1 00:00:14,680 --> 00:00:17,840 Speaker 1: This is Wall Street Week. I'm David Weston bringing you 2 00:00:18,160 --> 00:00:22,000 Speaker 1: stories of capitalism. This week explosive growth in the world 3 00:00:22,079 --> 00:00:25,600 Speaker 1: of racing. We talk to the drivers, engineers, and power 4 00:00:25,600 --> 00:00:28,920 Speaker 1: players in the business of Formula One. But we start 5 00:00:29,040 --> 00:00:32,080 Speaker 1: with a story about saving for the future. Sends for 6 00:00:32,120 --> 00:00:35,120 Speaker 1: an entire country to put something away for a rainy day, 7 00:00:35,640 --> 00:00:38,839 Speaker 1: and when doing something so sensible could lead to a 8 00:00:38,880 --> 00:00:40,800 Speaker 1: whole new set of problems. 9 00:00:41,920 --> 00:00:47,320 Speaker 2: We'll create America's own sovereign wealth fund to invest in 10 00:00:47,400 --> 00:00:50,159 Speaker 2: great national endeavors for the benefit of all of the 11 00:00:50,200 --> 00:00:53,720 Speaker 2: American people. Why don't we have a wealth fund? Other 12 00:00:53,800 --> 00:00:55,720 Speaker 2: countries have wealth funds, We have nothing. 13 00:00:57,000 --> 00:00:59,680 Speaker 1: In the final weeks leading up to the election, Donald 14 00:00:59,680 --> 00:01:02,600 Speaker 1: Trump and Joe Biden found some common ground on at 15 00:01:02,680 --> 00:01:06,240 Speaker 1: least one thing, the wisdom of creating some form of 16 00:01:06,360 --> 00:01:09,480 Speaker 1: sovereign wealth fund for the United States. But that they've 17 00:01:09,480 --> 00:01:12,760 Speaker 1: worked for some countries doesn't necessarily mean they'd worked for 18 00:01:12,800 --> 00:01:17,120 Speaker 1: the world's largest economy. Over eighty countries around the world 19 00:01:17,240 --> 00:01:20,520 Speaker 1: have sovereign wealth funds, state owned funds that invest the 20 00:01:20,520 --> 00:01:23,600 Speaker 1: country's cash reserves for the long term good of its 21 00:01:23,600 --> 00:01:27,840 Speaker 1: citizens and the economy. Globally, assets under management in all 22 00:01:28,040 --> 00:01:32,440 Speaker 1: SWFs total twelve point eight trillion dollars, up more than 23 00:01:32,480 --> 00:01:34,560 Speaker 1: tenfold over the last two decades. 24 00:01:34,840 --> 00:01:37,560 Speaker 3: We have invested in nine thousand companies around the world. 25 00:01:37,800 --> 00:01:40,120 Speaker 3: We own one and a half percent of all the 26 00:01:40,120 --> 00:01:42,240 Speaker 3: equities in the world. In Europe we own close to 27 00:01:42,240 --> 00:01:45,520 Speaker 3: three percent, and then we own bonds and we own 28 00:01:45,640 --> 00:01:46,160 Speaker 3: real estate. 29 00:01:46,840 --> 00:01:50,360 Speaker 1: That's Nikolai Tangan, the man in charge of Norway's sovereign 30 00:01:50,440 --> 00:01:54,400 Speaker 1: wealth fund, valued at roughly get this, one point seven 31 00:01:54,600 --> 00:01:55,520 Speaker 1: trillion dollars. 32 00:01:55,600 --> 00:01:57,520 Speaker 3: It's a big fund in a small country, right, and 33 00:01:57,560 --> 00:02:00,800 Speaker 3: you have a lot of sakeholders, people who want have 34 00:02:01,720 --> 00:02:04,560 Speaker 3: a sa in pretty much everything, right, and so you 35 00:02:04,600 --> 00:02:07,920 Speaker 3: have to navigate this. I would say the ministry has 36 00:02:08,000 --> 00:02:11,720 Speaker 3: been tremendously important in the success of the fund. I 37 00:02:11,760 --> 00:02:15,080 Speaker 3: think we have great politicians in the country, but we 38 00:02:15,200 --> 00:02:19,360 Speaker 3: need to navigate all these stakeholders, and you know, that's 39 00:02:19,880 --> 00:02:21,359 Speaker 3: a very very interesting exercise. 40 00:02:21,440 --> 00:02:24,600 Speaker 1: At the end of twenty twenty three, Tangan's Government Pension 41 00:02:24,680 --> 00:02:28,160 Speaker 1: Fund Global top the list of such funds, followed by 42 00:02:28,280 --> 00:02:33,240 Speaker 1: China's CIC and Safe Investment Company, with two from the 43 00:02:33,280 --> 00:02:37,160 Speaker 1: Middle East, Abu Dhabi's and Kuwait rounding out the world's 44 00:02:37,160 --> 00:02:40,720 Speaker 1: top five. It's no coincidence that so many of the 45 00:02:40,760 --> 00:02:44,639 Speaker 1: countries with large sovereign wealth funds like Norway are rich 46 00:02:44,680 --> 00:02:47,080 Speaker 1: in oil and other natural resources. 47 00:02:47,480 --> 00:02:53,200 Speaker 4: Initially, the strategy was to invest mostly in equity in 48 00:02:53,280 --> 00:03:00,640 Speaker 4: real estate, so to invest definitely outside there not resources, 49 00:03:00,680 --> 00:03:03,680 Speaker 4: although they also invest in all companies outside their countries. 50 00:03:04,800 --> 00:03:08,360 Speaker 1: Ruth Aguilera is a professor at Northeastern University who has 51 00:03:08,400 --> 00:03:11,359 Speaker 1: studied the origins of sovereign wealth funds and how their 52 00:03:11,440 --> 00:03:14,680 Speaker 1: mandates and strategies have evolved through the years. 53 00:03:15,160 --> 00:03:18,360 Speaker 4: Now they have become very sophisticated. They are investing in 54 00:03:18,600 --> 00:03:24,240 Speaker 4: AI data centers and also a huge huge push towards 55 00:03:24,840 --> 00:03:29,440 Speaker 4: green infrastructures and renewables, so that's another kind of like 56 00:03:29,560 --> 00:03:32,680 Speaker 4: big asset class that they're investing in. So we have 57 00:03:32,760 --> 00:03:38,000 Speaker 4: totally switched from investing more in They definitely invest in 58 00:03:38,160 --> 00:03:41,360 Speaker 4: all the public betrayer companies, but now the focus has 59 00:03:41,400 --> 00:03:45,000 Speaker 4: switched towards you know what, many markets, many investors are 60 00:03:45,080 --> 00:03:49,120 Speaker 4: doing AI and sustainable investment. 61 00:03:49,560 --> 00:03:52,920 Speaker 1: As the largest sovereign wealth fund, Tangan's nb I AM 62 00:03:53,120 --> 00:03:55,520 Speaker 1: in some ways sets the pace for others. 63 00:03:56,000 --> 00:04:00,000 Speaker 4: So Norway is the poster child of summer wealth fund 64 00:04:00,600 --> 00:04:05,720 Speaker 4: mostly because it's super transparent in their roles. So not 65 00:04:05,800 --> 00:04:08,960 Speaker 4: only there have a Council of Ethics, which has existed 66 00:04:09,000 --> 00:04:11,920 Speaker 4: for a long time, but in twenty twelve they decided 67 00:04:11,960 --> 00:04:14,360 Speaker 4: that they would only invest in companies that they have 68 00:04:14,760 --> 00:04:16,040 Speaker 4: good corporate governance. 69 00:04:17,720 --> 00:04:21,200 Speaker 1: You were the CEO of the largest sovereign wealth fund 70 00:04:21,240 --> 00:04:23,760 Speaker 1: in the world. Where did it come from? Where did 71 00:04:24,160 --> 00:04:25,480 Speaker 1: MBIM come from? 72 00:04:25,720 --> 00:04:28,760 Speaker 3: Well, it's very interesting. So in no way they found 73 00:04:28,800 --> 00:04:32,320 Speaker 3: the oil in sixty nine, and it was the last attempt. 74 00:04:32,400 --> 00:04:36,839 Speaker 3: They were really the last well and if they hadn't 75 00:04:37,279 --> 00:04:39,440 Speaker 3: found oil then they would just had needed to pack 76 00:04:39,520 --> 00:04:40,400 Speaker 3: up the toys and go home. 77 00:04:40,440 --> 00:04:40,640 Speaker 5: You know. 78 00:04:40,800 --> 00:04:43,039 Speaker 3: It was announced that the Rwegian people the day before 79 00:04:43,080 --> 00:04:47,279 Speaker 3: Christmas Eve in sixty nine, and in many countries it 80 00:04:47,360 --> 00:04:49,680 Speaker 3: had been a curse, you know, it had crowded out 81 00:04:49,760 --> 00:04:51,760 Speaker 3: industries that had led to corruption and so on, and 82 00:04:51,800 --> 00:04:54,200 Speaker 3: so the politicians they now decided to set up this 83 00:04:54,240 --> 00:04:57,360 Speaker 3: fund and it was set up in ninety six, started 84 00:04:57,360 --> 00:05:00,479 Speaker 3: with two billion Norwegian grunner and is now grown to 85 00:05:00,680 --> 00:05:03,760 Speaker 3: nineteen thousand billion Auegian growner or one point seven trade jendullas. 86 00:05:04,360 --> 00:05:07,480 Speaker 1: Along with its scope, its mission has also grown over 87 00:05:07,520 --> 00:05:10,760 Speaker 1: its twenty six years. I wonder if there's another function 88 00:05:10,800 --> 00:05:13,159 Speaker 1: of a sovereign wealth fund. In fact, it's described in 89 00:05:13,200 --> 00:05:15,600 Speaker 1: some of your materials online, which is sort of an 90 00:05:15,640 --> 00:05:19,080 Speaker 1: almost wealth transfer from the current generation to the future generation. 91 00:05:19,520 --> 00:05:21,719 Speaker 1: Is there a function for that even if you don't 92 00:05:21,760 --> 00:05:22,360 Speaker 1: have a surplus. 93 00:05:22,520 --> 00:05:26,280 Speaker 3: Perhaps there are some philosophical reasons for doing that, but 94 00:05:26,320 --> 00:05:29,799 Speaker 3: I do think you would need to have. It's basically 95 00:05:29,800 --> 00:05:33,640 Speaker 3: to save and safeguard the wealth for the future. But 96 00:05:33,680 --> 00:05:36,800 Speaker 3: I wouldn't borrow today in order to spend in the future. 97 00:05:36,880 --> 00:05:38,920 Speaker 3: But if you have one of these windfall gains like 98 00:05:39,360 --> 00:05:41,800 Speaker 3: we've had on the continental shelf, I think it makes 99 00:05:41,839 --> 00:05:42,440 Speaker 3: a lot of sense. 100 00:05:42,920 --> 00:05:46,039 Speaker 1: You have a mandate obviously it's a maximize return, but 101 00:05:46,200 --> 00:05:52,200 Speaker 1: also with an element of sustainability on various indicators economic stability, climate, 102 00:05:52,440 --> 00:05:56,000 Speaker 1: environment stability. Do those things come into contention with one another. 103 00:05:56,560 --> 00:05:59,920 Speaker 3: No, I don't think they do, because we believe that 104 00:06:02,000 --> 00:06:04,599 Speaker 3: climate risk is a financial risk. And the reason for 105 00:06:04,640 --> 00:06:08,320 Speaker 3: that is that you know, if you have we own 106 00:06:08,360 --> 00:06:10,240 Speaker 3: one and a half percent of all the equities in 107 00:06:10,279 --> 00:06:13,039 Speaker 3: the world, and if we have one company polluting while 108 00:06:13,080 --> 00:06:14,839 Speaker 3: it's being picked up by all the other companies we have, 109 00:06:15,040 --> 00:06:17,560 Speaker 3: we need to care about, you know, the future. We 110 00:06:17,560 --> 00:06:21,240 Speaker 3: need to care about the climate. We see that a 111 00:06:21,320 --> 00:06:26,479 Speaker 3: deteriorating climate is causing worse harvests, driving up prices. We 112 00:06:26,520 --> 00:06:30,159 Speaker 3: see it now in coffee, olive oil, orange juice and 113 00:06:30,200 --> 00:06:32,560 Speaker 3: so on, and so it's basically a financial risk, and 114 00:06:32,640 --> 00:06:36,000 Speaker 3: it hasn't been the case before, but it's increasingly the case. 115 00:06:36,320 --> 00:06:38,719 Speaker 1: Do you even take a look at some investments that 116 00:06:38,839 --> 00:06:41,800 Speaker 1: might have an adverse effect on climate? For example, brown 117 00:06:41,839 --> 00:06:44,160 Speaker 1: cole as I understanding, you don't invest in any company 118 00:06:44,160 --> 00:06:45,039 Speaker 1: involved in brown coal. 119 00:06:45,160 --> 00:06:49,159 Speaker 3: No, that's correct, and that's a separate entity from us. 120 00:06:49,200 --> 00:06:51,560 Speaker 3: It's called the Council of Ethics, and they exclude things 121 00:06:51,600 --> 00:06:54,119 Speaker 3: for ethical reasons. So there are a lot of different 122 00:06:54,120 --> 00:06:56,160 Speaker 3: types of weapons we don't do we do. We don't 123 00:06:56,200 --> 00:06:58,480 Speaker 3: do coal, we don't do tobacco for instance. 124 00:06:58,800 --> 00:07:02,279 Speaker 1: How do you take into account it changes in governments 125 00:07:02,360 --> 00:07:04,919 Speaker 1: in Norway for example? To what extent does your investment 126 00:07:04,920 --> 00:07:07,159 Speaker 1: strategy vary with who's in power. 127 00:07:07,960 --> 00:07:12,120 Speaker 3: We have a very constant investment philosophy and I think 128 00:07:12,120 --> 00:07:15,160 Speaker 3: that's really one of the success factors behind the fund 129 00:07:15,640 --> 00:07:20,120 Speaker 3: is that our investment mandate is widely anchored. All the 130 00:07:20,120 --> 00:07:25,440 Speaker 3: political parties agree on kind of the big guidelines, the 131 00:07:25,480 --> 00:07:30,320 Speaker 3: main guidelines for the fund. It means that when we 132 00:07:30,400 --> 00:07:35,200 Speaker 3: have a change of government or investment, philosophy does not change. 133 00:07:35,240 --> 00:07:36,160 Speaker 3: It remains constant. 134 00:07:36,840 --> 00:07:40,080 Speaker 1: Given your emphasis on the environment, do you see a 135 00:07:40,120 --> 00:07:42,920 Speaker 1: retrenchment in a lot of companies in their commitment. 136 00:07:43,880 --> 00:07:47,680 Speaker 3: Yes, there is retrenchment. There is a backlash against ESG 137 00:07:48,040 --> 00:07:52,559 Speaker 3: and against climate. So it's moving slower than we would 138 00:07:52,560 --> 00:07:54,560 Speaker 3: have hoped for it, and then we would have wished 139 00:07:54,560 --> 00:07:57,920 Speaker 3: for it. But you know, I do think if you 140 00:07:57,960 --> 00:08:00,880 Speaker 3: are really serious about your business, you are serious about 141 00:08:00,880 --> 00:08:05,680 Speaker 3: your stakeholders, about your employees, you need to take this 142 00:08:05,800 --> 00:08:06,480 Speaker 3: thing seriously. 143 00:08:06,720 --> 00:08:11,280 Speaker 1: Essential to that philosophy is nbim's focused on transparency and 144 00:08:11,360 --> 00:08:14,720 Speaker 1: its holding waiting and its market value. 145 00:08:14,880 --> 00:08:17,000 Speaker 4: If you go there, anybody goes there, they have a 146 00:08:17,160 --> 00:08:20,000 Speaker 4: very you know, a building that it's like all blasts 147 00:08:20,040 --> 00:08:23,880 Speaker 4: to represent their transparency. They are very open to We 148 00:08:23,920 --> 00:08:28,480 Speaker 4: have talked to them many times and everything is publicly available. 149 00:08:29,040 --> 00:08:33,120 Speaker 4: So that's I think very constructive and they are I 150 00:08:33,120 --> 00:08:35,480 Speaker 4: think they are an example for the rest of the 151 00:08:35,559 --> 00:08:39,320 Speaker 4: funds on how to follow the Santiago principles, how to 152 00:08:40,120 --> 00:08:43,679 Speaker 4: invest responsibly, because that will lead in the long term 153 00:08:43,760 --> 00:08:45,160 Speaker 4: to better financial returns. 154 00:08:45,240 --> 00:08:48,439 Speaker 1: The Santiago Principles are a set of twenty four voluntary 155 00:08:48,440 --> 00:08:51,760 Speaker 1: guidelines for sovereign wealth funds created in two thousand and 156 00:08:51,760 --> 00:08:54,120 Speaker 1: eight by the IMF and a group of the largest 157 00:08:54,120 --> 00:08:58,160 Speaker 1: funds in order to address concerns about risk taking and governance. 158 00:08:58,559 --> 00:09:01,360 Speaker 1: How do you compare with other salvas and wealth funds? 159 00:09:01,400 --> 00:09:03,959 Speaker 1: I mean there's one in Singapore, obviously, there's one UAE. 160 00:09:04,520 --> 00:09:06,280 Speaker 1: How are you similar? How are you different? 161 00:09:07,080 --> 00:09:10,920 Speaker 3: Yeah, there are a lot of really fine sothern wealth 162 00:09:10,960 --> 00:09:18,360 Speaker 3: funds out there. I would say, how we the main differences? Well, one, 163 00:09:18,559 --> 00:09:22,680 Speaker 3: we are we are one hundred percent transparent, right you can. 164 00:09:22,840 --> 00:09:25,199 Speaker 3: We even have a live tracker on our on our 165 00:09:25,240 --> 00:09:28,679 Speaker 3: website showing the real value of the fund. And you 166 00:09:28,679 --> 00:09:31,560 Speaker 3: know how often is updated. What do you think, Well, 167 00:09:31,640 --> 00:09:35,959 Speaker 3: thirteen times a second, so that's really really live value 168 00:09:35,960 --> 00:09:38,679 Speaker 3: of the fund and it's actually the most looked. 169 00:09:38,400 --> 00:09:41,640 Speaker 5: At number in the country, which is quite interesting. 170 00:09:41,760 --> 00:09:44,080 Speaker 3: Then we are we are very long term, we are 171 00:09:44,120 --> 00:09:48,920 Speaker 3: not in the private market. And then we also have 172 00:09:49,559 --> 00:09:52,640 Speaker 3: I think the fact that it is so broadly politically 173 00:09:52,720 --> 00:09:55,080 Speaker 3: anchored is a bit different. 174 00:09:55,640 --> 00:09:58,560 Speaker 1: The fund's website tells us just how broadly anchored it 175 00:09:58,720 --> 00:10:01,880 Speaker 1: is seventy two percent is in equities of those nine 176 00:10:01,960 --> 00:10:05,960 Speaker 1: thousand companies, twenty six percent in fixed income, and the 177 00:10:06,000 --> 00:10:09,679 Speaker 1: rest is in real estate and renewable energy infrastructure. How 178 00:10:09,679 --> 00:10:11,280 Speaker 1: do you look for alpha when you go out there 179 00:10:11,320 --> 00:10:14,000 Speaker 1: and look to beat returns? What sorts of indicie you 180 00:10:14,080 --> 00:10:14,520 Speaker 1: looked at? 181 00:10:15,400 --> 00:10:15,679 Speaker 5: Well? 182 00:10:15,800 --> 00:10:19,560 Speaker 3: We try to find great companies which ope perform their 183 00:10:19,600 --> 00:10:24,880 Speaker 3: pay group quality companies which can compound at higher rates, 184 00:10:25,400 --> 00:10:28,920 Speaker 3: high returnal capital with some MOLT which means that these 185 00:10:28,960 --> 00:10:30,199 Speaker 3: returns can be sustainable. 186 00:10:30,640 --> 00:10:31,600 Speaker 5: So that's what we try to do. 187 00:10:32,080 --> 00:10:34,600 Speaker 1: How much of it is ground up, that is company 188 00:10:34,640 --> 00:10:37,640 Speaker 1: by company as opposed to certain sectors or certain styles. 189 00:10:38,640 --> 00:10:41,319 Speaker 3: The alpha we try to create is all companies specific. 190 00:10:42,240 --> 00:10:46,280 Speaker 3: We have delegated mandates. We have roughly one hundred portfolio 191 00:10:46,280 --> 00:10:50,439 Speaker 3: managers who have a specific portfolio and they try to 192 00:10:50,640 --> 00:10:53,640 Speaker 3: perform the market on a daily basis. Now, we try 193 00:10:53,679 --> 00:10:56,600 Speaker 3: to have a longer term time horizon in what we do. 194 00:10:56,679 --> 00:10:59,319 Speaker 3: So typically we would measure results of where rolling three 195 00:10:59,400 --> 00:11:02,720 Speaker 3: year period, and I think that's important in this market 196 00:11:02,760 --> 00:11:04,959 Speaker 3: to be increasingly long term menu thinking. 197 00:11:05,960 --> 00:11:08,400 Speaker 1: You are lest way, I check seventy percent in equities, 198 00:11:09,640 --> 00:11:12,160 Speaker 1: does that vary and who decides to vary it. 199 00:11:12,679 --> 00:11:15,280 Speaker 3: Well, it's the ministry who decides. Now it has been 200 00:11:15,280 --> 00:11:18,400 Speaker 3: pretty constant for a long period of time. We increase 201 00:11:18,520 --> 00:11:21,040 Speaker 3: the equity portion from forty to sixty percent during the 202 00:11:21,040 --> 00:11:23,679 Speaker 3: financial crisis. So actually during two thousand and eight two 203 00:11:23,679 --> 00:11:25,920 Speaker 3: thousand and nine we were probably the biggest buyer of 204 00:11:25,920 --> 00:11:30,200 Speaker 3: equities in the whole world. Now, in retrospect, that turned 205 00:11:30,200 --> 00:11:31,040 Speaker 3: out to be a good thing. 206 00:11:31,480 --> 00:11:34,040 Speaker 1: Unlike some of its peers, none of the fund is 207 00:11:34,040 --> 00:11:37,440 Speaker 1: invested in private equity. You didn't mention private equity or 208 00:11:37,480 --> 00:11:40,440 Speaker 1: private credit. Why do you not invest in those? 209 00:11:40,840 --> 00:11:43,880 Speaker 3: Well, that's not in our mandate, so we only invest 210 00:11:44,000 --> 00:11:48,320 Speaker 3: in listed equities. We have suggested that to the Parliament 211 00:11:48,440 --> 00:11:50,800 Speaker 3: that we should be allowed to go into private investments, 212 00:11:50,800 --> 00:11:53,400 Speaker 3: but so far we cannot do it. There is a 213 00:11:53,400 --> 00:11:56,400 Speaker 3: political process and then we'll see where that will lead, 214 00:11:56,920 --> 00:11:58,440 Speaker 3: because we do think there is. 215 00:11:58,920 --> 00:12:00,480 Speaker 5: We do think we should have. 216 00:12:00,520 --> 00:12:03,360 Speaker 3: All the tools in the toolbox, but for the moment 217 00:12:03,360 --> 00:12:03,760 Speaker 3: we haven't. 218 00:12:04,760 --> 00:12:07,560 Speaker 1: Even without all the tools in the toolbox, few would 219 00:12:07,640 --> 00:12:10,440 Speaker 1: argue that Norway's Sovereign Wealth Fund has been anything but 220 00:12:10,720 --> 00:12:14,480 Speaker 1: a success for the country, but Professor Aguilera says that's 221 00:12:14,520 --> 00:12:16,439 Speaker 1: not always the case around. 222 00:12:16,200 --> 00:12:20,720 Speaker 4: The world, other funds have not worked so well. One 223 00:12:20,720 --> 00:12:26,000 Speaker 4: of them is the one MDB from Malaysia. The other 224 00:12:26,040 --> 00:12:28,840 Speaker 4: one is the one from Libya, and I would attribute 225 00:12:28,840 --> 00:12:31,280 Speaker 4: to that mostly to poor corporate governance. 226 00:12:33,120 --> 00:12:36,920 Speaker 1: Still ahead the fastest business in the world. We travel 227 00:12:37,000 --> 00:12:40,679 Speaker 1: to the UK for a report on Formula one that's 228 00:12:40,760 --> 00:12:54,040 Speaker 1: next on Wall Street Week. 229 00:12:56,880 --> 00:13:02,000 Speaker 6: It's an amazing sport, crazy because of everything that's involved 230 00:13:02,000 --> 00:13:05,599 Speaker 6: with it, and expensive because. 231 00:13:05,360 --> 00:13:06,160 Speaker 5: Of what it costs me. 232 00:13:06,920 --> 00:13:11,000 Speaker 1: This is a story about winning, winning and investing winning 233 00:13:11,000 --> 00:13:13,560 Speaker 1: on the track and what it takes to win at 234 00:13:13,640 --> 00:13:18,640 Speaker 1: both together. The mid size English city of Milton Keynes 235 00:13:18,760 --> 00:13:21,400 Speaker 1: dates back to the Bronze Age, got its name from 236 00:13:21,400 --> 00:13:24,360 Speaker 1: a family manor created in the wake of the Norman conquest, 237 00:13:24,800 --> 00:13:27,440 Speaker 1: and today as a quarter of its land given over 238 00:13:27,440 --> 00:13:30,280 Speaker 1: to parks, it might seem a long way away from 239 00:13:30,360 --> 00:13:33,480 Speaker 1: the hard charging world of Formula one racing, but it 240 00:13:33,559 --> 00:13:36,439 Speaker 1: is the home to one of the sports leading innovators, 241 00:13:36,800 --> 00:13:40,400 Speaker 1: Oracle Red Bull. Christian Horner is its CEO. 242 00:13:41,280 --> 00:13:44,000 Speaker 6: I think the biggest changes have been just in technology. 243 00:13:44,040 --> 00:13:45,640 Speaker 6: I mean, if I look at the amount of simulations 244 00:13:45,640 --> 00:13:48,800 Speaker 6: we're running now and our relationship with Oracle has really 245 00:13:48,840 --> 00:13:53,160 Speaker 6: exposed that we're running literally millions and millions of simulations 246 00:13:53,200 --> 00:13:54,240 Speaker 6: during the Grand Prix. 247 00:13:54,960 --> 00:13:58,680 Speaker 1: Formula one traces its origins back more than seven decades, 248 00:13:59,080 --> 00:13:59,760 Speaker 1: jumping into. 249 00:13:59,640 --> 00:14:02,560 Speaker 3: An early eighties one Venio number one, the former bus 250 00:14:02,679 --> 00:14:04,280 Speaker 3: driver from the Argentinle and. 251 00:14:04,559 --> 00:14:07,880 Speaker 1: The very first World Championship race held at Silverstone in 252 00:14:07,880 --> 00:14:11,439 Speaker 1: the UK in nineteen fifty. F one created this montage 253 00:14:11,480 --> 00:14:15,720 Speaker 1: in twenty twenty to celebrate its seventieth anniversary. Since its founding, 254 00:14:15,800 --> 00:14:18,920 Speaker 1: it has spread across the globe, but in recent years 255 00:14:18,960 --> 00:14:22,280 Speaker 1: it has exploded, with over three point two billion dollars 256 00:14:22,280 --> 00:14:25,480 Speaker 1: in revenues in twenty twenty three, up twenty five percent 257 00:14:25,520 --> 00:14:29,040 Speaker 1: from twenty twenty two, and second quarter numbers this year 258 00:14:29,160 --> 00:14:33,200 Speaker 1: climbing an additional twenty percent year over year. Those most 259 00:14:33,240 --> 00:14:35,520 Speaker 1: directly involved in the sport give the credit to a 260 00:14:35,520 --> 00:14:39,640 Speaker 1: certain Netflix hit documentary series following the sport, and to 261 00:14:39,760 --> 00:14:42,760 Speaker 1: Liberty Media, which bought F one in twenty nineteen. 262 00:14:43,680 --> 00:14:45,920 Speaker 6: It's been huge for us in the US, and I think, 263 00:14:47,040 --> 00:14:50,840 Speaker 6: you know, ever since the Netflix series you know, embraced 264 00:14:51,760 --> 00:14:54,640 Speaker 6: a whole new generation of fans and different countries in 265 00:14:54,680 --> 00:14:56,800 Speaker 6: the US was one of those and without that, you know, 266 00:14:56,920 --> 00:15:02,400 Speaker 6: Oracle becoming our title partner, of becoming our engine partner, 267 00:15:02,560 --> 00:15:06,440 Speaker 6: x on Mobile, AT and T. You know all huge 268 00:15:07,680 --> 00:15:13,280 Speaker 6: you know companies that are You're getting a great return 269 00:15:13,280 --> 00:15:14,080 Speaker 6: out of form One. 270 00:15:14,440 --> 00:15:17,560 Speaker 1: Today, an average of one point one million Americans watch 271 00:15:17,680 --> 00:15:21,600 Speaker 1: each race, double the figure in twenty eighteen. The surgeon 272 00:15:21,680 --> 00:15:25,480 Speaker 1: popularity has sent shockwaves through the sport. But one team 273 00:15:25,600 --> 00:15:30,000 Speaker 1: that's benefited most is McLaren headed by Zach Brown. It's 274 00:15:30,040 --> 00:15:33,040 Speaker 1: been a big shift in the United States respective Formula one, 275 00:15:33,200 --> 00:15:37,680 Speaker 1: partly because of the series drives to survive. How much 276 00:15:37,760 --> 00:15:40,040 Speaker 1: is that driven revenue from your side? Have you seen 277 00:15:40,040 --> 00:15:41,080 Speaker 1: a big updates huge? 278 00:15:41,200 --> 00:15:46,080 Speaker 7: If you look at the brands that we are associated with, 279 00:15:46,160 --> 00:15:49,080 Speaker 7: you know, the Googles, the Cisco's, the Dells. 280 00:15:48,840 --> 00:15:50,480 Speaker 5: These Golden Zachs. 281 00:15:50,520 --> 00:15:53,680 Speaker 7: These companies weren't in Formula one five years ago. 282 00:15:54,600 --> 00:15:56,360 Speaker 5: I think half of our partners. 283 00:15:56,480 --> 00:15:59,120 Speaker 7: Come from the United States now, so I think Netflix 284 00:15:59,120 --> 00:16:02,320 Speaker 7: did a wonderful thing for Formula One. 285 00:16:02,400 --> 00:16:04,600 Speaker 5: And when Liberty acquired. 286 00:16:04,240 --> 00:16:06,920 Speaker 7: Us, we went from being a very exclusive sport to 287 00:16:06,960 --> 00:16:10,520 Speaker 7: now we're a very inclusive sport. We weren't very digitally savvy. 288 00:16:10,920 --> 00:16:12,440 Speaker 7: Now we're very digitally savvy. 289 00:16:12,640 --> 00:16:16,040 Speaker 1: All business is competitive, but maybe none so competitive as 290 00:16:16,080 --> 00:16:19,200 Speaker 1: Formula one. How do you win in Formula one? 291 00:16:19,360 --> 00:16:23,040 Speaker 7: Oh, good question, and there's lots of different wins. You 292 00:16:23,160 --> 00:16:28,480 Speaker 7: need to win in Formula one. It's all about people. Obviously, 293 00:16:28,480 --> 00:16:32,840 Speaker 7: we're in technology business. It's about never giving up. It's 294 00:16:32,880 --> 00:16:38,960 Speaker 7: about incremental gains every single day and learning from your mistakes, 295 00:16:39,240 --> 00:16:42,200 Speaker 7: and you're constantly making mistakes. 296 00:16:42,800 --> 00:16:46,200 Speaker 5: You need to win with people, so you need to be. 297 00:16:46,200 --> 00:16:50,240 Speaker 7: A great employer and have a great work environment, take 298 00:16:50,280 --> 00:16:53,160 Speaker 7: care of people and their families. Of course, we need 299 00:16:53,200 --> 00:16:54,640 Speaker 7: to have state of the art technology. 300 00:16:54,680 --> 00:16:56,680 Speaker 5: We need to have great. 301 00:16:56,400 --> 00:16:58,920 Speaker 7: Commercial partners because they're the ones that are the big 302 00:16:58,960 --> 00:17:01,640 Speaker 7: financial contributor to us being able to get the greatest 303 00:17:01,680 --> 00:17:05,080 Speaker 7: technology and hire the best racing drivers and with a 304 00:17:05,119 --> 00:17:07,479 Speaker 7: Formula one team, if you don't have all of that 305 00:17:07,560 --> 00:17:08,560 Speaker 7: put together. 306 00:17:08,920 --> 00:17:12,440 Speaker 5: You're not going to win. And in our sport you 307 00:17:13,160 --> 00:17:14,440 Speaker 5: lose more than you win. 308 00:17:14,560 --> 00:17:16,879 Speaker 7: So you better get used to that and get ready 309 00:17:16,920 --> 00:17:18,400 Speaker 7: to respond for the next race. 310 00:17:19,480 --> 00:17:21,760 Speaker 1: If it takes all that to win in Formula one, 311 00:17:22,080 --> 00:17:24,960 Speaker 1: how do you put together the team to get it done. 312 00:17:25,560 --> 00:17:28,840 Speaker 1: Gunter Steiner is the former team principle of has F 313 00:17:28,920 --> 00:17:32,480 Speaker 1: one and author of the book Unfiltered. He put the 314 00:17:32,560 --> 00:17:36,000 Speaker 1: has team together for investor Gene has in twenty fourteen, 315 00:17:36,600 --> 00:17:38,160 Speaker 1: so he knows what it takes. 316 00:17:38,720 --> 00:17:40,440 Speaker 8: The first thing is you need to find an investor 317 00:17:40,680 --> 00:17:44,240 Speaker 8: which is happy to invest money in a business which 318 00:17:44,320 --> 00:17:46,679 Speaker 8: at the time nobody knew where it was going. You 319 00:17:46,720 --> 00:17:48,760 Speaker 8: need to put together the team with the people who 320 00:17:48,880 --> 00:17:51,920 Speaker 8: actually go and design a Formula one car, which by 321 00:17:51,920 --> 00:17:54,720 Speaker 8: no means is easy. You need a race team, you 322 00:17:54,760 --> 00:17:57,240 Speaker 8: need a commercial team, you need all the administration, and 323 00:17:57,320 --> 00:17:58,679 Speaker 8: then you can go racing. 324 00:17:58,760 --> 00:18:00,280 Speaker 5: And that is how we do that. 325 00:18:01,640 --> 00:18:05,280 Speaker 1: If all that sounds expensive, it's because it is. F 326 00:18:05,359 --> 00:18:08,280 Speaker 1: One limits teams to spending one hundred and forty million 327 00:18:08,320 --> 00:18:12,000 Speaker 1: dollars per year. Driver salaries and the three highest earning 328 00:18:12,040 --> 00:18:15,600 Speaker 1: staff members are exempt, but everything relating to the performance 329 00:18:15,600 --> 00:18:19,520 Speaker 1: of the car is included, from parts to payroll and 330 00:18:19,680 --> 00:18:23,160 Speaker 1: even the office Christmas party. It means the sports leading 331 00:18:23,200 --> 00:18:25,440 Speaker 1: innovators also have to be efficient. 332 00:18:26,040 --> 00:18:29,280 Speaker 8: You've got a cost cup of around fifty fifty to 333 00:18:29,320 --> 00:18:32,960 Speaker 8: sixty million on a capital investment, and then outside of 334 00:18:33,040 --> 00:18:37,080 Speaker 8: that it could be from ten million up to one 335 00:18:37,119 --> 00:18:39,800 Speaker 8: hundred million. Depends how much you want to pay your drivers, 336 00:18:39,880 --> 00:18:42,960 Speaker 8: you know, and obviously drivers like Louis Humbler and Maxostapham. 337 00:18:43,720 --> 00:18:45,480 Speaker 8: I've paid a lot these guys, so if you want 338 00:18:45,520 --> 00:18:47,040 Speaker 8: one of the good drivers, that's a lot of money. 339 00:18:47,040 --> 00:18:49,320 Speaker 8: So in total, I would say if you use everything up, 340 00:18:49,320 --> 00:18:52,360 Speaker 8: he could go from around two hundred million to about 341 00:18:52,720 --> 00:18:53,840 Speaker 8: three hundred and fifty million. 342 00:18:54,560 --> 00:18:56,919 Speaker 1: How do you make decisions about where you allocate that 343 00:18:57,080 --> 00:18:59,320 Speaker 1: money as opposed to not I mean you need to 344 00:18:59,320 --> 00:19:01,679 Speaker 1: compete on that as well, one hundred smarter than the 345 00:19:01,720 --> 00:19:02,200 Speaker 1: other guy. 346 00:19:02,400 --> 00:19:05,359 Speaker 7: Well, now we have a cost cap, which has been 347 00:19:05,400 --> 00:19:06,560 Speaker 7: wonderful for the sport. 348 00:19:06,880 --> 00:19:08,600 Speaker 5: We did it before, so before. 349 00:19:08,480 --> 00:19:11,200 Speaker 7: You could spend whatever you had so you didn't have 350 00:19:11,240 --> 00:19:12,320 Speaker 7: to make decisions. 351 00:19:12,359 --> 00:19:12,960 Speaker 5: You just went. 352 00:19:13,600 --> 00:19:16,320 Speaker 7: Now that we have a cost cap, we can't afford 353 00:19:17,000 --> 00:19:20,320 Speaker 7: to not have every dollar a pound that we spend 354 00:19:20,800 --> 00:19:23,320 Speaker 7: translate to performance that goes on the car. So our 355 00:19:23,359 --> 00:19:27,160 Speaker 7: financial department are led by our CFO. Laura is very 356 00:19:27,240 --> 00:19:30,320 Speaker 7: integrated into the racing team. So we're constantly, kind of 357 00:19:30,359 --> 00:19:33,520 Speaker 7: like any other business, looking at what's the best DOROI 358 00:19:33,560 --> 00:19:34,480 Speaker 7: do we want to spend a. 359 00:19:34,440 --> 00:19:35,840 Speaker 5: Dollar here or a dollar here? 360 00:19:35,920 --> 00:19:38,000 Speaker 7: Well, if this one's going to give us two dollars back, 361 00:19:38,080 --> 00:19:39,880 Speaker 7: this one's going to give us a dollar and fifty back, 362 00:19:40,240 --> 00:19:41,320 Speaker 7: we're going to spend it here. 363 00:19:41,760 --> 00:19:45,199 Speaker 1: Of course, spending money is never the problem. If you're 364 00:19:45,240 --> 00:19:47,399 Speaker 1: going to have even a hope of making it back, 365 00:19:47,720 --> 00:19:49,480 Speaker 1: you're going to have to find a good deal of 366 00:19:49,560 --> 00:19:51,640 Speaker 1: revenue to cover all these costs. 367 00:19:52,040 --> 00:19:53,840 Speaker 5: Yeah, two sources of revenue. 368 00:19:54,440 --> 00:19:57,000 Speaker 8: One what this code the price fonting F one which 369 00:19:57,040 --> 00:20:01,400 Speaker 8: every team gets from FOM. This part of the fram 370 00:20:02,040 --> 00:20:09,240 Speaker 8: offits of EBI, dalf OFM, And that depends partly on 371 00:20:09,440 --> 00:20:12,320 Speaker 8: where you finish the championship to Constructors Championship, not the 372 00:20:12,359 --> 00:20:13,320 Speaker 8: drivers Championship. 373 00:20:13,600 --> 00:20:16,720 Speaker 7: Now, I think to finish tenth in championship is about 374 00:20:16,720 --> 00:20:21,679 Speaker 7: a eighty million payday to win it is double and 375 00:20:21,720 --> 00:20:24,840 Speaker 7: then you know kind of ladders in between. So it's 376 00:20:25,040 --> 00:20:29,880 Speaker 7: it's a significant amount of revenue which obviously goes into funding. 377 00:20:29,520 --> 00:20:30,400 Speaker 5: Our racing team. 378 00:20:30,560 --> 00:20:33,040 Speaker 7: So the difference doing first, second, third, fourth, down the 379 00:20:33,119 --> 00:20:36,280 Speaker 7: tenth is quite significant that a lot of our sponsor 380 00:20:36,359 --> 00:20:40,360 Speaker 7: partner contracts will performance related bonuses in it. 381 00:20:41,000 --> 00:20:44,600 Speaker 1: E commerce technology company Rocked is one of those sponsors 382 00:20:44,600 --> 00:20:47,640 Speaker 1: for the Oracle Red Bull team, and deciding to sponsor 383 00:20:47,680 --> 00:20:51,159 Speaker 1: the F one team, CEO Bruce Buchanan said he was 384 00:20:51,160 --> 00:20:54,440 Speaker 1: looking for a unique way to strengthen his firm's branding. 385 00:20:54,800 --> 00:20:56,960 Speaker 9: We've been growing at about forty percent every year and 386 00:20:57,680 --> 00:21:01,000 Speaker 9: next year we'll have you know, eight hundred million in revenue. 387 00:21:01,520 --> 00:21:04,639 Speaker 9: And we wanted a position in the marketplace where we 388 00:21:04,680 --> 00:21:06,960 Speaker 9: wanted a partner that was going to serve us well 389 00:21:07,000 --> 00:21:09,439 Speaker 9: from B to B, so who we could connect with 390 00:21:09,520 --> 00:21:11,679 Speaker 9: clients at that level, at the C level suite that 391 00:21:11,720 --> 00:21:13,919 Speaker 9: we do a lot of the relationships with. How can 392 00:21:13,960 --> 00:21:17,040 Speaker 9: we create connections because our business is about creating opportunities 393 00:21:17,080 --> 00:21:19,080 Speaker 9: for different businesses to work with each other. That's how 394 00:21:19,160 --> 00:21:22,320 Speaker 9: we really flourish. And then we also wanted a business 395 00:21:22,359 --> 00:21:25,280 Speaker 9: will be good for recruiting, brand good for potential investors 396 00:21:25,320 --> 00:21:27,920 Speaker 9: when we get to IPO, so how can we get 397 00:21:27,960 --> 00:21:31,520 Speaker 9: traction there. We wanted something that was global so covered 398 00:21:31,520 --> 00:21:33,920 Speaker 9: the markets that were in and then we wanted something 399 00:21:33,960 --> 00:21:35,560 Speaker 9: that was a good brand fit. And we went through 400 00:21:35,560 --> 00:21:38,120 Speaker 9: all of that. There was very few things that ticked 401 00:21:38,160 --> 00:21:40,399 Speaker 9: all those boxes, but F one came up as something 402 00:21:40,480 --> 00:21:43,640 Speaker 9: that was strong in all of our markets, very strong 403 00:21:43,680 --> 00:21:46,679 Speaker 9: amongst the audience we want to talk to has a 404 00:21:46,680 --> 00:21:48,320 Speaker 9: billion people following around the world. 405 00:21:48,880 --> 00:21:50,760 Speaker 1: As I look at one of them, reclear on F 406 00:21:50,800 --> 00:21:53,080 Speaker 1: one cars there are a lot of names on it. 407 00:21:53,760 --> 00:21:56,200 Speaker 1: As any F one car, how much has a cost 408 00:21:56,240 --> 00:21:58,000 Speaker 1: to get a name up on that car. 409 00:21:58,760 --> 00:22:02,680 Speaker 7: Investments range anyway from five million a year to seventy 410 00:22:02,680 --> 00:22:06,399 Speaker 7: five million, so it ranges quite a bit. It's not 411 00:22:06,440 --> 00:22:10,280 Speaker 7: an inexpensive sport, but it's a very efficient and drives 412 00:22:10,280 --> 00:22:12,959 Speaker 7: a tremendous amount of value because we're broadcast into two 413 00:22:13,040 --> 00:22:16,040 Speaker 7: hundred countries, so while the numbers are quite big, the 414 00:22:16,119 --> 00:22:20,000 Speaker 7: reach is second to none. It's the largest annual single 415 00:22:20,040 --> 00:22:21,280 Speaker 7: sporting event in the world. 416 00:22:22,320 --> 00:22:24,879 Speaker 1: Despite the money that a successful F one team like 417 00:22:24,960 --> 00:22:28,159 Speaker 1: Oracle Red Bull receives from the sport and its sponsors, 418 00:22:28,680 --> 00:22:31,639 Speaker 1: it's still hard to turn a profit on the racing itself, 419 00:22:32,119 --> 00:22:34,919 Speaker 1: though that's changing thanks to the cost cap and the 420 00:22:34,960 --> 00:22:40,000 Speaker 1: growing popularity. McLaren reported profits of around thirty eight million 421 00:22:40,040 --> 00:22:43,320 Speaker 1: dollars last year, a staggering jump from a loss of 422 00:22:43,359 --> 00:22:46,760 Speaker 1: around twelve million dollars in twenty twenty two, and Brown 423 00:22:46,920 --> 00:22:48,880 Speaker 1: expects the trend will continue. 424 00:22:49,359 --> 00:22:52,760 Speaker 7: We're now commercially the most successful team in the history 425 00:22:53,040 --> 00:22:54,760 Speaker 7: of Formula One. If you look at the amount of 426 00:22:54,760 --> 00:22:57,879 Speaker 7: partners we have in the revenue is we're having a 427 00:22:57,920 --> 00:23:01,960 Speaker 7: fantastic year so our numbers will exceed what you've recently. 428 00:23:01,600 --> 00:23:03,320 Speaker 5: Read, which was our last year numbers. 429 00:23:03,480 --> 00:23:07,120 Speaker 7: Your question about the commercial side and the Googles, the Dells, 430 00:23:07,760 --> 00:23:13,160 Speaker 7: the Cisco's, these are all brand new companies to Formula one. 431 00:23:13,800 --> 00:23:18,520 Speaker 7: And there was three challenges we had before Liberty acquired 432 00:23:18,560 --> 00:23:22,560 Speaker 7: Formula one. We needed a younger audience, which we now have, 433 00:23:22,640 --> 00:23:25,600 Speaker 7: a more diverse audience, which we now have. And we 434 00:23:25,600 --> 00:23:27,960 Speaker 7: weren't as impactful in North America. And so when you 435 00:23:28,000 --> 00:23:31,160 Speaker 7: talk to these corporations, because ninety percent of them North 436 00:23:31,200 --> 00:23:34,679 Speaker 7: America is hugely important, we've substantially moved the needle on 437 00:23:34,880 --> 00:23:37,840 Speaker 7: all those areas and this is what a racing car 438 00:23:37,920 --> 00:23:38,920 Speaker 7: looks like when you do that. 439 00:23:43,760 --> 00:23:47,760 Speaker 1: While sponsorships form the foundation of Formula one revenues, in 440 00:23:47,800 --> 00:23:50,800 Speaker 1: the end, it's all about winning races, both because of 441 00:23:50,840 --> 00:23:53,840 Speaker 1: the money it brings in and because it's the reason 442 00:23:53,920 --> 00:23:56,720 Speaker 1: people are in the business to begin with. So that's 443 00:23:56,760 --> 00:23:59,200 Speaker 1: where we turn next. From what it takes to build 444 00:23:59,200 --> 00:24:01,840 Speaker 1: an F one t do what it takes to win. 445 00:24:14,160 --> 00:24:16,719 Speaker 10: When you jump into four ouh one, there's nothing that 446 00:24:16,760 --> 00:24:17,639 Speaker 10: can prepare you to it. 447 00:24:21,200 --> 00:24:25,119 Speaker 1: Formula one is all about winning at the business and 448 00:24:25,320 --> 00:24:28,280 Speaker 1: on the track, and in the end, you can't win 449 00:24:28,320 --> 00:24:31,040 Speaker 1: commercially if you're not winning a good share of those 450 00:24:31,119 --> 00:24:35,679 Speaker 1: races on Sundays, which, as in so much of business 451 00:24:35,720 --> 00:24:37,600 Speaker 1: and life, comes down to the team. 452 00:24:38,320 --> 00:24:41,159 Speaker 10: People talk a lot about the drivers, but there is 453 00:24:41,240 --> 00:24:43,520 Speaker 10: a lot of people out there that are in the 454 00:24:43,560 --> 00:24:47,399 Speaker 10: similar stages of their careers. They have given everything and 455 00:24:47,400 --> 00:24:50,359 Speaker 10: they are at the pinnacle of the motorsport. Whether you 456 00:24:50,359 --> 00:24:53,679 Speaker 10: are a mechanic or an engineer or team principle, you 457 00:24:53,680 --> 00:24:55,560 Speaker 10: are at the pinnacle of the sport and this is 458 00:24:55,600 --> 00:24:58,320 Speaker 10: your career and you want to do the very best possible. 459 00:24:59,040 --> 00:25:02,320 Speaker 1: That's Sergio Pair, who drives for Oracle Red Bull Racing 460 00:25:02,440 --> 00:25:06,880 Speaker 1: alongside three time world champion Max for Stopping, a fourteen 461 00:25:06,960 --> 00:25:10,480 Speaker 1: year veteran of the sport and six time race winner Peiz, 462 00:25:10,560 --> 00:25:13,000 Speaker 1: knows better than most that it takes much more than 463 00:25:13,040 --> 00:25:16,840 Speaker 1: a world class driver to win in Formula One. For 464 00:25:17,000 --> 00:25:19,680 Speaker 1: Oracle Red Bull, it all starts back at the factory 465 00:25:19,800 --> 00:25:23,159 Speaker 1: in Milton Keynes. Christian Horner is its CEO. 466 00:25:23,840 --> 00:25:27,760 Speaker 6: Across the whole campus there's just under two thousand people. 467 00:25:28,720 --> 00:25:31,480 Speaker 1: One of those two thousand people is Phil Turner, the 468 00:25:31,520 --> 00:25:35,400 Speaker 1: team's chief future mechanic. As this season winds down, he's 469 00:25:35,480 --> 00:25:38,400 Speaker 1: already looking ahead to build next season's car. 470 00:25:39,000 --> 00:25:41,080 Speaker 11: Some years we've had a complete clean shit of paper 471 00:25:41,480 --> 00:25:46,280 Speaker 11: and the car has been designed from scratch year on year. 472 00:25:46,320 --> 00:25:48,320 Speaker 11: But with the cost cap now, we tend to try 473 00:25:48,320 --> 00:25:50,359 Speaker 11: and carry over the good bits of the previous years cars. 474 00:25:50,760 --> 00:25:53,520 Speaker 11: So from maybe some of the good parts from this 475 00:25:53,560 --> 00:25:55,800 Speaker 11: year's car, we'll go into next years carpa. Again, some 476 00:25:55,840 --> 00:25:58,280 Speaker 11: of it depends on packaging. Maybe the good pass we 477 00:25:58,320 --> 00:26:00,800 Speaker 11: want to keep fitting next year's package of car, and 478 00:26:00,880 --> 00:26:03,399 Speaker 11: so we have to tweak and make it fit the 479 00:26:03,440 --> 00:26:04,240 Speaker 11: new package. 480 00:26:05,119 --> 00:26:11,399 Speaker 6: So all these dinos are basically recreating track conditions. So 481 00:26:11,440 --> 00:26:15,600 Speaker 6: we're running the engines in a steady state condition where 482 00:26:15,600 --> 00:26:19,720 Speaker 6: we're tuning them, developing them, evolving them, running race distances 483 00:26:19,840 --> 00:26:25,440 Speaker 6: from prestarts, pit stops even so, yeah, we're basically proving 484 00:26:25,480 --> 00:26:28,080 Speaker 6: out the engines in a controlled environment. 485 00:26:29,119 --> 00:26:31,720 Speaker 1: It typically takes around twelve months to build an F 486 00:26:31,760 --> 00:26:34,520 Speaker 1: one car, but given that Oracle Red Bull one is 487 00:26:34,600 --> 00:26:38,199 Speaker 1: staggering one of twenty two races last year, it was 488 00:26:38,240 --> 00:26:40,800 Speaker 1: more about refining the car than building a new one. 489 00:26:41,760 --> 00:26:44,560 Speaker 1: For Turner, that means taking input from the twenty two 490 00:26:44,640 --> 00:26:47,720 Speaker 1: different departments at Oracle red Bull to come up with 491 00:26:47,760 --> 00:26:50,480 Speaker 1: what the team feels is the best car to take 492 00:26:50,560 --> 00:26:51,159 Speaker 1: to the track. 493 00:26:52,119 --> 00:26:55,000 Speaker 11: There's loads of them departments that going to put in 494 00:26:55,000 --> 00:26:56,840 Speaker 11: the car on track, and I was suppose to making 495 00:26:56,840 --> 00:26:59,160 Speaker 11: it go around the track as well. Track side electronics, 496 00:26:59,320 --> 00:27:03,480 Speaker 11: composite mechanics technicians, you know, hydraulic ski box technicians. 497 00:27:04,000 --> 00:27:05,840 Speaker 5: There's the different different concepts that come through. 498 00:27:05,880 --> 00:27:08,359 Speaker 11: And obviously design the DOO talk to each other quite 499 00:27:08,600 --> 00:27:11,040 Speaker 11: quite a lot, quite frequently as a producing a new 500 00:27:11,080 --> 00:27:13,840 Speaker 11: car and designing it, you know, area with the package 501 00:27:13,880 --> 00:27:15,760 Speaker 11: and say we want everything's fitted within this shape, and 502 00:27:15,800 --> 00:27:18,120 Speaker 11: then mechanical will get involved and say it's not going 503 00:27:18,119 --> 00:27:20,040 Speaker 11: to happen. You know, they will try, but maybe sometimes 504 00:27:20,160 --> 00:27:22,760 Speaker 11: it doesn't happen as compromise on both sides. 505 00:27:23,720 --> 00:27:24,920 Speaker 5: So this is all about front arrow. 506 00:27:25,440 --> 00:27:27,959 Speaker 11: We can change the flap angle on this to reduce it, 507 00:27:28,160 --> 00:27:30,200 Speaker 11: increase it depending on how much front downfall soone on 508 00:27:30,240 --> 00:27:31,959 Speaker 11: the car, depending on the circuit as well. We can 509 00:27:32,000 --> 00:27:35,240 Speaker 11: have different types of flaps with different camps. They may 510 00:27:35,280 --> 00:27:37,320 Speaker 11: design something and we then we go over to the 511 00:27:37,320 --> 00:27:38,520 Speaker 11: deal and have a look and say well we can't 512 00:27:38,560 --> 00:27:40,840 Speaker 11: work on that, and then it's you know, maybe you're 513 00:27:40,840 --> 00:27:42,760 Speaker 11: about to draw a more slightly in a different tooling, 514 00:27:42,880 --> 00:27:46,640 Speaker 11: or they may have to change things slightly to help 515 00:27:46,720 --> 00:27:47,280 Speaker 11: us work on it. 516 00:27:48,119 --> 00:27:51,400 Speaker 1: Once the car is built, it's prepped for racing. Drivers 517 00:27:51,440 --> 00:27:53,880 Speaker 1: test the car before the season starts, and the team 518 00:27:54,000 --> 00:27:57,960 Speaker 1: runs simulations to see how it performs in different weather conditions, 519 00:27:58,080 --> 00:28:01,080 Speaker 1: different tracks, and in different diferent race settings. 520 00:28:01,720 --> 00:28:03,800 Speaker 12: So this here is a race plot, which is really 521 00:28:03,800 --> 00:28:06,560 Speaker 12: one of the main tools that we use in strategy 522 00:28:06,960 --> 00:28:09,280 Speaker 12: to kind of see what's happening during the race the journey. 523 00:28:09,280 --> 00:28:12,280 Speaker 1: And that's where Hannah Schmitz comes in. She's Oracle red 524 00:28:12,280 --> 00:28:14,639 Speaker 1: Bull's principal strategy engineer. 525 00:28:14,920 --> 00:28:18,240 Speaker 12: As principal strategy engineer, it means I go when I'm 526 00:28:18,240 --> 00:28:21,200 Speaker 12: at the track, I'll be sitting on the pitwall making 527 00:28:21,240 --> 00:28:24,080 Speaker 12: the decisions about when we pit the car, what tires 528 00:28:24,119 --> 00:28:26,600 Speaker 12: we fit, basically trying to come up with a way 529 00:28:26,640 --> 00:28:30,040 Speaker 12: that we can win the race. And then when I'm 530 00:28:30,080 --> 00:28:33,439 Speaker 12: here in the operations room, then it's more trying to 531 00:28:33,480 --> 00:28:36,199 Speaker 12: gather all the data together to give to that person 532 00:28:36,240 --> 00:28:37,919 Speaker 12: on the pitwall and make sure they can make the 533 00:28:37,960 --> 00:28:39,200 Speaker 12: right decisions in the race. 534 00:28:40,120 --> 00:28:43,600 Speaker 1: The team runs some eight billion simulations before a race 535 00:28:44,040 --> 00:28:47,120 Speaker 1: helping them settle on a strategy tailored to each competition, 536 00:28:47,680 --> 00:28:51,160 Speaker 1: working out optimal times to take pit stops, which tires 537 00:28:51,160 --> 00:28:54,040 Speaker 1: do use, and when to attack and when to defend. 538 00:28:54,560 --> 00:28:56,560 Speaker 12: Before we've even got to the track, we will have 539 00:28:56,640 --> 00:29:00,920 Speaker 12: run billions of simulations looking at various things. We will 540 00:29:00,960 --> 00:29:02,800 Speaker 12: already have an idea of what we think the race 541 00:29:02,840 --> 00:29:05,640 Speaker 12: strategy will be, because obviously we're going to make decisions 542 00:29:05,720 --> 00:29:08,440 Speaker 12: right from the first practice session, so you've got all 543 00:29:08,480 --> 00:29:11,360 Speaker 12: the actual data points. So that's things like what we're 544 00:29:11,360 --> 00:29:14,320 Speaker 12: expecting the pace of our competitors to be, the speeds, 545 00:29:14,800 --> 00:29:18,600 Speaker 12: the tie degradations. Has something changed at this track compared to. 546 00:29:18,640 --> 00:29:22,640 Speaker 1: Last yet, But of course F one is unpredictable and 547 00:29:22,720 --> 00:29:26,280 Speaker 1: sometimes even the eight billion simulations can't prepare you for 548 00:29:26,320 --> 00:29:28,959 Speaker 1: what happens on the track, and so the team is 549 00:29:29,000 --> 00:29:32,880 Speaker 1: always adapting. Schmidz is stationed on the pitwall while a 550 00:29:32,920 --> 00:29:36,320 Speaker 1: team of around fifty analysts are pouring over live data 551 00:29:36,360 --> 00:29:39,600 Speaker 1: back at the team's NASA like control room at Milton Keynes. 552 00:29:40,240 --> 00:29:43,840 Speaker 1: Some monitor the weather, some monitor lap times. Some are 553 00:29:43,880 --> 00:29:48,040 Speaker 1: even tasked with trying to decode rival teams strategies. 554 00:29:48,040 --> 00:29:51,480 Speaker 12: Live in a race we're now running simulations all the time, 555 00:29:51,520 --> 00:29:53,560 Speaker 12: so every time we update a bit of data, we 556 00:29:53,640 --> 00:29:56,120 Speaker 12: can see how that would impact what strategy we're going 557 00:29:56,160 --> 00:29:59,320 Speaker 12: to do, and so we use the Oracle Cloud infrastructure 558 00:29:59,360 --> 00:30:01,640 Speaker 12: to do that. That means we're still running billions of 559 00:30:01,680 --> 00:30:06,920 Speaker 12: simulations during the race itself, which is extremely helpful for us. 560 00:30:07,400 --> 00:30:09,840 Speaker 12: And then when you're here in the operations room, it 561 00:30:10,000 --> 00:30:12,320 Speaker 12: basically feels like you are at the track. That's why 562 00:30:12,320 --> 00:30:14,440 Speaker 12: we don't have any windows, so that you don't know 563 00:30:14,440 --> 00:30:17,960 Speaker 12: what time of day it is, and it's instant like 564 00:30:18,040 --> 00:30:23,040 Speaker 12: talking on the intercom's instant. These are windictors, so they're 565 00:30:23,120 --> 00:30:26,440 Speaker 12: kind of showing the speed of the wind and their direction, 566 00:30:27,040 --> 00:30:29,200 Speaker 12: and we'll have that different points around the track, which 567 00:30:29,240 --> 00:30:31,480 Speaker 12: we get from the weather stations at the track. 568 00:30:33,120 --> 00:30:36,080 Speaker 1: Schmiz takes all that data on board and uses it 569 00:30:36,120 --> 00:30:39,240 Speaker 1: to make real time adjustments to the driver's race strategy. 570 00:30:39,880 --> 00:30:42,760 Speaker 1: It's a role that requires a sharp, decisive mind and 571 00:30:42,800 --> 00:30:43,840 Speaker 1: a steely nerve. 572 00:30:44,400 --> 00:30:47,240 Speaker 12: It's important to try and take a breath, tell people 573 00:30:47,240 --> 00:30:49,320 Speaker 12: to stand by if you need them, to make sure 574 00:30:49,320 --> 00:30:52,280 Speaker 12: you're getting the most important information. So for me, when 575 00:30:52,280 --> 00:30:54,280 Speaker 12: I'm on the pit, well that'll be the information coming 576 00:30:54,280 --> 00:30:56,800 Speaker 12: from here from the operations room because they'll be the 577 00:30:56,800 --> 00:30:59,880 Speaker 12: ones looking at the specific data. They'll also have done 578 00:31:00,280 --> 00:31:02,400 Speaker 12: some of them have done the strategy role on the pitwall, 579 00:31:02,440 --> 00:31:04,680 Speaker 12: so they know exactly what you need to know that 580 00:31:04,800 --> 00:31:09,200 Speaker 12: might impact your decisions. There is also the race engineers 581 00:31:09,240 --> 00:31:12,040 Speaker 12: and Christian and Pierre, and we'll all have a kind 582 00:31:12,040 --> 00:31:14,600 Speaker 12: of conversation about what the plans are. You know, I'm 583 00:31:14,640 --> 00:31:17,560 Speaker 12: planning to open the safety car window on this lap, 584 00:31:17,640 --> 00:31:19,880 Speaker 12: and I think the next time should shall still be 585 00:31:19,960 --> 00:31:22,920 Speaker 12: this one. Do the race engine is agree, Do they 586 00:31:22,960 --> 00:31:26,560 Speaker 12: have any data that might mean something different? What's the 587 00:31:26,640 --> 00:31:29,640 Speaker 12: driver saying on the radio? Does that impact the strategy 588 00:31:29,640 --> 00:31:31,920 Speaker 12: I'm going to do? And then we're also listening to 589 00:31:32,000 --> 00:31:35,360 Speaker 12: all the radios of all our competitors because at the 590 00:31:35,440 --> 00:31:37,680 Speaker 12: end of the day, we could do the best strategy 591 00:31:37,680 --> 00:31:41,160 Speaker 12: in the world, but we're actually racing other people, so 592 00:31:41,320 --> 00:31:43,920 Speaker 12: what they do has an impact on what we should do. 593 00:31:44,920 --> 00:31:47,360 Speaker 1: Of course, when Schmidt does make the car for a 594 00:31:47,440 --> 00:31:50,640 Speaker 1: driver toppit, it's then over to the mechanics to ensure 595 00:31:50,800 --> 00:31:52,440 Speaker 1: no time is lost. 596 00:31:53,080 --> 00:31:55,840 Speaker 6: Everything looks synchronized. You can tell a fast stop because 597 00:31:55,840 --> 00:31:59,280 Speaker 6: even the sound of the guns, everything is in synchronizing 598 00:31:59,320 --> 00:32:03,680 Speaker 6: the car. Just the whole thing is just like in 599 00:32:03,760 --> 00:32:06,720 Speaker 6: one beat, whereas if it doesn't quite go so well, 600 00:32:06,760 --> 00:32:08,920 Speaker 6: even a two and a half second stop, you could 601 00:32:09,000 --> 00:32:12,320 Speaker 6: hear it without even looking at the start watch oracle. 602 00:32:12,360 --> 00:32:15,320 Speaker 1: Red Bull has won F one's Fastest Pit Stop award 603 00:32:15,440 --> 00:32:18,520 Speaker 1: each of the past six seasons and art refined by 604 00:32:18,560 --> 00:32:22,840 Speaker 1: practicing twice a day. Three mechanics are stationed on each wheel. 605 00:32:23,160 --> 00:32:26,120 Speaker 1: One is the gunman responsible for loosening the old tire 606 00:32:26,200 --> 00:32:29,120 Speaker 1: and tightening the new. One, one removes the old tire 607 00:32:29,400 --> 00:32:32,440 Speaker 1: and another places the new tire on the car. One 608 00:32:32,480 --> 00:32:35,080 Speaker 1: mechanic jacks up the car, and two more are on 609 00:32:35,200 --> 00:32:38,520 Speaker 1: the side holding it steady. When it comes off, Teams 610 00:32:38,520 --> 00:32:43,160 Speaker 1: can have a car in and out just like that. 611 00:32:44,200 --> 00:32:46,600 Speaker 1: For the pit crew it's a matter of split seconds. 612 00:32:46,840 --> 00:32:48,680 Speaker 1: For the driver, it's a game of inches. 613 00:32:49,320 --> 00:32:52,480 Speaker 10: It's very important when you come in to stop riding 614 00:32:52,560 --> 00:32:55,240 Speaker 10: on your mars, you know, because for the boys it's 615 00:32:55,560 --> 00:32:58,120 Speaker 10: less of a movement if you stop right on your 616 00:32:58,120 --> 00:33:01,160 Speaker 10: marks that if you go over or on there, they 617 00:33:01,240 --> 00:33:03,760 Speaker 10: have to move a little bit more. They're amazing the 618 00:33:03,760 --> 00:33:06,240 Speaker 10: amount of practice they're doing for a pitzob because if 619 00:33:06,240 --> 00:33:08,240 Speaker 10: you think about it, half a second can make the 620 00:33:08,240 --> 00:33:11,200 Speaker 10: difference on winning a race, and that half a second 621 00:33:11,240 --> 00:33:15,000 Speaker 10: can come from the pitzop, so they're very important. This 622 00:33:15,080 --> 00:33:16,320 Speaker 10: is why it's a team sport. 623 00:33:17,800 --> 00:33:20,160 Speaker 1: As we head into the final races of the season, 624 00:33:20,440 --> 00:33:23,280 Speaker 1: Max vers Stopping is set to seal a fourth drivers 625 00:33:23,360 --> 00:33:26,120 Speaker 1: championship for Oracle Red Bull, but the race for the 626 00:33:26,160 --> 00:33:29,960 Speaker 1: Constructor's title is closer than ever, in part because Perez, 627 00:33:30,080 --> 00:33:32,440 Speaker 1: as the number two driver, has fallen behind. 628 00:33:33,040 --> 00:33:35,480 Speaker 6: We need both drivers delivering and performing. I mean it's 629 00:33:35,520 --> 00:33:39,080 Speaker 6: the construction's points that are where the distribution of the 630 00:33:39,120 --> 00:33:41,320 Speaker 6: price fund is based upon of where you are in 631 00:33:41,400 --> 00:33:44,240 Speaker 6: the constructor's table. You don't get a single dollar for 632 00:33:44,320 --> 00:33:46,680 Speaker 6: winning the Driver's World Championship. 633 00:33:47,480 --> 00:33:49,640 Speaker 1: But the drama of the twenty twenty four F one 634 00:33:49,720 --> 00:33:52,560 Speaker 1: season is also a product of improvements made at Oracle 635 00:33:52,600 --> 00:33:56,840 Speaker 1: Red bulls rivals Ferrari and McLaren. Improvements made throughout the 636 00:33:56,880 --> 00:33:58,560 Speaker 1: season at a breakneck speed. 637 00:33:59,400 --> 00:34:02,120 Speaker 7: Pace of the elopment in Formula one is awesome. So 638 00:34:02,160 --> 00:34:05,400 Speaker 7: if you took the car that qualified first the beginning 639 00:34:05,440 --> 00:34:07,840 Speaker 7: of the year and you left it untouched, it would 640 00:34:07,880 --> 00:34:09,520 Speaker 7: be last by the end of the year. So that's 641 00:34:09,560 --> 00:34:12,919 Speaker 7: the pace of development of our entire sport, about two 642 00:34:13,000 --> 00:34:14,960 Speaker 7: percent covers. 643 00:34:14,640 --> 00:34:17,120 Speaker 5: The best to the worst, so. 644 00:34:17,080 --> 00:34:21,040 Speaker 7: To make small incremental gains can have big material impact. 645 00:34:22,920 --> 00:34:25,200 Speaker 5: Imagine in the airport, everybody's walking, but. 646 00:34:25,160 --> 00:34:27,760 Speaker 7: Then there's a few people that are on the moving walkway, 647 00:34:27,920 --> 00:34:31,880 Speaker 7: and so we just outdeveloped them over the course of 648 00:34:31,920 --> 00:34:34,760 Speaker 7: the year to get in front of them, as has. 649 00:34:34,680 --> 00:34:36,200 Speaker 5: Ferrari, and it's been remarkable. 650 00:34:37,840 --> 00:34:42,480 Speaker 7: Development on the car is primarily aerodynamic, so you'll see 651 00:34:42,520 --> 00:34:45,799 Speaker 7: things like our side pods change over the course of 652 00:34:45,840 --> 00:34:47,960 Speaker 7: the year, so we're trying to put as much downforce 653 00:34:48,000 --> 00:34:48,520 Speaker 7: on the car. 654 00:34:48,400 --> 00:34:52,440 Speaker 5: As possible and reduce drag. That's ultimately where the performance 655 00:34:53,120 --> 00:34:53,560 Speaker 5: comes in. 656 00:34:53,600 --> 00:34:56,400 Speaker 7: But you do get into things suspension changes, so you 657 00:34:56,560 --> 00:34:58,520 Speaker 7: change eighty percent of what's. 658 00:34:58,280 --> 00:35:00,000 Speaker 5: Allowed to be changed. 659 00:35:01,000 --> 00:35:05,520 Speaker 7: But you'll see all of our wings and it's very small, 660 00:35:05,640 --> 00:35:07,880 Speaker 7: small changes that can make a big difference, and then 661 00:35:07,920 --> 00:35:11,480 Speaker 7: a lot of the downforce is also created under the floor. 662 00:35:12,040 --> 00:35:14,680 Speaker 1: The twenty twenty four Formula One season has turned out 663 00:35:14,680 --> 00:35:17,160 Speaker 1: to be one of the closest and most dramatic in 664 00:35:17,239 --> 00:35:21,440 Speaker 1: recent memory, particularly where it matters most for a team's revenues, 665 00:35:21,760 --> 00:35:25,520 Speaker 1: the Constructor's Trophy. It's about winning, winning on the track 666 00:35:25,600 --> 00:35:29,040 Speaker 1: in the last few races, winning in the design and engineering, 667 00:35:29,400 --> 00:35:32,640 Speaker 1: winning in the pits, and whoever wins there will stand 668 00:35:32,640 --> 00:35:35,880 Speaker 1: to win a great deal financially. As the value of 669 00:35:35,960 --> 00:35:38,000 Speaker 1: teams continues to surge. 670 00:35:38,840 --> 00:35:40,640 Speaker 6: Formula one is the biggest team sport in the world, 671 00:35:40,680 --> 00:35:42,960 Speaker 6: and people what they don't see is you just see 672 00:35:42,960 --> 00:35:45,040 Speaker 6: our shop window at a grown pre weekend, is what's 673 00:35:45,080 --> 00:35:49,680 Speaker 6: going on behind the scenes throughout the organization. The amount 674 00:35:49,680 --> 00:35:52,160 Speaker 6: of people that are involved is phenomenal, and it takes 675 00:35:52,200 --> 00:35:56,720 Speaker 6: every one of those personnel to design, develop and operate 676 00:35:56,920 --> 00:36:02,239 Speaker 6: cause that we have achieving these incredible results with I 677 00:36:02,280 --> 00:36:04,520 Speaker 6: am a racer hard I enjoy it most of all 678 00:36:04,520 --> 00:36:06,160 Speaker 6: when the red light goes out and the race is 679 00:36:06,239 --> 00:36:09,200 Speaker 6: underway and it's just you and your team and your drivers. 680 00:36:11,480 --> 00:36:14,719 Speaker 6: I think you have to keep a calm head and 681 00:36:15,040 --> 00:36:17,200 Speaker 6: try and read a situation. You're not always going to 682 00:36:17,239 --> 00:36:20,000 Speaker 6: get it right, but certainly try and get more right 683 00:36:20,040 --> 00:36:21,920 Speaker 6: than you get wrong, and learn from the ones that 684 00:36:21,960 --> 00:36:25,400 Speaker 6: you do get wrong. That's life. 685 00:36:25,440 --> 00:36:26,720 Speaker 5: That's Formally one. 686 00:36:29,520 --> 00:36:31,560 Speaker 1: That does it for us. Here on Wall Street Week, 687 00:36:31,760 --> 00:36:34,239 Speaker 1: I'm David Weston. We'll see you again next week for 688 00:36:34,320 --> 00:36:49,360 Speaker 1: more stories of capitalism.