The man whose innovative thinking has revolutionised the domestic hi-fi industry harbours a comprehensive ideology, both political and economic, of how to turn around Britain’s flagging economy. Linn’s Ivor Tiefenbrun tells Mark Young why the UK should be ashamed of its manufacturing record, why free market principles are essential, and why maybe – just maybe – there might be a silver lining to the storm clouds of recession.
The Tiefenbrun name is a famous one on the Glasgow business network.
Jan Tiefenbrun, a Polish immigrant, set up an engineering company – Castle Precision Engineering – in 1951. That company is now run by his son Marcus, while Marcus’s brother Ivor is the founder of another Glaswegian company, Linn Products. It is this company which has completely revolutionised the hi-fi industry.
Ivor Tiefenbrun, who has an MBE for services to the electronics industry, began working for his father’s firm in the 1960s. He soon found it was an opportunity that afforded him one or two extracurricular activities which combined two of his strongest interests: music and engineering.
“I discovered as a music listener that the performance of products available at the time was degraded because the turntable was influenced by the output of the loud speakers,” he says. “Illicitly, since I was taking up the time of my father’s workers and using his materials, I developed a turntable that got more information from the groove.” His work showed the world that the most critical factor in the quality of sound recordings is the source of the music, rather than its amplification.
Initially it was only a personal enthusiasm. Yet, “as my Dad used to say, one stupid thing leads to another,” he says.
A company saw the turntable he’d made and told him they could sell them if he made more, which Tiefenbrun began to do. The problem was that he never got paid and this left him in “a real mess”. His hand was forced: set up shop or forget about it. “I decided to go into the hi-fi business,” he says with a smile.
Amps, labels and bye-bye to CDs
Tiefenbrun then turned his attention into creating a loudspeaker, also very radical, which used very low frequencies with no audible bass resonance. “My ambition from the start was to make a complete system because I understood that you had to compare and monitor the signal at each stage to get a good result.” Next up was creating his own record label, Linn Records, which this year won Gramophone magazine’s Record Label of the Year. The label is home to many artists, including the Scottish Chamber Orchestra, and it recently released an album by renowned producer and electronic musician William Orbit. And herein lies Linn’s ambition: to control music from its capture all the way though to the output sound from the speaker, to reproduce in a living room exactly what is recorded in a studio.
“That makes us unique,” says Tiefenbrun.
“Although other companies do this – Sony Records and Sony Music, for instance – they’re not properly joined up.” Ivor is now executive chairman and all of the day-to-day running of the business has been passed over to his son Gilad. But Linn continues to reinvent its industry. “We were the first to introduce solid state switching, micro processor controls and distributed multi-user audio systems,” says Ivor. “We were the first company with music servers and now we’re the first with high quality digital streaming. Innovation is fundamental at this business.” Linn decided 18 months ago that it would no longer make CD players or include them in products. This is not only because of its belief that digital music represents the only medium of the future, but because it insists that downloading tracks on a CD to a computer and then playing the tracks through a Linn system produces a cleaner sound than if the CD were played.
The mention of Tiefenbrun’s name can yield a wry smile and knowing nod from other Glaswegian industrialists. He is highly respected for his innovation and the foundations upon which he has built his company, but equally he is known to be highly opinionated and even provocative. You don’t have to go far back to find evidence of this. Mr Tiefenbrun was going to stand for the Conservative Party in next year’s Holyrood elections. He has revoked his application, after a Scottish newspaper attributed some colourful quotes to him regarding the perception of Baroness Thatcher north of the border. For the record, Tiefenbrun denies the accuracy of the article.
Whatever happened, public politics today is often about remaining ‘on-message’; saying anything other than his honestly held opinions is something a man like Ivor might not be prepared to do.
Those who know him talk of a man who rewards hard work yet will suffer neither indolence nor fools gladly. His demeanour, age and stature are not unlike that of another famous Glaswegian – there are even some similarities in physical appearance to Sir Alex Ferguson. At a maximum cost of £140,000 per room, Sir Alex is in an elite group that could afford to deck out their houses with Linn Products’ best systems. For the consumer of more modest means, an entry level cost of £1,500 is more within reach.
It is clear why the Conservative Party coveted Tiefenbrun’s leadership. Not only has he built one of Scotland’s best business success stories, attaining from scratch a £16m turnover, his views are completely aligned to the ideology that David Cameron and George Osborne have sought to promote. He believes in a small state and free market principles, emphasising the importance of transferring activities and jobs from the public to private sector, he refers to the New Labour years as a “catastrophic experiment in government control”.
“I don’t believe the Government can answer every problem,” he says. “We’ve seen the catastrophic consequences of the most profligate, imbecilic and destructive government in this country’s modern history, maybe ever.
“One thing they did to cling to power was to try to please everybody. It became a PR exercise and the real needs of the economy were ignored. No central control can administer that kind of resource, the only mechanism that can do that constructively is the operation of a competitive, free market.
The problem has not just been New Labour, he says. Since the industrial revolution, “Government has been the enemy of Britain – with brief exceptional periods,” he says. And manufacturing particularly has fallen victim.
“The more that government distorts the market place, the more wealth destruction that occurs, the higher the tax burden, the more damage is done to the most price-sensitive and competitive sectors of our economy. Without a doubt, that is manufacturing.”
Tax regime stifles free market growth
This has led to a shameful state of affairs in terms of British national interests, he says. “Since the Second World War, nobody in the UK has built a major [FTSE-100] manufacturing company from scratch.
This is so pathetic and unique compared with the rest of the world. Tiny places that were swamps 50 or 60 years ago, like Singapore, are now great manufacturing powerhouses. Countries that didn’t exist or that are beset by warfare, like Israel, have created very large manufacturing companies. Britain has created none.” That, he says, is down to state interference and a corporate tax regime which is punitive. “It’s the effective tax rate which is important – tax after allowances. Because there are few allowances you have the strange anomaly where, especially in manufacturing, lead times are long, investment is high, its capital intensive, you’re exposed to global competition, and the rate of change is phenomenal. Companies are damaged by the very high rates of effective corporation tax and the tax instability, while our foreign competitors in effect pay no corporation tax or a maximum of 10% net He points to Germany as a country that is committed to maintaining its competitive position.
“There is a clear focus on trying to be world leaders in as many areas as they can. You see the same drive in Japan, and now in China and it is emerging in India. All over the world people see the route to wealth creation is through manufacturing. No country can go from an agricultural economy to some so-called elusive knowledge-based economy without manufacturing.”
We can prosper, he says, but we have to work harder than our low cost competitors in order to so.
“I don’t believe that as wages increase you become less competitive. If that was the case Scotland and England could not have made the UK the richest nation in the world through the Industrial Revolution. Wealth can be created. The issue is productivity. If we earn ten times more than someone in India we have to be ten times more productive.
That requires investment and that’s another reason why companies need to accumulate cash. High interest rates and an artificially strong pound don’t help.” Turning innovation into products with longevity must be the focus; at the moment we are too quick to sell ourselves short, he says, and there is inadequate infrastructure to support people with ideas. “Ideas are stymied by regulation,” he says. “Often people just cash in their chips and sell their intellectual property overseas. We’re the best country in the world at that. We squander our birthright and the productive output of generations of hard labour.”
As for the quangos whose raison d’etre is to enable innovation yet face the prospect of the Chancellor’s axe? “I would get rid of them all,” he says, “certainly those with the power to regulate and tax other companies. I don’t think that a single one adds any value. In Britain we have a habit of tinkering with things but never scrapping anything. So much money is squandered that the good they do is not sufficient to compensate for the waste. Wealth can also be destroyed and the method of wealth destruction is redistribution.”
For all of the barriers to successful manufacturing, Tiefenbrun believes that recession itself could be the very catalyst for innovation and the chance for a fitter industry to emerge. “One of my favourite concepts is that people drove into the Great Depression on a stage coach with a petrol engine bolted on the front and they drove out of it in high tensile steel alloy cars with independent suspension and hydraulics, pneumatics, air conditioning and radios. Most of the features you associate with modern cars emerged from the turmoil of this depression. Crisis causes a lot of destruction but it makes people realise that they want to buy things that add real value. They shop around and they look for advantage.” He points to Linn’s streaming product as an example. “At the very basic level it makes music more accessible and improves quality, and you can have all your music collection for you, and your kids, in two homes, three homes, on your boat, in your car and it sounds better but it also saves you a fortune,” he says.
“Businesses must focus on productivity improvement and wealth creation – Adam Smith explained that a long time ago. That is not always understood, especially by our socialist brethren.
But standards of living over the last 200 years have increased at one and a half per cent per annum, in line with our productivity. If we want to increase our wealth and the strength of our economy more in future we have to increase our productivity.” Were Tiefenbrun to have stood in next year’s Scottish Parliament election it would be difficult to see him winning except as a list MSP. Scotland is, by and large, resolutely red and Tiefenbrun is just about as blue as they come. But many will see the removal of his policy input as Scottish manufacturing’s misfortune.
Visit www.themanufacturer.com for the video interview with Ivor Tiefenbrun.