Finding My Virginity: The New Autobiography

by Richard Branson

  Cable was against the deal in principle, but made his opposition personal, too. My past was catching up with me. When I was nineteen, I made one of the most stupid decisions of my life, selling records intended for export to British customers, and not paying tax on them. I was caught, thrown in jail overnight and fined three times the tax I had not paid. HM Customs & Excise didn’t press charges, I did not get a criminal record and I vowed to myself never again to do anything that would mean I couldn’t sleep with a clear conscience at night. I decided to share the story myself so other people could learn from it, so I didn’t have any skeletons in my closet, and so I wouldn’t forget it. Thirty-six years later, however, it seemed I wasn’t the only one who remembered my mistake.

  While the debate raged on about whether Northern Rock should be nationalized, I was still extremely confident the government would do the best thing for the bank and the country. As the pressure and criticism continued, we were asked to increase our government guarantees and put in up to £200 million extra in equity warrants. The risk of the deal was skyrocketing, while the prospect of any returns was nose-diving. Unsurprisingly, rival bids from private equity groups disappeared at this prospect, but we held firm. We seemed to be the only option for the government.

  Then, at 2 p.m. on 17 February, Gordon Brown and Alistair Darling announced the nationalization of Northern Rock. Ironically, given where the spark of the idea had come from, I found out from watching a BBC news report. I was livid. I had seen Chancellor Alistair Darling early in the process and he had agreed to let me know the final decision personally. Now here I was learning about it from the TV. I phoned Patrick McCall, who was working on the deal for Virgin Group.

  “The deal’s off—they’re nationalizing,” I said.

  “Very funny, Richard. I’m not falling for that.” He thought it was a wind-up.

  “I’m serious, turn on BBC1.”

  Patrick switched on his television to see a report on Northern Rock, but still couldn’t believe it: “How the hell have you got the BBC in on the joke?”

  Eventually, Gordon Brown telephoned me to explain their decision and requested that I didn’t make too much fuss. I was fuming, and began writing a stinging opinion piece about shady dealings at Downing Street as soon as I got off the phone. I saw sense before hitting Send, though, realizing little good could come of this—there is no point burning bridges. Instead, I jumped in a boat from Necker to Moskito Island, where we were looking at a new sustainability project. As Dr. Daniel Kammen talked me through computer modeling for solar panels, my mind was elsewhere.

  “I’ve just heard that they’re nationalizing Northern Rock,” I interrupted him. “So if it’s all right with you, I think I’m going to get drunk.”

  “Gordon Brown may come to grasp a truth I learned long ago,” Jonathan Calder subsequently wrote in the New Statesman. “There is nothing more dangerous than a disappointed Virgin.” His joke wasn’t too far off the mark. While we were frustrated at missing out on Northern Rock, we pushed on with other plans for Virgin Money. I was always looking for new opportunities to expand the brand, though not all of them were as enticing as they first appeared. In the mid-2000s lots of people were excited about a new commodity that Goldman Sachs wanted to invest in. I had never heard of it, found it quite confusing and balked at the amount of money required. We decided to bide our time and get more details. As we investigated the deal further, I grew even more skeptical about the damage it could do to our brand, and we turned it down.

  I forgot all about these commodities until the real estate lending crash sent the financial world into disarray. Suddenly the commodities were all anybody was talking about: subprime mortgages. Many experts placed lots of the blame for the crash on subprimes, and Goldman Sachs were fined $550 million by the US Securities and Exchange Commission. As well as forking out the second biggest penalty ever paid by a Wall Street company, Goldman Sachs also had to state that its subprimes marketing material—the same documents we had been looking at—had misled investors with incomplete information. It was a timely reminder to always examine every aspect of a deal, and go with your instinct if it doesn’t feel right.

  —

  As it turned out, losing our Northern Rock bid in 2008 may well have been a blessing in disguise. After the bid, we concentrated on expanding Virgin Money’s existing services, while our international brand also grew around the world. But when a new Conservative government came to power, Chancellor George Osborne announced Northern Rock was being put up for sale to the private sector in June 2011. We decided to enter the fray again. We made a jumbo-sized bid of £747 million—a nice number for an airline owner. We had put the best package together, and this time the government agreed.

  In November the deal was announced for Virgin Money to buy Northern Rock. The deal brought us huge scale overnight: 2,100 employees, seventy-five Northern Rock branches, one million customers, a £14 billion mortgage book and a £16 billion retail deposit book. The combination of Virgin Money and Northern Rock fitted really well together. We already had credit cards, investments and insurance offerings, and now added mortgages, savings and current accounts. The combination meant we had a platform to grow, and no need to merge or cut jobs. We pledged to make no compulsory redundancies. Now we could make a real challenger bank that would be strong, stable and a true test for the big boys.

  We made Newcastle upon Tyne the operational headquarters of our savings and mortgages business and embraced the local culture. I went to Virgin Money’s offices in Gosforth to get to know the staff, then traveled up to Edinburgh to meet more of the team. On the way back down to London we made a detour into the store in Norwich, before I raced back to the capital to speak on a panel about ending the war on drugs. It was one of those moments when I just had to laugh at the paradoxes of my life. I must be the only person in history to go from launching a bank to calling for marijuana to be legalized in the time it takes to open a current account—or roll a joint.

  The deal was done hours before the biggest football match of Newcastle United’s season so far against Manchester United. We rushed to a local printer and got some stick-on logos to paste onto the front of the Newcastle shirts. Alan Pardew was the team’s manager, which felt like a good sign. He was a star player in Crystal Palace’s team in 1990, the first football club Virgin had sponsored. Back then, we had one Virgin Atlantic plane at Gatwick and I was searching for ways to get the word out about our airline. We heard Crystal Palace were looking for a sponsor at very short notice and offered £10,000 to back the team—an amount that wouldn’t cover a player’s daily wages now. The unfancied Palace team, led by their fearsome strike force of Ian Wright and Mark Bright, made it all the way to the FA Cup Final. With the Virgin logo flying proudly on their shirts, they took Manchester United to a replay. I’m not usually much of a football fan, but was cheering wildly as Wright bagged a brace at Wembley. The replay meant even more coverage, and was probably the best ten grand we ever spent. Fast-forward to January 2012, and Newcastle beat Man United 3–0 live on Sky Sports, and everyone knew Virgin Money had arrived, too.

  Now we had a large presence back on the high street, I was determined we would be drastically different from the tired old banks still lining the streets. I hated the glass windows that blocked customers from bank tellers. I wanted Virgin Money to feel as close as possible to Virgin Records and Virgin Megastores—places in which you were comfortable relaxing and meeting friends. Why should the experience of buying a financial product be worse than buying a record?

  “Why can’t we take the glass screens out of every branch?” I asked Jayne-Anne.

  “It’s because the staff are worried about safety and bank robberies,” she explained.

  I wasn’t to be deterred, however. “But when was the last robbery and how much cash do we keep in the banks?” Eventually the team relented and we took out the glass, freeing up the branches.

  Then
Jayne-Anne mentioned an RBS store she had visited in Edinburgh decades before, called The Ladies Branch. It was a bank that doubled as a tearoom, with free drinks, calming music and even complimentary paracetamol! All the customers were women—and so were the staff. It was all rather sexist, but there was the germ of a good idea there. We decided to launch our own Virgin Money Lounges, taking inspiration from Virgin Atlantic’s Clubhouses and providing a unique banking experience. The main difference is that no banking actually takes place in the Lounges. They are instead places to meet friends, enjoy free refreshments and complimentary WiFi, relax during a busy day or take the kids to play. We hold book talks, exhibitions and charity events, and even have a grand piano in each Lounge to celebrate our musical heritage. It’s basically a private members’ club, where the only condition for entry is being a Virgin Money customer.

  Most of the Lounge visitors appreciate the extra effort so much that they become extremely loyal customers across the road in the bank. Don’t tell our competitors, but in the cities where we have Lounges alongside branches, sales are nearly 300 percent higher than anywhere else. One young businesswoman, Jessica Banister, regularly takes her young son to our Norwich Lounge and gets her work done there. She wrote me a letter in June 2015 that summed it up: “I feel supported, I feel known, I feel a sense of community and belonging. I’ve already taken out every account I could with you because I believe and want to support your ethos and I tell everyone about what an incredible place this is.” No other bank gets feedback like that.

  Jayne-Anne spent the next couple of years bedding Virgin Money down. Staff morale was sky-high, customers were flocking in and we continued to expand. In July 2012 we bought £465 million worth of mortgage assets from the government—these were from the “bad bank” side of Northern Rock. A journalist asked me why we were buying the “bad bank”—“To make it good, of course!” I told him. More investment followed in January 2013 when we picked up £1 billion of credit card assets from MBNA, adding £363 million more the following year.

  Our little bank was growing up.

  CHAPTER 21

  Planes and Mergers

  One question I am often asked is which company is my favorite. Founders, just like parents, shouldn’t have favorites—we love all of our kids equally. But if you promise not to tell anyone, I’ll admit to you, Virgin Atlantic will always have an extra special place in my heart. Can you imagine me still running a record label, in my sixties? Virgin Atlantic was the jump-off point from which I built a whole world to live, love and laugh within. As I said in 2012, “We have no plans to disappear. Virgin Atlantic was my baby twenty-eight years ago when we set up with just one plane. Like all children, they never really stop being your babies and Virgin Atlantic is still much cherished.”

  In the mid-2000s, with so much other stuff going on, I was thankful the airline, which had taken up so much of my time, energy and passion, was relatively stable and enjoying several years of growth. But there was more trouble brewing. In 2007, I got a call from the Civil Aviation Authority asking for a meeting—that was curious enough, but when the officials who came swore me to secrecy I knew something was up.

  The officials told me a few individuals within Virgin Atlantic had been colluding with their counterparts at British Airways. Our management had found out about it and immediately reported it to the CAA.

  “Tell me this is a wind-up?” I turned to Virgin Atlantic CEO Steve Ridgway.

  Surely nobody would be foolish enough to forget the golden rule—never talk to your competitors unless there is a formal process. I was shocked. I knew nothing about it and would of course have stopped it immediately. But rather than being a misunderstanding, the accusations were true; it turned out there had been a couple of discussions around fuel surcharges on long-haul flights. Virgin Atlantic was granted immunity for immediately reporting this to the Civil Aviation Authority when they found out about them, but I still felt very uncomfortable with the whole episode. Several people at BA lost their jobs, and some of them could have gone to prison. BA were fined £121.5 million by the Office of Fair Trading. Later, the US Department of Justice fined them a further £148 million.

  Will Whitehorn found out years later that BA’s management learned of the discussions twenty-four hours after we had, and their lawyers were about to go to the CAA, too. A former board director at BA told Will: “You guys did the right thing.” If ever a lesson had to be learned about the folly of even accidentally talking with your competitors, this was it.

  While I believed both sides were to blame in that case, Virgin Atlantic and British Airways were somewhat further apart on the latter’s plans to merge with American Airlines. For more than a decade, BA tried to form a partnership with AA, which we fiercely contested. This partnership could lead to anti-trust immunity under US law, which would allow legal collusion on pricing, substantially reduce competition and potentially put Virgin Atlantic out of business.

  If I was king for a day, I would ensure competition laws were more strictly adhered to. I believe small is beautiful, and the more companies competing, the better. BA were essentially requesting permission to fix prices and schedules, as well as share marketing and operational data—activity that would normally be illegal. It was an unholy alliance. Two separate attempts were blocked, as we protested and the competition authorities held firm against BA’s considerable lobbying power.

  Then, in September 2008, the BA/AA deal looked to be back on the table. The “Open Skies” agreement, allowing any European Union or US airline to fly between any point in the EU and the USA, had become active in March. It paved the way for approving alliances between UK and US airlines, without increasing competition at all. BA/AA would dwarf the capacity of rival alliances. Allowing the two biggest carriers on the planet to merge would create a hugely uneven playing field. The deal would also damage the UK economy, with Heathrow’s position as Europe’s number one hub under threat with fewer airlines operating there. We were determined to stop it going ahead, and had common sense and evidence on our side.

  On the opposite side was BA’s new head, Willie Walsh, who seemed determined to make this a personal battle between the two of us. I had no idea what I had done to upset him, but he had held a grudge for as long as I could remember. I didn’t know Willie personally, but I knew his organization was trying to put my airline out of business. So we fought back the best way we knew how—by making sure everyone knew the tricks they were trying to pull.

  I went to Heathrow and we launched the No Way BA/AA campaign, slapping the slogan loud and proud on the side of our planes, as well as on advertising around the world. If allowed to proceed, what was already a near-monopoly for BA would become a complete monopoly with AA. They would have highly dominant market shares on key routes, including 100 percent on Heathrow to Dallas/Fort Worth, 80 percent to Boston, 70 percent to Miami, 67 percent to Chicago and 62 percent to JFK. Yet, to my surprise, their lobbying seemed to be working with the regulators.

  In August 2009, on the first anniversary of BA and AA applying for permission to tie up, I sent a letter to President Obama warning him how dangerous the merger would be for consumers. “Your Administration is nearing a defining moment in US airline competition policy,” I wrote. “Never before has the US Government approved an anti-trust immunity application where barriers to entry are so significant that any new meaningful competitive entry is virtually impossible. Now, more than ever, consumers are counting on you to put their interests first.”

  On this occasion, he didn’t intervene. I met President Obama a little later at the White House, but we kept our brief discussion to sharing updates on the Elders, international relations and drug reform. There was a persistent story going around that we nipped out onto the South Lawn after I offered to share a spliff with the President. I assure you that, despite our shared belief in marijuana regulation, it was just a rumor! As for the tie-up between BA and AA, I could only hope the proposal
s would go up in smoke.

  —

  Virgin Atlantic wasn’t the only one of our airlines facing difficulties. On the other side of the world, Virgin Blue was discovering that there was nowhere to hide in Australia’s tough airline business.

  When we had scaled Virgin Blue, we were careful to stay smart and efficient. At its peak, Ansett had 16,000 staff catering for ten million passengers. By the time we hit fifteen million passengers, we still only had 4,000 people working for us. Virgin Blue had grown into a real competitor in the leisure sector, and were becoming more respected for our customer experience as well as the reliability and fun for which Virgin is always known.

  But our main competitor, Qantas, attacked us by expanding their own low-cost airline. I believed, for us to combat this, we needed to answer back by diversifying, entering new markets, and attracting the business traveler. Not to respond, I felt, was not an option, for there was a danger that Virgin Blue would be squeezed out of the middle. Brett Godfrey disagreed and decided to step down. I felt sad to stop working so closely with my friend, but we remain close (and even co-own Makepeace Island together!) and he will always be a part of the Virgin family.

  As we began searching for new blood to bring in, the top candidate emerged from the least likely source. John Borghetti was the number two guy at, of all places, Qantas. He had worked his way up at the company for thirty-six years and was widely expected to become the new CEO. Instead, he was passed over for the job in favor of Alan Joyce. As soon as I met John I realized that he understood the power of people and the importance of brand. He was largely self-educated, had built his career on hard graft and worked in his dad’s coffee shop when he was struggling to make ends meet for his family. As well as the business market, he identified regional and charter flying as key focuses for us.