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Hi, everyone. Hi, everybody. Good evening and welcome to. Welcome to what is honestly a lecture, not a magic show. Some of you are hoping it's a magic show, but it's not a magic show at this point. In a way, there may be some magic here tonight. A couple of bits of housekeeping before we start, just to remind you that we've got Next Tuesday Media Gender Talk is going to be incredibly topical and incredibly interesting. We'll be looking at Chinese media, the idea of soft power and China's image in the world. So next Tuesday is going to be very, very good. Go and have a look at the polis website for another event which we've got on the 28th, which is a professor from Columbia University, David Hadjew, who also writes for the New Republic. And he's going to be talking about the moguldom of hip hop. I don't even know what that means, but he's going to be looking at the whole hip hop industry, the music industry, and the relationship between the actual content and the business models of hip hop and other black music. So lots of other stuff to come this term, but tonight I'm very pleased. Giles Hedger is somebody who I did an event with a few months ago. Now looking at how marketing, advertising, how it relates to other spheres of communication. The thing we were looking at before was looking at media and development and how we could learn lessons from the for profit world that Giles inhabits. Giles is MD and he's chief Strategy officer for Leo Burnett, which is a, as I'm sure you know, a huge advertising and marketing company. Tonight I'm very pleased that he's taken apart from our logo, he's taken our motto. He's also taken. When I was a child, I was brought up on these books, Lady Bird books. And tonight he's going to be looking, using the parable of the elves and the shoemaker to look at the idea of creative value and how it's create. Okay, so over to you, Giles. Thanks very much for coming. Thank you very much, Charlie. It's an honour to be here. It really is an honour to be here. And Charlie, thank you very much for the invitation. It is the first time in 13 years that I have not spent sort of my kind words. Hello, I'm Giles. It's the first time in 13 years that I have not spent the evening of the 20th of November with my wife. Because this evening, today is our wedding anniversary. But this was a big enough gig for me to put that principle to one side. But I should dedicate what follows to her behind every foppish twit of a man is an extraordinary woman, and she is mine. So here we go. Rarer and cogniscary causes. That's your motto. I was trying to sort of connect with that at some level. And I think what follows does connect with that at some level. This will be about understanding what causes the creation of value. And I am just to sort of get the first sound bite in early, because I know that in this age of Twitter commentary, you have to get your first sound bite in early. I am an economic creationist, which has got nothing to do with religion or how the world began and has everything to do with that. I have come to believe after the best part of 20 years in creative business, that value is only created when it is actually created. It can't simply be generated or assembled in a nonspecific hope for the best kind of way. So I've come to believe that creation is an economic engine and if anything, the main economic engine. And I get very passionate about that. You might find me sort of losing emotional control over the next 50 minutes. I get very passionate about that. And it's because of that and because of my belief in that, that I sort of still find myself, even as a grown up, making ads for a living at the age of 41. So, as Charlie mentioned, I've taken as the sort of central theme or sort of metaphor, if you like, the Elves and the Shoemaker, which I read probably for the first time back in the mid-70s. And here it is, here is the first edition. I don't know why, but as Charlie had asked me to think about something interesting to talk about. And as I sort of stood in the shower thinking about something interesting to talk about, for some reason, a book that I had not thought about for 35 years popped into my head as the sort of potential Earth wire of everything I wanted to say to you this evening. So we'll give it a go and we'll see how it works, and I'm sure you'll tell me if it doesn't. That book is what inspired me to bring this all together into one presentation, but rather less frivolously and rather more seriously. This inspires me to talk this evening on the theme of value creation. This is what keeps me. I wake at night. It's a strange thing, working advertising. You end up being thoughtful about all sorts of things that have nothing to do with your day job. And I am kept awake at night by this. I don't know whether this is a kind of human condition that others experience as well. You may not yet be sufficiently established in your consumerism to have experienced this in as intense a way as I have, but I believe we're sleepwalking into what I call a flat pack economy. Too much of what is bought and sold is simply too much the same. There are too many variations on too few themes. And we're so busy pushing parcels of very modest absolute value around different parts of the economy that if we're not careful, the only way that we will really be able to compete in the world is by pushing those parcels around more quickly or more cheaply. And good luck with that in a country structured the way this one is. So this is what keeps me awake at night. And when I look at this innocuous little hardback that I read at the tender age of probably 6, I see a parable for an alternative economy. And I describe it as a high value one. Because what I see in 12 simple pages of a children's hardback book is a set of lessons for how we can start to regain our prowess when it comes to creating things. And it goes something like this. There is, top left, a shoemaker who's down on his luck in a kind of pre industrial world. He gets to the workbench one last time with the last two remaining pieces of shoe leather, which in his world are the precious commodity that he's about to run out of, goes to bed, defeated, in hopes of the best, and says to his wife, I'll have to finish that in the morning. I don't really know what else to do. Wakes up in the morning to find that the shoe leather commodity has been transformed miraculously overnight into the most exquisite pair of shoes. He runs to his wife, says, look what's happened. He goes into town and the first member of the bourgeoisie who comes by takes one look at them and says, I'll have those and I'll pay you twice the price because they're gorgeous by it. And he thinks, that's good. So I've got twice the money so I can go and buy twice as much shoe leather. So back he goes to the workshop, cuts out twice as many bits of leather, hopes for the best, once again goes to bed and blow me if in the morning they're not transformed miraculously into two. You see the pattern here. You see the kind of cash flow pattern emerging. Everyone wants some. The one becomes two and the two becomes four, because there's a premium on this product. And in the end, these shoes are the Must have of whatever kind of continental European lakes, 18th century town this happens to be. And fame and fortune and a happy retirement are guaranteed for our shoemaker. So what on earth, you may say, has any of that got to do with the LSE or with advertising or with this evening's talk? Well, let's just break it down, let's just break it down. If you take progress over time along that way and you take return on investment up that way, then, and if you take a sort of economist view of the world, you could summarize this story in the following way. You could say, right, the elves get involved here, okay, the short term effect of that is that this lovely member of the bourgeoisie says, oh, they're nice, have twice as much money, she walks around, she becomes the envy of the town. That's the sort of intermediate effect of this. But the sort of key, sort of the pivot point is that people around her suddenly want these things and become prepared to pre order these shoes. And when they start pre ordering, the cash flows for the shoemaker just are transformed, as are his long term fortunes. And as he repeats the business cycle numerous times, he amasses enough wealth to be able to retire a happy and contented man. That's what that story is really telling us. But of course the key bit is this. This is where the elves get involved. All of the rest of the steps are familiar to us either as citizens or as economists or as consumers. We're very, very familiar with all of these steps except the first one. We don't really know what happens when the elves get involved at all. And over the years I've watched with envy as the Work foundation and Will Hutton have tried to codify and quantify the contribution of creative business to the economy. And they've done sterling work and they've really sort of laid the path for industries like advertising to professionalise itself and talk in grown up terms about the value of contributing. But what even the Work foundation have never done is to look at this bit where the elves get involved and try to understand what actually happened there. And that's what I'm trying to get into this evening with this talk. Now back in the 21st century, of course there are exquisitely made shoes. This is one of the most exquisitely made shoes. It's the Christian Doubtin and retails I believe at around 1500 pounds a pair. Single shoe only really has any value on ebay, but it's a pair, about £500. Now I just want to bring this parable up to date briefly for you by sharing a piece of advertising for Christian Doubletin. Think of this as the page of this book that never existed, where one of those courtesans called them what you like, goes off into the world wearing her shoes. Sam. It genuinely is quite possible that that is where this story ends and that fascinates me too. The point is, what really happens when the elves come out? It's not for nothing that they were elves in this fairy tale. That was a very simple way of coding the fact that the this was a miracle. This was an act of magic. This was something that was beyond the expectation or comprehension of the shoemaker. It happened at night and it was done by little chaps with long ears. The signaling there is pretty clear, isn't it? How do they do that? And how is value actually created? What I want to do is just go back through the story and try to extract some principles which my 20 years greater visits have confirmed are sound. And I hope they are of some use to you. I hope also that they connect with the wider conversation that's going on at the moment about our future competitiveness as a country and what subjects should or should not be supported in the curriculum. This week is the 175th anniversary, I believe, of the Royal College of Art. So this I hope is at some level topical. How relieved was I to hear Andrew Maas start the week in. Start the week with the conversation about this very thing. Every time you hear that there's a key principle going to happen right there he is. So search that picture for clues and what you'll see is that this is not the fully industrialized 19th century, nor is it the sort of service dominated 20th century, nor is it the technology dominated 21st century. This is the pre industrial era that this guy has sat in. And that very simply leads me to the first key learning about value creation. However much it is fashionable to think in our post industrial fantasy that creativity is something that's happening now and hasn't really ever happened before. And however much we're encouraged to think that by the smoothing effects of technology and by the new glamour that exists around creativity, the act of value creation is ancient and predates not just the Internet but also the steam engine. And it is a set of quite in some ways visceral and primitive impulses that come together when something is created. And we all need to remember that. I'll tell you why we need to know that is that if we can sign the creative project to this post industrial era, then what will happen is that we will innovate around the periphery of things. We'll look at services and we'll innovate to make services better. And what we'll end up with by way of a metaphor is an economy that resembles an airline whose lounges are fantastic, whose airplanes are obsolete. We will forget what the core product is and we will cease to create value around that core product. Because it is so much easier to take the post industrial view and say, no, no, no, just servitize everything, just servitize everything and you'll be okay. You will not be okay because you will erode core value. I want to get back to what happens when things are created. I'm going to start with the Killers and I'm going to start with what happened when Mr. Brightside, probably the best song of the 21st century so far. I want to start with what happened there. Because two people came together, one had written the verses, the other one, Brandon being the other one, Dave being the first one heard the verses, thought, oh, you need a chorus, I'll write a chorus. And by the way, you need some lyrics too, and I'll write those too, and they'll be all about jealousy. And literally the two sort of semi matters of this modern masterpiece came together to create this sound. And if anyone says to me, what does value creation sound like? It sounds something like that. It's a fundamentally low tech, fundamentally low tech, pre digital, fundamentally pre industrial thing. And we need to remember that, otherwise we will gradually stop creating value at the core of the economy. Another example is this lovely thing. So Pixar was bought by Disney for billions of dollars a couple of years ago, and yet Pixar is at heart this wonderfully, wonderfully sort of pre technology company. Everybody thinks of it as this kind of high tech thing that's all driven by pixels on screens and clever machines that can animate anything. When you think of Pixar, or the genius of Pixar, they are inspired by things as simple and as analog as this. I mean, how many helium balloons would it be take to lift this bottle? And if the answer was 300, then how many would it take to lift a house? And would it be possible for a man who's not enjoying his retirement in the States to have so many balloons that he could actually lift his house and go somewhere else and escape? Now that question really is such a beautifully simple kind of pre technology question. And then what happens is they bring to that, not immediately, all sorts of gadgetry. What they bring to it is thousands and thousands of pieces of artwork, all sorts of things that capture the mood, the emotional arc of it, the casting, the texture, the landscaping. Thousands of pieces of good old fashioned artwork in order that. And this is one of them, this is a piece of a colour strip from in order back then that magic can be kind of bottled and turned into. And glorious it is too. There are a few films I've watched more times than that. That was principle number one. Principle number two is that there's actually controversially no such thing as a value chain. Value chain is a phrase one hears a lot, moving up and down the value chain, capturing value at various points in the value chain. And there are many businesses out there who appear to want to compete simply by manipulating some sort of value chain. I contend that there's no such thing because there is no linear or sequential set of steps by which value can be created. Created. All you are doing by moving things to and fro from a sort of warehouse to a distribution point, to a lorry, to a person, to a configurator, to a Christmas present is pushing parcels of value around. Nothing in that is creating anything. There is no such thing as a value chain, as my humble letter will demonstrate. It is the same lettuce when it's in the ground, it is the same lettuce when it's been picked, it is the same lettuce when it has been wrapped, it is the same lettuce when it has been put in the supermarket shop and it is the same lettuce when it's in our fridge. But along the way it acquires all sorts of value, all sorts of psychological value, all sorts of sort of convenience value. But nothing has really happened along the way way to create value. And of course things like value chains are wonderful if what you're doing is trying to manipulate wafer thin margins at various stages. And if you're scaling a business to the extent where those wafer thin margins can produce a return. But that's not really the beating heart of a vibrant economy that has creation at its heart. And I believe that it's a dangerous thing to drift towards. Remember the letters. Remember also this creation is when it comes down to it, problem solving. If you haven't solved a problem, then it is unlikely that you have created anything. Because by definition, when you try to create something, you're trying to do something that others haven't done, there's a reason why they haven't. It's probably because it's quite difficult and you normally come up against something that appears insurmountable insoluble and solve it. And one of the most sort of angry making objects, I think, of the 21st century is the low energy light pole. Anybody got any low energy light poles in their life? Yeah, that was a problem that had not been solved. So they'd done the low energy bit of the design task and they sort of forgotten about the light bulb bit of the design task. It was a half solved problem that Brussels approved and rolled out to everybody. And we've all had to change our light fittings at vast expense. And what we've now got is houses that aren't lit. And that is, and I exaggerate not. That is a fantastic example for me of how the problem has not been solved. Real, real creativity, real design. The sort of stuff that changes the world and moves nations forwards. Okay. And joins Buddha to Pest across a river for the first time. Okay. For example, is in the end about solving problems completely. Okay. And solving any problem completely is very difficult. I refer you to Sir Christopher Wren, who spent 45 years of his life associated, one way or another, with the building of central force. And at every single stage, from blueprint to, you know, final stone, there were problems to be solved. Not least the problem of how to create the double dome or lantern that creates the effect both inside and outside that he wanted. And there's a lovely. In the book the building of St Paul's there's a lovely passage that describes him being hoisted up as he was kind of in his old age by then, hoisted up on a sort of primitive prey to inspect the work. Thought of this, but he died knowing that this as a set of problems had been well and truly solved. And there is not enough commitment to that. And at the heart of that is design working out, you know, how form and function relate to each other. At the heart of that is design. And if we forget about things like design as a society and commit them to, you know, the frills and frivolous trappings of a sort of decadent society, we will lose our ability to solve problems. And if we do that, we will not be able to move forward as a nation. It is not by selling more furniture that we are going to compete in the world. Trust me. Right back to our man. There he is. And he is scratching his head. The key thing about this is he is scratching his head. He hasn't the first idea how these shoes have been made. And that's because there are times when the creative effect is miraculous, as is Coca Cola. And I'm going to drink Some. Now there are times when the creator effect is miraculous. Now remember what happened when the lady saw the shoe. She said she paid twice the usual price. And that is that premium is the basis of this. And this is the fact that it's the value of creativity is exponential. Now look very hard at the zeros on this chart. What 20 years in creative business has taught me is that it is possible for the value of a piece of creative stimulus to exist in these ratios. And according to this order of magnitude it is possible. If you start with the one, imagine that's a million pounds, for the sake of argument, that is the total cost associated with producing something, creating something. Then move to the 10 because that is a realistic figure for the number of millions of pounds worth of media investment that might be set against that one. Then move a step to the right and think right now there's 100 million. That is a realistic figure for the incremental sort of medium term sales achievable through a successful Peter Chris stimulus in the marketplace. Then add another one and think to yourself, in the sort of medium to long term, it is not impossible for a billion pounds worth of incremental sales to be generated by that piece of creative stimulus. And then move a step to the right and think and actually some of that stuff is somehow ending up in brand value, this creating tangible value. And it is possible actually to add another zero and get to the order of tens of billions of brand values. Check with Interbrand if you don't believe me and then add another one and look at market capitalization. And the ratio between those last two varies hugely by company. The ratio between brand value and market cap ranges between sort of 2 and 10 at the outside. But those ratios are not exaggerated. And one of the weird old things about working for 20 years down at the end of that chart where the one is, is that you are this teeny tiny prism through which, and a real sort of cottage industry if you like, prism through which this value is subsequently being created. And that I think is what makes ad people thoughtful about the broader economy because they know somehow they can feel, they can sense that somehow they're close to the heart of the matter. Those are the largest, 52 brands by brand value. But those are the orders of magnitude. Right, there we go. This one is going to sound a little bit sort of Marxist and I sort of make no apology for that. It takes all strains of thinking this topic. True value is only ever created at source. Here he is, he's holding these shoes saying, look what's happened in that moment. That thing has already been created. Everything that happens subsequently is simply the steps that follow the creation of anything exciting. It's the rolling out of it, it's the scaling of it, it's the distribution of it, it's the pricing of it. In that moment, only at Source is value ever truly created. I want to talk about that through this example. Who doesn't like talking about Star Wars? So there it is. Star wars recently sold to Disney for the equivalent of about two and a half billion pounds, which interestingly, if you put it through one of those sort of value of money computers, you find that if it were priced in the year that the film was launched would be about half a billion. So not a bad sort of, not a bad premium to be paid to George. And the way I think that we should all look at this is not that the two and a half billion pounds describes potential future cash flows. I know that's how it's going to be narrated, has been narrated. I know that's how Disney will reconcile it. That in my view is wrong. The two and a half billion pounds is simply a delayed, a 35 year delayed paycheck for the genius that was created at Source. That is what happened back there and that is how we should think about things. If we always defer the value of things into some sort of future cash flow, we will never acknowledge what goes on when something is created or indeed how valuable it is. And we will always undervalue the beginning of the process and we will always overvalue the end of the process. And we will make gross miscalculations about the future and we will make scandalous miscalculations about the past. Because what makes that worth two and a half billion pounds is this. This. I've been waiting for you, Obiwan. We meet again at last. The circle is now complete. When I left you, I was but the learner. Now I am the master. Only a master of evil. And you notice how low tech some of those attacks were. I mean, this really, really was low tech stuff. This was the 70s. We did this thing, you know, this was a company scratching around for clever ways to make stuff sound like that. And there's all sorts of apocryphal story about this and how the X Wing Fighters are air conditioning units in reverse. That's what was happening. That's what it is when things are created. And all the rest of the story that you read in the financial press about what that franchise is then worth and the potential for sequels and the merging, that's just the rest, and we have to remember that. Now then, back to our story. Here we have our first very pleased customer. Now, she happens to like these shoes and, well, she might, they're gorgeous. But what this is a very keen reminder of for me is about that all value is rejected. We like to think, particularly in the age of mass and of mass media and in a world where in any given market a million people can appear to like the same thing. We're very comfortable but mistaken in thinking that there is such a thing as objective value. So, you know, yep, this T shirt seems to work. So we just need a million of those and then we'll have a million happy people. The only reason that that T shirt works is because it happens to be able to align the subjective assessments of a million people. It all begins with somebody's subjective response to something. There's no such thing as a unit of pleasing stuff. It all begins when you do something, you put it in front of somebody and that person thinks it's fab. And if you can get to the point where you can line up a million subjectivities so that a million people think it's fab, then you've got the economies of scale. But don't start thinking that there's ever any such thing as objective value. There is not. And the danger, the peril, and the reason I'm saying it, in thinking that there is, is because that is half a step to towards a commoditized economy while it seems to work for them. So we'll just have a load more like that, please. And the let's have a load more like that, please mentality is a slippery slope. It's fascinating thinking about this in the current age where you've got social media able to bring together millions of subjectivities in a very different way to the way that broadcast media previously did. But nonetheless, that same dynamic exists. Right, here we go. Here he is cutting out his leather. He's thinking, right, if I do this, right, if I cut this out right, then maybe, just maybe, it will happen. But of course, whatever he does, whatever he does is not actually going to make this thing happen, because value is not assembled, value is created. And I'll tell you in a diagram how I think that works. If you think about the sale price of something, you think about the production cost of something, then the difference between the two is very simply value added. And we talk freely about value added as though it is just one homogenous thing. But the truth about value added is that all parts of it are not equal. There is always a huge chunk of it that one can describe as acquired value. When the components of a laptop are assembled, those components acquire a value because it's just more useful when they've been put together, because the thing works. When something is customized or mass customized, there is an acquired value there because it comes in the color you wanted. And when something is delivered all the time, then there may be a contextual value because it's convenient. It may also be that it's a bottle of Chateau Petrus and it's been maturing in the cellar of a chateau in the southwest of France for 20 years and has, over time, acquired value. It may be that you're drinking that chateau Petrouse at 30,000ft in first class, in which case there isn't much claret at 30,000ft feet, and therefore it is scarce and it requires even more value. But the point about it is that none of that is created value. There's a top slice of value added, and there's a top slice that neither acquired value nor contextual value can fully explain. And that is the bit, albeit sometimes only a few percent, that is the bit that describes value creation. And if I were to lobby for the creation of a new term, it would be that. Not total industry value added, but creative value added. Look at value added, analyze it, ask yourselves, use common sense. What's the bit that's really created the value there? In the case of Petrusics winemaking, of course, I just wanted to demonstrate this. The difficulty of trying to just assemble some stuff through the medium of an ad. What we made as an agency, it's an ad that's turned out to be very successful. I thought if I could just take you through some of the steps and show you that the attempt to simply assemble it according to some sort of formula will never quite work. I'll go really quickly so as not to bore you with a world that isn't quite your own. But here we go. Here's a script. Okay? Now, the laborers and cablers and council mission tablers were just passing by. And the nurses with the purses and the bloodshippers that notices were just passing by. The insomniacs and Pontiacs just driving through their big max were just passing by. And the cheeky guys with shifty eyes who peel for someone else's fries were just passing by. You get the message. This is a lyric about all the different people who eat at McDonald's, okay? So you go, well, that's OK. So we've got the word. Now what we need is some pictures. I know what. Let's have a storyboard and we'll match some pictures to some words. We'll work out how to structure the this piece of advertising and we'll be halfway there. We've got the words, we've got the pictures. We just need a camera. No, we don't. We need some people. We need some real people. So let's go and cast them. Let's take each one of those people in that lyric and cast to type. So here is the real casting for the laborers and capers. Here they are workman types. Okay, so surely. So we've got the people got the words, we've got the pictures, we've got the storyboard. We've got the structure of the ad. It's going to be about 60 seconds. We're nearly there. We're nearly there. We just need voiceover. So how's it going to sound, this lyric? I mean I just said that in that way. But it could sound a million ways, couldn't it? I know what let's do. Let's do these four influences are kind of running around in our heads at the moment. Let's do the ches and Dave 1. Now the labourers and cablers and council motion tablers were just part of the passing by all together. Now you lost me altogether. Now that's car to Chaz and Dave. And that just sounds to be right old cockney knees up. That's not what we're aiming for. So let's try. Let's try a bit of oh, Rolf. I mean, who doesn't like a bit of that? So let's. That could work for this. Sure. Now the lip fillers and tip nibblers and cheeky little pilferers were just passing by and the singer typed in linger types and take your greasy finger types. But then someone cries. You know, it's got to be contemporary. It's got to be a bit more. This is about kind of timeless urban poetry. We don't want something that's located in time the way that is. So I'm going to think, okay, right, what about a bit of injury? That's going to give it a contemporary edge, isn't it? So away you go. Now the labourers and cablers and council motion tablers were just passing by and the nurses with their purses and the blokes who post up. There's something a bit. There's something a bit try hard about all of this. And someone says at some Point. I think this needs to be a little bit more sort of wa. Jordan, you know, you know that poem from Four Weddings and stuff and it just. It's just really nice, just sort of. There's a lovely idiom about it and it just feels modern but effortlessly so. Under the door is slipped a copy of, you know, Audrey's finest. And somehow in this muddle of influences and left a bit and right a bit and all the casting and all the lyric and all the restaurant and all just the practical challenge of filming anything like comes a piece of film that has become a very high value piece of film. Now the labourers and cablers and council motion tablers were just passing by. And the gothy types and scoffy types and like coffee frothy types were just passing by. Those on their own whilst on the phone dunking McNuggets and having a moan were just passing by. The driving through with hungry crew who just pulled. I won't make you watch it all you've seen it's on there. You can't assemble this stuff. You can find as many intermediate stages as you like. If I could have shown you 100 intermediate stages. It is impossible to simply do this as a covering 1 numbers there. Creation is a real thing. I am a creationist. That is why. The other reason why is this. This advertising has had a sales return, a return on investment of £9.79 per pound spent. The order of magnitude of the total contribution for incremental sales of this advertising is in the order of hundreds of millions of pounds. Right now here he is, he's looking at the shoes and he's trying to see where the stitching is. It's one of those how did they do that? Moments. And of course he will never find the stitching, not all of it because really most of the value we create is invisible for our cultural health. I think this is the most important point of all of this that I'm going to make. Most of the value that we create is invisible. It may sometimes manifest itself through physically things that you can touch and see. But what makes most of it valuable in the end is what it means to others. And meaning is in the end the most valuable stuff there is. And you can't see it or touch it. And if we fail to see that in society, we'll lose touch with intelligence. And when we make all these decisions in fiscally austere times, the decisions we make about what to cut out of life will be disastrous. And One thing that 20 years spent around advertising teaches you is that it's all about intangibles. It is all about these little markers that indicate the presence of something that you can't see. That is what the world is in creative business. It's little markers, little signposts, physical things which indicate the presence of something you can't see that is vast and powerful and lies beneath. That is what meaning is all about. And that's what most of the time you're creating, when you're really creating value. And we have to remember that because at the end of the day, the stuff that really holds society together is intangible. And we will make disastrous decisions if we don't get this bit right. Mad Men. There's one scene in Mad Men that is adored by the advertising industry because it understands the business of meaning. And it's the scene where Don Draper tells Kodak what a slide machine means. Teddy told me that in Greek, nostalgia literally means the pain from an old wound. It's a twinge in your heart far more powerful than memory alone. This device isn't a spaceship, it's a time machine. It goes backwards, forwards, Takes us to a place where we ache to go again. It's not called the wheel, it's called the carousel. Explaining the meaning of things. People who can explain the meaning of things, you know, get listened to. And that is the one scene that's universally connected with the industry that that series attempts to portray. Here's a tricky one. Creation's elitist. No, it's not. You shout. It's all creation. Surely that's a sort of for everyone project. Surely we're all doing it now. Surely we've all got these laptops, you all sit in cafes drinking our mochaccinos and surely we're all doing it. Do you know that's not the case? It is an elitist thing. People look at this brand and they say, oh, I love this brand because it sort of brings it, it democratizes creativity. Because now anyone can do it. It's got software and all the design works. It's really intuitive and user friendly. So we can all do it. Now, if you were to look inside that company, you wouldn't find some sort of loose, democratic, sloppy sense of design or creativity. What you would find is gold standard, inch perfect Virgoan standards of design creativity. You have to remember that paradox. The way that these things appear on the outside is not what makes them successful in the first place. It is only about 5% of creative endeavor that sticks. 95% of it simply isn't Good enough to get someone to spend a premium on a thing. If you're quite good, it doesn't mean I'm going to spend quite a bit to make an impact. You have to be at that 5% level. It is not a for everyone thing. It's about the best. And we need centers of excellence in order to compete in the world. It's not one of those sort of circus sledgehammers where you hit it harder and harder and harder and harder. You use 95% of your glucose and nothing happens. And then finally you hit it hard enough and the thing goes up and the bell rings and you've made an impression. And that's what you have to do to make an impression on the public. It's only that last 5%. So this is a fundamentally kind of elitist project, this one. And it has to be. I'll tell you what has to be. Because sometimes you're faced with something as dreary as this, okay? It's a piece of rubber. And to most people it's the same as every single other piece of rubber that is put round the wheels. People don't care that much about the car, let alone the wheels. If they don't care much about the wheels, they certainly don't care too much about this. And sometimes the job of creativity is to make people care about stuff they otherwise didn't. And it's really hard. And that's why the bar needs to be set really high. And one of my favorite examples of that, that is the application of creativity to make something matter that previously didn't matter is this. Chaplains. When you go out of call, you need ties at a test. What could that mean? Well, it could mean someone just jumps out. It could mean that I love that. And the creative bar is very, very high in that. And most of the time it has to be. Value creation is not some for everyone wonderfully democratized project. It's a project of excellence. It needs to be crucial. Here's one. Look. Ideas. We all love ideas. Everyone looks at things and says, the idea in this is love, jealousy, separation, whatever the idea happens to be. We love to extrapolate ideas. And then it's very fashionable currency, isn't it? Ideas. It's all about the strength of the idea. And we talk about the value of ideas. My view is ideas are worth nothing. The only time when they start to be worth something is when they crystal, crystallize and work. That's my view. Having worked in greater business for 20 years, here's an idea I mean fear, yeah, massive good idea because people get scared. Fear sharks. Yep, I'm getting it, I'm getting it. People are scared of sharks. Yeah, they're talking about fear sharks. But then you're staring into the kind of abyss of a blank piece of paper, trying to think how we actually going to make this viscerally happen for people. And you're thinking, well, it can't just be a documentary. And then John Williams comes to the rescue. They say it's in my history, but one along with Star wars, one of the most profitable stories of all time. Not because the idea was, you know, a scary one because. Because it became fantastically scary in the execution. It's about craft. Ideas are not worth anything on me. Move. I'm going to, I think the last, because it's in many ways the most important to talk about at the London School of Economics, which is this happy city where all these prosperous people wearing all these fine clothes. So what's happened? So I think from there, top left down on his luck, no money anywhere to there. So what's going on there? So surely what this reminds us of is this, that in the end creativity is a driver of prosperity, not simply some sort of decadent byproduct of it. Now this is important because we're all very aware of motifs like this. The fall of Rome. It's so easy to think back through real history lessons and think, yeah, things go wrong when we get wealthy and what happens is we stop doing stuff we don't really need to do and life becomes a bit frivolous. We start eating too many grapes and round and round in our togas and we forget to fight the wars properly. And then all hell caves in and Rome falls and the barbarians enter through the front gate. And those motifs are really powerful when you. The trouble is they become part of our sort of moral imprint. And we start to believe that creativity is this thing which happens when society has achieved a decadent state of prosperity. And then we look at the cranes in Shanghai. Everyone knows that there are more cranes in Shanghai than there are anywhere else in the world. And as tourists we conclude, don't we, that those great buildings, those sort of modern masterpieces that are the skyscrapers of the future are only really being built now that there is that sort of concentration of wealth in places like Shanghai. We think that it's a byproduct of wealth. And what we forget is the other way around of seeing it. We forget, you know, here are three bands, they all started in the recession in the early 90s in Oxford. One was called Ride, one was called the Jennifers, and one was called Radiohead. The middle one became Supercross. They all started their music in the late 80s, early 90s, in a particularly bleak time, and they did it despite that. And when you dig into the stories, when you dig into the sort of the history of successful creative projects, what you normally find is that things have been done against the odds. There's a lot of blood, sweat and tears involved. And when people do that, they overcome stuff and it creates prosperity. Look into the story of any great piece of film that's ever been made and you'll find a story of a film that nearly didn't happen. You'll find a story of people who stuck with it and found ways. How do we get the cameras on the fishing boat in Jaws? My favourite example of this is with an Illinois, which works at so many levels. The director had to contribute money of his own, out of his own fee into the making of this film in order that it could be completed. I don't know how many times anecdotally, this film is supposed to have almost not happened, but I think this is a film that the politicians of today should watch because it's a great reminder of the fact that adversity sometimes and the overcoming of it have. That, you know, creates value. Creates value. Hey. Stop. Stop. Stop. No, please stop. Please. Please stop. Please stop. Are you the farmer? Shut up. Aren't here with this. We've gone on holiday by mistake. We're in this cottage here. Are you the farmer? Stop saying that, Whitner. Of course he's a fucking farmer. I hope you found some of that interesting, useful or both. Thank you very much. How many people have actually seen with Nolan? I. Yeah. The rest of you try and access with me and somewhere and you'll understand. Understand that reference. We've got 10, 15 minutes for some quick questions. Does anybody like to ask some quick questions about any of that or anything else related to marketing, advertising and the rest of it, please? Over there. This touches on a word that you used a lot in the presentation and one that I'm not sure I entirely understand your meaning of, which is the word value. In particular, the concept of advertising, where I think it's not uncommon for the best creative work to not align with the greatest commercial success or even for it to ever see the light of day. So is there something about value that goes beyond the success in the market that you would define? I think the two are. The two are more compatible than I think Folklore has it, I think that the best examples tend to bring those two worlds together. So in advertising, there's a section of the output of the industry that is the creative output that is also highly effective enterprise business. And it's that intersection that the industry tends to sort of focus on when it's trying to sort of extract lessons and principles. That's certainly true of that McDonald's example that I put in front of you. And then in other worlds, you know, I've tried to talk about films that have been. That have been, despite everything, great commercial successes. And I think you're absolutely right. You know, the creation of value is not something which happens in isolation. It. It is by definition, commercially harnessed. But what I learned actually, is that there is a very rich intersection of those two worlds, the creatively rich and the commercially effective. And yes, it is important to sort of live in that intersection. Absolutely. Otherwise it just becomes art for art's sake. Absolutely, absolutely. But there is a very rich intersection there, and we ignore it at our peril. And it's interesting because that question, that question confirms one of the prejudices which is a common, common prejudice, which is, you know, the greater the artistic expression, actually, the less commercially harnessable or effective it is likely to be. And yet there is this lovely intersection. It's a myth that's perpetuated, I think, within the industry as well, which is that the client always comes the wrong idea. Yeah. And I'm sure. Absolutely. And we are famous for doing ourselves no favors where that is concerned. In previous kind of recession, do you think the same cuts have been made on artistic creative that are kind of big? I think the same debates are had. I think the same debates are had. I think the difference between this one and previous ones are that now when the debate is had, as it has been had before, some of the abundance economic potential of what I'm loosely terming creativity is more deeply hidden because there's this veneer that sort of sits on top of it and obscures it from view. There is this world that seems to just work seamlessly. Technology smooths out so many of the wrinkles in life and the world seems to turn and there's so much great stuff being made already that actually for a few years you can live off the fat. I mean, it's interesting this, you know, there's the whole back catalogue in your breast pocket now, isn't there, with this tablet? And we could all live off that fat for quite a long time before we started to notice that at the core there was less being created, but in the end we would notice. So I think there's enough in the back catalogue and there's enough sort of veneer of technology to sort of suggest that. And also there's just the thrill of the new and the fact that we all love sort of Internet shopping and it all seems to be kind of fine. Pushing this sort of quasi commodity stuff around the world in cardboard boxes, it's more deeply hidden. So when we have the debate this time around, it's less obvious to people why it is we have to champion this stuff. I think that's the only difference. How do you separate. I'm sorry, you didn't hear the first question. So it's redundant, forgiving. But if. How do you separate your value propositions to your clients from that product? So if they give you something that's miraculous, it's the iPhone and you're negotiating your value creation in presenting it to the world. Value is actually in the product. How do you. How do you commit some new. I'm really glad you asked that. The more intrinsic value and difference there is in a product or service, the less communication based creativity has to compensate for it. And the smartest thing you can do when you've got something that is just intrinsically unique is sort of release it into the world as you might, you know, a young fish, you can see without really interfering with it too much. And it's interesting when you look at the advertising styles that surround some of the world's most differentiated products, they are simply elegant ways of showing the world how those amazing products work. And if there were a tire. If there were a tire. And by the way, creative value added can be applied to the tire making business just as it can to the advertising business. If that creative value added got to the point in tyres where there was such a palpable difference between one tyre and another that consumers actually could care about and understand. And interestingly, the continent is closer to that because they have snow to contend with and winter tyres with bits of metal in them and stuff. But if you could get to that point, then the job of advertising would be very different for them. The piece of work that I showed you, the job of advertising them, would simply be to say, look what we've done. Unfortunately there isn't that much true differentiation in the world, which is why advertising so often is saying a lot more than what we've done. It's saying, look what this could mean to you if you thought about it a different way. But you're absolutely right. So My follow up question would be, I'm from Canada and we've got a product called BlackBerry. Yeah. Which is going like that. And Apple, which has gone like that. And the true intrinsic value of the products is the same in terms of the ability to communicate by text and one kind of huge head start, they marketed themselves quite differently. Any comments on. Yeah, I mean, the answer is in your question. The true intrinsic value at a functional level may be the same. And that's not just true, by the way of BlackBerry and Apple, it's true of others too. So the area, the locus of differentiation has moved because consumers love the fact that in these 21st century products, form and function come together in beautiful ways. And these products define people and their identity and the way that they live. And it matters acutely to people how things look, feel, sound, touch and you know, my start of the 10 answer for you, although it's the subject of an entire other talk which we haven't got time for today, is that Apple have. They have prioritized design within their business. They have made design, you know, a king alongside technology. And they've made those two agendas equal. And when those two agendas come together, something magical happens and those products are selling magic. And if anything interferes with that magic at a design level, then the technology, however miraculous, will be less impressive. And that is the new locus of differentiation. And that is why Apple that way, Apple that way. Anybody else please. I really enjoyed the parable of the elements you make of this. I read it both myself. It was fantastic. There's one criticism I would have was at the moral finite end. You've got your curve images and then after that it stops. Big things, banking institutions, they kept trying to create value, trying to squeeze value out of these incredibly complicated master maneuvers that in the end no one understood. What happens when the value of the analogy is more appropriate, like Schrodinger's tact, you open the box or the emperor, so he's got no clothes. Fantastic question. I think if this story were dynamic rather than the sort of beginning and end one that gets kids to sleep on a wet Wednesday, then I think what would happen is that that business had been created, would be faced, wouldn't they, with new competitive pressure. Others would start to sort of figure out the secret. They start to make their own shoes that also achieve the same sort of premium and they'd suddenly find themselves not in a sort of beautiful monopoly but in a competitive situation where they had to keep innovating. And what then they would be doing is applying their creative value added to the next generation of shoes they would probably be trying to wrap intangibles around those shoes by way of names and brands and all those good things too. Which is why I said that it is not impossible for that story to turn into the story of these shoots because really that's what happens. People choose different kind of ways forward by their strategy but that's really what happens. So you're right. If you kind of drop the pill of competitiveness into that particular glass of water, it all changes. Well maybe we'll do a sequel. So onto the final talk, what happens if people start doing these shoes anymore? There are many businesses that have fallen foul of that, you know, not anticipating fundamental changes in need. Happily for our shoemaker the need for footwear is so far constant. But you make a good point. Last question at all. All exhausted. Okay, let's leave it there then. Thanks very, very much. Charge.