YouSaid · the spoken record

Tom Murphy

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40
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2023-11-22
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2023-11-22
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  1. “Biographies on Thomas Murphy. I can't find a company history on Capitol Cities, which seems like I'm making some, I have to be making some kind of massive mistake. So if you find either a biography on Thomas Murphy or company history, please let me know. I'd gladly read it and then make a longer, like more in-depth podcast episode on this. I'm always fascinated about learning more about and from the people that are admired by people I admire. The fact that Warren Buffett calls Thomas Murphy his hero, that Ted Turner says that these guys know what they're doing, that they were building an excellent multimedia or multi-billion dollar media conglomerate really piqued my interest. So I will leave a link down below. I assume you already have this book. It was number one on Warren Buffett's recommended reading list for a long time. It's referenced over and over again. I think they sell it at the Berkshire annual meeting every year as well. I actually did a podcast on a chapter in the book previously. It was episode 94 on Henry Singh.”

    2023-11-22 · Founders · #328 Tom Murphy (Buffett's favorite manager) · IDENTIFIED FROM THE TRANSCRIPT · source

  2. “In studying, they call this company TransDime, a contemporary doppelganger to capital cities. It says a contemporary analog for capital cities can be found in TransDime, a little known publicly traded aerospace components manufacturer. Like Capital Cities, the company focuses on very specific types of business with exceptional economic characteristics and Transdime evolved a highly decentralized corporate structure and operating system for optimizing the profitability of these specialized businesses. And there's actually an excellent podcast series I listened to that's actually produced. It's called 50X if you search in your podcast player. William Thorndyke, so the author of this book, actually did a four-part series on TransDime. So if you're interested in companies that are like Capital Cities and you want to listen to that podcast or you want to learn more, I'd highly recommend listening to that four-part series. I thought it was really good. I wish there was more books on, I can't find any.”

    2023-11-22 · Founders · #328 Tom Murphy (Buffett's favorite manager) · IDENTIFIED FROM THE TRANSCRIPT · source

  3. “The best price I can do. There's no back and forth. Can we just agree on this? If not, let's just keep it moving outside of acquisitions, the second largest amount he spend was actually share repurchasing. He bought back over $1.8 billion. He spent over $1.8 billion on share buybacks. That investment alone generated an excellent return for shareholders, 22.4% over 19 years. As Murphy says today, I only wish I had bought more. And then the chapter closes with this interesting anecdote about this very unique culture. He told me a story about a bartender at one of the management retreats who made a handsome return by buying Capital City stock in the early 1970s. When the bartender was later asked why he made the investment, he replied, I've worked a lot of corporate events over the years, but capital cities was the only company where you couldn't tell who the bosses were. And then there's a post script on the chapter that if you're interested.”

    2023-11-22 · Founders · #328 Tom Murphy (Buffett's favorite manager) · IDENTIFIED FROM THE TRANSCRIPT · source

  4. “During his nearly 30 year tenure CEO was the result of a handful of large acquisition decisions, just a handful. These acquisitions each represented 25% or more of the company's market cap at the time they were made. Murphy was a master at prospecting for deals. He knew what he wanted to buy and he would spend years developing relationships with the owners of these desirable properties. He had a very unusual negotiating style. He would often ask the seller what they thought their property was worth, and if he thought their offer was fair, he would take it. And if he thought their proposal was high, he would counter with his best price. And if the seller rejected his offer, Murphy would walk away. So it says like he would never do well at auctions. He usually bid, you know, sixty or seventy percent lower than the winning bid. But that was very interesting. He's like, you told me what the price is. I think it's worth that. I won't even negotiate with you. I'll just say, okay, I'll take it for that amount. And if that doesn't work out here.”

    2023-11-22 · Founders · #328 Tom Murphy (Buffett's favorite manager) · IDENTIFIED FROM THE TRANSCRIPT · source

  5. “Paid them off, we leverage them again to buy other assets. Acquisitions was where Murphy spent the majority of his time. He did not delegate acquisition decisions and never used investment bankers. To Murphy as a capital allocator, the company's extreme decentralization had important benefits and allowed the company to operate more profitably than its peers, which in turn gave the company an advantage in acquisitions by allowing Murphy to buy properties and know that under Burke, remember Burke's extreme efficient operator, they would quickly be made more profitable, lowering the effective price paid when he had conviction Murphy was prepared to act aggressively. And Murphy was not impatient. Murphy was willing to wait a long time for attractive acquisitions. He once said, I get paid not just to make deals, but to make good deals. When he saw something he liked, Murphy was prepared to make a very large bet. Much of the value created”

    2023-11-22 · Founders · #328 Tom Murphy (Buffett's favorite manager) · IDENTIFIED FROM THE TRANSCRIPT · source

  6. “Lots of resumes, but we never see any from capital cities. Why? Because the system in place corrupts you. In place corrupts you with so much autonomy and authority that you can't imagine leaving, so that was a description of more of operations which fell under Burke. Let's go to Murphy and his capital allocation in the area of capital allocation. Murphy's approach was highly differentiated from his peers. He eschewed diversification, paid minor dividends, rarely issued stock, and made active use of leverage. He would regularly repurchase shares in between long periods of inactivity made the occasional very large acquisition. The two primary sources of capital for capital cities were internal operating cash flow and debt. The company produced consistently high industry-leading levels of operating cash flow, this high amount of cash flow provided Murphy with a reliable source of capital to allocate. We take the assets and once we”

    2023-11-22 · Founders · #328 Tom Murphy (Buffett's favorite manager) · IDENTIFIED FROM THE TRANSCRIPT · source

  7. “A clear preference for intelligence, ability, and drive over direct industry experience, because neither one of them, Murphy when he was hired and Burke when he was hired, they had intelligence, ability, and drive. They did not have direct industry experience. And so they specifically targeted what they called talented younger foxes with fresh perspectives. Murphy and Burke were also comfortable giving responsibility to promising young managers, as Murphy described it to me. We had been fortunate enough to have it ourselves and we knew it could work. And so one of the people they hired young was Bob Eiger. They hired Bob Eiger at 37. And before that, he had spent his entire career in broadcast sports, and they hired him to assume responsibility for A, B, C entertainment. Another important trait that fueled their success is they had exceptionally low turnover, part of this culture, right? And they talked about there's a rival broadcaster once remarked, this is another great line.”

    2023-11-22 · Founders · #328 Tom Murphy (Buffett's favorite manager) · IDENTIFIED FROM THE TRANSCRIPT · source

  8. “Margin that your company operated at was viewed as a form of report card to HQ outside of these meetings managers were left alone. The company did not simply cut its way to high margins. Murphy and Burke realized that the key drivers of profitability in most of their businesses were revenue growth and advertising market share, and they were prepared to invest in their properties to ensure leadership in local markets. Why? Why did they invest in expanding their market share? Because they realized this through trial and error. They realized early on that the TV station was the number one in local news ended up with a disproportionate share of that market's advertising revenue. And a great way to think about this is another description by an early employee at Cap Cities. The company was careful, not cheap. The company was careful not cheap. The company's hiring practices were equally unconventional. Murphy and Berg shared.”

    2023-11-22 · Founders · #328 Tom Murphy (Buffett's favorite manager) · IDENTIFIED FROM THE TRANSCRIPT · source

  9. “Insane about getting this competitive advantage that comes when you just watch your costs like a hawk. This is where he goes into headcount over and over again. So Phil Meek is one of the guys he runs their publishing division. He works for both Burke and Murphy, right? Phil Meek took this message to heart and ran the entire publishing operation. So at this time, they had six daily newspapers, several magazines, and a bunch of weekly like shoppers, the things you see in grocery stores. And he ran his headquarters with only three people. They would have very few meetings. One of the meetings is the people would come to New York and they'd go over all of their, again, they're obsessed with economic efficiency and how it relates to every single other idea that they have in their philosophy. And so what they do is they sit down and they go through line by line everything that you're spending. And so it says particular attention was paid to capital expenditures and expenses. Managers were expected to outperform their peers and great attention was paid to margins.”

    2023-11-22 · Founders · #328 Tom Murphy (Buffett's favorite manager) · IDENTIFIED FROM THE TRANSCRIPT · source

  10. “Story anecdote told in Sam Walton's autobiography. He's flying the plane, that little Sessna that he would go around picking out like the new Walmart stores. And they're trying to come up with a name for the concept behind Walmart. And there's a series of names. Walmart is one of the ones suggested. And one of the reasons, first Sam was inspired by Sol Price, who I've covered over and over again about FedMart. And so he liked the idea of Walmart, but one of the reasons he picked it is because it had less letters than the other options and therefore less lighting. You knew you had to light up your stores, right? And so the less letters, less lighting, less costs on a grand scale. As he expands might be only, you know, seven letters instead of 11 or whatever the other options were, but that extra four letters. You don't have to make them. You don't have to light them. You don't have to clean them. All the additional expenses that would compound over time. So again, they all think this this way. They are forever cost conscious. They're just.”

    2023-11-22 · Founders · #328 Tom Murphy (Buffett's favorite manager) · IDENTIFIED FROM THE TRANSCRIPT · source

  11. “Said. You can control your costs. They believe that the best defense against a revenue lumpiness inherent in advertising supported businesses was a constant viligence on costs, which became deeply embedded in the company culture. That is Andrew Carnegie and Henry K. Frick. That is Rockefeller. That is Ford. That is Sam Walton. In fact, it was hilarious. Oh, I got, I'll bring up Walton in a minute because the next story that illustrates how obsessed they were about cost control reminded me of something that I read in Sam Walton's autobiography. One of the earliest and most often told corporate legends, Murphy even scrutinized the company's expenditures on paint. They wanted to repaint one of their TV stations. And Murphy says, paint the two sides that face the road and leave the other sides untouched. He is forever cost conscious. There is a great”

    2023-11-22 · Founders · #328 Tom Murphy (Buffett's favorite manager) · IDENTIFIED FROM THE TRANSCRIPT · source

  12. “Are receiving no response. He stopped sending them, realizing his time was better spent on local operations than on reporting to headquarters. As Burke said, Murphy delegates to the point of anarchy, again great memorable language in here. Murphy delegates to the point of anarchy. Frugality was also central to the ethos. This is going to sound a lot. I mean, again, the two main, I think, ideas you see over and over again in the history of entrepreneurship is, one, the importance of focus, and two, gentlemen watch your costs. That is a quote from Andrew Carnegie. All of the people that we study on the podcast, with very few exceptions, were maniacal about watching their costs and Murphy and Burke describe why they were also fanatical about this. And it is exactly like the frame of mind that Andrew Carnegie and his partner Henry Clay Frick had 150 years before this. This is exactly what they...”

    2023-11-22 · Founders · #328 Tom Murphy (Buffett's favorite manager) · IDENTIFIED FROM THE TRANSCRIPT · source

  13. “Either in the capital city's culture, the publishers and station managers had the power and the prestige internally, and they almost never heard from New York if they were hitting their numbers. The company's guiding human resource philosophy was repeated over and over again by Murphy, and it was higher the best people you can and leave them alone. Extreme decentralized approach keeps both cost and rancor down. And I love how they make the point that capital cities ate their own cooking. The guinea pig in the development of this philosophy was Dan Burke himself. In 1961, after he took over as general manager at WTEN, which was the station in Albany that first Murphy was managing, right? So after he takes over for Murphy, Burke, this is hilarious. I love this part. Burke began sending weekly memos to Murphy as he had been trained to do when he worked at General Foods. After several months,”

    2023-11-22 · Founders · #328 Tom Murphy (Buffett's favorite manager) · IDENTIFIED FROM THE TRANSCRIPT · source

  14. “Dehydrated corporate staffs. They also talked about headquarters staffs being anorexic. Both of those descriptions being important because that's how they want to build the company's culture. So the company's culture at Capital Cities meant extraordinary autonomy for operating managers. And this principle was stated in a single paragraph on the inside cover of every capital city's annual report. And it says, decentralization is the cornerstone of our philosophy. Our goal is to hire the best people we can and give them the responsibility and authority they need to perform their jobs. We expect our managers to be forever cost conscious. That phrase is repeated a few times. Forever cost conscious. And to recognize and exploit sales potential. Headquarters staff was anorexic. No vice presidents in functional areas like marketing, strategic planning, or human resources. No corporate council and no public relations department.”

    2023-11-22 · Founders · #328 Tom Murphy (Buffett's favorite manager) · IDENTIFIED FROM THE TRANSCRIPT · source

  15. “Okay, and so then the book goes into a little bit more about how they ran the business before the acquisition by Disney. It says one of the major themes in this book is resource allocation, the outsider CEO, so not just Tom Murphy, but the eight other CEOs or the eight total CEOs covered in this book, including Henry Singleton, John Malone, Warren Buffett says the outsider CEOs shared an unconventional approach, one that emphasized flat organizations and dehydrated corporate states.”

    2023-11-22 · Founders · #328 Tom Murphy (Buffett's favorite manager) · IDENTIFIED FROM THE TRANSCRIPT · source

  16. “Other way. Capital cities never made another large scale acquisition after the ABC deal, focusing instead on integration, small acquisitions, and continued stock repurchasing in 1995, so 10 years after he bought ABC, Buffett suggested to Murphy that he sit down with Michael Eisner, who was the CEO of Disney at the time. They wind up meeting at the Allen& Company gathering in Sun Valley, Idaho. And Eiser expressed an interest in buying the company. They wind up having a negotiation and Murphy negotiated a buyout price of $19 billion. He left Murphy then retired from active management. He left behind an ecstatic group of shareholders. Why are they ecstatic? Well, if you had invested a dollar with Tom Murphy as he became CEO in 1966, that dollar would have been worth $204 by the time he sold the company to Disney.”

    2023-11-22 · Founders · #328 Tom Murphy (Buffett's favorite manager) · IDENTIFIED FROM THE TRANSCRIPT · source

  17. “My god, check this out under Burke's oversight, the staff that oversaw ABC's TV station group dropped from sixty to eight people. The margin gap was closed in just two years from two years they brought ABC's margins from 30% to over 50. A story from this time demonstrates the culture clash between the network executives and the leaner, more entrepreneurial acquires. ABC was a limousine culture. Executives had the habit of taking a limo for even a few blocks to go to lunch. Murphy, however, was a cab man. Before long, this practice of Murphy's practice of taking cabs everywhere instead of a limo for God's sake, you should walk a few blocks. Come on, stop being lazy. Before long, this practice of taking calves rippled through the ABC executive ranks when asked whether this was a case of leading by example Murphy responded, is there any”

    2023-11-22 · Founders · #328 Tom Murphy (Buffett's favorite manager) · IDENTIFIED FROM THE TRANSCRIPT · source

  18. “So he buys ABC Network for nearly $3.5 billion with financing from his friend Warren Buffett. The ABC deal was the largest non-oil and gas transaction in business history to that point and an enormous bet, this is what I meant about him being able to be bold when he has real convection and an enormous bet the company transaction for Murphy, representing over 100% of capital equity's enterprise value at the time. So the Wall Street Journal reported on this transaction with the headline the Minnow Swallows the whale and then Murphy's partner Burke said at the time that this is the acquisition that I've been training for my entire life. So why would Murphy bet the entire company on one transaction? It says Murphy's conviction was that he can improve the margins of ABC's TV stations from the low 30s up to capital city's industry leading levels of margins of fifty plus percent.”

    2023-11-22 · Founders · #328 Tom Murphy (Buffett's favorite manager) · IDENTIFIED FROM THE TRANSCRIPT · source

  19. “Murphy became an aggressive purchaser of his own shares. He eventually bought back close to 50% of his outstanding shares, most of it at single digit price-to-earnings multiples. In 1984, the FCC relaxed its station ownership rules, and Murphy, in his master stroke, bought the ABC network. So the note I left myself here is this is something that comes up over and over again in these books, staying the game long enough to get lucky. This is the most important thing that he does in his entire business career. And it happens 30 years into his career.”

    2023-11-22 · Founders · #328 Tom Murphy (Buffett's favorite manager) · IDENTIFIED FROM THE TRANSCRIPT · source

  20. “They're advertising driven businesses with attractive margins. Let me go ahead and buy a cable television business. And this is one of the most fascinating things about the Ted Turner autobiography is the fact that Ted Turner was one of the first people in the broadcast TV industry to actually embrace cable. There's a maxim here that this is not a threat. It's an opportunity. Every other broadcaster besides Ted Turner, and now we see Tom Murphy as well. thought about cable as oh my god this is a threat to my broadcast business they both both Turner and Murphy thought it's like no it's not a threat it's an action opportunity and they also understood as a better product offering like the genie's out of the bottle like there's nothing you're going to do like you might as well go with the technology that enables you to just reach a much larger market than somebody watching like a local or regional TV station and then it goes into another strategy that he used that was quite different during the extended bear market of the mid-1990s”

    2023-11-22 · Founders · #328 Tom Murphy (Buffett's favorite manager) · IDENTIFIED FROM THE TRANSCRIPT · source

  21. “So by this time Capitol City owns five different TV stations, that was the maximum allowed by the FCC. So there's a regulation on the books at the time. You cannot own more than five. So it's like, okay, well, we're not going to stop growing. What are we going to do? It says they next turned their attention to newspaper publishing, which as an advertising driven business with attractive margins and strong competitive barriers had close similarities to the broadcasting business. So that's another example of him deviating from what other people building conglomerates are doing this time. He's like, well, I just want to stick to these businesses that are very similar to each other that I know very well. And so after buying a bunch of newspapers, he's like, well, what other businesses are very similar to the ones that I already own? Eventually, this regulation is going to be lifted. But before that happens, he's like, well, there's this new invention, which we talked about last week, which is cable television. Okay, well, that looks very similar to the broadcast TV stations I own. And then some of these newspapers that I own.”

    2023-11-22 · Founders · #328 Tom Murphy (Buffett's favorite manager) · IDENTIFIED FROM THE TRANSCRIPT · source

  22. “Smith and Murphy had been working together for 11 years, so that means at 40 years old, after Smith's death, Murphy becomes CEO. And that's the position he's going to hold until he sells it to Disney. So at the time he takes over the company, they have revenue of just $28 million. Murphy's first move as CEO, he's like, okay, I'm going to elevate Burke to the role of president and chief operating officer. And this was an excellent selection of a partner because they have essentially opposite skill sets and they have a very clear division of labors. And so this is a description of their excellent partnership and who did what. Burke was responsible for daily management of operations and Murphy for acquisitions and capital allocation. As Burke told me, our relationship was built on a foundation of mutual respect. I had an appetite for and a willingness to do things that Murphy was not interested in doing. Burke believed his job was to create the free cash flow and Murphy's job was to spend it.”

    2023-11-22 · Founders · #328 Tom Murphy (Buffett's favorite manager) · IDENTIFIED FROM THE TRANSCRIPT · source

  23. “Formula that the company would apply repeatedly in the years ahead. In 1957, so this is now three years later, Smith and Murphy. Then shortly thereafter, they buy a third TV station, and then they change the name of the company to Capital Cities. Now, the third TV station is important because this is when Murphy hires a young 30-year-old with also no broadcast experience as his replacement to run the Albany station. That is Dan Burke. Dan Burke and Tom Murphy are going to be this dynamic duo of these partners for the next 30 years. So Murphy spends time training Burke and he says he quickly indoctrinated Burke into the company's lean, decentralized operating philosophy. Then Murphy moves back to New York to work with Smith to build the company through acquisition. So that is how Capital Cities is going to grow. It grows by selectively acquiring additional radio and television stations. Now here's what happens. Smith unexpectedly dies in 1966.”

    2023-11-22 · Founders · #328 Tom Murphy (Buffett's favorite manager) · IDENTIFIED FROM THE TRANSCRIPT · source

  24. “29 years old. Tom is going to turn around this station. It's going to take him three years. So the station has a bunch of operating losses, obviously, because it was bankruptcy, right? So he went to turning it into a consistent cash generator generator by improving programming and then aggressively managing costs. That's going to come up over and over and over again, aggressively managing costs, as you can imagine when he's giving advice to Warren Buffett. By the way, Warren Buffett says that Tom Murphy was one of his heroes, that Tom Murphy made him a better person and that Actually, that is the ultimate gift you can give to somebody by helping them become a better person. So you can imagine if he's giving Warren Buffett advice saying that don't think about hiring another person just as like a $20,000 thing. Think about all like how much you're going to pay more over a decade, all the other stuff that comes with employee down to the amount of toilet paper that person's going to use in the office. I think that that's an understatement, aggressively managing cost, right? So says this is.”

    2023-11-22 · Founders · #328 Tom Murphy (Buffett's favorite manager) · IDENTIFIED FROM THE TRANSCRIPT · source

  25. “Harvard Business School, and he gets a job, just a normal job. He's working for Lever Brothers, which is this massive consumer package goods company at the time. He goes to this event at his parents' house, and he meets this guy named Frank Smith. And Smith begins to tell him about Smith's latest venture, which is he bought a struggling TV station. This is before Cable, just like if you listen to last week, this is the early days of cable. This is very similar to the early days of Ted Turner's career. That's why I think it's so interesting to do this podcast right after the last one. So Smith buys this. He buys a struggling TV station, and he purchased it out of bankruptcy. And before the evening was over, Murphy had agreed to leave his job in New York City and relocate to Albany to run the TV station. Now, here's the crazy thing. He had no broadcast experience, nor did he have any kind of management experience of any kind. At this point, Tom Murphy is...”

    2023-11-22 · Founders · #328 Tom Murphy (Buffett's favorite manager) · IDENTIFIED FROM THE TRANSCRIPT · source

  26. “Murphy and Burke are probably the greatest two person combination ever. And it's this division of labor, the fact that Burke was the incredible operator, the one that rooted out all the inefficiencies, and then Murphy was the one that was capital allocator, focused on strategy and acquisitions, which we'll get to. And again, here's another great Murphyism, if you will. So he says, capital cities combined excellence in both operations and capital allocation to an unusual degree. As Murphy told me, this is great. This is excellent. The business of business is a lot of little decisions every day mixed up with a very few big decisions. Okay, so let's go back in the timeline and figure out how did Tom Murphy even get associated with capital cities to begin with. And really the reason I'm highlighting this is because it speaks to the fact that one of the things you have to admire about Tom Murphy is that once he had conviction, he had no hesitancy about being bold. And you see that with the decision to take this job in the first place. So he graduates from”

    2023-11-22 · Founders · #328 Tom Murphy (Buffett's favorite manager) · IDENTIFIED FROM THE TRANSCRIPT · source

  27. “Them and why it did not happen to Tom Murphy. A lot of these companies collapsed under the burden of too much debt. These companies typically failed because they acquired too rapidly and underestimated the difficulty of integrating acquisitions and improving operations. Murphy's approach to the roll-up was different. He moved slowly. He developed real operational expertise, which I think is one of the benefits of not diversifying, right? By the time he does his biggest acquisition, it's going to come three decades into his career. He's going to buy ABC with Warren Buffett's help. He can have real conviction. Do I actually have operational expertise in operating all these media properties? Well, let me look at the past 30 years. Did I do this correctly or not? And then he focused on a small number of large acquisitions that he knew to be high probability bets. Capital cities combined excellence in both operations and capital allocation to an unusual degree. And that goes back to the start of the chapter where Buffett's saying, like, you know,”

    2023-11-22 · Founders · #328 Tom Murphy (Buffett's favorite manager) · IDENTIFIED FROM THE TRANSCRIPT · source

  28. “That's exactly what's happening in the book, right? They're just following fashion. What's really popular to do at the time, whatever company and other conglomerates doing, they're diversifying to unlimited businesses. They're going to build large corporate staffs and they're going to overpay for marquee media properties. Obviously, he's setting that up for you and I to tell us that Murphy did the opposite. He did none of those things. Capital cities under Murphy was an extremely successful example of what we would now call a roll-up. In a typical roll-up, a company acquires a series of businesses, attempts to improve operations, and then keeps acquiring, benefiting over time from scale advantages and best management practices. Now, just because it sounds simple does not mean it's easy. There's a lot of people, especially in the 90s and the 90s and the 2000s that try to do this. And a lot of these companies that try to do a bunch of roll-ups wind up going out of business. And he talks a little bit about why this happened, why this happened.”

    2023-11-22 · Founders · #328 Tom Murphy (Buffett's favorite manager) · IDENTIFIED FROM THE TRANSCRIPT · source

  29. “Radio and TV stations as opposed to buying the Yankees or a toy company, right? So it acquires more radio and TV stations operated them superbly well and regularly repurchased his shares. The formula that allowed Murphy to overtake Paley was deceptively simple. Number one, focus on industries with attractive economic characteristics. Number two, selectively use leverage to buy occasional large properties. Number three, improve operations. Number four, pay down debt. And number five, repeat this loop. More contrasting by Thorndyke. What's interesting is that his peers at other media companies did not follow this path. They followed fashion and diversified into unrelated businesses. I'm going to pause in the middle of that sentence, actually, because when I got to that section, made me think of something I read in Warren's Berkshire shareholder letters where he says the behavior of peer companies will be mindlessly imagined.”

    2023-11-22 · Founders · #328 Tom Murphy (Buffett's favorite manager) · IDENTIFIED FROM THE TRANSCRIPT · source

  30. “Murphy's goal was to make his company more valuable, not just larger but more valuable, as he said to me, and so Thorndyke is talking to him before this book, right? As he said to me, the goal is to not have the longest train, but to arrive at the station first using the least fuel. Murphy's got a bunch of good lines when he's talking to Thorndyke. That's one of my favorite. The goal is to not have the longest train, but to arrive at the station first using the least fuel. And so as he continues to describe the difference in Murphy and Burke's strategy compared to CBS, I just jotted down a few notes on what was happening on this page for my own self. I just put find your edge, don't diversify, and then repeat what works. Murphy and Burke rejected diversification and instead created an unusually streamlined conglomerate that focused laser-like on the media business that it knew well. Murphy acquired more”

    2023-11-22 · Founders · #328 Tom Murphy (Buffett's favorite manager) · IDENTIFIED FROM THE TRANSCRIPT · source

  31. “And generally displayed what Charlie Marger calls a prosperity blinded indifference to unnecessary costs. When I got to this section of the book, it made me think of one of my favorite things that Munger says they go and I think he was touring the Buffalo Evening News after they bought it. And he was really against Munger was really against spending money on luxurious offices. And so he has this great quip. He's like, why does a newspaper need a palace to publish in? And so that's what I think of when they're describing what's going on here. The strategy at CBS was consistent with the conventional wisdom of the conglomerate era, which espoused the elusive benefits of, quote, diversification to justify the acquisition of unrelated businesses. At its core, CBS's strategy, implemented by Bill Paley, was focused on making CBS larger, so now they start contrasting that with Murphy's strategy for capital cities.”

    2023-11-22 · Founders · #328 Tom Murphy (Buffett's favorite manager) · IDENTIFIED FROM THE TRANSCRIPT · source

  32. “Fund some of these acquisitions. They're going to compare and contrast obviously the way CBS is being led under this guy named Bill Paley, who's actually the founder of CBS. I was reading about Bill Paley last week in the Ted Turner biography autobiography, and he mentioned Bill. So actually went out and bought, and it's actually sitting on my desk right now. It's Bill's autobiography, which was published all the way back in 1979. So eventually I'm going to read it. And if it's good, I'll make a podcast on it. But let's go back to this. They're getting into new fields they don't know. enough about. They're issuing shares. They're building a fancy headquarters in Midtown, Manhattan at an enormous expense. And then they develop, now this is going to be maybe the largest contrast between CBS and capital cities. They develop a corporate structure. Listen to this.”

    2023-11-22 · Founders · #328 Tom Murphy (Buffett's favorite manager) · IDENTIFIED FROM THE TRANSCRIPT · source

  33. “Be dismissed, however marginal his contribution to the business. So as we go through this overview of Tom Murphy's life and his business philosophy, just remember that. He watched headcount like a hawk. So let's go back to the book, the chapter on Tom Murphy in the outsiders. And it's going to pick up where we just left off where capital cities winds up vastly outperforming over the three decades CBS. And like, okay, well, how does this happen? How did this seemingly insurmountable gap between these two companies get closed? So it says the answer lies in fundamentally different management approaches. CBS spent much of the 1960s and 1970s taking the enormous cash flows generated by its network and broadcast operations and funding an aggressive acquisition program that led it into entirely new fields. So instead of focusing on other media properties, media business that they knew well, they bought things like a toy business and they even bought the New York Yankees. They also would issue stock to”

    2023-11-22 · Founders · #328 Tom Murphy (Buffett's favorite manager) · IDENTIFIED FROM THE TRANSCRIPT · source

  34. “That Tom Murphy gave Warren Buffett on cost control. Cost control is something you and I are going to talk about a lot today. It's central to understanding Tom Murphy's incredible performance. This is what Warren Buffett says. 30 years ago, Tom Murphy drove this point home to me with a hypothetical tale about an employee who asked his boss for permission to hire an assistant. The employee assumed that adding twenty thousand dollars to the annual payroll would be inconsequential. But his boss told him that the proposal should be evaluated as a three million dollars decision, given that an additional person would probably cost at least that amount over their lifetime, factoring in raises, benefits, and other expenses down to the amount the fact that the company would have to buy more toilet paper. This is how insane this guy paid attention to cost and efficiency. And unless the company fell on very hard times, the employee added would be unlikely.”

    2023-11-22 · Founders · #328 Tom Murphy (Buffett's favorite manager) · IDENTIFIED FROM THE TRANSCRIPT · source

  35. “Magazines and operating them efficiently. That is not the first time I read Tom Murphy's name in one of the books that I've covered for the podcast, all the way back on episode 286. I did an episode on Warren Buffett and Charlie Munger. Warren Buffett and Charlie Munger talk about Tom Murphy over and over again. They met him in the shareholder letters. They met him when they're answering the Q&As at their annual meeting. But this is what they said in the book. All I want to know is where I'm going to die, so I'll never go there that I covered back on episode 286. This is Warren Buffett. He says 40 years ago, Tom Murphy gave me one of the best pieces of advice I've ever received. He said, Warren, you can always tell someone to go to hell tomorrow. You haven't missed that opportunity. Just forget about it for a day. If you feel the same way tomorrow, then tell them that then. But don't spout off in a moment of anger. And just one more excerpt before we jump into the book. And this actually comes from the book called A Few Lessons from Warren Buffett. I covered it all the way back on episode 202. This is advanced.”

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  36. “Is an excerpt from the book that I'm going to talk about today, which is The Outsiders Eight Unconventional CEOs, and their radically rational blueprint for success. It was written by William Thorndike. And specifically, I'm going to focus on chapter one, which is about Tom Murphy in Capital City's broadcasting and the name of the chapter is a perpetual motion machine for returns. And before I do that, I'm going to actually put this book down for one second. I'm going to pick up last week's book, which was Ted Turner's autobiography and read this section because he appears Tom Murphy and his partner, Dan Burke appear in Ted Turner's autobiography as well because they also built, they essentially build capital cities from a small broadcasting company and say multi-billion dollar media conglomerate. And so this is what Ted Turner said about them. I like the capital cities people a lot. Dan Burke and Tom Murphy really understood the business. They had built their company up by buying TV and radio stations as well as newspapers and magazines.”

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  37. “And valuable publishing and music properties. In contrast, at that time, capital cities had five TV stations and four radio stations, all in small markets. CBS's market capitalization was sixteen times the size of capital cities. But by the time Murphy sold his company to Disney thirty years later, capital cities was three times as valuable as CBS. In other words, the rowboat had won decisively.”

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  38. “Want to test it for yourself now is the best time to do that. Get $500 off of your own eight sleep by going to eight sleep.com forward slash founders. Warren Buffett said Tom Murphy and Dan Burke were probably the greatest two person combination in management that the world has ever seen or maybe ever will see. When he speaks to business school classes, Warren Buffett often compares the rivalry between Tom Murphy's company, Capital City's Broadcasting, and CBS to a transatlantic race between a rowboat and the QE two. QE two is the Queen Elizabeth too. It is this giant transatlantic liner, much, much larger than the Titanic. So he compares it to a transatlantic race between a rowboat and the QE2 to illustrate the tremendous effect management can have on long-term returns. The top-rated broadcast network,”

    2023-11-22 · Founders · #328 Tom Murphy (Buffett's favorite manager) · IDENTIFIED FROM THE TRANSCRIPT · source

  39. “For me not to notice my eight sleeps absence, and I think that's a definition of a great product. A great product is when you notice its absence. There's a lot of founders that have actually spoken publicly about their love for A Sleep. People like Elon Musk and Mark Zuckerberg have both tweeted and posted publicly about the fact that they own and use and enjoy an eight sleep mattress. I know Matteo, who is the founder of Eight Sleep, spent a bunch of time with him. We live in the same city. He listens to founders. I know he has a complete dedication to the constant improvement of his product. I believe that there are very few no-brainer investments in life, and eight sleep is one of them. Normally, when you go to eight sleep.com forward slash founders, you actually get $150 off. But right now, if you do this now, you get $500 off because eight sleep is having a holiday sale. If you wanted to see why so many high quality people are raving about eight sleep, why I hate traveling without it.”

    2023-11-22 · Founders · #328 Tom Murphy (Buffett's favorite manager) · IDENTIFIED FROM THE TRANSCRIPT · source

  40. “Might be able to hear this in my voice in the episode that you're about to listen to, but I just got over either COVID or the flu. I had been traveling way too much and I've been sleeping terribly and it finally caught up to me. I've been home now for almost a week and I feel way better. And one thing that actually helped me feel a lot better is my eight sleep. Before I had an eight sleep, I never had the ability to change the temperature of my bed before and I had no idea how much that affects and improves the quality of my sleep. I keep my eight sleep ice cold. It's cold before I even get into bed. This helps me fall asleep faster and wake up less during the night. And when I had this fever and these flu-like symptoms, I kept it even colder and it actually helped me recover from the sickness faster than if I didn't have an eight sleep. I had been feeling terribly for a day or two before I got back home and I was forced to sleep in a hotel bed that I cannot make cool. And I slept terribly. It was impossible.”

    2023-11-22 · Founders · #328 Tom Murphy (Buffett's favorite manager) · IDENTIFIED FROM THE TRANSCRIPT · source