Why Most Companies Are Borderline Sociopathic: The Founder of Octopus

0:00Most businesses are selfish, self-interested and short-termist to the point they're almost borderline sociopathic. The only stakeholder you really think about is the shareholder. Drives every single decision you ever make. Simon Rogerson is the co-founder and CEO of Octopus Group and Enterprise Spanning Energy, Investments, Real Estate. But what makes Simon different from every other founder you'll hear in today's meeting? He had to go and raise a couple of million quid. So we used what was the Yellow Pages and we just called up financial advisors. we had to call 15 ,000 of them over nine months from nine o 'clock in the morning to five o 'clock at night.

0:32If you've got a really good idea, come and pitch it. If I think it has legs, we'll give you 40, 50 ,000 pounds. We'll set you on your way. And if it doesn't work, we'll give you your job back in the next 12 months. Want a job? So tell me something about you that makes you vulnerable that you wouldn't normally share in an interview. Tell you something about him that's very vulnerable if you want. What do you think?

0:55Simon, welcome to the show. Thank you very much. We always start our podcast off the same way. So who are you and what problem do you solve? Oh, first one's easy. I'm Simon. I'm one of the founders of Octopus Group. What problem do we solve? I'd say most businesses are selfish, self-interested and short-termists to the point they're almost borderline sociopathic. And I think business should be at the heart of solving the world's problems. And hopefully the kind of businesses we build at Octopus demonstrate that. So whether it's our energy business, our financial services business, or our special needs school business, we're trying to build companies you would choose to be friends with.

1:34Nice, okay. And what is the, you mentioned a really good point then around short-term focus. What is a symptom, if you're a business owner listening to this, of being short-termist? The only stakeholder you really think about is the shareholder. So it's just the bottom line. Drives every single decision you ever make. And that is not the right way to build a company you want to be friends with. It just doesn't work. So Simon, when I look at businesses, there's been, and you might know this better than most, but there's this quote that gets thrown around that like 90 % of businesses fail within the first year, 80 % in three years, 70 % or whatever, it keeps going on.

2:09When you look at all the businesses that you've been involved in, where do you typically see businesses going wrong for them to fail in a short amount of time? I think it's a few things, right? And it normally comes down to the person running it. so sometimes the person running our business just doesn't have it it's not in their DNA, they don't have the makeup, they don't have the resilience and the staying power that I think entrepreneurs need sometimes it will come down to funding and I have a slightly different view I think to some of the US VCs where actually the best thing I think you can do with entrepreneurs you can find really talented people and then you can give them too little capital the moment you give someone too much capital they tend to piss a bunch of it up against the wall they do a whole bunch of it, they hire too many people, they make decisions too quickly and it doesn't work.

2:53If I think back to the start of Octopus, right, I'd love to say age 24, we had this amazing mission, we're going to change financial services. We worked in a sector, it was the least trusted sector in the world, it still is 25 years later. But actually it wasn't a big mission at the beginning, it was like frustration and then it was a series of tiny little milestones which are about survival, right, the start of a business is survival. You set tiny little milestones and you're the kind of person, the kind of human that just does absolutely everything to hit that milestone, then you move to the next one And then the next day, it probably took us more than a decade to say, actually, what are we doing this for?

3:27We've hit all our financial metrics and all our milestones, but actually, why are we in business? What are we doing this for? When we look back, when we've hung our boots up and we look back and go, yeah, we're part of building that, what's special about it? Why are we so proud of that? But I think to answer the question, normally the entrepreneur, they just don't have what it takes. And it's really difficult. right um the vast majority of the population would love to be entrepreneurs but actually the reality is quite different um so you mentioned dna which makes it feel like it's a nature thing and then there's resilient which makes me feel like it's maybe a nurture thing you must have met so many brilliant entrepreneurs and so many entrepreneurs and so many entrepreneurs so like what do you what makes a brilliant entrepreneur what one thing well just give us give us the maths equation oh um i've read lots of maths equations right in in uh you have to be likable when i'm hiring people there's a ratio which is how good you think you are divided by how good you really are right if that's ever more than one you're unemployable you won't be nice to do business with you're like yuck um if you look at the number one factor as to why someone is successful octopus whether you're running one of our group companies whether you are just and it just it just and an employee who's been really successful gets promoted all the time it's how busy a life did you choose to lead from when you were this tall, right?

4:47So when you were, I imagine for you guys, I hope it was anyway, right? When you were like five or six or seven, you just won't have been able to help yourself, right? When someone is version of busy is I'm going to go watch another series on Netflix, it doesn't work. It doesn't matter what you do. It could be like ultra running. It could be knitting. It could be socializing. It could be reading. It could be what, but you're really passionate about something. You just can't help yourself, right? The human spectrum, if we've got a bell curve of where you're distributed, the people are really successful in life are the people that tend to be at the extreme and the same thing is true for entrepreneurs and they just have this thing inside them they literally can't stop it's like the terminator gene uh and and you just won't build they just can't help themselves literally it doesn't become i don't work really hard because i feel i need to i work really hard because i love it i literally can't help myself and when you're in that position then you can give it all and it makes you feel alive it makes you feel fun so someone will be listening to this that thinks that's me simon's just described that's exactly what i'm like and i've got the idea but now i want to test the idea where do you think is the what do you think is the best way to test an idea before going all out on it and quitting your job uh okay cool question um first thing is when when you say um i want to be an entrepreneur and you say well why don't you do that and they go well i haven't had an idea yet right how many businesses can you tell me where they whether idea is genuinely new right dyson might have built something which had a different vacuum technology and or something that might actually been like a like a apple fell on my head moment but most companies most businesses they're built they're just someone else's idea executed better so don't use the idea thing as an excuse because i don't think that works and then what i would do is i just take two weeks off work i take two weeks off work and go and see if you can get someone other than your friends and family to buy your product and service even if you haven't built it yet you just pretend it's there and see where they'll actually buy it and if they'll actually buy it, total strangers, then there's your market research done and you can see if you can make it work.

6:39But don't believe your family and don't believe your friends because they'll all say, that's amazing, brilliant. Yeah, you're going to be, oh my goodness, wish I thought of that. Get total strangers to buy it. So two weeks off work and you'll have a pretty good idea. Nice. Okay. Well, let's go down that rabbit hole. And this predominantly at the start was a sales podcast, me and Jack are career long salespeople. So selling an idea to a stranger, what works and what doesn't? Oh, I think stories always work, right? because I think the world is exceedingly transactional, right? So I think everything about the world is exceedingly transactional, and that's not a nice place to be, I don't think.

7:15I think great business is simply about how you make someone feel. So I'm going to try to sell you something, whether it's the culture of Octopus as a company, or whether it's a product or a service, I'm going to try and tell you a story, right? Because humans remember stories because it's interesting, and I'll go tell other people. And I think that's the power and brands and customers. I think your customers are either the terrorists or the apostles. You get it right, I'll go and tell everybody I possibly can and people will believe that marketing because it's come from a person. That's the way the world works now.

7:42It didn't 20, 30 years ago, but it does now. So I think you need to tell stories. And don't think like binary code. Don't think like a computer. Remember, human beings are emotional beings who think, not the other way around. And I think the world's defaulted to this world of just all cognitive. It's all in your head. It's all in your brain. So we think here first, and then we use this to rationalise stuff. So take us back to the start of Octopus. What was the story that you were selling when you were picking up the phone? That's properly embarrassing, Parker. I'll tell you, right? So if you cast your mind back, I was a lot younger since 25 years ago.

8:18We used to work at a company called Mercury Asset Management. Mercury Asset Management was a great big fund management company. It managed hundreds of billions of pounds for big institutions and pension funds. It was based on King William Street, just next to London Bridge. just next to Lundbridge. It had carpets thick enough to leave shoes in. It had monos on the wall. It had Picassos on the wall. If you ask for a cup of tea or coffee, a butler with gloves and tails will come and bring it to you. That was the environment I was working in. And three of us left at the same time because I would just get to one o 'clock every day.

8:46And I just look at my watch and go, are you joking me? I can't do this for the rest of my life. It's so boring. And so we kind of leave. And then we realized that we didn't have any money. And we needed to raise two and a quarter a million pounds to get regulated because we were a fund management company and you needed approval from the regulator the financial conduct authority so we had to go and raise that money um we asked our friends and family they had a bit of money between them but only a bit and then we had to go and raise you know a couple of million quid and well how are we going to do that because we're like 25 we don't know anyone with any cash so we used what was the yellow pages which was a phone directory so a phone directory back in the old days and we just called up financial advisors and gave them this pitch about what we were doing and why we were doing it.

9:29We weren't very good. So the pitch is not very good, right? We had to call 15 ,000 of them over nine months from nine o 'clock in the morning to five o 'clock at night to get the 84 people that ultimately invested in Octopus 25 years ago. And the pitch went something along the lines of, so Mercure Asset Management had massive credibility. It was probably the number one fund management company in the UK 25 years ago. So we described ourselves. We're three graduate trainees, right? I was still on the graduate training program. We described ourselves as a breakaway from Mercury Asset Management, which the irony was quite heavy, right?

10:01I'd never managed any money for anyone. I was just an analyst. I used to write the company minutes from meetings that I attended. So you do that to start with, and then you try and tell them a story. And you tell them a story about, look, financial services. People don't like interacting. But money will change your life. It will change the life you lead. Your family will lead. The schools your kids go to. The holidays you go on. The age you retire changes your life. Because they say, tell me about a financial service company. you want to be friends with, right? They've been fined$350 billion since the financial crisis in 2007-8 because they outsourced their conscience to the regulator and they've behaved in a way that's not okay.

10:37If these companies were people, they'd be in the corner of the room facing the other way. No one wants to interact with them. They're not nice. There's friction everywhere. Then they behave badly, right? So you tell them that story and say, I want to build a different kind of company. I want to build a different kind of financial services company. And you can get them on that because people understand it because they go, yeah, do you know what i don't like dealing with xyz bank or xyz investment company it's not nice it's not a good experience right i'll this will this will make you chuckle um i was having a bad day at work and we and i bank i won't say the name of the bank um uh but i had some money in a savings account and they'd sent me a whole bunch of messages somewhere in my app like along with the other 300 messages they sent me which clearly i don't read and i my savings thing had gone from like 3 % interest to 2 % to 1.5 % to 1.5 % to 0.05%.

11:26This was in an account which was called a super savings account. So I went downstairs, I queued up, joined the queue, I got to the front, I went up to the cashier and I said, hello, can you tell me what is super about this super savings account? And she looked at me and she goes, oh, we do that all the time. And I'm like, well, fair do, you're winning on this one. I said, well, why do you work here then? and she goes, oh, final salary pension scheme. And I'm like, well, you've won that interaction, but that's so typical of a financial services company. That's what they do, right? They are back to where we started, right?

11:59Self-interested, selfish, short-termist, money-focused, bottom line, to the expense of their customers and their employees. And I don't want to work for a company like that. I don't want to interact with a company like that. I'd never be friends with them, right? That's what's bust about business, about the world we're in. You wouldn't be friends. If I said, tell me about a company you love being a customer of, well, you probably won't be able to tell me one. It's depressing. You interact with hundreds every day, and they're either instantly forgettable or depressing, or don't treat me very nicely.

12:31None of that is okay. Oh, God. I'm so tired. I've just been talking to qualified prospects all day without any wait time. How have you been doing it? Because I've been cold calling people on my mobile, and I reckon I've spoke to one person. No, no, no. Stop that right now and use Nooks.ai. Why? What does Nooks do? It finds me the right people to call and it calls them and it connects with them over and over and over again. So you're saying it's Nooks.ai and I can just be speaking to qualified decision makers all the time. No other better connection, right? Wow. Nooks.ai. So you mentioned resilience at the start when it came to like good entrepreneurs.

13:09And we run a company. We probably make hundreds of thousands of cold calls a year. Okay. So we're in good company with you here. um but i think your story there so yellow pages 15 000 companies 84 people said yes now you've got octopus group it's a very linear path but i imagine what you learned about resilience at that time has probably taught you lessons along the way for the highs the lows and what's come what can you tell us about resilience from that period and kind of how it set the scene for you moving forward um i think it taught me two things so resilience i i'm not sure you learn maybe some people won't learn resilience i think the best thing you can give a kid is confidence so you give a kid confidence never give them arrogance but give them confidence make them believe they can do something and someone says oh was there ever a time when you thought because we're going to fail like never right but we didn't have any customers we weren't regulated we didn't have anything but i never thought we were going to fail right and i think some people you just feel i'm just not going to give up i'm just not that person i'm like last breath i'd still be going rightly or wrongly so i didn't have i don't think it taught me resilience it definitely taught me the importance of distribution and sales and customers and this is the weird thing in the uk right so often you'll find entrepreneurs who are really clever and what they'll do is come up with this really clever idea and then what they'll do is they're going to try and make that really clever idea even cleverer uh as opposed to the u.s entrepreneur who'll go i've got pretty smart idea i'm now going to commercialize it or i'm going to sell it and and it's the power of distribution and the power of sales and the power of storytelling and relationships is so unbelievably important in building a business a brand and everything else and sometimes i think now entrepreneurs get that firsthand right you haven't got any customers you can't pay yourself a wage you understand that i know who my first customer was he was called mr gower we got the application i called him up don't tell if you have an investment company don't tell your first ever customer that they are your first ever customer right that's a that's a bad thing to do um but but you just remember how how was i trying to make mr gower feel i'm trying to make him feel like he's the most at that moment in time he was the most important man in the world you're like you've given me your trust and your money and i'm going to invest it for you oh my god what responsibility so you know we will add across the group i don't mean how many kind 150 200 000 customers this month right i want all those customers to feel just like mr gower felt 25 years ago right because that's what's important i think in a company how do you make me feel right you make me feel really good i'll tell everyone else and i'll and i want to belong to you right a time when humans are you know theoretically never been more connected but practically never been lonier we are desperate to belong to stuff right customer companies are one of the things we could belong to if we got that bit right you mentioned a point before that i want to come back to you around being uh forgettable a lot of businesses as being forgettable.

16:00When I think about Octopus Energy, I don't know when it came into my life, but suddenly it's in my brain. If you ask me about an energy business, I'd probably think of Octopus first. So obviously that's something that has been mastered there, but I can't really tell you how you did it. There's certain brands where I can tell you the first time I've tasted something or whatever it may be, but I don't really know how you did that. So what have you learned that you could maybe share with us about being rememberable? Well, first thing is, so I met Greg who set up and runs Octopus Energy in 2015. He's a total freak.

16:29He is the most talented entrepreneur I've ever worked with by an order of magnitude. Rebecca looks after the brand. Pete Miller does the global content. And the three of them have worked like hand in glove for like best part of 10 years. But if you walk down the street and you see Constantine, Constantine is the pink octopus, right? And Constantine's holding a sword saying, we'll keep fighting for you. Or you'll read an email that says love and power. Or when you call up, we'll know when your date of birth was. and so we'll play the number one from the year that you were 12 or 13 years old because that does something to you emotionally.

17:03So you connect. It's all these tiny little interactions and there's no friction, right? The technology system works so well. There's no friction. If you call another energy supplier, chances are you'll spend 25 minutes on the phone being passed from pillar to post and they won't be able to resolve the issue. That's not okay. I don't want to do that. But actually it's the brand. You know everything about the personality of that company from the fact it signs its emails, love and power. That's all you need to know. Or you see the octopus holding the sword, I'm on your side. I'm trying to do something that's good for all my stakeholders.

17:32You, the customer, you, the employee, you, the environment, you, the community. Why do we send tens of thousands of electric blankets out to people who struggle to pay their heating every year? Because it's what good companies should do. It's a nice thing to do. And that helps build the brand and what we stand for and who we are. So they're very, very consistent. And Constantine, the pink octopus, is mighty powerful. Yeah, definitely. And it's, you know, it's in the, I think it's in the global super brands. It's in the top 100 brands in the UK. It's done some, they've done something extraordinary in that business.

18:05So it feels like the passion from you comes across. I'm sure the passion from the other founders and C-Suite would come across as well. How then do you translate that down to a brand new employee to make sure they're on board with the mission, the values, and that carries on when you're not in the room? That's down to the people you hire, I think. So I think sometimes companies shy away from having a personality, like have a personality, express it really clearly. And by doing that, some people and other organizations will want to be part of that because they'll see they'll see similar traits and characteristics go, yeah, I can associate with that.

18:40Other people will go, that's not for me. That's totally cool. Like literally, if you want to work at Goldman Sachs, that's great. Right. Chances are you won't want to come work at Octopus. I'm totally cool with that. It's not a problem. But have a personality and express it properly. And then when you're hiring people into your business, whether they're the leadership team, whether it's founders you're going to bring into the group, whether it's an employee starting their career, interview them brilliantly and hire for values ahead of functional expertise. Always hire for values, ask brilliant interview questions once people aren't expecting.

19:12And you must never, ever compromise on that because the thing that creates a culture and the thing that creates values and behaviors are the people in the company. Give us an example of that. A question? Yeah, like interviewing for a value-based question rather than a functionality-based question. Do you want to answer one? Can I try? You can try, okay. You can tell me if you can. You won't long a kit. You're fired. So tell me something about you that makes you vulnerable that you wouldn't normally share in an interview.

19:42Oh, my God. Something about me that makes me vulnerable. I'll tell you something about him that's very vulnerable if you want. What do you think? What, something that makes me vulnerable? You love your friends, but you'd never admit it on camera. Oh, I wouldn't have to admit it. That's a great question. That's a good question. Really good question. Right, and you don't have to answer it. It's good, it's very unfair. But there are three ways people answer it. They either refuse to answer it, because they're normally middle-aged men and they don't like doing that kind of stuff, or they'll make something up, which is a nonsense, which they say, oh, sometimes I'm a bit of a perfectionist.

20:16Oh, that's the question. Oh, really? Okay. or they'll say something which is reassuringly human right because you'll be as messed up in some parts of your life as i am as you are like we all are we've all got stuff wrong with us or a bit different or we think it also and we all carry to some extent a little shield around with us and we just hide all the stuff that doesn't quite work properly men are particularly bad at this and it's like i'd much rather be in a team with somebody where you just drop just drop your shield just be you right you'll be amazing at some stuff you'll be less good at other stuff and if if we have that really straight conversation at the start, that's cool.

20:48We're on the same team and we'll help each other. And I want to work in that environment. I don't want to work in an environment where I'm pretending to be something I'm not because that's draining. I'm going to be thinking about that question on the train. I don't know. Good. You mentioned there was three options there. And you might say actually we've never had the fourth, but there feels like there's a fourth option where somebody would say maybe something too vulnerable. You know this whole authentic self where it's a case of be vulnerable and then you're sharing something online. Have you had experiences where there is a fourth where people can be too forthcoming and actually it's a case of you've maybe shown a side of you that's vulnerable but that wouldn't work with Octopus?

21:26I don't think so. And people have given very personal answers about mental health, about relationships, about things that's happened in their family or past. They've given me stuff that's like really, really, I don't want to never go anywhere with that. I don't want to tell anyone that. It's just, but I don't think there's a wrong or a right answer. It's how you approach it. Everyone's life's a bit different. and life throws some pretty nasty things at you. Everybody is in how you deal with it. And I think people are prepared to be open and talk about that. It's a really nice characteristic. I think it's quite a strong characteristic.

21:58But I don't think I've ever had someone where I've gone, oh, maybe drug problems would be a step too far. But no. It's a powerful question. So then, I mean, let's keep on with this path. So hiring, what have you learned about onboarding employees? So when they come on, setting them up for success, how do you make sure from day one they're aligned, they feel rewarded, they feel ready for the challenge? So really important when they join Octopus, they go through induction. And I think I don't have most companies do induction. They probably outsource it to the HR function and say, go and induct those employees.

22:35The people doing induction should be the most senior people across your organisation, your group, saying this is the kind of company we are and this is what we should expect. So everyone wants to read monthly inductions for people. And then for me, what I try and do is I, not try, I do, but for the last 17, 18 years, I've written a Friday update. So every Friday, I'll write about something I think is interesting. It might be to do with life, the world, occasionally to do with Octopus, but not normally. And I say, this is just something I think is interesting. And I'll write about it every Friday because I'd like them to come and talk to me as Simon, not as the group CEO of Octopus, because that's a bit weird.

23:09And therefore they wouldn't come and talk to me. I work in reception so people can see me because I'm nosy and I can see what's going on. But so you can have this conversation as me rather than as a job title. And by writing about me and what I think about things, it's very closely linked to Octopus and its personality because we're kind of one and same, hopefully. But it also gives them an insight into how I'm thinking about the world and therefore I'm thinking about Octopus and the position it has in society and the world it's part of. So I do as much of that. I think communication is really important.

23:36And then rewarded, I think everybody working in an organization should be a shareholder in that company. You should all share in the wealth that you all helped to create. I don't believe in a world where founders set up a business and they keep 100 % of the equity for themselves and they have employees. I wouldn't want to be part of that company. I don't think it's right. I don't think it's fair. And we've created hundreds of millions of pounds of wealth for people working for Octopus who didn't own any shares when they joined because of what we'd all helped to create. But you did a whole bunch of that.

24:04And that's really cool. And we've all been really lucky. And that's really nice to be able to do that. There's a guy called Pete Mendham who used to, he joined us when he was probably 63, something like that. And he used to help, he used to deliver the post around the office, he used to move all the desks when we moved within the office when teams were moving and all that kind of stuff. And he's a really nice man. And he took part in the share incentive plan when we introduced it in 2013, I think. And he's made hundreds and hundreds of thousands of pounds all tax-free for him and his family and every time he comes in whatever the weather's like whatever time of year he's always in shorts he gives me a great big hug and he means it right because we've helped change his life and his family's life and that's really nice and makes me really proud and um and he was part of that journey and a big part of the culture and what we stood for and i'm like yeah that's cool that's that's a nice thing to be able to do so it feels like that share incentive scheme is an example of keep keeping people incentivized in the business long term as well, obviously, is a corporate way of looking at it.

25:05It might be the way you think about it. What are some other ways maybe leadership, management, can be thinking about making sure people are in it for the long term, not just for the classic, you know, in sales? I think it's 18 months, for example, and they start saying, I'm off to my next paycheck. Well, I think sometimes companies will sit there and go, you've got to realise it's two-way, right? If I don't create the right environment for super talent, I think companies should have cultures which are extremely meritocratic. So everyone should not have to jump through the same hoop. We're not painting by numbers.

25:40Sometimes you will hire someone who is absolutely exceptional. And you might pick them up. You might put them in a different part of the group. You might give them way more responsibility. You might do all kinds of different things. You might treat them quite differently. I think that's all fine. I think you can have programs for your very, very talented people. And I think there can only be 5, 10, 15 people on those programs. That's fine. It could be open to everyone. and then you've got to create a culture. We have something that's really cool actually, one of the best things we've done. We created something called Octopus Springboard, which is an internal entrepreneurship program, which says to anyone working on Octopus, if you've got a really good idea, come and pitch it to the team that look after Springboard.

26:14If they think it has legs, you come pitch it to me. If I think it has legs, we'll give you some of the balance sheet. We'll give you 40, 50 ,000 pounds. We'll set you on your way. You're going to start your company outside of Octopus. We'll do everything we can to help you. And if it doesn't work, we'll give you your job back in the next 12 months. Right. that's a cool program to encourage entrepreneurship and risk-taking within everyone working at Octopus. And also I feel really lucky to be an entrepreneur, so I'm like, well, that would be nice if other people could do the same thing. We second our employees into startup companies for three months to say, go and see how a startup does it, and then come back to Octopus and take some of those learnings and apply it to a much bigger company and a bigger organization.

26:50That's cool as well. That's like mini springboard. But yeah, the Octopus springboard program is really good. Wow, I want a job. Thank you. Have you got any examples of that springboard program ideas that have come to you? Well, we've got the last one. We've had like 10 people, 11 people leave on it so far. The last one was Jack and Lucy, who used to work for me actually, and they've built something called Groundswell. And Groundswell is a sustainability business. So sustainability, when it was first invented, all businesses went, oh, yuck, don't really like that. And then we did what we normally do, which is we massively overcomplicated the whole thing.