, but I would almost certainly not allow it to increase, and I would insist that the BBC somehow devises.
A subscription model. That means that those people who want various different services have to pay for it like you do for Netflix or Apple Plus. Or Disney. Yeah. Plus people pay quite happily for this. Yeah. Yeah. Sure. So look how much they pay every month for Sky.
Luke: So the, you, you think the BBC could evolve into a subscription?
[00:44:00] I think so, yeah. Type service. Luke, what, what about the future for you? I mean, you said you know, you, you like going on adventures. Have you, have you, have you got anything in mind for your Risk Capital Partners next steps? Well,
Luke (2): I'm forever looking at projects here. I'll be frank. It's very tough at the moment to get hugely enthused about the prospects in the UK in the immediate future.
As I mentioned earlier, you know, you've got this Blockbuster employment rights bill and so forth and so on, and Net Zero, all the rest of it. It's, it's an expensive place to do business here. It's highly regulated. Growth is proving elusive. Unsurprisingly. So I, I, I can't pretend the prospects are, are amazing.
Uh, however, this is where I've spent my life. This is where I've built my business career. It's harder to say, oh, I'll go off and, you know, invest in Asia. Uh, it's a long way off and I don't know. How I go about it and at my age, it's tough to start all over. So I'm not sure is the answer. I will probably continue to do what I've done for the [00:45:00] last few decades and carry on trying to find interesting opportunities here like Gales and others that I think still offer, um, expansion possibilities and are, and are not.
Too expensive. Well, Gail seems to be getting great guns. Yes, it is. And um, despite the climate, uh, actually trading is pretty strong. It has great team running it, and I'm very lucky to be a part of it.
Luke: This is a tough period for business. I completely concur. That's what I see. But often when, if people are able to start businesses in these tough periods.
Do really well later on
Luke (2): the history of businesses that many of the great businesses were started in recessions or even depressions.
James: Yes,
Luke (2): and of course it may feel tougher than it did five or even 10 years ago now, but this is nothing compared to countries that go through war or the depression of the 1930s or whatever it may be.
And I suspect there will be a recovery at some point. You know, I dare say that if there's a recession this year, it'll end next year. So, you know, most recessions only last about 18 [00:46:00] months. And as you say, often recession's a great time to pick up assets or hire talent or launch something new. I hope that's right, and I think we have nothing to fear, but fear itself, I guess.
Luke: Yeah,
Luke (2): no, I'd agree.
Luke: I mean, there are always opportunities. Yeah, yeah. Tough times. Throw up different types of opportunities to boom times.
Luke (2): Yes. I mean, I think what you had until a few years ago was money that was almost free, you know, with zero or close to zero interest rates for over a decade. Capital was cheap, so you could borrow money, you could raise equity.
And assets got very expensive. We are now, what's happening is, is part of the unfolding of all that, which is capital's got a hell of a lot more expensive. A risk premium is up. Asset prices in some respects are probably falling. Business is getting more difficult, so growth is proving very hard to come by.
And as you say, there are still consumers out there and there are still opportunities. And it's a question of finding the technologies or the. Business models. [00:47:00] That makes sense. I mean, it sounds self-serving
Luke: for me to say this, but it's a great time to recruit people. People. It, it is people. And, and I found that
Luke (2): too in that, you know, there's a lot of talent looking for work.
Luke: There is. And, and that's something we really focus on at this sort of, in this sort of economic environment. Luke, thanks so much for coming in to talk to me. Thank you. I'm gonna ask you two questions that I ask everyone at the end. The first one is, um, my standard question. There's a clue on the wall and, and that is what gets you up on a Monday morning.
Luke (2): I suppose two things. One is my first cup of coffee, which I look forward to relish and is always delicious. And then second, whatever's in my diary. First, I've gotta psych myself up for that meeting or that call, or whatever it may be, to approach it with a sense of. Enthusiasm and, and alertness and try and give it my best.
Luke: And the last question, uh, which is from my interview, but why you, which is also behind you up there somewhere, is where do you see yourself in five years time?
Luke (2): Five years time I'll be approaching 70. So, uh, I won't be a spring chicken, but I [00:48:00] guess I will still be working. My father worked till he was well into his eighties.
I like to think I'd do the same. I think I would die of boredom if I didn't work. Keeping on, keeping on, I suppose.
Luke: Keep going strong, Luke and I look forward to more of your projects becoming, uh, thanks, public news. Thanks for coming in to talk to me. Thank you. Thank you, Luke, for joining me on all about Business.
I'm your host, James Reed, chairman and CEO of Reed, a family run recruitment and philanthropy company. If you'd like to find out more about Reed, Luke, and Risk Capital Partners, all links are in the show notes. See you next time.
All about business is brought to you by Reed Global. Learn more at: www.reed.com
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