by Bower, Tom
After the Olympics, oil prices fell below $100 a barrel, and in September 2008 Branson did an about-turn. Visiting Lisbon, he explained that the economic crash had changed his philosophy. ‘I think a real collapse of oil prices is possible at this time,’ he said with relief. ‘Maybe back down to $56 a barrel.’ One month later, he somersaulted again. Cheap oil was anathema to environmentalists convinced that governments should be compelled to embrace renewable energy. Virgin’s task force on fuel prices, chaired by Whitehorn, predicted that a ‘peak in cheap, easily available oil production is likely to be hit by 2013’. Branson fell into line. He joined the chorus predicting oil prices of $200 a barrel by 2010, and even announced the creation of Virgin Oil – his plan to build a £1 billion refinery to supply aviation fuel. This was pure fantasy. Faced with a surplus of refining capacity in Europe, the major oil producers were selling or closing their plants. Investing in a new refinery was far beyond Branson’s finances.
On the same day in September 2009 that Branson urged business leaders from over fifty countries meeting in London that recovery from recession ‘must be environmentally sustainable, moving away from the excesses of the Industrial Revolution to a new future based on protecting and valuing our natural resources’, he flew on his Falcon to New York to attend that year’s Clinton Global Initiative. (At least three scheduled flights departed every hour from Heathrow to New York.) He was met by staff from the War Room.
Their idealism was evaporating. The financial crisis had destroyed the evangelism espoused by Claire Tomkins and other campaigners. ‘Everyone is in shock,’ Tomkins declared. ‘What can we do next? Whatever, it will be a long slog.’ Looking at Branson’s team, she decided, ‘It’s the end of euphoria. There are too many defeats and negative rhetoric against climate change. We can’t run any campaigns. It’s too hard to raise money. At the beginning we’d been told that they would be raising tens of millions of dollars, but that hasn’t happened. It was the inflection point.’ The War Room was to be shrunk. Its income from the trustees had fallen from $5.5 million to $1.1 million and its losses stood at $2.5 million. She and others decided it was time to leave. By then, Travis Bradford had also left. ‘Nothing new was launched,’ he said about an organisation struggling to survive. ‘They were looking for the next big thing to grab attention and build momentum.’ Four years later, the War Room had still failed to find a new ‘big thing’.
In 2010, oil prices did not hit $200. Branson postponed the ‘apocalypse’. In another report, he now predicted that the oil crunch would occur in 2015. His warning of a world without oil was endorsed by Sir David King, the British government’s former chief scientist. King pronounced in 2010 that the world’s oil reserves had been exaggerated by 33 per cent and that by 2014 demand would exceed supply, causing shortages and price spikes. To support the doomsayers who claimed peak oil was just four years away, Branson published the Virgin Review of the Environment. The ‘proof’ was provided to him by experts including Jeremy Leggett, a manufacturer of solar panels who predicted an oil crunch within five years. Helped by Virgin publicists to appear on BBC TV’s Newsnight, Leggett argued on Branson’s behalf that the only alternative to oil’s gradual disappearance was renewable energies and, particularly, solar panels – produced by himself.
To promote the accelerated use of renewables, in December 2010 Branson jetted to the World Climate Summit in Cancún. Unusually emotional, he told his audience that oil prices would soon hit $200 and never fall. The world’s reliance on oil, he continued, would cause the American unemployment rate to rise to 15 per cent. ‘The next five years will see us face another crunch – the oil crunch. Our supplies of oil and natural gas are being rapidly depleted.’ Governments and business, he urged, needed to switch rapidly from oil to renewable energy. ‘Just do it,’ he pleaded. ‘For God’s sake. Get off your arses and get on with it.’ If governments failed to do more, he predicted, the world would suffer an ‘unbelievably painful’ economic slump. ‘We’re going to have the mother of all recessions if we don’t sort out our energy policy fast.’ To his audience, he was a crusader. Encouraged by their response, Branson added an attack on the world’s shipping companies as ‘culprits’ for emitting ‘one billion tons of carbon dioxide every year’. He won applause by demanding that shipping be instantly taxed to encourage them to cut their emissions by 25 per cent over the following twenty years. Pertinently, he forgot Hinchliffe’s reprimands and side-stepped the IMO’s statistics stating that emissions were a quarter of his assertion, while taxes on air travel were not even mentioned.
Beyond the media and supportive audiences, Branson was struggling. He and Whitehorn had set themselves up as leaders of the environmental campaign in Britain but their forecasts were unconvincing. ‘Because we’ve been believers that the possibility of peak oil is real,’ Whitehorn said, ‘we’ve been investing in diversifying our businesses. That’s why we’ve become one of the UK’s largest long-distance train operators.’ In reality, Virgin Trains started in 1992, long before Branson’s interest in the environment. ‘We’ve also been investing’, continued Whitehorn, ‘in new aircraft types, which are more efficient, and we’re looking at issues such as carbon composites.’ The choice of materials used to manufacture planes was beyond Virgin Atlantic’s influence. The small British airline had no option other than to lease aircraft offered by the two principal manufacturers. Whitehorn’s opinions, he discovered, were disregarded in Whitehall. The Department of Energy, he complained, ‘ignores not just our conclusions but our very existence’. Both Branson and Whitehorn wrongly assumed that Virgin’s admission of participation in the cartel to fix the fuel surcharge had been forgotten.
Rebuffed by civil servants, Branson once more appealed directly to the prime minister. He urged David Cameron to prevent oil traders from speculating and, through price-fixing, being ‘allowed to make large sums at the expense of us all’. Prices, he said, were artificially increased by 30 per cent. ‘I think there should be strict rules set as to how much trading can be done in the oil market,’ he wrote. ‘Billions of dollars is being traded on oil futures which is falsely pushing up the price of oil.’ He provided no evidence to support his allegations. On the contrary, the proof gathered in America showed that the oil market was too diverse to manipulate, except for brief moments in unusual circumstances.
The disconnect between Branson’s convictions and reality could be explained by his lifestyle. Cocooned on Necker, travelling on his private jet among like-minded billionaires, he was isolated from the wider debate. His predictions of an apocalypse were contradicted by the facts: the West’s demand for oil was falling; new supplies had been found in Brazil, Kazakhstan and Iraq; and with new technology additional oil was being extracted from existing wells. ‘Peak demand’ for oil was more likely than a peak in supplies. Rising oil prices were caused not by shortages or speculation by traders but by OPEC, the cartel of the world’s major oil producers, who daily limited the amount of oil produced to protect the high prices. Oil’s politics and technology were a foreign language to Branson. Simplicity was his credo: the inevitable end of oil would be followed by the era of renewable fuels.
The popularity of alternative jet fuels had been boosted by Branson. As his publicists highlighted, his advocacy had been followed by BA’s agreement in February 2010 to buy jet fuel manufactured from organic waste by the Solena Group in the US once the factory was completed in 2014. Branson himself had invested in Solazyme, a Californian biotech company that was spending $60 million to produce fuel from algae. An alternative supplier puffed by Virgin was AltAir Fuels. Based in Seattle, the embryonic company committed itself to supply 750 million gallons of jet fuel manufactured from farmed saltwater-plant and camelina feedstock to fourteen airlines.
The parade of Virgin’s investments was applauded by environmentalists. Despite the lack of progress and dubious science, the Virgin brand benefited from the portrayal of Branson as a concerned citizen spending millions of dollars to save the world.
The jigsaw was completed by Virgin Unite, the charity set up by Branson.
Many billionaires in their sixties present themselves as benefactors by giving away in excess of $50 million every year from their bank accounts or a trust to the underprivileged. Branson took a different path. Business, he believed, should help the disadvantaged to help themselves. Under the banner of Virgin Unite, he cast business as ‘a force for good, helping people to thrive in balance with our planet’. He offered Virgin and himself as a beacon of selflessness. ‘We unite people’, he wrote, ‘to tackle tough social and environmental problems in an entrepreneurial way for the public benefit.’ Branson was not offering charitable funds like Bill Gates to eradicate Aids and malaria or the Rockefellers to foster education; he said his fortune would ‘focus on great ideas and areas where we feel there is a gap’. In a declamation placing Virgin among the global leaders, he explained: ‘Our aim is to help revolutionise the way that governments, businesses and the social sector work together, in order to address the scale and urgency of the challenges facing the world today.’ His proof of Virgin’s contribution to the cause was to have ‘incubated and launched the Carbon War Room and the Elders’ – a group of retired politicians financed by Branson to dispense advice to the world. The next stage was ‘a new Global Leadership Initiative driving a new model of business leadership which would see businesses achieving charitable objectives as a fundamental part of doing business’.
Virgin Unite’s lofty ambitions in 2011 amounted to encouraging volunteering, campaigning in the media against homelessness, and making Virgin employees aware that they should encourage entrepreneur ship. The charity’s principal bequests were £209,000 towards the establishment of an HIV clinic in South Africa and a small contribution towards maternity clinics in northern Nigeria. The accounts did not clarify all the bequests made from the £5.7 million budget – except that the source was £3 million in cash, with the remainder in-kind resources donated by Virgin companies. The first accounts reported that staff costs were £2.2 million, while £1 million was lost in an investment managed by a hedge fund. The charity claimed to have generated ‘£20 million of free media coverage’. Spending less than £1 million on two health projects represented, in Branson’s words, funding ‘to tackle tough social and environmental problems in an entrepreneurial way for the public benefit’. Some had noticed a disparity between Branson’s promises and delivery.
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Tim Flannery and Crispin Tickell had been pleased to be associated with Branson’s Earth Challenge. Since the triumphant meeting in Kensington, Branson had praised ‘a bold call to action which stimulated a lot of thinking around the world’. In the four years since the $25 million prize had been offered, Virgin had received 2,600 proposals. Among them was a submission by Alex Michaelis, the designer of David Cameron’s eco-home in London. Michaelis was among the many waiting to hear a response. After examining the submissions, Alan Knight, the Earth Challenge director, had announced that there was no winner. ‘There’s no silver bullet,’ he explained in November 2011. Flannery and Tickell were surprised. Both understood that Branson would immediately give $5 million to the winner. ‘It might have come across as a beauty contest with an instant prize,’ Knight replied, ‘but we said it would take ten years before a winner was announced. It was never going to be a quick cheque.’ That was not Tickell’s recollection about the original invitation. Branson’s staff seemed to be prevaricating.
‘You have to announce a winner,’ he told Knight’s staff.
Instead, Knight produced a shortlist of eleven ‘pioneers’ with whom, he said, ‘we will work’. He added, ‘Richard is very excited we have eleven pioneers. It’s first past the post, not the best at the date. We will decide.’ The prize seemed impossible to win.
‘It’s not thought 100 per cent through,’ said another person involved with the contest, suspicious whether Branson would ever pay the money.
‘Branson launches something on Monday’, concluded Tickell, ‘and has forgotten it on Tuesday.’
The competition began to attract criticism from environmentalists as ‘barmy geo-engineering which is speculative and useless’, motivated by a man responsible for ‘a carbon-manufacturing business who promises to make it better’. Branson’s arrival in Calgary, the capital of Canada’s polluting tar-oil industry, to promote the competition’s shortlist brought him criticism for being the ‘friend’ of Big Oil, for being ‘ill informed’ and for causing the public to be ‘duped by projects based on incomplete and in some cases downright false information’. His carbon-capture schemes were described as ‘nonsensical’. No one even mentioned any more his $3 billion contribution to Clinton’s campaign against global warming.
11
Virgin Speed
Defeat, Branson enjoyed saying, caused him little fear. ‘My mother taught me never to look back in regret but to move on to the next thing. I have fun running all the Virgin businesses so a setback is never a bad experience, just a learning curve.’
Virgin’s name had been slapped on to many ventures that had failed but, until 2008, pictures of Branson surrounded by blonde Virgin Atlantic hostesses or kite-surfing across the Caribbean with a nude ‘girlfriend’ clinging to his back had entrenched Virgin as the brand for the hip to fly, for the cool to buy their music and for the healthy to work out with at Virgin Active. Virgin at its peak epitomised the crazy spirit of teenagers disrupting the Establishment. Aspiring rebels worshipped Branson as the champion of the counter-culture. He was the modish billionaire inviting the public to party and profit, and Virgin’s customers defied convention by subscribing to a heroic maverick. Across the globe, his image as an intrepid buccaneer mitigated his declining fortunes.
An attempt to launch Virgin Radio in Dubai had been unsuccessful. Virgin Vie, his clothing company, was heading for closure, joining Virgin Cars. Virgin Cosmetics, which Branson had said in 1997 would have a hundred stores within five years, was running into insolvency. To save embarrassment, the founders were paid £8.8 million and the company’s name was changed to Effective Cosmetics. In America, the Virgin Megastores, which had opened in Los Angeles in 1992 and peaked in 2002 with twenty-three shops, were dying. Branson blamed supermarkets for selling CDs too cheaply, an odd stance for the self-proclaimed consumers’ champion, who regularly accused rivals of ‘ripping off’ the public. In Britain, after transferring twenty-two Megastores rebranded as Zavvi to its managers, he watched the chain crash with losses of £122.5 million, exposing Virgin to liabilities of £57 million. In New York, an attempt to launch Virgin Comics in collaboration with Gotham Entertainment of India ended less than two years after it began. Virgin Vine, a new wine label, was launched and disappeared, and at the same time Branson finally quit the music business. V2, the successor to Virgin Music, had been established in 1996 with finance from the McCarthy brothers. Two years later, the business was bust and the brothers could barely afford to buy a pint of milk. After squeezing the McCarthys out of the business, Branson transferred V2 to Morgan Stanley, the bank who had loaned money to the failed venture, and Virgin abandoned the music business. Virgin Health Bank was another transitory business, unveiled in 2007 and encouraged by Gordon Brown, the then chancellor of the exchequer. Flagged as a non-profit blood bank to store stem cells taken from umbilical cords, Virgin Health Bank was established in partnership with Professor Christopher Evans, a biotechnology entrepreneur. Sufficient space was available, said Branson, to store 300,000 frozen samples for twenty years in order to regenerate tissue and treat blood cancers. Within the first months, the £1,500 ($2,940) charge was considered too high and the service was rejected by parents and the NHS. The facility disappeared from Britain.
Junking failed businesses never deterred Branson from announcing new ventures. In Miami, he told local journalists that Virgin was going into cruise holidays, but he failed to interest the owners of existing cruise lines in a partnership, so his idea was forgotten. During a visit in 2008 to Macau, in the Far East, he announ
ced that, in co-operation with Tabcorp, an Australian gambling company, he was going to compete against Las Vegas’s moguls and open a Virgin casino there. Although he had no experience of gambling – unlike other tycoons he rarely played roulette or blackjack in Las Vegas – Branson announced at the end of his first day in the city that he was ‘in advanced talks’ with Edmund Ho, Macau’s chief executive, to build a $3 billion resort. He was ‘close to buying’, he said, a fifty-acre plot for three hotels and a casino. ‘We hope to get all the boxes ticked in the next couple of months and start developing the site soon afterwards.’ Once Ho realised that Branson offered no money and expected Macau to pay for hosting the Virgin brand, the discussions ended. Virgin’s substitute was a virtual casino on the internet.
Casting around for other opportunities, Branson envied the fortunes earned in Russia’s mineral-rich economy. He flew to Moscow in search of business and associates. Virgin Atlantic, he announced, would soon be flying to the city from London, followed by the launch of a Virgin airline flying within Russia. ‘We’re in discussions with two or three different partners in Russia,’ said Branson, predicting an agreement within three months. He also announced the launch in Russia of Virgin Mobile and Virgin Connect, his new internet company. Virgin Connect, he said, under the management of Rostislav Gromov of Trivon, a Swiss company, would capture 10 per cent of Russia’s market within five years. ‘We will demystify the complex tariff jungle and bureaucracy seen in the market.’ His script was identical in every country, but, surprisingly perhaps, he attacked the oligarchs, his putative partners. ‘Having a large boat’, he said, ‘isn’t going to give you a lot of satisfaction and it gives capitalism a bad name.’ Branson believed that owning private islands and a fleet of planes distinguished him from the oligarchs’ gin palaces. Virgin made no progress in Moscow.