Friday, 7 July 2006

Talking Shop

Speaker: Steven Lowy

Transcript

This is an edited transcript of an interview conducted at the University of NSW on May 29, 2006, with Steven Lowy, group managing director, Westfield. The interviewer was Helen Trinca, editor of AFR BOSS.

Q: Stephen Lowy, welcome. I want to start tonight by talking about success. You head one of the most successful companies that Australia has ever known – what do you think defines successful people, what is the difference between being successful and not?

A: I think success a word to us that really means a journey more than a destination and that once you are there you have to get there again and again. I think the company views success in that way, the board views success in that way. We are always worried not about the current period but the future, and so success really needs to be defined as a journey. Whilst we talk about success in the current status of the company, the company over time has had some failures, had some serious failures, and I think we are much better and stronger for that and more disciplined about the way we go about our activities because we do know what it is like and it is very uncomfortable to taste the alternative.

Q: It is hard for you not to be coupled with you father’s name. You grew up with a very charismatic, amazing business person – what was that like, growing up as Frank Lowy's son?

A: Well, you know, I'm looking at it from the perspective of a son growing up and you're looking at it [from the perspective of him as] an extremely successful man, father, immigrant… Given my father's background and where he is today, it is truly an amazing story and of course I have been part of that journey, but really I see him as a father and growing up as a young boy and in the family. My parents are very close and I am very close to my brothers and various extended families – we are just a family and we get on with it. Whilst I saw a very hard-working man [as I was growing up] I also saw a great father and a strong family man and somebody who was around when he was needed

Q: That brings us, I suppose, to the succession question. In some ways, Westfield has sort of settled the succession question. What has been the hardest thing about that change?

A: I think the question of succession, it comes up a lot, of course, it is a natural question, I think, at this period.

The question of succession … has been on the agenda for a long period of time and it is not just succession from my father, it is succession throughout the business. We have grown to become today the largest shopping centre company by market capitalisation in the world, we are in the top ten Australian companies, we have been an international organisation since 1976, we have been in the US since ’76 and New Zealand since ’97 and the UK since 2000. We have now got more than $50 billion of assets that we are responsible for. So you have to think of your business as a professionally managed international corporation. It happens to be led by members of the family that have grown the company and the succession of the company to where it is today.

There is in effect a chief executive of each of the countries, myself or Bob Jordan in Australia, who is a long-serving Westfield member, Peter (Lowy) and Ken Wong in the US and Michael Gutman in the UK. Underneath them is a team of people who are responsible for running the business and I think that we pride ourselves on having a senior executive team that is both long serving in a sense – the average working career in our company is, I think, 11 or 12 years, but the average age is less than 50. So you can see we have been planning at that for some period of time and the concern of succession among us is not really an issue. We're just working and we're working as a team, whether my father takes the lead on an issue, my brother Peter takes a lead on an issue or I take a lead on an issue. We work very much as a team and we don't see it as tossing the coin or who is better or not. We each complement the skills of each other, and to the extent we need to work as a team, we do, and we have a very deep expertise in the company but it is not reliant on any one of us to do the job.

Q: But has it been hard to stand up to Frank?

A: No, it's not. Again, I think people have the wrong impression of my father from that perspective. Let's talk about the company for a moment. We have a public company with a majority independent the board structure. I think we have been a company that has been acutely aware of corporate governance and proper disciplines over a long period of time, and whilst my father is a strong individual and of course has a view, the company is not run in a manner that maybe where the company started with him and John Saunders, where they made every decision and instructed the executives what to do. That's a long time gone in our organisation. My father is obviously the leading member of a large team of people. I can't recall a board decision – there are a few board members in this room tonight – where we've had to take a vote or my father has said, "We're going to do this", because it doesn't work like that.

I think people have the impression of my father that way because of the position he retains in society and in business spheres and maybe his reputation is like that, but we very much work as a team at the board level and at the senior management level in the company. So we stand up to each other but I think we do it in a respectful and a proper manner. We do it at the board. There's healthy debate and there's healthy debate outside of the board room … We get ourselves collectively to a position.

Q: Some people say that you are quite like (your father) Do you think you've learnt a lot from him and do you think you share his characteristics?

A: Well, you know, I mean a son usually takes on some characteristics from parents and some better, some not so good.

Q: One of the specific things I am thinking about is people note your own capacity for work, that you're a pretty hard worker. Do you think that is true? -

A: Yes, I mean, you know, we're running a very large organisation and to work – not just my father or myself or my brother, but the senior members – in fact to be successful in our company one of the ingredients is leading by example. Having a very strong work ethic is really core to the business. It is a business that is intensively managed; the culture is one of intensive management; it's not a culture of stand back and let it guide and let it happen; that's not our company. That culture obviously started from my father and John Saunders and it has permeated through the various levels of management as we've grown up. So I would definitely say that's a necessary trait, whether your name is Lowy or not.

Q: Jill Margo says in her biography of Frank Lowy that he learnt from early teenage years, on the streets of Budapest an alertness and a great respect for detail, and I was quite taken by those words and wondered whether you think you have got that same respect for detail. Some people find respect for detail is a negative, you know, it's a micro managing, but I wonder what you think of that and whether you understand what she was getting at.

A: I think that that eye for detail is critical. I would like to think that I have that. It is a very important trait to have in our company. I think we're an interesting organisation because whilst we're very large and we're spanning four countries, we're operating basically 24 hours a day, seven days a week, almost every day of the year. It's a large organisation to run, but it is one that is run on the basis of having a detailed knowledge of what you're doing.

Of course, you can't have the same level of knowledge about each particular transaction …People probably criticise us as micro-managing in a sense but it is a core part of the company. Either we know it or we would expect somebody to know the absolute detail of what is going on. We've got caught once or twice over the years, possibly without doing our due diligence and not knowing enough detail, but I would be surprised if that would happen again.

Q: It is just an interesting point, I think, to make to an audience like this which is composed largely of a alumni, and also recently graduated alumni, because often management books tell you not to micro-manage and not to sweat the small stuff.

A: Well, I think you need to know when you need to understand the detail and what it means. To the extent you over-manage, that's probably not a good recipe, but you need to know when and when not to delve into the detail. I think that we would probably be too far on one side but that is the nature of the business and I really would like us not to change that as we've grown.

I suppose one of the fears we have, and it comes back to your success question, is how do you continue to be successful as your business grows internationally in size over a long period of time? We're a company where the senior management are setting the strategy and executing the vision of the company but also have a very detailed knowledge of the financial controls of the organisation as well.

Q: Now, back to your own career. You were at Sydney Grammar, you did your schooling there, and I gather also played a lot of soccer. So did you like school, were you good at school?

A: I was okay at school. I liked soccer at school, it was really good. I was okay at school. I went to Sydney Grammar for my education until I came here to university. We were talking before in the previous venue, school, you're very distracted at school by many things--

Q: Soccer obviously.

A: Yes, that was one of the main events and somehow we've come back home to that issue as well, which is very exciting to be a part of, but school was just okay actually.

Q: Then you came here and you did a Bachelor of Commerce. Bachelor of Commerce seems to be the preferred degree for the Lowy boys, because you were the youngest of the three sons and you were the third to do the degree.

A: Yes.

Q: What do you think of that degree? Did you learn much that has been useful?

A: Yes, you might think this is an advertisement, but it is not. I think it's an incredibly practical degree. It sets you in good stead I think, particularly for a business career. I learnt a lot of things that I would put into play every day, particularly management, accounting techniques, organisational and behavioural studies. Running a large company requires a lot of attention to organisational structures, organisational behaviours, human resources, these type of issues, and I think that the course that I did – I finished 25 years ago – was an incredibly effective course. I just sort of struggled through school but as soon as I got to university, I excelled at that and the disciplines that the university created and in particular the honours degree that I did, I think was incredibly valuable for a business education.

Q: And you won the prize in fact that year for your thesis on organisational behaviour. What do you think you learnt from that about the way people behave?

A: I was surprised by that. I would have been the last person you would have expected to have won a prize for a thesis at university, but again, it just sort of clicked. My thesis was on organisational behaviour and the effects of budgetary control, feedback, the correlation between budgeting and organisational behaviour. So it was very practical study to do.

Q: Did you always know you were going to do a Bachelor of Commerce and go into business? Was there no rival to business in your mind even when you were growing up?

A: I actually wanted to be a vet when I was growing up but I wasn't good enough at science, so I figured I had to change course and I think it was quite a good choice.

Q: I agree with you, yes. Then after university, you were off overseas. I think your mother refers to that period as a sort of period in exile that all of you had to go through, away from home, to in a sense, turn you from boys into men. What was that like? You were in New York, not exactly a hardship posting.

A: Well, it's not a hardship posting in a sense, but, you know, a 21 or 22 years old, to leave here and turn up in New York – I worked as an analyst in an investment bank. It was First Boston at the time. Today it is obviously CSFB but I found that quite challenging actually because you are turned into the real world and New York is not the easiest place for a young person to establish themselves. But again, I think the education that I got at university reinforced becoming an analyst at a bank. Living on your own in a foreign city, it is a great experience. You asked how did you get into commerce and those issues. I wasn't quite guided that way – that you need to do commerce and you need to go to a bank. You know, there was no path that was actually created. I think it was more subtly created and of course I had the benefit of being the youngest. I had two older brothers who did the same thing and it just became natural to do. But it was a great growing up experience. The work hours are incredible.

Q: You worked for a little while I think with Westfield in the States and then you came back here and worked through a number of positions. Can you pinpoint a time when you felt that you were going to have that top job? Did you always want it? Were you ambitious?

A: I don't quite have the top job.

Q: I suppose the question is: Have you always been ambitious?

A: Yes, I think that going to New York and doing that activity, I felt quite young to do that and then I came back, I worked there for three years and then came back, probably at 25, and was thrust into some quite senior jobs, probably earlier than would have been appropriate. Again that comes from the benefit of having a father who is the chairman of the company – it helps you get established. But then of course you are thrown into situations that can be very uncomfortable and you need to be well ahead of maybe who you are at that time. So there were a number of incidences where at an early age you had jobs beyond you, a lot more senior people in age and experience were reporting to you. That can be a quite difficult task to deal with, particularly from a human perspective. So there would have been many incidences at that time where you've really had to figure how to rise to the occasion and over time I suppose you establish yourself.

Q: What lessons do you think you learnt in that rising to the occasion? What virtues or what attributes do you think you learnt from that?

A: Well, I suppose, a huge amount of hard work – probably extra because you wanted to succeed. Almost like every day you are studying for an exam the next day because you have got, again, more experienced people who are reporting to you. You need to establish yourself. I am sure many people in this room have gone through that experience. It's a very good experience from that perspective, and then from the human perspective, to understand human behaviour I think is a critical part of success in life, and certainly success in business, to be able to learn, and you make lots of mistakes along the way. Hopefully you learn from that. But to learn how to deal with people, particularly older people and achieving what you like to achieve but in a way that brings people with you, as opposed to a younger person who with a lot less experience may be too arrogant or aggressive. So you have got to weave your way through those issues, and I'm sure I made lots of mistakes but I got through that over time.

Q: Okay. So now you've got to share some of these gems of wisdom with the rest of the hall here. I mean, it's a people business. You observe people, you learn how they operate. How do you get people to follow you then?

A: Well, I think we're clearly a successful company and continue to plan to be going forward. So it is a good start to attract people there. Leadership in our company, attracting people has really been the leadership, being able to do it yourself. I think we're an organisation [where] you can move among the business and know exactly what is going on in the business. There's a respect for that.

So how do you get people to follow you? You lead by example; you set the tone. Change is a very important thing for a company like ours to continue to do, because I think as you continue to grow, and particularly internationally, you must change the way you operate, one to attract high calibre people who can take the charge with you, and so it is a combination of leadership and changing behaviour along the way as it is necessary.

Q: Now, leading by example in your case obviously has been about long hours and sometimes Generation Y, and X perhaps, aren't so keen perhaps in putting in those hours. Do you think Westfield has a fairly tough culture? From the outside looking in, you feel as if it would burn people out.

A: Yes, I'm sure we have a reputation for being a tough culture. I've heard it a lot. I hear a lot from our staff, from our competitors, they don't want to come to us because it is too hard. Well, then Westfield is not for you, but it does have a reputation as a tough culture, but I wouldn't agree with the comment that it burns people out. If you look at our senior management, on our board there is longstanding senior management. In essence there is a mixture of long-serving executives plus a lot of newer executives who we've brought into the company to take the company forward with us. I wouldn't say it is a company that would burn people out. I think it is an excuse often used for those who really don't grow as the company grows and that is used as an excuse, but our senior team in essence, probably half of them have grown with the company over the last 15 to 20 years, and I would say they are working as hard now as they did ever – but I don't agree with that burning out issue.

Q: Now, what about when the company is hiring younger people, what do you look for? Can you tell a star from the word go?

A: I think in the first few minutes you can tell a star, sure.

Q: What do they look like? What does a star look like?

A: They come in many shapes and sizes you know, and genders of course, but what do you look for? You look for a spark, you look for drive, you look for confidence, not arrogance. I think that companies can fail greatly when they're arrogant organisations. So it's a whole range of – not necessarily with skills that have been brought up in a particular industry.

For instance, the gentleman who is our President in the United States, who works for both my brother Peter who lives there and myself, he was a long-serving Disney executive, financial and real estate business, but nothing to do with shopping centres. We see that our organisation requires a whole lot of different disciplines. We learn a lot from other industries. I think if you look at just your own industry, you'll miss a lot. So we learn a lot from other industries and therefore to bring people in from different industries is a very important part of our business.

Q: Do you ever hire people just because they look so great, even though there is no specific job for them?

A: Yes, often. Often we'll hire people and there's a leap of faith obviously because when you do that you just like them but you're not sure where they're going to fit. So you take a leap of faith in doing that and I think that we've justified that over a long period of time. A lot of executives won't do that. They either don't have that faith in you or it doesn't suit their agenda, but everyone I know of who we have hired just because we liked them have come in and actually done very well.

Q: So they come in. They're pretty hungry often, you know, particularly younger people these days. Do you think they're in a bit too much of a hurry?

A: I think so. I think that there's an expectation of immediate success, immediate growth. We haven't really lost any very senior executives I think, but a lot of lower to middle executives I think we have, because their desire is to succeed and get promoted and have significantly increased pay very, very swiftly, and that often is at loggerheads with the company's organisational plan, succession plans, et cetera. So we see that a lot and I think it is increasing. I mean, all of the statistics are that people are having more jobs today than they used to have and I don't think that is healthy, no.

Q: Your sector is one where projects take years and years to come to fruition, don't they? So you need people who have been at it a long time. Other organisations perhaps need more new blood earlier. Is that one of the reasons why people don't get the promotions perhaps?

A: No, I think that our sector is – there are many different skills necessary for our sector. We are a vertically integrated company … we are an architectural company, we are a general contractor, a builder and then of course a management company and a leasing company. I would regard us as a very sophisticated financial organisation, so we attract a lot of finance executives from the banking industry. So there's a whole range of different executives who are necessary for our success.

Q: We know it is not all peaches and cream at Westfield and that you work people hard but you also play pretty hard ball with other people as well. You are a very big, powerful company, you negotiate from positions of power. You've had your critics in a number of areas, tenants who complain about you ripping them off … The criticism is that you run your centres and the small shopkeeper may be thrown around and made to go to a different position, all those sorts of different things.

Do you worry sometimes that it is actually quite hard for a big, powerful company to exert its power in a way that is consistent with being a good corporate citizen?

A: Yes, I think we cop it quite a bit from that perspective. The business we are in, we have in our 128 malls 22,500 retailers. In Australia alone we have nearly 10,000 retailers. Probably half of those are small tenancies. The whole nature of Australian society, which is heavily reliant on immigration over the last period of time, retailing by nature is easy to get into. You can finance your fixtures and fittings, basically you can get your stock on consignment and you can lease the shop. So you really don't need a lot of capital to become a small independent retailer and because of that there is a lot of business failure. There is not enough capital there when it doesn't go as good as they think. There is clearly not enough expertise, enough governance, all of those type of issues, and then that small business failure generally gets portrayed as a big bad landlord, whether it is ourselves or any of the other landlords, but us being the largest we cop that quite a bit.

We have had to manage that over the years. There is a lot more legislation today than there was … but you cannot legislate against business failure, as much as various governments have tried to do over a long period of time … I think what it has done though is it has created a huge awareness in our organisation. We are very conscious – I think I mentioned the word arrogance before. Large organisations are often portrayed as arrogant. We will go to great lengths not to be portrayed that way. There are a lot of business processes in our organisation to stamp it out, but it does happen. Of course, it happens. We have human beings working for us. They overstep the mark from time to time. Our responsibility is having the processes and procedures and the culture where it doesn't happen a lot, and so we are really attentive to that. One of the things we do often is fight against rezonings, the sites, from particularly industrial sites to retail sites. The whole concept of the value equation of the piece of land which is zoned industrial is a very different value than if it is zoned retail. We have, of course, over the years put hundreds of millions of dollars into a site, sometimes billions of dollars into a site, based on certain planning laws and we will go to great lengths to make sure that those planning laws that are set down by government and decisions that we are making based off those planning rules are adhered to and if they are not adhered to we will fight against it. Some people see that as fighting too hard. We see it as protecting our shareholders' interests, we see it as protecting the interests of the hundreds of retailers that are in our malls, and that is our responsibility, and the way we conduct it is more important than the conducting of it itself.

Q: Before we go from that, the (NSW) ICAC regarded your tactics at Orange Grove – which obviously was one of the most controversial incidents of this kind a couple of years ago here – as extravagant and sharp, though they obviously cleared you of any wrongdoing. Do you regret the publicity around that and regret what happened there?

A: Well, I think we – do we regret it? I don't think we regret the activities that took place. We felt that everything that we did was entirely proper. We went through the court process. We actually went through three court processes. Every judge through the process came on our side and at the end of the day it became a political football between both sides of the government. I would prefer not to go into the detail of it for obvious reasons but it became a political football and we were the football. It was a very unpleasant situation, a huge diversion of senior management activity. So do we regret it? From that perspective we would definitely regret it. If you [knew] the whole path ahead you may make different decisions along the way.

Q: So what's the big challenge for Westfield now here and also perhaps overseas?

A:Well, the challenges are quite different here than overseas I think. We are the market leaders, we are industry leaders in Australia by some distance. I think we are very proud that as our company has grown internationally, and now 60 per cent of our income comes from offshore and that will probably be an increasing figure not a decreasing figure, we have maintained our market position in Australia. When we did the merger nearly two years ago, we would have expected the vast majority of our growth to be offshore. Since that period of time there are actually nine new Westfield shopping centres in Australia. We would not have expected that. Some of that came through corporate activity; others came from just opening a few new centres; but basically it was through corporate activity that was not expected at that period of time.

So growth in Australia – we wouldn't be the only company in Australia facing that. Large companies that have stronger market positions in Australia need to expand overseas to grow. We saw that a long, long time – my father [and] John Saunders saw that a long, long time ago. We have been in the United States since 1976. We are now one of the market leaders in the US. About half of our business would be in the US.

So the challenges in Australia are more about how to just eke out continuous growth and what is effective in a mature economy, and we are in a mature industry in a mature economy. Although having said that, Australia is very well managed economically. Whilst growth is an issue, I think risk is a lot less here as well, so that is somewhat offset.

The challenges for us overseas are to continue our international expansion and to execute very well. I think the Australian corporate landscape is littered with companies that have not fully executed internationally and therefore suffer greatly. We have been in the US since 1976, grown extensively, particularly in the US. In the UK more recently. We now have exposure to some very exciting assets in the UK. Today, after only five years, we now have the largest development program of any shopping centre group in the UK. So in that short period of time we have established that market position.

Our consciousness is about execution, particularly as a large company … you are a beacon of success but what comes with that is if you screw it up in a sense you're a beacon for that as well, and so that is a huge challenge for us.

Q: What about China? You have stayed away from that region. Why?

A: Well, this whole question of these international trends that are taking place and the growth of Asia, and more particularly China and India, these are exciting places I am sure. We are very conscious of them though. Our business is one of continuous growth expectation, relatively low risk, particularly if the business is well managed.

The economies that we have done business in, being Australia and New Zealand, United States and the UK, are economies which you can probably forecast better. Everything from the planning regimes to the whole financial make up of the countries to the infrastructure, the people. We have studied countries like India and they are very difficult countries to do business in in terms of poor infrastructure, not exactly welcoming foreign capital to the business. If you are a foreign retailer you can't do business there. So our basic customer, that is the retailer, is really constrained in those markets. So they are exciting to read about and clearly international companies over time have to be focused on them, but they come with a lot of challenges and probably risks that are not properly being measured at the moment.

Q: So you don't think your children will be doing their apprenticeship in China rather than New York?

A: Well, no – I don't know the answer to that… Maybe one of them will be a vet and I won't have to worry about them.

Q: We will go to some questions from the floor. I might just slide in a quick question about the World Cup while we get everyone positioned for the more serious ones. Are you going?

A: Absolutely, yes, very exciting … Well, one, our family has been a soccer – I am going to call it football now because everybody gets used to it – a football family ever since we were kids. Obviously, the European influence had a lot to do with that, and of course my father's personal… You talk about hard work, the work that he is putting into the football and those achievements that have been done are really fantastic, fantastic for the country too.

Question from the floor: Steven, thank you for that, and I enjoyed particularly your description of success being a journey where you might measure yourself on the way. Looking at five or so years time, if you were to describe yourself as being successful, or the corporation as being successful five years out, what would the measures be and what do you think are the things that you really would have had to have done extremely well to get there?

A: Whilst our corporate structure has adapted over the years, each of the vehicles in which we run Westfield Holdings have an unbroken record of proper growth or the financial returns of both Westfield Trust and Westfield America Trust over long periods of time. Not one year in the history of our group has real estate income gone backwards, just to give you a sense of it, and we have been around for 46 years. So we would obviously want to continue that success.

How will that be measured? That will be measured in many ways. Obviously, return on shareholders funds would be a critical component of that. Use of our capital is very important. We have a huge capital base and one that we can do a lot with and we're looking at doing a lot of very exciting things with that. That was one of the purposes of putting the group together – to create this huge capital base that gave us the opportunity to grow.

Internationally I would like to think that our entry into the UK was really a springboard, not just into the UK but also into Europe. That has got a whole lot of different challenges to it that we have assessed over that period of time.

I think from corporate citizenship, all of those issues, they are very challenging issues. The larger you are and the bigger you are the bigger target you are for those. So we are continually putting in place all the corporate governance and corporate citizenship issues to be measured on.

I am not sure we will be a leader in issues like – you tend to get a lot of pressure environmentally today, which is important for us, to adhere to all the rules and be a responsible corporate citizen. I don't think you will see us being an absolute leader in that field. I think that our responsibility to our shareholders is somewhat different. I think that our responsibility to our retailers is somewhat different. Nonetheless, we are going to be working in a lot more challenging environment.

Success is often measured financially and I think that we will be very focused on that. The challenge of succession clearly comes into play for that period of time. I think any company looking at a five-year timeframe has to look at the concept of succession, not just a company such as Westfield with my father being founder and executive chairman over a long period of time. How well we continue that process is a very important aspect of the company. I think that is one [issue] that gets huge attention on a regular basis and I am certain we will be very attentive to that issue.

We have really gone through a number of generations of management already in the company. The common element has clearly been my father in that period of time and it has moved to a very professional approach, a very systematic approach to it, so we are very attuned to it. I would be greatly disappointed – you see many companies that are successful and then they become unsuccessful because they haven't managed the process very well and they haven't managed the ability to execute on a larger scale very well.

Our challenges are enormous … currently we are doing 19 projects with $7 billion currently being spent in four different countries. The shopping centre business lends itself to continuous redevelopment to improve the assets themselves, increase market penetration in those [areas] where you are to continue to have a good asset. The requirements you need to do that on a very successful basis as you get bigger [means that this] is very challenging. But I would like to think that we are right on top of that issue and we will look back and say: Well, we managed that period very well.

Our company has grown enormously. I mean, the assets of the company were some $35 billion only 18 months ago and now they are over $50 billion and that has come through acquisition and redevelopment and I just think that those challenges will continue.

Question from the floor: I am always interested in how organisations deal with specific events. Westfield had just signed fresh ink on the Westfield's deal on the World Trade Centre just before it went down. How does a company like Westfield deal with that and what kind of effect do you think it has had on Westfield?

A: Well, the World Trade Centre of course had a huge effect on a lot more than our company. I think we performed incredibly well under very difficult circumstances. We had only settled on that building three months before September 11 and actually we got out there and we settled early. Had we not settled early we would have never owned it at the time. But of course it was a horrific event …

We immediately had to deal with that in terms of emergency management of the highest order, with the world watching us. None of us got a lot of sleep that night. I was very pleased that already by the morning – I think this happened at 11 or 12 at night our time and by the morning – there was already a stock exchange announcement out about where we stood as a company, what the impact was on us, where we stood from the insurance perspective, and I was very proud of how we acted. And this brings [me to] another issue, another challenge that I think we all have. which is the whole question of the environment of the world and potential terrorism. We as an organisation put that at the highest order of our focus, and we very unfortunately lost an executive that day in the World Trade Centre and it was a very difficult thing for our business in the US to cope with, a long-serving Westfield member. I was very proud of how we acted and I think we have adjusted our whole risk-management processes since that period of time.

The potential to get back is very exciting in a sense. We would like to do that if the opportunity is there. We really sold our investment there, which was a $US130 million. It was a small investment in the scheme of the company and it was an issue that would have sucked our senior management up greatly because of the focus of the site, the political issues that were going on and still are going on in New York to eventually resurrect what was there in a different form. We have an opportunity to come back there and I think we would like to do that. It would be good to do if it makes financial sense and political sense. We have an opportunity to get back there and we will have a look at that. I think in the very near future that will be an issue.

This brings up a whole issue of iconic projects. We have a lot of iconic projects, shopping centres around the world, whether it be there or Century City in Los Angeles or Bondi Junction in Sydney or the Sydney Tower. It would only be the Opera House and the Harbour Bridge that would be more [iconic].

… We own in downtown Chicago a major mall on Michigan Avenue. We are building currently in White City on the west side of London. There is a San Francisco centre in downtown San Francisco, a major half a billion dollar complex with Bloomingdales and Nordstrom’s. These are all – if they were targets, these are huge issues. These are issues that we are very conscious of and we take incredibly seriously. I think we would be the most serious I know in our industry on these issues. So it has shifted our mindset to an extent and it has really honed our skills in emergency management, which will be I think a much bigger issue for us all to cope with.

Question from floor: In your response to the first question it seems to me that you gave the response that one might expect from any of your competitors. A lot of the students here are taught about competitive advantage. They are also taught about the issues of large companies regressing towards the mean. Would you like to convince us as to why you will succeed where your competitors won't?

A: I think paranoia is a great driver in life and particularly when you have the success record that our company has. To convince you, we've continued this path over a long period of time. We are very conscious of the requirement to succeed on a bigger scale. I talked abut success as a journey but I didn't really talk about it from a competitive advantage and I think that if you were to measure our success versus the success of our competitors, particularly in the Australian landscape, I think it would be an easy question to answer. Where we are today versus where our main competitors have been over the years, how have we achieved that and how do we continue to achieve that is one of continuity of what we do best.

From the comparative advantage perspective, I think that our people know more than our competitors. I think that when it comes to detailed knowledge of the business and all that drives the business. I think that those that have failed over time have really been because of poor execution, either because of not knowing how to extract as much out of government buildings and the structures that are put together. I think that our peers who have struggled over the years are all about lack of execution and we have been successful in the corporate takeover sense in Australia and in the United States and in Holland and in the UK. Our growth has come out of corporate acquisition and seeing acquisition opportunities that our peers didn't see.

Most of that acquisition opportunity has come out of our competitors stumbling and the market creating that opportunity, whether it was created by us initiating it … or was created opportunistically by somebody else.

… So I come back to the deep knowledge of the business, the ability to permeate that knowledge through a lot more executives, who are required to do it on a lot bigger scale, and I suppose that's our job, to do that. So I can't give you a guarantee today that we'll achieve that over a period of time. I don't know who will do it better and I don't know who will get a better shot at it than we will.

Question from the floor: Mine is actually more of a personal question. Obviously, given the family you are in, you actually don't need to work. That's pretty clear. And I'm wondering are there days when you think, "I don't want to do this any more. I want to go and live on an island and forget all about this hassle", and if so, how do you get out of bed and go to work and do it all over again?

A: This is a very personal question I think. You know, some people work because they have to work, other people work because they really desire to work and they want to achieve and create things. I'm very proud of our company and the history of our company. I'm proud of the family's achievements. Where do you stop and go to the beach? I don't think we subscribe to that theory. Clearly we could. We choose not to. Some days you do think, "What the hell am I doing here? Why am I doing this?" But those are hard, just like any days and I think we are really driven by wanting to create. The business we are in, I think is a great business, the shopping mall businesses. It is not just building buildings and collecting rent as a tax. The office building business is like that, the industrial business is like that, where you are building sheds on any piece of land. Our business impacts society greatly, on creating things and how humans react to one another. The whole question of technology comes into this, and I won't o into all this because we don't have a lot of time now, but fundamentally people like to get out and socialise and be together and we create opportunity for that to occur and it is very, very exciting. The best days in our business are when we open a new mall and you see hundreds of thousands of people come in there and say, "What were they doing yesterday and why are they here today?" If any of you have been to our mall in Bondi Junction, and I hope most of you have, that mall today does three quarters of a billion dollars in sales. Before we put it up, just two years ago, it was doing 200 million dollars in sales. That is a staggering change in behaviour of society and I think that we're very proud of that. So we're in a really good business, we know it very well, we have the ability to adapt that business to the changing needs of the consumer and the retailer, our customer, and it is very exciting. So what gets us up every day is the ability to continue to create.

I think we've got a responsibility to society to do a lot of things outside of business because you choose to do them, and that's just a personal choice. Do you choose to go and live on a beach if you can afford it or do you choose to create and be productive in the world? I prefer to think we are in the second camp, not the first camp. I've got four children, young, and I would like to think that they're going to grow up seeing a hard working family that they're also going to do that, to be productive, and I prefer it not to be a society where we do that. I mean, you asked me a personal question; I am giving you a personal view. That is how I would choose to run my family. Others may choose to go to the beach and opt out. That probably may have certain advantages of course but I don't think you'd be that intellectually stimulated or productive in life. So that's you know, personal choice.

Venue

The University of NSW