FT Business of Luxury Summit 2015 - Johann Rupert

thank you liono I also want to thank Michelle for co-sponsoring the event and then Mr Russo our loyal Tom loyal shareholder if you hadn't bumped into Gainer at Alfred's and told her that you're coming here especially for the speech my toothache was growing and I might just have missed your conference here Mr B because this is he caught me but luckily apparently also uh John elen at the Google conference last year and persuaded us to come here those things where a year in advance you say yes and then it gets close and you think did I say that last night any case and then when I looked at the list of these speakers and their attende DS I realized that I had a big problem because normally if I speak to Golfers I speak about the economy if I speak to economists I speak about golf but I'll always pick a subject that the audience that I'm a little bit better year I've got issues but you know you chose this technology Legacy I started in luxury goods by accident in 1976 was working for Lazard in New York and I remember in those days we had no internet no mobile phones forget laptops we had no portable music it was before the Walkman no video streaming no satellite TV no flat screens but we had Studio 54 for those of you old enough to remember that David you and I probably the only two remember that David tang and we enjoyed life we didn't know about all these wondrous things that were going to change our lives now how did I get into luxury goods there was a gentleman who already owned a Bugatti Before the War of Mr Robbie o Jewish he joined the resistance he got thrown into Beal after the war he came out and because of his resistance uh because the old people who fought uh they were given deals contracts so he dealt with secondhand tires with the East block and through that he worked with petrochemicals and he designed the first plastic lighter silver match before big or Gillette and that's where Alan Dominic peran started he sold plastic lighters out of briefcases but in those days Mr Hawk designed another thing he designed a Cartier lighter and the genius of it was the problem with lighters in those days was that the valve kept on leaking and breaking so he designed a valve in a tube that was disposable or removable so you brought your lighter back they fixed it gave it back to you and after a year he found out he was making more money than Cartier Paris so they bought C here Paris then they bought C here London then they came to the United States and they ran out of money and we met through Lazard and through friends and we our family my father's company bought it there's still a dispute whether it's 7 million uh that joke the L joke and we said or nine that I said but we bought it from Rapid American Pandora's husband the first junk bond King but in those days you you couldn't fill a room like this if you advertised for 10 years I mean luxury goods was not sexy it was actually perfect because nobody was interested in buying and certainly we did not have Mr Arno Mr Pino or private Equity chasing so when Mr Hawk died in uh in a car accident in 79 uh we had had preemptive rights over all of the shares but my father was not interested so lazard's went around and or I can't remember who it was and they went to John elen who's speaking tomorrow's grandfather and the late Andre mayor of Lazard said to him no johanny you are a serious businessman you make automobile this luxury it is a joke until his death the avocato kept on saying to me what a mistake he declined but in those days it was not a sexy business but I went and started a bank in South Africa and I think it's important because I wanted just say how we started what I did the changes that I saw what happened in the economy and the ecology and where we are in the future I went and started a merchant bank in Johannesburg and we repriced 98% of the market because we only had a 2% market share and we were the most hated place on Earth uh we started the uh we call them promisory notes but we started uh commercial paper market and we were the Kings we had a black and schs uh student uh so we ran the bond market for 8 years there we called it the legalized way of transferring wealth from the relatively sophisticated to the truly sophisticated and this lasted for a number of years and then my dad I couldn't stand in because he was having problems uh with some of his colleagues so I joined him in ' 84 but we also the first Partners in a software company and we were the first Apple importers at the bank Steve Jobs I'm talking about 85 886 these little Macs going from that to luxury goods was interesting so we bought P vason the big change was when we bought the Manis man watch brands we bought panai we I also at home started the mobile phone company vodom which we sold to V phone we laid cables undersea cables so here in the world because I don't really do a lot of talks I'm known for luxury goods at home it's kind of different uh our little bank is now grown to 32,000 people and we swore would never be more than 400 Max uh we've got medical uh hospitals in Switzerland and South Africa so there we're Diversified industrial and financial I'm saying this because this gives me an Insider but an outsiders look at luxury goods whilst I did learned all of this the world also changed I would say the first big change was when they broke their word to Billy Salomon and they Incorporated Salomon brothers and the Partnerships disappeared at Lazard you didn't really need a world bank and IMF any feds to regulate us the partners regulate ated us if you messed around they went bankrupt trust me those people did not need regulation Goldman's the same it was Partnerships then came incorporation leverage and then obviously never get B Donaldson giggling in a earing about the potential effects of allowing more leverage people say it's the free market system that caused this it's not the free market system it's the lack of the free market system if they had allowed long-term John Merryweather and his men to go under when they hit the skids people wouldn't have had a one-way bet but but we kept on supporting interfering supporting interfering Little Brush fires were put out so I did predict what happen in 87 but more importantly in 208 but the real thing that I want to say to you is I then predicted to my colleagues who in the room I said folks it's going to happen but something worse is going to happen we are going to have a tearing of the social fabric we're going to see a Resurgence of anti-Semitism we are going to see Society at one another's throats again I had no idea of that Isis was going to be that big and we're going to have big structural unemployment so that's what we've got at the moment we've got a crowded world or so we think people who don't think that there's global war warming was fly with me which I've done for 30 years between Cape Town and Europe the cumulus is getting higher every year every year you can map it we've done it for 20 years now and we say we have an overcrowded world if you take every single human being 7.3 billion people and Counting and you vacuum packed every human being and put it in a cube like a sardine can how big do you think that Cube will be any guess not you Frank or hle you know you'll fit three times the world's population into a 1 kilom Cube and yet we still don't worry I've checked it and checked it and checked it I called my son to just say I'm not going to make a fool of myself but yet we managed to stuff the world up all of this before the single biggest thing is going to hit us and that is what he so aptly described as the second Machine Age we've gone from agrarian society we domesticated the horse then the horse went because we had the steam engine with we replaced muscle power of horse and man now we've got computers and other digital advances and the big thing here is this is exponential it's digital and it's combinatorial and I have to thank uh an Austrian uh for his book I'll I'll thank them later for this to try and explain the difference between counting 1 2 3 4 5 6 and exponentiality we all know the sultan and the rice but more interesting if I walk from here and I walk 30 yards to to L and back you can all see that if I walk 30 exponential yards anybody give me an idea where I'd have to go to well I'll go to the moon and back and twice around the earth so what's happening today with artificial intelligence robots Bots this is not science fiction folks it's happening driverless cars it's happening it's going to put hundreds of millions and people out of work and I urge you to read the books that I'll refer to later on why am I talking about this in a luxury goods conference because I think we're focusing on the Ron technology we're talking about e-commerce clicks versus bricks I keep on being quoted incorrectly as saying I don't believe in e-commerce of course I believe in e-commerce but I think e-commerce is dwarfed by what's going to hit the world with artificial intelligence and Bots The Internet of Things I read about it as much as I can but it's going faster than I ever thought so the whole discussion we had about our luxury goods from 76 up till now laptops it's all going to be squeezed into faster and faster now in the luxury goods business we've survived Wars we've survived depressions we've survived I just want to keep Tom Russo happy as a big shareholder at richmont we had have I think with the leaders in I've got to thank Norbert plot in data management so we're ready we know where our stuff is and we know what it cost us at all times we have maon that are centuries old our role is to protect their DNA and their brand Equity because if we can have desirability and brand Equity then we can have pricing power if we have pricing power our goal as Tom knows is to grow by 15% per year grow our dividends we've done it now for 25 years really by managing brand equity I want summarize by saying we discussed how we started uh the time it took it's now 40 years that we've been in the business we have a lot more competition especially from ridiculously mispriced Capital when people misprice something it's abused England waters for free it rains all the time but there's a drought I mean they don't have water now if you misprice Capital people will abuse it and will regret it unfortunately in our business as well it starts with landlords yes there are a few here who take us to the cleaners especially in Asia and people get I was offered a 100y year a billion Swiss Franks 100 years fixed prime plus 15 basis points I I thought it was a joke it's not possible and remember Swiss Prime is zero underneath so I I called back and said well know now when this lunacy Carries On things are mispriced we've survived that I hope to survive another Century but our threat is not this immediate technology our threat to all of us is how are we going to organize society when the abundance hits us because artificial intelligence combined with robots will create abundance but we cannot have .1% of .1% taking all the spoils and folks those are our clients but it's unfair and it is not sustainable so I don't know what new social P will have but we'd better find one otherwise clients will be targets they'll be hated despised because the next wave of unemployment is going to be even bigger than the current one and these people will be unemployable you don't believe me I give you two books to read and then think about the effects and how it will affect all of our lives uh the one is the second Machine age and the other one is uh a robot uh humans need not apply robots going to steal your job and don't worry it's not going to be it's going to be cool but I would urge you to look at this it's going to be more important than e-commerce and clicks versus bricks uh hopefully we will survive it because we're planning for it uh it's really what keeps me awake at night that I'm telling you now how is society going to cope with structural unemployment and the Envy hatred and the social war social Warfare because the people with money will not to show it if your child's best friends parents go unemployed you don't want to buy a new car or you know anything showy and folks we are destroying the middle classes at this stage and it will affect us and it's unfair so that's what keeps me awake at night not uh whether uh e-commerce is going to cause me problems I think this is going to hit Society far are there any questions okay sorry I think you will appreciate the thoughts a lot more once survive enriched two authors of the second Machine Age even more because it changed my thinking and it led me into a totally different thought process we're in for a huge change in society get used to it and be prepared thank [Applause] you on call no okay well thank you very much for that uplifting uh now I know why you were christened rert the bear uh you called me rert the bear that was the making of you though it was well in one respect in that you called the global financial crisis back in 2006 we were very lucky because I went with gayer to The Hamptons and we a friend of mine sit to dinner up with a whole bunch of edge fund managers Lewis Bon Stan dren Miller uh I can't Soros they all off their heads off at the stupid South African and then in 207 again and then in 208 again so but by then uh you also christened the three what was it the horsemen of the apocalypse and nuriel brought me in and he said you're the fourth one you're even more disgusting than we [Laughter] are so you described yourself as The Insider Outsider and you made I thought a very important point about the pricing power inherent in brand Equity if you look across all your portfolios your your 20 children I believe you talk about do you think that that portfolio now is where you want it and that there's still pricing power in all those Brands let me try to answer it in a different way at the watch Fair the SI a gentleman from T came up to me and showed me his langa and he had just gone to uh glassa where he looked at the manufactur and he came back and he said to me your watch us or two cheap that that we always like heing so I asked him why he said no whilst he was there he had his new Range Rover serviced and he said he checked and he engineer he checked they basically changed the oil and the spark plugs and he said how much training does it take to change spark plugs and oil but that person charged him more per hour than the people did in gluta because every Lan Zona is assembled then tested then disassembled and cleaned and to be make to make sure that there's no dust and assembled again so I think those things will survive the technological era but what bothers me and we're going to make an announcement now in in June what bothers me is that we've also been guilty of this homology we've mated luxury uh ubiquity and luxury can't be ubiquitous it must be individual and we need style and we need design and we need creativity now Europe's not very competitive in a lot of I mean in France or two three centuries I think therefore I am the Americans I do therefore I am there's a slight difference okay America France is the only place where people are stopped from improving themselves by law not allowed to work for more than 35 hours so how do you better yourself in France to get a company out of liquidation or bankruptcy takes 9 years N9 years in America less than a year chapter 11 in and out now here we're in Europe what have we got that we can compete with taste design culture luxury goods but some of the people will tell you if you speak to them privately that the new client till uh should I say gotten their money quicker than in the past so they did not stop past the culture bar on Route uh and they ask the people to make things that these per the metor art the people who have this they feel affronted in many ways to apply their skills to do things that the new clients want so what we want to do uh with a friend Franco colon uh we found it we've got a foundation uh to help in the meod art of Europe and we will speak to the various governments because we need to identify those Artisans MH and I've spoken to feder Rico of Yuks and to Nutley and to have a platform for them because we were also guilty we've am olated you know in England you can't get proper cheese anymore with some bureaucrat says hey we're not allow to choose for ourselves yeah now with luxury goods to give back we'll announce in June that we want to create a platform for the little artists and Artisans who sit in the little Villages throughout hopefully those people will still be employed in the second Machine Age who are going to be working more than 35 hour working uh working week kiding me you tell somebody in Italy they've got only work 35 hours they laugh at you could you talk a little bit about the rational the rationale for the merger of ukes and metap unlike what some magazines I do believe in e-commerce but you know when Lewis Hamilton won last night or yesterday in in Montreal but last night out time he's Mercedes car at 200 M an hour was sending 1 gigabyte of data per second 1 gab per second to his pit Lane and it was sent via tataa Communications to woking where they analyze it that's big data UK's on its own nip on its own richmont on its own and I said to Mr Arno the other day forget it lvmh on its own we're not big enough was was he trying to buy something or were you trying to buy no no no I was speaking to him as I spoke into caring about joining us on that platform to make it totally neutral when we at 95% of Neta we ran it neutrally the reason why L is it's too big a game for any company to try to dominate that's that's combinatorial that they talked about last year at Google I speak to the sap guys and they swallow when they talk about the cost of big data I he a re want but we've got like 5 billion Euro that's a hiccup to I mean look at Apple look at the players look at IBM well you haven't mentioned Amazon yet you not do you not feel threatened by Amazon firstly Amazon was never interested in buying it was a created rumor by somebody who wanted to sell some shares okay it's nonsense don't look at me I I don't do anything not abon shares some nip shares but have you seen the capex of Amazon it's a fantastic business for me who sits in Africa I press a button I get a book I've been using for 20 odd years I think I was one of their first 100 customers great business I'm not sure as a shareholder it's a phenomenal business business I'm not sure it's they eating Capital uh so uh you mentioned Apple yeah do you think that your high quality watch business is threatened by the Smartwatch you I've have refrained from commenting on that because Johnny IV's a a friend and I Mark newson's a friend and I really admire their work but there's a bit of a contradiction between technology and luxury as in value and parity uh I let you in when our son was in his Gap here we have these product committee meetings and there's some people here who were at that product committee meeting where the Cartier people wanted to make a mobile phone my son very quiet he just started getting very fidgety he was saying to me are they mad are they insane mom keeps her boxes that cartel products come in you don't throw carer away and everybody throws a phone away after two years are they mad I should let them Carry On And They carried on they really wanted to make a mobile phone uh and then he said to me where are they going to have it serviced if there's a problem I said I'm don't let them carry on and afterwards I I let them have it I said you totally utterly mad I mean you are you insane carer is not to be thrown away now how many generations this is eight 8 years 10 years eight years ago that phone would not have been as good as a noia 6310 which at least you could keep because the battery life was a weak it couldn't take pictures it would have been thrown away now do you expect me to pay $177,000 and throw something away in two years time but it's a thre I think it is the Richie stupid strategy and I don't think it's that smart I you don't treat clients like fools to spend $117,000 and you know in 2 years time it's in a drawer because the technology is that old I they'll sell a ton of them I think our colleagues uh thinking of doing the same thing but putting it on a watch strap is a bit of lateral thinking so we're going to put them on straps so you get all the data on the strap and all the beauty and last no no you get your data on your iPhone right so because this is just the remote control I mean I've seen it now in meetings where people look and after three looks every time it vibrates their colleagues get irritated you know you're wasting our time now switch the thing off or get out it's not a very social thing no it's what do you use it for you get a message there's an email well if you've got it on vibrate you get that it tells you when you've died already doesn't tell you you're going to die because it tells your puls is stopped which is of Great Value to everybody but me yeah yeah okay keep cheering us up yeah no no hey it says somebody who's got a thing on his right arm but what I'm trying to say The Internet of Things yes proximity but I don't know anybody here's got a Range Rover Sport in London nobody you can't get insurance why because they can scan the door open for something that costs under $5 that you can buy on the internet guess what the insurer said unless you've got off-road parking zero insurance so when you start doing access control on a watch or banking on a watch you'd better make very very sure that so there are people in Switzerland that have now devised the watchstrap that reads your veins which is like a fingerprint it's this technology that's jumping all the time I think Apple will do well I'm the biggest fan but I'm not sure that okay your wife's got a birthday you've got a choice of taking her X or an Apple Watch I'm not sure you're going to do better and I'll use opposition watches as well if you go with a carer or a bulgary I'm not sure she's not going to love you more if you now if your daughter turns 18 or 21 you want to give her something that she's going to remember for the rest of her life that's where I envy the PK Philipe ad so much you never really own it you know you you know it's in bement before we have time to throw it open I just got one question which fascinates me and no you're not going to win the World Cup England no but Ben told me well you can't tell me the Box are going to win surely no I'm pulling your leg okay good okay well that's reassuring um you talked about Switzerland what's been the impact or H how are you dealing with the unpacking of the Swiss frank I mean this is an extraordinary move wasn't it by the Central Bank you know everybody everybody criticize Mr Jordan I don't think he's the Swiss bank Governor he's the governor I actually don't think he had a choice and I actually think the fact that he did it in the middle of the market buy was really interesting because now the markets are edgy forever they're never going to know what to deal how to handle him I thought the original pigging was a little bit bold because as I've said Stan dren Miller is a good friend and when uh Norman Lamont uh remember with a pound I mean you never go tell the market you've pegged something I mean it's a one-way bet and they were betting and when he heard then that the QE 3525 whatever of the ECB was coming again he had no option he had to unpeg but Norman Lamont said he he was singing in his bath when the uh pound was unpegged in the what was he singing That's the okay no I don't know but no but how is it affected us obviously it's increased our Opera operating cost but you know what if you look at Germany and what they they did uh as a friend of mine said never waste a good recession okay never waste an opportunity to fine-tune your business even more so what are you doing Switzerland is a very good place to do business and the workers I mean we have factories in the French part of Switzerland so they had a vote should Switzerland get extra holidays paid holidays and the Swiss workers said no we have enough the French workers in our factories told our Swiss workers see out of your mind are you crazy they want to give you extra holidays and the swis said no we have enough holidays now do you not like working in a place place like that the people and by the way technically they are brilliant this is the Swiss yep absolutely right so you know SWAT didn't just fall out of the sky right was that a a a statement in the long-term confidence in the French economy I think frankly if I have Envy it's for the lifestyle of the FR it's just the most beautiful place on Earth best wine best food but you know they need a thatcher like Revolution there otherwise they''re going to have real issues well they've already got real issues yes did you have anybody in mind no I'm not involved I mean it's all I'm saying is you guys weren't doing that great before M thater arrived either that's true okay okay so I remember the the coal miner strikes Etc I was young but I remember it in France they just need to find the leader uh yes just on Asia you you mentioned how you were being how ridiculous um prices uh actually didn't say that so I'm not going to misquote you but you look at Hong Kong and maau there's been a serious downturn is that cyclical or is it something deeper in this Lord sir David Tang I'd rather ask him no but if you know when David shoot me but if you're 80 to 100 million people in the Communist Party about 90 million correct you're running a country with 1.3 billion people if you have to make a law that you're not allowed to have military number plates on Ferraris Bentley and rollers then do you smell a bit of corruption so if you are such a minority I'm not talking about using it to get rid of political opponents I don't know but it's a very wise thing to do it's I don't think the anti-corruption is going to stop it's going to continue isn't it I think it's going to continue they uh they does that stop the Chinese propensity remember they were civilized when all our forefathers were running around in cave somewhere they chose the wrong Philosophy for a short period but as David said things are coming back to normal the normal status symbol of a mistress is reappearing I David correct so sorry four Mistresses which is great for our business okay yeah now China why why is China great for our business people are smart they work like ill they save and they're more men than women so how are they going to get lucky think about it they're going to have to be very generous to the women and when you add and you look at the numbers it's but they're so sensitive we dropped our prices in Hong Kong our dollar region prices increased our Euro region prices the Chinese visitors landed in Dubai but they didn't buy anything in April because every tour operators got a spreadsheet that will give them the exact prices per currency per country these are smart Shoppers the moment we adjusted they started shopping in Dubai but our Shoppers are there our Shoppers the Chinese will shop in Paris or yeah we've got to go but Paris London they'll shop and increasingly Japan ja ja is becoming a very big destination for traveling Chinese yes yeah I was there just three weeks ago I'm look so it's a blip no I wouldn't call it a blip a blop no man Ralph Lauren and I are really good friends and we finally nailed it when he said to him you are as paranoid as I am aren't you I said yes you know if you have a healthy dose of paranoia you kind of survive so I don't know but we've got five engines five continents uh and you know koca Chanel said money is money it's money it's only the pockets that change and it's true oil prices go down somebody else makes money oil prices go up our sales go up in the Middle East we just got to remain true to the brand Equity uh so that's by the way to keep my big shareholder there happy my co- shareholder Mr Tom Russo we've got time for just two questions from the floor um so who would like to step up into the lion's den yes ma'am hold on just wait for the microphone and if you'd like to identify your yourself I'm Susan Owens I'm a journalist um for Jing Daly I just wondered how your uh conversation with Mr Aro and Mr Peno is progressing in terms of your platform for Artisans and protecting and growing them knowing that Chanel have started to do that Chanel did jewelry with natal but what I said to them was they can come in and get equity in the company if they commit maon because I wanted to be a neutral or uh caring's already using nap but what I said to them is look I don't want you to blame me afterwards for not inviting you but it's up to you uh I think it's in your interest it's certainly in all of our interest and it's run totally neutrally and I think you can ask the caring people uh they'll tell you that it's absolutely unbiased in fact at times I got annoyed that some of the opposition got better uh uh coverage I don't think any of us on our own can do it and uh I just want it to be for everybody it really is the question that was asked about why did we merge we need a platform that's big enough for the luxury goods industry and uh that's neutral oh well okay just the the the lady in the front please sorry there's a lot of questions I know but time hello I'm Lizzie Z I'm a fashion journalist I wanted to go back to what you were talking about the lack of jobs in the future I have a 12-year-old daughter Kiara what industries do you think will be buoyant in 10 years time okay um there are two more okay I'll be very quick I'm a chance of University and I tell people go and read those books and hairdressers will be employed Flores will be employed a doctor that does diagnostic work forget it you're going to go through a scanner they're going to look at your blood big data and they're going to so it's not always obvious who will lose their jobs but check go on uh the internet go look at YouTube they've got brilliant brilliant summaries I tell all the kids before they go to college University we' say read this watch this and then decide uh there were two others at the yeah gentleman in the blue shirt because we do have a little just a tiny bit more time then I'll go over the other side maybe hi Zachary SX with wadel and Reed sorry to say former shareholder but potential in the future um just curious about the fast moving nature of information these days you're talking about Big Data how do you how do you envision your companies potentially innovating faster I mean it's something about cardier and P is its timelessness but in an environment where data move faster consumers are more responsive to Innovations effectively um are they looking increasingly for timelessness or is it important for card to innovate more okay thank you one of the biggest compliments you can give me is to say we don't innovate at all which means we stay so true to the DNA of the brand that you don't notice that it's a new product so thank you well that's dispatched to the boundary no it's not it is not I no I get this all the time I get this all the time but yeah we've got Jiro bodino and people here 25% of the products must be new but you've got to stay within the DNA if you don't stay within the DNA it won't sell and it will not have lasting value look at SBE and Christies and look at what are the product products whether they be Rings whatever watches that keep their value and go up over time there's your indicator you do you know do you eat slow food Etc is is could you give me one example of where you think you innovated and you were not true to the DNA just one oh my Lord that watch that that that phone would have been one uh where did we innovate and not stay o there was a watch a divon watch okay it was one of the worst things we ever did uh about 15 years ago no they're a couple they're a couple don't worry question from over there last one anywhere they're all been at the back yes ah yes ma'am you want to go take the my microphone to all the way to the back there there's lady there there's lady wants to okay where's the microphone all right do stand up oh yeah there we are hello I'm AST vant and I write about the luxury goods industry forwarders um you alluded to speaking to Bernard Arno and caring about maybe them potentially investing is it in a separate platform or the newly created platform that you're forming with meta and UK if you could clarify look it's these are merely hypotheses we have no idea where we're going 6 months a year from now what I want to do is to establish one platform that's open to everyone if they want separate platforms sell a it's up to them I just extended the hand of friendship that was all and by the way it's not only them you Mr uh Armani is already on it so it's it's everyone if Valentino wants everybody we've got Valentino here if we can't do it better that they can do it themselves then there's something wrong with us you 100 thank you very much for that conversation I hope it you didn't feel it was too much of a trip to the dentist chair uh for me certainly it was a great pleasure listening to you thank you you owe me big time I [Applause] know

Channel: FT Live

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Keywords: ft live, Financial Times (Newspaper), business of luxury summit, johann rupert, luxury, summit, event, conference, Monte Carlo, Monaco, Financial Times Live, FT, Richemont SA, Wealth

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Length: 55min 47sec (3347 seconds)

Published: Tue Jun 09 2015