Branson: Behind the Mask (5 page)

One year later, in March 2007, the tempo increased. Selling tickets and rooms in space hotels needed agents, so forty-seven ‘space agents’ associated with the Virtuoso travel network were invited by Virgin to a two-day training course at the Kennedy Space Center in Cape Canaveral. The session started with a slick film. ‘It blew me away,’ Mike Melvill, the pilot, told the viewers as he stepped out of SpaceShipOne. ‘It really did. You really do feel you can reach out and touch the face of God.’ Melvill was followed by George Whitesides, the executive director of the National Space Society. ‘Stephen Hawking plans to hop a flight on Virgin Galactic,’ he said. ‘Virgin Galactic is the private company with the only reusable manned spacecraft that has successfully flown to space and back.’ Virgin Galactic, the travel agents were told, would be taking off on schedule from the spaceport. The agents departed as enthusiasts. They were convinced there were many Americans eager to spend their pocket money on a unique thrill.

In New Mexico, not everyone was convinced by Governor Richardson’s ‘pay to play’ spaceport or Branson’s promises. ‘This is your classic Old West story of your snake-oil salesman’, scoffed John Grubesic, a member of the New Mexico senate, ‘who comes to the dying town promising to revitalise it. Unfortunately people have bought it, hook, line and sinker.’ But no one had any reason to assume that Branson did not sincerely believe that Scaled could deliver the rocket as promised.

Soon after, Grubesic resigned from politics in disgust. His isolated protest was ignored. Branson’s trumpeting of Virgin Galactic had forced America’s power brokers finally to recognise the tycoon’s importance.

Al Gore, the former American vice-president, flew to London in his private jet in April 2006 to meet Richard Branson at his home in Holland Park, west London.

Long before he entered politics, Gore had campaigned about climate change.
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Inconvenient
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his documentary film warning about the imminent catastrophe of global warming, was due to be released the following month. To mount a popular crusade, Gore needed support from influential businessmen, and was persuaded by environmentalists that Branson embodied the ‘can-do’ dream. His newfound celebrity in America had magnified his global fame.

Until then, Branson had played at the periphery of the green movement. Invited in 2004 to sponsor the launch of the Climate Group at a celebration at the Banqueting House, in London’s Whitehall, attended by Tony Blair, bankers and industrialists, Branson had declined to donate any money and paid only lip service to those classified as ‘mission driven’. In the following two years, the Climate Group had attracted support from HSBC, Starbucks, Google and other global brands. Virgin could no longer afford to ignore the environment.

‘This is a wake-up call,’ Gore told Branson during the three hours he spent with him at his Holland Park home, which adjoined another house that served as his office. ‘I’ve got a plan for you. You’re a well-known business leader and you could make more of a difference than almost any other business leader if you do something dramatic and try and get people to pay
attention.’ An aviation company, said Gore, needed to be seen as caring for the environment.

Branson was conscious of his personal vulnerability. In 2002, Virgin Atlantic had rejected the option of two-engined jets, leasing instead four-engined Airbuses, with Branson promoting Virgin’s ‘safe’ planes for transatlantic flights through advertisements on his aircrafts’ fuselages stating, ‘4 Engines 4 Long Haul’. Four years later, Branson recognised his mistake. Four-engined planes polluted more and were not safer. His awakening coincided with the environmental movement focusing on aviation’s greater responsibility for pollution compared to power stations and ground transport. Within thirty years, the campaigners argued, 50 per cent more aircraft would be in the air, yet aviation’s carbon emissions were being reduced by only 1 per cent a year. Many supported taxation and strict carbon allowances on air travel. Banning aircraft was not an option for those environmentalists wary of alienating the public who were keen to holiday in foreign countries. Until Gore arrived, Branson had not addressed the conundrum of profiting from a business that polluted the environment. The question, suggested Gore, was how Branson could pose as the ‘responsible face of aviation on emissions’. Environmentalists, he said, could embrace aircraft and simultaneously campaign for them to reduce their emissions. In a nutshell, continued Gore, Branson’s airline should abandon its boast that ‘Virgin produces less ice cubes’ and show instead how its core decisions were driven by ‘green’ credentials. The latest fashion of corporate self-cleansing had been labelled as ‘greenwashing’.

Branson found Gore irresistible. Attractive, popular, rich and famous, the politician embodied the qualities Branson admired. He was also offering a solution to a problem. By joining Gore’s campaign, Branson would be introduced into the elite of America’s Democrats, chief among them Bill Clinton. Over the
previous year, the former president had positioned himself as an environmental evangelist. Branson spotted an unusual opportunity: by embracing the cause, he could glow and at the same time earn serious money. He was following a recently established path.

As a normal consequence of the personal relationships between those with political power, in 2004 the Climate Group’s leaders had been introduced by Tony Blair to Clinton and his staff at the Clinton Institute. With Gore’s help, the group had supplied Clinton, a voracious reader, with documentary evidence for the possible ways of avoiding the ‘inevitable’ environmental catastrophe. Once immersed, Clinton developed a passion for ‘green’, combined with a desire to curtail America’s dependence on foreign oil supplies. Global warming, he believed, could be stopped without threatening the American way of life.

In
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, the book he published in 2005, Clinton highlighted the importance of billionaires embracing philanthropy. One of the more virtuous ways in which the rich could improve the world, he wrote, was to combat global warming and the constant rise in oil prices by investing in renewable energy. The ideal investment was ethanol manufactured from corn, which, when mixed with petrol, could power cars. The biofuel, wrote Clinton, was a win-win: a tick for American farmers profiting by selling corn to American biofuel manufacturers, and a tick for reducing carbon emissions. Above all, political resistance would be minimal because Americans could still drive their big cars.

Clinton’s advocacy of ethanol was not entirely philanthropic. ‘Clean technology’ and ‘green’ politics provided a profitable answer to those preaching about ‘peak oil’. In their scenario, the world’s oil supplies were in permanent decline, leading to a future shortage and an irreversible rise in prices. Clinton’s contribution to the debate was called ‘big-footing’. His commitment tilted more to mythology than reality – but he intended to profit from the vogue.

Since 2002, Clinton had been a paid adviser to Ron Burkle, a Californian who had earned at least $3 billion from supermarkets and was now seeking other investments and political leverage. At Clinton’s behest, Burkle’s company, Yucaipa, had invested in a manufacturer of ethanol from sugar cane. The company’s owner was Vinod Khosla, who co-founded Sun Microsystems in Silicon Valley before selling it for over $1 billion. He was also an early investor in Amazon and Google. Like many other dotcom billionaires, Khosla foresaw renewable fuels as the next multi-billion fortune-maker. ‘We need to declare war on oil,’ he said, advocating renewables as the ‘mainstream solution’ to replace 80 per cent of oil-based energy. If the world failed to heed his prediction, he warned, ‘the planet is history the way we know it today’. Powered by his convincing salesmanship, Khosla had become a friend, political ally and commercial partner of Burkle, Gore and Clinton. Together, the ‘ethanolites’ were promoting the ‘drop-in solution’ to potential investors: ethanol was easy to produce, easy to mix with petrol and, with generous government subsidies, delivered guaranteed profits.

Branson was introduced to Khosla by the organisers of the Climate Group. Branson’s endorsement of ethanol, the campaigners calculated, would electrify their cause. ‘We need to dispel the notion that we must make a choice between saving the planet and saving money,’ Khosla told him. ‘We must find solutions which are good for the environment and also profitable.’ For Branson, focused on money since his late teens – as he admitted, his agenda ‘was always 99.5 per cent business’ – ‘green’ was an ideal vehicle for new profits. His introduction to Khosla would work out better than the Climate Group had expected.

The celebrities’ endorsement of ethanol aroused Branson’s curiosity. His interest was further bumped up by Governor Schwarzenegger’s decree that 20 per cent of all ethanol consumed in California should, by 2010, be produced in the state
itself. Khosla was happy to oblige. Cilion, his new corporation, planned to build nine factories to produce ethanol from corn. The first three would be built in California. ‘I am confident’, said Khosla, ‘that Cilion will be able to produce all of the ethanol that the Governor has ordered for 2010.’ Aggrieved at having missed out on the internet billions, Branson was impressed by Khosla’s record. His success echoed that of Bill Gates, who had already invested $78 million in an ethanol company, albeit by buying preference shares, which minimised his risk. Persuaded by Khosla and by the same bankers who had profited from the dotcom era that ethanol was a safe bet, Branson’s reservations about risking his own money gradually receded. Mixing in the firmament of political superstars and billionaires such as Clinton, Schwarzenegger, Gore, Burkle and Khosla was hooking him. He trusted that Khosla’s record as a venture capitalist would help earn huge profits for Virgin from green technology, and relied on Clinton as the promoter.

He was invited to join the Green Rush, financed by businesses known as ‘watermelons’ – green on the outside and red capitalist within. He could not join on the favourable terms he normally extracted – offering the Virgin brand instead of hard cash – but caught up in the philosophy of Khosla and others, he finally decided not to be left behind. Then, his publicists revealed that Branson and media mogul Ted Turner had discussed ethanol over dinner. Turner had signalled his interest in the environment by contributing $1 billion to the United Nations Foundation and creating the Energy Future Coalition. Once the tabloid newspapers heard that Branson and Turner had discussed rescuing the planet, biofuels were blessed by the media as potential saviours and Branson was hailed as a hero for being appointed by Turner to the Energy Future Coalition’s steering committee, of which Khosla was also a member. One of the committee’s priorities was to lobby the US government to grant bigger subsidies
for developing renewable and alternative fuels from crops. The ‘ethanolites’ wanted their profits to be guaranteed.

In early 2006, Branson announced that Virgin Fuels would invest $60 million in Cilion. For him, that was an unusually large commitment in a project over which he lacked even limited influence. He was gripped, and in April increased Virgin’s commitment to invest in the ‘world’s biggest’ factories, which would produce 100 million gallons of bioethanol a year, to $230 million. The company by then held a majority stake in factories in Indiana and Tennessee.

The following month, his enthusiasm appeared to be justified. Senator Hillary Clinton introduced a bill in Congress to create a $50 billion ‘strategic energy fund’ to expand the use of ethanol. Her support was a surprise. Previously, she had opposed subsidies for ethanol but, without explanation, she switched, and Khosla received approval for the Mascoma Corporation in Rochester, New York, to convert forest products into cellulosic ethanol. The Greater Rochester Enterprise group published their thanks to Mrs Clinton for her efforts in also obtaining permits for Cilion’s two ethanol plants. Those had been negotiated by Yucaipa, who in turn were advised by Bill Clinton. The project, Jerry Wilhelm of the Greater Rochester Enterprise group volunteered in a seventeen-page report, ‘would not have happened without the senator’. One month later, Khosla repeated his commitment to build nine bioethanol corn refineries in America, using government subsidies for the $160 million programme. The first three factories in California, he confirmed, would be operational by 2008. Branson appeared to have bet on a winner.

Gripped by what he referred to as a ‘golden opportunity’ for the Virgin brand and his business, Branson stepped up his commitment. In June, he won approval from the British government to use a mixture of bioethanol and diesel on Virgin’s cross-country rail routes and was granted a tax reduction. A month
later, he said that Virgin’s investment in renewable fuels would increase to $1 billion over the next four years.

Shai Weiss, his adviser and representative on Cilion’s board, was a former banker with the gift of being able to talk a good story. With Weiss’s help, Branson intended to combine Virgin’s commercial investment with a political campaign to promote his environmental convictions. ‘We plan to move into this sector in a big way,’ said Branson. Calling his plan the Gaia Capitalism Project after a theory developed by his favourite scientist, James Lovelock, Branson mentioned that his future investments would include wind turbines and nuclear power. ‘In a few years it will be a major field for us,’ he said. ‘Nothing is off the agenda.’ To boost his cause, he began repeating the mantra, ‘The world is fast running out of oil and minerals.’

Flying in his Falcon at 38,000 feet over the Andes or across Africa’s bush, he had clearly not understood that the mines below could produce sufficient copper, iron, sulphur and other minerals to sustain the world’s industries for hundreds of years. Similarly, he seemed unaware that peak oil was an illusion advocated by prejudiced lobby groups who dismissed the importance of the constant technological advancements which were spurring the extraction of additional oil. He appeared equally unaware of the political manipulation by many oil-producing nations to deny the major oil-exploration corporations access to their vast untapped reserves. To some, his ingenuity reflected his eye for another commercial opportunity. Others believed that for once he had failed to balance the financial risk against his customary self-promotion.

The immediate consequence of the biofuel producers’ demand for corn was a dramatic increase in prices for the crop. The cost of grain for animals and poultry rose, and food prices in supermarkets followed. The IMF estimated that the increase in ethanol production in America raised the price of maize across
the world by 60 per cent and threatened to cause starvation in the poorest countries. Paradoxically, producing more corn for ethanol generated additional greenhouse gases, undermining the environmentalists’ arguments. American motorists also complained: cars which drove sixteen miles on a gallon of petrol could cover only twelve on the ethanol mixture. The environmentalists’ enthusiasm was defied by another statistic: filling a car’s tank with bioethanol required 250 kilogrammes (550 lbs) of corn – the amount consumed by a single family in a year.

Branson seemed oblivious to those ambiguities. He rarely read scientific briefs and appeared not to fully understand the science of producing ethanol from corn. His staff also disliked delivering bad news. Like his sidekick Weiss, he did not question why George Soros and Bill Gates were producing ethanol from sugar cane in Brazil rather than investing in Khosla’s factories in America.

Branson had relied on Khosla’s assumption that producing ethanol would be uncomplicated. Khosla had purchased the equipment for his factories from India and hired experienced engineers formerly employed by BP. Among them was Lawrence Peck, an American chemical engineer. Peck soon realised that ‘Khosla was just throwing darts at the dartboard to see which would stick. His group seemed to have little idea how to produce ethanol. He wasn’t impressive.’ Branson discounted the problems. His millions of dollars had bought a ticket to the top table with Clinton and Gore, and proximity to Governor Schwarzenegger, who had assumed importance in his ambitions in the US, especially to launch his new airline.