A life in computer leasing: a personal view
By Lord Mitchell, The House of Lords, UK
1968 – Martin Luther King and Robert Kennedy were assassinated. Riots raged on campuses around the world. Paris was in turmoil. Manchester United had just won the European Cup (I was there) and one Parry Mitchell entered the leasing industry. On and off I was to stay for 40 years, until I was seduced into the calm, uneventful world of politics!
Entering the computer leasing market
My specialisation has always been IT and the four companies I ran were all computer leasing companies. The first one was Boothe Computer which I joined in 1968. Based in San Francisco, Boothe was the most fun of all. Imagine at the tender age of 25 I became Managing Director of their UK operation and how on top of the world I was when I was whisked off first class to sales conventions in places such as The Bahamas, Acapulco and Monte Carlo?
My office then was the biggest and most lavish I have ever worked in (including the Palace of Westminster), at Carlos Place in Mayfair, London, a luxurious and massive room lined with mahogany and a secret drinks cabinet activated by pushing a pressure point in the panelling. Those were the days!
One of our Californian competitors was a company called Itel. They had a travel policy that stated that it was an offence for anyone to fly anything other than first class. Their rational being that you would never meet anyone of any consequence in economy and besides flying first class gives you an inner aura of invincibility. They too went bust, but in what style! Pure Trumpian.
At Boothe Computer we wrote operating leases on huge IBM mainframes: 11-month fixed term leases and thereafter three-month’s notice. In those days IBM mainly rented out their equipment and we were able to undercut them – it was easy. Of course, all good things must come to an end and Boothe imploded, but luckily for me I had already left. One thing for sure, I learnt about residual values, aggressive marketing, and that business should be fun.
In 1970 I attended a meeting of the heads of the newly formed leasing companies in the UK. It was at that meeting that we decided to form a trade association, which we called the Equipment Leasing Association. We grew very fast and in no time at all we became a power in the land and at our annual dinners our guests of honour were either the Governor of the Bank of England or the Chancellor. And so, it should have been, because leasing had become a major enabler in encouraging British industry to invest in new equipment, ensuring the growth of our national productivity.
Leasing in the 1970s and 1980s was great fun and we were all chasing new horizons. We all prospered, and we provided a service that was, and is, essential. Entrepreneurial companies like my own, could compete with the bank-owned leasing companies because we listened to our customers. We were nimble, and we were brilliant at marketing. To put it bluntly our customers much preferred dealing with us because, unlike the establishment companies, we provided the service that they wanted, and we were fun to do business with.
We were also international in ways I do not detect today. I was always attending leasing conventions in Europe and the US. Indeed, in my time I opened offices in France, Switzerland, Belgium, the Netherlands and Germany. At United Leasing we had five offices in the US and when I left in 1987, we were writing over $350m worth of leases per annum in the United States alone. I seemed to live on planes and LHR was my second home. As I say those really were the days.
But my eyes were turning and I became involved in politics. I helped create the SDP political party in 1980 and I stood for Parliament in both Ealing, London and Salisbury. In both cases I lost, though in Salisbury it was pretty close. I could never get politics out of my blood. Why? Well to quote President Kennedy “it’s the only game in town”. But I am getting ahead of myself.
In 1972 I persuaded Standard Chartered Bank to set up a computer leasing company as a joint venture between them and me (as a 29-year old). You can imagine a very crusty colonial bank in partnership with my brother and myself? We had our differences, mainly in style, but somehow it worked.
Standard Chartered Leasing grew quickly and when we left in 1976 the bank purchased our shares for £1 million. In 1976 that was some payoff. That money was invested into our new independent company United Leasing. In 1983 United Leasing floated on the London Stock Exchange. We were the first operating leasing company to do so, effectively creating a new sector.
Computer leasing was all about residual values. We made judgements about the value of a computer three or so years into its future life and factored these forecasts into our rate calculations. Now I know that the majority of car leasing today assumes residual values, but at least with cars you have a chance (so they tell me), but with computers it was living in the fast lane.
This equipment, then and now, was experiencing rapid technological growth and we were always in danger of our assessments being shot to pieces by someone in Japan, or San Francisco, inventing something faster, smaller and cheaper. Product obsolescence plagued us, but luckily we were always ahead of the game.
Our main competitor at United Leasing was a company called Atlantic Computer. They wrote seven-year leases, which were fixed term non-cancellable finance leases, but to satisfy customers’ insatiable needs for flexibility, they themselves issued separate documents offering early terminations at no penalty. And you know what happened, the customers fell for it? A typical example of not seeing the wood for the trees.
Atlantic went spectacularly bust and they took down their new parent, British and Commonwealth, who at the time were the fifth largest finance company in the UK. A Board of Trade investigation followed, and I was a key witness. We sold United Leasing in June 1987, four months before the stock market collapsed and two years before Atlantic went up in flames.
To this day I pride myself in running the campaign to alert the financial sector to the dangers of Atlantic’s so called Flexilease, just as a decade earlier I had exposed the so-called Lloyds ‘J’ policy. This was a brilliant piece of financial jiggery pokery, which persuaded Lloyds of London to issue insurance policies which guaranteed computer residual values.
Inevitably the J Policy collapsed, causing hundreds of millions of pounds worth of losses for Lloyds. I don’t suppose I won too many friends there either. I learned in my innocence, that if telling a lie is bad, then telling the truth and being very vocal about it, wins you few friends especially when mega-bucks and massive professional fees are involved.
In 1992 I helped set up what became Syscap. This time we were leasing network systems and our customers were mainly SMEs. I loved the speed of Syscap, in the office you could almost hear the tills ringing as the deals were done. I tried to persuade the company to go international, but to no avail – no-one (apart from me) could speak any foreign language, and no one had a feel for ‘abroad’. But we did very well and in 2006 we sold the company to a Private Equity company. Two years later the financial markets went south.
You can say whatever you like about me, and, believe me after 40 years in the business many people have said many things that should not be repeated in polite society, but no one can deny that I get my exit timings spot on. In 1987 it seemed to me that it was all too frothy and something dangerous was imminent. In 2006 it felt similar, unsustainable and threatening. In both cases I got out before Armageddon arrived.
Now I am in the House of Lords and I have a very different perspective, but some of the lessons I learnt in leasing still apply. The first is don’t be a lemming. Just because everybody else is throwing themselves off a cliff there is no reason for you to do the same. The second is that fortune truly does favour the brave. Be timid if you want, but then that never was my style. Thirdly trust your people. I have always found that most people have capabilities way beyond what even they themselves believe – give them their heads and they will blossom. Fourthly if something is too good to be true, it usually is. Finally, don’t trust politicians, whatever they promise you in the morning is often scrapped by lunchtime. It’s the way they are built, they can’t help it.
Leasing was my principal career and I am grateful for that. I met some amazing people, a few rogues it’s true, but overwhelmingly men and women of great integrity. How lucky am I?
Parry Mitchell was born in London in 1943. He left school at 16 and sold vacuum cleaners door to door. He went to evening school and obtained a B.Sc in Economics from the University of London and an MBA from Columbia Business School in New York City. On his return to London he joined IBM and has had an affiliation with IT ever since.
In 1968 he joined Boothe Computer, a US computer leasing company. In 1972 he formed Standard Chartered Leasing in the UK and in 1976 he formed United Leasing which had its IPO in 1983. In 1992 he became chair and majority shareholder of Syscap which was sold in 2006.
He was made a life peer by Tony Blair and joined the House of Lords in 2000. He sat on National Security Strategy select committee. He became Shadow Business Minister. He lives in London, New York and Umbria.