>>Martin Sorrell: As usual, I find myself in 150% agreement with Jim.
This is a process of -- just listening over the last hour or so, it's a process of readjustment.
And, you know, Niall -- I studied history, not at university but with my close friend
Simon Schama, which always makes Niall tremble.
But, you know, I just think -- I believe in cycles, and this is a cycle.
And if we went back to 1820, China and India would be 50% of the world's GNP, which is
where Goldman and Jim and his colleagues predict it will be again shortly, and it's just inevitable.
We can do one of two things.
You know, we can either kick the can down the road again and avoid the evil day or we
can -- we can adopt Niall's plan, but there's a third leg that has to take place which he
touched on.
It is that we have to get the structural inflexibility right.
And that means pain the other way.
It's going to be extremely unpleasant.
I see, you know, a headline in the FT this morning.
No fault dismissal is now going to become the latest issue that Vince Cable follows
out of agreement with the coalition, and it's going to be -- it's going to be unpleasant,
that side, too.
So what do you do, you know, whilst all this conversation is going on, if you're trying
to run a business?
And the answer is, you know, you do what we did this morning.
You open up Myanmar, for example.
66 million people.
A mini Vietnam.
Or not so much a mini Vietnam.
Potentially as strong an economy as Vietnam in opportunity, which is a mini China.
On Friday, we acquired the leading digital agency in Russia, Grape.
And that's what you have to do.
So I'm totally in agreement with Jim.
You have no choice.
You know, our -- ironically, pension funds look at companies, institutional investors
look at companies on a quarterly basis, but ironically, we have a longer time view than
politicians.
Politicians are concerned about being -- you know, they're in the business to be reelected,
and that's it.
So if you're at the beginning of a five-year term, or 40% into it, like the coalition here,
you have a little bit more time to be flexible.
If you're Obama, in America, where you have an election every two years -- of course you
have the midterm Congressionals -- you have very little room to maneuver if you want to
stay in power, which is -- which is what it's all about.
So we have to take -- ironically, we have to take a much longer-term view.
And what am I trying to do with WPP?
Well, you know, our strategy is new markets, so that's the BRICs and that's the MINTs,
however you want to define it.
It's new media.
It's what Google stands for, whether we're talking about Facebook or whether we're talking
about Twitter or whether we're talking about Apple or Amazon or whatever.
It's about consumer insight, trying to figure out what the hell is going on in the consumer's
mind.
And lastly trying to get our people, our 158,000 people in 107 countries, to work together
more effectively.
So I'm totally focused on that.
In a way, I find these conversations depressing, distracting, and they're off strategy, as
far as I'm concerned.
You know, you remember what Macmillan said.
Macmillan said "Events, dear boy.
Events, dear boy."
When somebody said, you know, "What politics like?"
"Events."
Now, a member of the government, the cabinet, said that to me exactly four weeks ago in
response to the question "Why does the government not have a strategy?"
"Events."
Well, I mean, you know, if you're worried about the red tops and what the red tops are
saying every morning -- which is what they do worry about, the ministers -- what do you
expect?
>>Stephanie Flanders: Okay.
But one -- >>Martin Sorrell: So -- so I think you just
need to be realistic about it.
>>Stephanie Flanders: But one classic political strategy, for either side of the Atlantic,
is "no crisis tomorrow."
That is the main thing that will often animate politicians.
>>Martin Sorrell: Yeah.
>>Stephanie Flanders: But are you saying as a businessman that you would rather Europe
be plunged into chaos -- >>Martin Sorrell: No, no, no.
>>Stephanie Flanders: -- over the next six months --
>>Martin Sorrell: No, no, no.
>>Stephanie Flanders: No.
I'm serious, though.
Would the Greeks be -- well, that is kind of what you're suggesting.
>>Martin Sorrell: Let's take Niall's plan.
Let's say -- you know, I always look in these discussions for concrete proposals, and you
very rarely get them.
Let's take Niall's program.
Let's let Eurobonds out.
But there's a third leg -- you know, I was just reading a breaking news before I came
up which exactly follows -- not completely follows Niall's thesis or diagnosis, but then
adds "you have to deal with labor market inflexibility."
It is high -- you know, I'm not a great fan of Jean-Claude Trichet, but he has been consistent
over the years before he left the ECB.
He's been consistent about high unit labor costs being a problem and there has to be
a readjustment.
We have to get more -- But, you know, going back to your intro, whether
it's the advertising industry -- you know, "We think we're so wonderful here in London"
or "We think we're so wonderful in New York" and we traipse around the world, we give festivals
and we tell all these people and we call them emerging markets.
They're not emerging markets.
They've emerged.
China is the second largest economy in the world.
7 trillion, $8 trillion.
America's 15.
Where are we?
>>Stephanie Flanders: Okay.
But is the lesson of the last couple of years that someone like you, we ought to just tune
out of Europe, if we possibly can, or leave, for that matter --
>>Martin Sorrell: No.
We have to -- >>Stephanie Flanders: -- and wait for 10 years
until Jim O'Neill's solutions have all come --
>>Martin Sorrell: No.
You have to look at it like Detroit looked at it a few years ago.
You know, the Big Three in Detroit, Ford did not take government money but Ford got its
act together under Alan Mullally, Jim Farley, Mark Fields.
They all got their act together.
>>Stephanie Flanders: Diana was talking about that.
>>Martin Sorrell: The other two companies -- right?
-- went into bankruptcy.
You know, to succeed in America, you have to get into Chapter 11 and you shore yourself
of the health care liabilities and the pension fund liabilities.
That's what you have to do.
And you have to understand that it has -- that it is an unpleasant adjustment.
This is not -- you know, I -- one statistic that always sort of amazed me.
You remember when Apple had its problem with Foxconn and about cheap Chinese labor?
And the Chinese government said, you know, the -- the compromise was Chinese workers
will not work for longer than 49 hours a week.
What was Francois Hollande elected on?
35-hour week in France.
Tells you everything.
You know, whether those are productive hours or they're unproductive hours, we have to
adjust.
We have to get our minds around the fact that we're not in the catbird's seat.
And by the way, I was thinking about that game of chicken.
It reminded me of the Jimmy Dean film.
I can't remember the -- it may be that nobody in the room is old enough to remember this,
but in the James Dean film where they have the two cars.
And you remember what happens in the chicken run is that -- not James Dean, he jumps out
of the car, but the other guy, he gets his sleeve caught in the door and he goes over
the cliff.
So there's always the danger.
And I agree that this is a game of chicken and Angela Merkel and the Germans have to
take this position, they have to take this sort of front with the Greeks.
It also reminded me a little bit about Chelsea's strategy against Bayern.
You know, the rope-a-dope -- the rope-a-dope strategy.
You know, you take the -- the Mohammad Ali, "I'm standing on the ropes, I get bashed about,
I protect myself and then I -- you know, I come out, I break out and I score," or I win
in that particular case.
So the Greeks actually -- Chelsea -- >>Stephanie Flanders: I wonder if there's
anyone who came here today not knowing all about that game because they would certainly
find it very mystifying, but they bloody well ought to know about that game.
>>Martin Sorrell: Yeah.
That would be fun.
It's worldwide.
>>Stephanie Flanders: But do you think -- I mean, there will be a lot of people in this
room who actually think, a little bit similar to what Jim was saying, that this is -- you
know, what governments do and these nice headlines about these nice figures -- you know, Chancellor
Merkel and Francois Hollande -- is not actually central to what they do anymore and not central
to the direction certainly of the global economy.
Because what's actually happening is that people are succeeding despite their national
economies, rather than because of them.
Is there an element of that in your business or do you feel --
>>Martin Sorrell: No.
No.
I just think it comes down to very -- You know, I'm sort of simple in my thinking.
It's not complicated.
You know, for anybody to believe that 1.3 billion people in China, or 1.1 or 1.2 billion
people in India, can't produce better advertising agencies or research companies or identity
companies or PR companies than 60 million people in the U.K. or in 300 million people
in the U.S. is living in a dream world.
I mean, over time, that is going to happen.
You know, for 200 years, history has been against China, India.
It may not be in the next 200 years.
It's going to be in favor.
And by the way, you know, all this stuff about America, Diana was right.
You know, a couple of years ago the Europeans looked at America and said "They got us into
this mess," right?
But here again, we're here between -- sort of between Bear Stearns and Lehman now.
A lot of people believe what's going on now is just a forerunner to another September
2008 crisis with Lehman.
By biggest worry, actually, is not about Europe or western Europe.
By the way, there's one other thing.
To be quite clear, western Europe and eastern Europe are two totally different things.
Germany, Poland, and Russia -- you know, the same way the world is moving eastwards, I
believe Europe is moving eastwards, and the center -- and this raises lots of political
issues.
The axis -- and I use that word advisedly.
The axis of Germany, Poland, and Russia is an extremely powerful one.
Jim's statistic about Russian GNP is absolutely on the money.
You know, Putin faces, I think, the issue of trying to deal with the regional integrity
of Russia.
It's not about the demonstrations in Red Square.
Those are, quotes-unquote, friendly demonstrations.
It's about maintaining the regional integrity of the republics.
Because they were -- and I was in -- don't ask me why, but I was in Tatarstan a few weeks
ago and they give 78% of their local revenues to Moscow, and the president and prime minister
of Tatarstan spend more time in Moscow trying to get the money back than -- than anything
else.
So think about -- and I think the issue is in America, because I think after the election,
they will be unable to kick the can down the road.
I personally think -- this is a personal view -- Obama will get reelected, although the
polls are starting to tighten up, but we'll have deadlock, gridlock.
Republicans will control the House or the Senate or both.
And so you'll -- the problem is that you get into that gridlock situation and then they'll
have to come up with some form of Simpson-Bowles solution.
They won't be able to kick the can down the road, inevitably.
I was at the -- sorry to say this -- the Microsoft conference last week and there was a lot of
gloominess about that particular issue post the election.
>>Stephanie Flanders: We're going to finish up in a minute.
Just to take us back to where we started -- >>Martin Sorrell: Yeah.
>>Stephanie Flanders: -- various stories about people searching again for the drachma symbol
again on their keyboards.
>>Martin Sorrell: Yeah.
>>Stephanie Flanders: You know, is that something that internally you're preparing for?
Not having a Euro?
>>Martin Sorrell: Yes.
We sweep every night, you know, out -- we sweep every night.
The Telegraph was slightly inaccurate on a number of -- I mean, we're not moving to Singapore.
It's amazing how journalists actually seek to sensationalize --
>>Stephanie Flanders: How is that the answer to "Do you expect the" --
>>Martin Sorrell: No, but I -- because they also -- I wanted to get that one in.
[ Laughter ] >>Martin Sorrell: They also -- they also said
that we -- we move our money into stronger currencies out of the Euro.
That's not quite true, but we do sweep every night, to protect ourselves.
>>Stephanie Flanders: So when you say "sweep," you mean make sure that you haven't got any
outstanding positions on the Euro that will get you in trouble.
>>Martin Sorrell: Yes.
That's right, that's right.
>>Stephanie Flanders: Okay.
>>Martin Sorrell: So essentially, we've taken that sort of action to try and --
>>Stephanie Flanders: But in a year's time, do you think 17 countries will still be in
the Eurozone?
>>Martin Sorrell: I still feel that we don't know what the implications are of Greece pulling
out.
I still think it is a game of chicken.
I still think there will be some resolution of the -- that the Germans will ante up.
It looks to me that this is sort of similar to west Germany buying east Germany.
It's unpleasant in the short term, but in the longer run it's to the Germans' benefit.
I mean, who has benefitted from the Euro?
The Germans.
Their free-floating mark.
They would have been priced out of the export markets.
So I just think at the end of the day their self-interests will prevail.
I mean, you said, you know, you have your choice between price stability or this, and
I think I would go for this.
>>Stephanie Flanders: Sir Martin Sorrell, thank you very much.
>>Martin Sorrell: Thank you very much.
[ Applause ]