Sir Martin Sorrell | Business Growth, Hostile Takeovers & the Future of AI

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28:28Listeners of this show will get a$75 sponsored job credit at Indeed.com slash podcast. That's Indeed.com slash podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed Sponsored Jobs. Talking of change, I know that you've been a changemaker, which goes all the way I know that you have. So, there's companies specializing in AI, like IFS, ChatGPT, OpenAI, Google Gemini. How is AI affecting all your business interests now? Hugely.

28:56Sir Martin Sorrell:I mean, it's, well, back up for a minute. Firstly, consumers like you and I use it far more aggressively than companies. So consumer adoption is faster than company adoption, which is a little bit strange. But we've seen that before with the internet. We've seen that before with the mobile phone and the smartphone, that consumers probably adapt faster. And there's a number of reasons for that. But just to make me go through the reasons, how it's affecting our business. And it's probably five ways. Firstly, what we call visualization copywriting. So that's the time taken to make an ad and the cost of it.

29:40Sir Martin Sorrell:So you can do it through synthetically. You know, you don't have to go to the top of a mountain for a snow scene anymore. You can do it synthetic. We can argue whether it's the right thing or not. I was just listening to something on Radio 4 this morning about a rock band on Spotify that was totally AI generated. The critic said it was pretty average in terms of, but the technology is improving all the time. So average will become better over time. But he was arguing that it was synthetic and therefore not good. So visualization, copywriting is number one. Personalization at scale is number two.

30:16Sir Martin Sorrell:We can reach you. We know you're interested in property. We know you're interested in doing 230 interviews like this with the people, the people you've interviewed. We can message you knowing what your interests are. We had two sources. One is the first-party data that we have on you because of our commercial relationship. And the second is signals from platforms from Alphabet, from Meta, from Amazon or TikTok and whatever. So personalization at scale is hugely important. Tailoring ads. So instead of having appointment by television where you sit in front of a screen and it's a mass audience, you're relating to people on an individual basis.

31:01Sir Martin Sorrell:That is huge. The third area is media planning and buying. We're a relatively small industry. We're only about 1.2 trillion last year of ad revenues, probably 1.3, 1.4 this year. Just to put it in perspective, BlackRock manages 14 trillion of assets, right? And it's just one provider in the equity industry or the investment industry. We're in media investment management. We're exactly the same as the investment industry, but what we try and manage for clients for media planning and buying is where they buy their media. So we call it media investment management. That will become totally algorithmic.

31:40Sir Martin Sorrell:At the moment, 75 % of that$1.2 and$1.3 trillion is provided digitally. Google is last year was 300 billion of ad revenues this year will probably be about 350 Meta was 200 this year will probably be 250 Amazon was about 75 this year will be about 80 85 and TikTok last year outside China was about 40 it will probably be about let's say 50 you put all those four together those four platforms account for well over half of the total of 1.2 and two-thirds of the 900 billion. So it's a huge concentration in these platforms and you can algorithmically analyze where it is best. And the outputs you get are much more sophisticated than the human mind can develop, but the human mind can then play with those in a much more creative and effective way.

32:37Sir Martin Sorrell:So that's the third area. The fourth area is general efficiency. So we've got an outside broadcast relationship with NVIDIA, AWS, and Adobe, where we reduce the cost of outside broadcasting by using the cloud and remote broadcasting instead of on-site by about 80 % or 90%. So that's just an example of the efficiencies. And the fifth area, which I think is super interesting, is democratizing companies, meaning you're going to have different structures as a result. My favorite example is Jensen Wang, who has 51 direct reports or 50 direct reports. Doesn't do one-to-one meetings. I had lunch with one of his direct reports recently.

33:24Sir Martin Sorrell:And he said to me, he's never had a one-to-one meeting with Jensen Wang. The only one-to-one meetings he had was when he was being recruited in 2012. So this flattening of the organization and providing information to everybody in the organization. because in NVIDIA people have access, means that you flatten it and you make it much more efficient, much more agile, much more responsive. I think that is absolutely huge. And we'll see whether other companies in time, the impact on government and government efficiency could be huge too. So those are the five areas. Having said that, where do we see adoption?

34:06Sir Martin Sorrell:We only see adoption in companies or in verticals where there's an existential threat. So, for example, in the auto industry, where you have companies like BYD who can produce an autonomous vehicle for$10 ,000 with God's eye, which is their technology, or an EV for $25 ,000, super competitive. You know, the founder and Stella Lee, who's the chief executive of BYD in Europe and the Americas, has said she wants BYD to be the biggest car manufacturer in the world. It's number five at the minute, which means it probably has to double in size from where it is now. So hugely ambitious, Chinese driven.

34:55Sir Martin Sorrell:There was an article this morning, actually on Bloomberg, I think it was, where it talked about how the Chinese are dominating the car parts supply chain in Europe. That's one of the ways they're investing very heavily and where they have very significant, it's the front page of the FT, I think. They have significant influence and maybe even control, certainly influence of the supply chain. So where you get an existential threat, you get people moving at scale on AI. Second example would be financial services. Branch banking is under huge pressure from Revolut and NewBank. We work for them in Mexico and Brazil.

35:34Sir Martin Sorrell:They're launching in America now. They have a banking license. They're launching on the back of F1, actually, interestingly, and also the NewBank Stadium, which is the messy Beckham Stadium into Miami in Miami. So they're putting huge pressure. So the branch banking companies like HSBC, Santander, there, JP Morgan Chase, everybody have to react to it. The third area where we're seeing a third vertical a little bit, not pervasive yet, but we are seeing it, is packaged goods. So a Unilever or a Procter is starting to see that consumers are price resistant. They increase their prices, Pepsi, Coke, Mondelez, increase their prices during COVID and after it by 10 or 15 % a year because of commodity price increases, but also because they could.

36:24Sir Martin Sorrell:They're now seeing a bit of consumer resistance. And then all the global political issues around US-China relations, around Russia and around Iran mean the supply chain is becoming more difficult and more complex. So their supply chain costs are increasing and the margins are coming under pressure. So net-net, big impact on our business, big impact on manufacturing and other areas of corporate activity, organizational structure, et cetera. Take up depends on how much pressure you have. I mean, if it ain't broke, don't fix it. And the other thing, I mean, I have never seen, I've been at this for a fair bit of time, as you said.

37:06Sir Martin Sorrell:I can't remember ever, even in the 80s, where corporates have been doing so well. I mean, look at the S &P 500 in Q2 this year. EPS probably up about 22%, including the hyperscalers. Take out the hyperscalers, still high double digits. We've had seven quarters of double digit EPS growth. So what's not to like? And if you're doing well, particularly in, I don't mean this in a bad way, bureaucratic organizations where CEOs last for, on average, five or six years or whatever it is. CMOs only last for about 18 months, two years. Where you see this violent change, why do you need to change? No, no, no.

37:51Sir Martin Sorrell:A wholesale. So just finally, what's really interesting is we're starting to see pressure in some companies build through the financial function. And the people, our biggest clients are the hyperscopers. They are Google and Meta and Apple and Nvidia. These are all the people that we work with and T-Mobile and Amazon. These are the people we work with. And they're all starting to understand that the really engine of change inside a company is when the CEO comes under pressure on quarterly reporting, or if it's a private equity company from the investment committee to hit the EBITDA target. And it's the financial function that then puts pressure on the organization to change.

38:41Sir Martin Sorrell:So what we're starting to see, which I think is really interesting, is CFOs become much more a part of the team together with the CMO and the CIO and the chief digital officer.

39:11simplify campaign delivery, and access better data across the business. The result? Less time spent on operations, more time connecting brands with the moments and fandoms that matter most. Learn more at Accenture.com slash Spotify. When you need to build up your team to handle the growing chaos at work, use Indeed Sponsored Jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications, and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a$75 sponsored job credit at Indeed.com slash podcast.

39:48That's Indeed.com slash podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed sponsored jobs. Change. How about humanize? I love the fact that you said your father was a people person. Yeah. And that's rippled through.

40:02Sir Martin Sorrell:Well, he was a retailer, so he understood about people. So much now is going to potentially be relying on AI, which potentially could take away that empathy, that gut instinct, which you 100 % will have used subconsciously, built that kind of memory bank of what's worked for you, the mistakes you learn. And how much of that potentially where you're sort of relying on the AI machine as it is gathering all the momentum, how important is this human element going to be? Well, I think, look, the answer is I don't know. But I can give you a view. I think in the short to medium term, the humor element becomes even more important.

40:39So, you know, I remember James Quincy at Coca-Cola saying on a call about a year or so ago,

40:45Sir Martin Sorrell:if everybody can do personalization at scale, how do I differentiate Coca-Cola advertising? And the answer is this, right? The humor, the agency, the big idea, whatever, the strategic insight, the creative brilliance will be the defining factor. it. The issue in my mind is beyond that. Let's say that's three, four, five years. If you see some of the TikTok films that Eric Schmidt has done or Demis at, not at Davos, at Cannes, the Cannes Advertising Festival a few weeks ago. I wasn't in the room, but I'm told he said he did say that machines will become more powerful than people. If that is the case, then you'd probably veer more towards the Elon school.

41:32Sir Martin Sorrell:You know, Elon Musk did an interview, I think with the columnist a couple of weeks ago when he said, you know, we'll not be working at all because robots will be doing it for us. Yeah, I read that. I was listening to an interview yesterday on CNBC, actually, where a German robot manufacturer said, no, no, the robots will do all the work that human beings don't like to do, the dirty work, if you like. We'll see. my view would tend to be, I'm not in the Elon camp. I mean, you know, or Sam Altman said 95 % of advertising jobs will disappear. I don't think, I wouldn't go as far as what Elon Musk has said, or what Sam Altman said, but directionally, I'd be in that direction.

42:14Sir Martin Sorrell:I think it is more likely that machines will become so powerful that they will be. I tried to study economics for many years and I think it was in 1930, John Maynard Keynes, famous Cambridge economist, or global economist, wrote a pamphlet on automation where he said, well, it's the effect we'll have more holidays as a result. So I think he was right, But I think it was 100 years too early. So I do think this whole area of employment is going to become super difficult. I think in our business, you know, I'm working with Harvard Business School. There's Professor Karim Lakhani, who's doing a lot of forward thinking with a number of people on the impact of AI and professional services.

43:08Sir Martin Sorrell:of business as a woman who's doing some research into it. Did an interview with her recently. And I asked her what her hypothesis was. And she's looking not just at agencies, looking at consulting companies, accounting companies, lawyers, investment banks. And you're going to get sort of two levels. You're going to have, in our case, strategists and creatives, probably fewer of them, probably more highly paid. and then you'll have more people doing the implementational, what we call the foundational work. So you sort of get two levels in the organization. We'll see how it pans out. But these machines, and the other thing that people don't talk about, and I go to a thing called Google Zeitgeist every year in North America, in Montecito, in Meganland.

43:58Sir Martin Sorrell:And we were allowed into the Santa Barbara quantum lab last year. And it is quite remarkable what they're doing. And, you know, as I said before, if you think AI has had an impact, stand by. Because, you know, the compute power that quantum brings, well, it's on steroids. Interesting times, right? Yeah. So I think net-net, it's going to take a lot. I mean, having said all that, just one thing I will say, running a company in these times is much more difficult than it was. I thought you'd say that. Much more difficult. A number of people will be able to describe you as successful. So many things you've done.

44:41I'd love to know your definition of success. Proving the model.

44:45Sir Martin Sorrell:And I wouldn't say being successful, really, in that sense. I mean, it's such as we took to a certain level. We took PP to a certain level. Neither have survived, right? I mean, WPP must be about 60%, 70 % less in terms of value than 2018. A lot of questions about star-shedges has disappeared into various things. We'll see what happens with S4 over time. We had our good time and we had a tougher time. or things are getting a little bit better now. But I think the answer to your question is proving the concept. Whatever it is we were trying to do, demonstrating that the model works. And so I think that's how I would define success.

45:41Sir Martin Sorrell:No, I appreciate that. A number of things you've achieved, sitting here at night of the realm and all the different business accolades. I might have liked it. What's the greatest achievement? Well, you come back to kids, I guess. That's what you come back to at the end of the day. I did a course at Harvard Business School called Planning in the Business Environment. And it was with a guy called Henry Cabot Lodge. And Henry was the son of George Cabot Lodge. And George Cabot Lodge was, I think, the Secretary of State in the Eisenhower administration. We didn't think much of George in my class at HBS.

46:22Sir Martin Sorrell:But I've got to tell you, actually, his thinking was profound. And he did this course called Planning in the Business Environment, which was a compulsory course in the first year on strategy. And he had a Venn diagram. And we thought it was BS. And if you reproduce the Venn diagram, by the way, you've got an A on the course. I reproduced it. I remember my final exam when I got an A -. But it was three circles. One circle was family, one was society, and one was career. And what he did was he said, life is about how you manage those three areas and how you bring them together, how they intersect.

47:09Sir Martin Sorrell:I think I would define success as being successful in all those three areas, right, which I wasn't, right, or haven't been. But I think that's the objective. And I actually think that is a super good way of describing it. So it's about a family. I put that first. I would say career and then society. And then there's how the intersection of those three circles. And if you can get them as one, we're going to see a solar eclipse later. But if you can think about those three circles coming together, they're one. They're one. I think that's it. So I would define success as if you can demonstrate success, defining it as happiness, actually, in those three areas, then you've done it.

48:05one of the key ways you've achieved a lot of success is by leadership, leading with your gut, leading with the information you've got to handle, and importantly, making a decision. What would you say are the most important values of leadership?

48:20Sir Martin Sorrell:Yeah, you are what you are, being authentic. I think there are lots of things. I think speed of decision-making. If I hesitate, it's because I don't know what the answer is, right? Or if people generally hesitate, it's because they don't know what the answer is. I think a lot of it is instinctive. I mean, authenticity is important. Speed of decision making is really important. Delay is a negative. I mean, I had a terrible phrase, which was, you know, a bad decision on Monday was better than a good decision on Friday, which is a bad way of putting it. It's always been trying to apply the principles of running a small company.

49:08Sir Martin Sorrell:I mean, going back to what you said about deal making, it wasn't about deal making. It was about being able to act faster and in a more agile way than the opponent. That was always... That makes sense. That was always the opportunity. I mean, I haven't written a book, but if I was to write a book, I would write about what I've seen, how companies, clients and agencies managed to subvert the purpose of the leadership. I mean, you would be amazed, as I've been continually amazed, by the ingenuity that people show in preventing things from happening. We talked about AI. I mean, there's a lot of things that go on where it is clear that applying AI would help, where people delay, defer, demur, or whatever it happens to be.

50:11Sir Martin Sorrell:So I think the critical thing is, and that's why I think AI is really the most exciting. is the change that it will bring to organization. I think NVIDIA, you know, I've been trying to get, however, business school to write a case study on NVIDIA unsuccessfully because I think what Jensen Wang is doing, and it may be that it's Jensen, right? It may be it's his style and it's unique. I don't think it is. I think, I'll just give you an example. early 2000s when the internet was was you know coming coming really into play I went to Mexico Tech College always remember the print when Ogilvy were doing the branding and we met the principal there was I think about 30 ,000 students then it's now much much bigger and he said to me and to Margell who was running Ogilvy then he said you've got to understand how important the internet is to Mexican villages.

51:15Sir Martin Sorrell:There are all these villages, kids in villages around Mexico who didn't have a library. And you have the internet available. Now the marginal cost of information is zero and they can access all this information. Well, if you think about the same thing in relation to AI and how it democratizes knowledge inside the company. So instead of people building a silo and controlling it by controlling information, they can't do that anymore because the information is available to everybody. And then there's Sorrell's law of cooperation is that the deeper you go inside an organization, the more cooperative people are.

51:48That's really good to say.

51:49Sir Martin Sorrell:I mean, the further up you go, the more resistant people are because it threatens their, not threatens or it sort of challenges their control, right? And what you want to do is to get to a situation where it's very flat, where the reporting ratio. Mark Zuckerberg recently in a memo to meta people made this point, more agile teams, he said, and also talked about 50 to one ratios, which is the Jensen direct report. Yeah, sure. Whether that's true or not, but that's the mythology. And I think that's super important. Now, if you think about government and you think about industry and you think about business, So I don't have any sort of fundamental, but you are what you are.

52:35Sir Martin Sorrell:You're authentic and you do what you believe is the right thing. You've got to have a good strategy. You've got to have a good structure. Yes. And then you've got to get implemented, which is not easy. I mean, bringing businesses together, integrating them is very good. This episode is brought to you by Accenture. When your advertising operations fall out of sync, everything else follows. Spotify and Accenture are working together to reinvent the rhythm of ad sales, using automation, analytics, and smarter workflows to simplify campaign delivery and access better data across the business. The result?

53:11Less time spent on operations, more time connecting brands with the moments and fandoms that matter most. Learn more at Accenture.com slash Spotify. When you need to build up your team to handle the growing chaos at work, use Indeed Sponsored Jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications, and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a$75 sponsored job credit at Indeed.com slash podcast. That's Indeed.com slash podcast. Terms and conditions apply.

53:47Need a hiring hero? This is a job for Indeed sponsored jobs. So interesting, isn't it? I've got one last question. Sure. I could talk to you for a lot longer. The kind of myth, if you like, of to be successful, you've got to get up at four in the morning. You've got to run the marathon. You've got to read the book. Where have you sat with that through your life and right now? Are you an early riser and trying to attack the day?

54:08Sir Martin Sorrell:Yeah, but there are people who are very successful who don't get up early in the morning and work late. Well, my day, like this morning, I woke up at six. I was a little bit lethargic this morning, got out a bit about 6.30. I didn't have a, I sort of woke up about three in the morning this morning thinking about some things. You try and go to bed early. This is an interesting device because it sort of disciplines your life and makes you much more conscious about, you know, sleep is very important i don't get enough of it um so i'm i mean i would say i i'm 24 7. feels like you know we have this yeah we have this debate as the in the office or out of the office right especially i mean covid didn't create this covid accelerated it that's why i say it's quite difficult now because gen z has a different attitude i think in many respects and it is quite difficult but i I believe in seven days a week in the office, not two or three or four or five.

55:17Sir Martin Sorrell:So, and, you know, I'll tell you what, this may tell you a lot about me. One thing that drives me crazy is out of office, you know, particularly in our business. Because if I'm a client and I have a crisis and I send a note to, and there was one email out of office that absolutely drove me insane when I was at WPP. It drove me absolutely insane. A guy said it was out of office, I'm out of office, still on holiday. I'm at the end of an olive grove. No reception. And it drove me absolutely, absolutely crazy. Because if I was a client with a problem, I wouldn't care. It's not helping you all that.

56:02Sir Martin Sorrell:It's not what I pay for. so if you're away I'm not saying people shouldn't take holidays don't get me wrong I'm just saying there should be a really efficient mechanism it's not enough to say I'm out of home it's you should be you should be you should direct them there so I think thinking about that way is really important well I said to you I was going to enjoy this conversation and I have you're so interesting to talk with so Martin thank you and we didn't get to talk about Andy Burnham I know we didn't maybe next time okay thanks thanks so much The right window treatments change everything.

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