#268 John Malone (Cable Cowboy)

What I learned from reading Cable Cowboy: John Malone and the Rise of the Modern Cable Business by Mark Robichaux. ---- Get access to the World’s Most Valuable Notebook for Founders at Founders Notes.com ---- Outline: Thread of highlights from Cable Cowboy by @Loadlinefinance Malone was stalwart about building long term value through leveraged cash flow. Earnings didn’t count. He wasn’t constrained by quarterly expectations. Malone built the pipes, then bought the water that flows through them. Malone took spartan operations to another level. Absolutely no bureaucracy. No waste. We don’t believe in staff. Staff are people who second-guess people. Malone averaged one M&A deal every two weeks over 15 years. That’s insane. These guys were slinging billion dollar deals like bowls of breakfast cereal. One of the best parts of the book is Robichaux’s exploration of Malone’s complex personality. It’s not just a fawning glow piece. The beginning of industries are always filled with cowboys, pirates, and misfits. This book— by far — has been the most requested book for me to cover on Founders for years. Founders episodes on Andrew Carnegie: Meet You In Hell: Andrew Carnegie Henry Clay Frick, and the Bitter Partnership That Transformed America by Les Standiford. (Founders #73) The Autobiography of Andrew Carnegie by Andrew Carnegie. (Founders #74) Founders episodes on JP Morgan: The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance by Ron Chernow (Founders #139) The Hour of Fate: Theodore Roosevelt, J. P. Morgan, and the Battle to Transform American Capitalism by Susan Berfield (Founders #142) Mavericks Lecture: John Malone Two Rockefeller podcasts: Titan: The Life of John D. Rockefeller by Ron Chernow (Founders #248) John D: The Founding Father of the Rockefellers by David Freeman Hawke (Founders #254) Bob when recruiting John: You've got a great future here. If you can create it. Malone's top executives were rough riders. In 1972 TCI had $19 million in annual revenue and its debt load was an obscene $132 million. Magness learned to listen instead of talk. Successful people listen. Those who don’t listen, don’t survive long. —Michael Jordan Driven From Within by Michael Jordan and Mark Vancil (Founders #213) That $2,500 loan turns into hundreds of millions of dollars for his grandsons. New employees were asked can you walk 10 miles in 10 below zero weather? The cable companies hardly paid any taxes because of the high depreciation on the equipment. He skimmed the company's numbers, looked up at Betsy and blurted out, I'm gonna hire the smartest son of a bitch I can find. Francis Ford Coppola: A Filmmaker's Life by Michael Schumacher (Founders #242) Once you make a guy rich don’t expect him to work hard. Very unusual people do that. You can identify an opportunity because you have deep knowledge about one industry and you see that there is an industry developing parallel to the industry that you know about. Jay Gould saw the importance of the telegraph industry in part because telegraph lines were laid next to railraod tracks. Edison: A Biography by Matthew Josephson (Founders #267) Dark Genius of Wall Street: The Misunderstood Life of Jay Gould, King of the Robber Barons by Edward J. Renehan Jr (Founders #258) 1. You raise money so you can increase production. 2. Use your increased production to get better rates on transportation than other refiners. 3. Use your increased profits —because you have better transportation —to buy your competitors. 4. You continue to find secret sources of income. — John D: The Founding Father of the Rockefellers by David Freeman Hawke (Founders #254) Malone thinks about his industry more than anyone else. He blundered early by suggesting in a meeting that Amazon executives who traveled frequently should be permitted to fly business-class. Jeff slammed his hand on the table and said, “That is not how an owner thinks! That’s the dumbest idea I’ve ever heard.” — The Everything Store: Jeff Bezos and the Age of Amazon by Brad Stone (Founders #179) Our experience has been that the manager of an already high-cost operation frequently is uncommonly resourceful in finding new ways to add to overhead, while the manager of a tightly-run operation usually continues to find additional methods to curtail costs, even when his costs are already well below those of his competitors. — Berkshire Hathaway Letters to Shareholders 1965-2018 by Warren Buffett (Founders #88) FedEx was fearful the bank would try to seize the mortgaged planes. The bank had a young officer keeping track of the situation. Every time he showed up at the airport, we would radio the planes not to land. It was all very touchy. — Overnight Success: Federal Express and Frederick Smith, Its Renegade Creator by Vance Trimble (Founders #151) How John described this point in his career: I'm the head of a little pipsqueak company in debt up to its ass, a couple million dollars in revenue, and not credit worthy to borrow from a bank. We're barely making it. Malone like the mathematics of it. Tax sheltered cash flow could be leveraged to land more loans, to create more tax sheltered cash flow. Stay in the game long enough to get lucky. Bowerman’s response to other coaches: “As a coach, my heart is always divided between pity for the men they wreck and scorn for how easy they are to beat.” —Bowerman and the Men of Oregon: The Story of Oregon's Legendary Coach and Nike's Cofounder by Kenny Moore. (Founders #153) "Forget about earnings. That's a priesthood of the accounting profession," he would preach, unrelentingly. "What you're really after is appreciating assets.” If you control distribution you get equity in return. My Life and Work by Henry Ford (Founders #266) Call Me Ted by Ted Turner When picking an industry to enter, my favorite rule of thumb is this: Pick an industry where the founders of the industry—the founders of the important companies in the industry—are still alive and actively involved. — The Pmarca Blog Archive Ebook by Marc Andreessen (Founders #50) ---- Get access to the World’s Most Valuable Notebook for Founders at Founders Notes.com ---- — “I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — Gareth Be like Gareth. Buy a book: All the books featured on Founders Podcast ---- Founders Notes gives you the ability to tap into the collective knowledge of history's greatest entrepreneurs on demand. Use it to supplement the decisions you make in your work. Get access to Founders Notes here. ---- “I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — Gareth Be like Gareth. Buy a book: All the books featured on Founders Podcast

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00David Senra?

  In the American cable industry, one man has, over the last several years, seized monopoly power. Using bully boy tactics and strong-arming competitors, suppliers, and customers, that man has inflicted antitrust injury on my company and virtually every American consumer of cable services and technologies. That man is John C. Malone. Malone seeks to exert monopoly power over key stages of the delivery of cable programming to the American consumer. Control over the creation of programming in studios. Control over cable programming services. Control over the mechanics of transmitting programming by satellite.

• 0:41David Senra?

  And control over the delivery of programming to the home. At every stage in this process, the consumer has paid and will continue to pay a monopoly tax to John Malone. That was an excerpt from a lawsuit that Malone's one-time rival, Summer Redstone, filed, and it is found in the book that I'm going to talk to you about today, which is Cable Cowboy: John Malone and the Rise of the Modern Cable Business, and it was written by Mark Robichaud. So before I go to the actual book, I want to read some highlights from this fantastic Twitter thread written by this anonymous account called Low Line Finance. It was written a few years ago, and I think it gives a fantastic overview of John Malone's

• 1:24David Senra?

  philosophy on company building, and I think knowing this before we go into some of the highlights, it actually enhances your understanding of the highlights as we go through. So the first idea: Malone believed in building long-term value through leveraged cash flow. Earnings didn't count. He was not constrained by quarterly expectations. The entire time that he runs TCI, it's a public company. And so he would tell his stockholders, "If you're going to ask about quarterly earnings, you're at the wrong meeting, and you probably own the wrong stock." I'll go into a lot more detail about his philosophy once we get to the book. Malone built the pipes, then bought the water that flows through them. So he wanted to own the cable lines going directly into the house and the parts of the programming that flowed through those lines. This is why, by becoming the gatekeeper with access to subscribers, he could negotiate

• 2:07David Senra?

  equity stakes in the channels, gaining huge financial upside.

• 2:12David Senra?

  Third idea, Malone took Spartan operations to another level. Absolutely no bureaucracy, no waste. This is a quote from Malone. "We don't believe in staff. Staff are people who second guess people." Fourth idea, always protect the mothership. He used a web of subsidiaries to spread risk. So if one went down, it didn't sink the whole ship. Here's idea number five. This one actually made me laugh and it gives insight into how Malone viewed himself. He was not really interested in operating a company. He thought of himself as a dealmaker. Malone averaged one merger and acquisition deal every two weeks for over 15 years. That's insane. These guys were slinging billion dollar deals like bowls of breakfast cereal. Oh, and TCI shares rose 55,000%.

• 2:56David Senra?

  And then the sixth idea is exactly what I read at the very beginning, which was Redstone's description of Malone. And it says, "One of the best parts of this book is the exploration of Malone's complex personality. It is not a fawning glow piece. Malone is cast as a monster as much as maven, an isolated sociopath as much as a loving family man." And the final idea that I want to include from this thread is if you give managers equity ownership, they can focus on fighting for economics rather than wasting energy fighting for control. And I'll go into more detail about that specific highlight later on. At the time, Malone was critiquing the difference between like a professional manager with no skin in the game and the way they think and the way entrepreneurs think. So I want to jump to the introduction of the book where the author is telling us why he is writing the book.

• 3:41David Senra?

  This is one of my favorite things to study, which is the beginning of industries. And the reason it's one of my favorite things to study is because the beginning, the very beginning of industries are always filled with cowboys, pirates and misfits. And so the author says, "I had studied the bumpy odyssey of the industry for six of my 12 years at the Wall Street Journal. I was fascinated by the cast of underfunded cowboys who had wanted merely to make a buck by building a rural antenna service." So that is how the cable, the modern cable industry in its infancy was essentially just a bunch of young entrepreneurs with no money in the middle of nowhere, trying to build an antenna service, which I'll get to in more detail. Their vision always seemed just beyond their grasp, and they often stumbled in running to reach it. Now, the same spider's web of copper lines across the country

• 4:25David Senra?

  was suddenly the single fastest route to the internet. So, the difference between what he's describing there, a rural antenna network morphs into the way Americans get high-speed internet for the first time. That process that he's describing took over 50 years to happen. The tapestry of events that led to cable's dominance was connected by a single threat: John Malone. And before I read this description of Malone, and where he's going to be compared and contrasted with a bunch of robber barons that you and I have talked about, the way to think about Malone is he's one of these dominant personalities that you and I have seen over and over and over again. And what's interesting to me is he's still living. This book is written about 20 years ago. He's still living, and he's got this cult-like following. This book, by far, has been the most requested book

• 5:09David Senra?

  for me to cover on Founders for years. I was finally pushed over the edge by my friend Sam Hinku, who's actually sponsoring this episode. And he told me a few weeks ago, he's like, "You've got to read Cable Cowboys. Malone was a monster." And to me, that was an unintended double entendre. Because Malone's competitors definitely saw him as a monster, but he was also a monster and a formidable individual at company building. And so, this is a little bit about that. Malone symbolized a much more ominous side of business to critics, consumers, and competitors. They saw a monopoly run by a Machiavellian bully who lived up to his many nicknames, including Darth Vader, Genghis Khan, and the Godfather. He had skated very close to security law violations. And like industrial powers Andrew Carnegie or JP Morgan before him,

• 5:54David Senra?

  he had extracted a price for the progress that he offered. As his power grew, he decided which cable network survived, and he crushed competitors. And all of this he did openly and brazenly. So on the next page, there's an overview of what he did. Malone did not found TCI. He is actually hired and recruited by the founder named Bob Magnus. And I'll get into Bob's story in a little bit because that's fascinating. I was actually disappointed I could not find a biography on Bob. It makes sense when you get to know him because he very much believed that bad boys move in silence. And so he didn't seem like the personality type that would cooperate with an author, actually. So it says, "TCI was born in western Texas in 1952 when Bob Magnus, a part-time rancher

• 6:36David Senra?

  with a weakness for whiskey and gambling, gleaned from a couple of hitchhikers a nifty investment idea that almost bankrupted him." That's that rural antenna service that morphs into cable. "He sought help from Malone, and by 1990, Malone had expanded TCI's reach and assets more than tenfold, making nearly 500 acquisitions in that time." That is bananas. "At an average of one deal every two weeks, the structures of his deals were exotic and his financial alchemy often befuddled Wall Street and investors and befuddled the hell out of me." I had to read several sections of this book over and over again, and I still have no idea what the hell is going on. And that was intentional, by the way, because the author points out at one point, they

• 7:18David Senra?

  had like a 350-page prospectus of some investment deal that Malone was pushing through. And it's extremely unlikely that anybody other than Malone actually understood the deal completely. So in addition to reading the book, I also watched this lecture that took place about 10 years ago, and it's John Malone, and he's actually speaking to a strategic finance class. And I'll leave the link down below because it's very fascinating. It's like just under two hours long. But strategic finance, I feel, was Malone's superpower. So back to the book. It says, "The structures of the deals were exotic, and his financial alchemy often befuddled Wall Street and investors. The flurry of complex mergers, acquisitions, stock dividends, and spinoffs clouded the picture of the company's true performance." That, too, I also think was intentional. This is really about his belief.

• 8:03David Senra?

  It reminded me, remember a couple podcasts ago? I can't remember if it was, I did two Rockefeller podcasts recently, one 248 on Titan and another one on 254 on this like very obscure 40-year-old biography of Rockefeller. But what was interesting is I talked about probably in both those podcasts is the fact that To understand Rockefeller, you had to understand that he literally believed, literally believed this as if like, as clear as day to him, that he was sent here by God to make as much money as possible, so then he could give it away. And I thought the reason that was important to emphasize is because when you, when, if you're operating with that belief, like you and I may think that, okay, that's a little ridiculous, John, but to him, it wasn't. It was actually real. And so then you understand what is, like, what's his motivation

• 8:48David Senra?

  behind what he's doing? And it stems from that belief. Malone had almost like a, to me, it was like, he repeats this several times in the book. He thought it was like a moral, like, achievement to build wealth. And the part where his philosophy conflicts with mine is the fact that he would build wealth. He'd put the achievement of building wealth over service to customers. So it says, "His shareholders got rich along with him." For Malone, it was a noble, if not moral, achievement, the fruit of his enormous capacity to deduce and strategize. That is repeated, variations of that idea, that it's a moral, building wealth is something good, something, you know, moral achievement is repeated, different variations of that is repeated over and over again in the book. Okay, so before I go into Bob and the starting of the company, which is really one of my favorite parts of the book, we gotta go with the fact that Malone, in some ways,

• 9:33David Senra?

  it was irrational for him to, this is so important for me and you to understand. Maybe the greatest opportunity that's ever gonna be presented to you and I, like, it's going to be irrational that we chose to do it. And what I mean by that is Malone is an extremely gifted, I think he graduated from Yale, had all these credentials. He's getting recruited by all these other super smart, rich people, right? And he's, I think he's in his late twenties. I think he's like 29 at this point in the story, right? And he turns it down, like this, let me just read this, and it's crazy. So it says, "weeks earlier, Malone had spurned a far more lucrative job offer in New York from Steve Ross, who was the chairman of Warner Communications." Ross had promised the 29-year-old Malone a limo and $150,000 salary.

• 10:17David Senra?

  This is probably in the 19, this is, I think this is 1970, early 1970s. I think we're right around 1972. So this is a lot of money. Ross had promised the 29-year-old Malone a limo and $150,000 salary, even pledging to relocate the new cable headquarters to Connecticut, where Malone lived, so it would shorten his commute. So I want to pause there before I go into him turning down his offer and going into the details of an offer, what is that, less than half of the salary he's going to accept from Bob. But I think I need to point something out to you is like every single person in the book, whether it's a young version of John Malone or an older version of John Malone, makes the same point. Malone is just smarter than everybody else. And I think you're seeing shades of that here where Ross is already a formidable individual in his own right. It's like, hey, I need to get this guy, this young kid on my team and I'm willing to go

• 11:02David Senra?

  to great lengths to do so. As it says, instead, Malone had chosen hardship. This is what I mean about, it's almost like, this is going to wind up being the best opportunity he ever has, the foundation in which he's going to build his multi-billion dollar wealth on. And it didn't look like that at the time. Instead, Malone had chosen hardship to take a pay cut and join TCI, which is an obscure cable company that had lurched from crisis to crisis for the preceding 20 years. And this is a little bit why Malone made this decision. Malone had picked TCI because Bob Magnus was fatigued and running out of luck and was ready to relinquish power and let a new man run the entire show. And because if Malone could make it work, he might become extremely wealthy. "I can't pay you very much," Bob told him one day, "but you've got a great future here

• 11:47David Senra?

  if you can create it." Such a great line. Malone found the challenge irresistible. So he's going to make $60,000. Okay, so he turns down a limo, relocating the headquarters, so it's a short drive from a house, and $150,000 salary. And all Bob can give him is $60,000 of salary and a bunch of stock options. So it says they agreed upon a salary of $60,000. And then Malone had seen fit to buy 7,500 shares of TCI stock, which he helped pay for with a $60,000 personal loan from a local bank. Oh, and I forgot to mention, he's got to move, him and his wife, from the Northeast all the way to Colorado. And that might have been part of the appeal. It says Malone is taking a liking to the informal Western setting in Colorado.

• 12:31David Senra?

  It was scenic and unhurried. Malone's top executives were Rough Riders. They were not the NBA types that Malone knew back on the East Coast. And so let's go into the culture that Bob built. It was very much a cowboy, Rough Rider, heavy drinking, extreme behavior culture. And it is wild how it started. For two decades, Bob had relentlessly driven himself and his wife, Betsy. So this is right before he goes and recruits. I need to give you background into why. Up until the point where he puts, he's looking at the numbers, he's in such despair and pain, and he realizes he's in a really shitty situation. And he says, there's a great line I'll get to in a little bit, he's like, "Damn it, I need to find the smartest man and recruit him to run this company for me." And so we'll get there.

• 13:15David Senra?

  So, his wife is also his business partner, so that's Betsy. They had started out with a single cable system in Memphis, Texas, that they had built themselves. And they had ultimately assembled a company with more than 200 cable systems in the top 100 markets. So that's what Bob's been up to for the last 20 years, okay? Bob had done it by constantly doubling, this is so crazy, he had done it by constantly doubling down on his bets and accumulating a mountain of debt. He was always gambling that Americans' hunger for this new thing called television would permit his company to grow fast enough to stay ahead of the bill collectors. What the hell does that mean? That means at this point in the story, 1972, TCI had $19 million in annual revenue. That's fantastic, right?

• 13:56David Senra?

  Its debt load was an obscene $132 million. This is irrational, that Malone saw this as an opportunity, and he was right. Bob had discovered this fledgling industry in a chance encounter in 1952, so 20 years earlier than we were in the story, when he gave two strangers a ride after meeting them in a cotton gin. Bob was then a 28-year-old cottonseed buyer at the time. And then he gives us background on his life, just some highlights. He'd grown up during the Great Depression, and he came from a family of farmers and ranchers. After serving in WWII, he pursued a college degree, and he was looking for the prosperity that the post-war American economy could offer.

• 14:38David Senra?

  He also worked in oil fields during the summers. That's when he meets his wife, and it says he would gain more than a country girl, she would also prove to be an astute business partner. And a trait that Bob had early in his life that he kept his entire life was, he kept his mouth shut. He hated that Malone would tell competitors like their strategies and stuff. So it says Malone learned to listen instead of talk. And within a short time, he could read a customer like a poker player, anticipating what that person wanted from the deal moments into the negotiation. And when I got to that part, it made me think of one of my favorite lines from when I read Michael Jordan's autobiography on episode 213. And I've never forgot this line since then. He says, "Successful people listen. Those who don't listen don't survive long." And we're seeing the same thing from a young Bob Magnus here.

• 15:21David Senra?

  And then this is how he found the opportunity. So he's giving these two hitchhikers a ride. And he says the two men told him that they had just built a big community antenna system. And what did this system do? It helped folks in tiny towns get broadcast TV signals from bigger markets far away. So again, Magnus is listening to him, thinks that's interesting, drops him off, doesn't think about it anymore. A few days later, a business partner brings this up. And so the name of the chapter that I'm reading from is called License to Steal. And that's why, this is why right here. Days later, a business partner mentioned to Bob that if you knew how to get into something called the CATV business, I understand that's a license to steal. To which Bob replied, "Hell, I know how to get in." And so Bob decides to build one of these systems in this tiny town that he's in. And this is why they call it a license to steal.

• 16:06David Senra?

  If he could raise the money to pull it off, Bob would be able to charge his neighbors a monthly fee for the television service, which he would get free of charge, basically pirating the programming from the TV stations themselves without paying them a cent. So you can think about he's extending the range of these TV networks from bigger markets into smaller markets they're not currently serving. And this next part, you and I have seen over and over again, the importance of having a supportive spouse for entrepreneurs and founders. So it says, "Betsy told Bob that she would do anything to support his idea." So they decided to bet the ranch, literally, on cable. They owned like some cattle, so they wound up selling it. Bob then sold his cattle, mortgaged the house. This guy, they called him a gambler. Now you'll see why.

• 16:49David Senra?

  He literally bet the ranch on cable, right? And what's crazy is how early it is. Up until this point, Bob and Betsy had rarely even seen a TV set, and they certainly didn't own one. That is how early they are in this industry. So it says, they decided to bet the ranch later than cable. Bob sold his cattle, mortgaged the house, and borrowed $2,500 from his father. That last line about borrowing $2,500 from his father is crazy. If you think about what's gonna happen, let's say 50 years, a little less than 50 years from where we're in the story. If you think about the decisions you make today and how they reverberate past your lifetime to your kids and grandkids.

• 17:34David Senra?

  This is a perfect example of that. The reason I bring that up is because I think you'll make decisions differently if you think like that's a really long-term perspective. But that $2,500 turns into hundreds of millions for his grandsons. There's no way he could have known by lending $2,500 to his son, I'm pretty sure his grandsons aren't even born yet, that his son is gonna take that $2,500, along with the money he got from selling his ranch or selling his cattle and mortgaging his house, and turn it into, this is literal, this is not an exaggeration, hundreds of millions of dollars that are gonna flow to his grandsons when his son dies. And at that point, I think his son dies when he's 72 years old. So this is many, I think he's 28 when he's doing this.

• 18:18David Senra?

  So this is 50 years into the future. That note on this page is crazy. That $2,500 turns into hundreds of millions for his grandsons. So once Bob and Betsy start in one market, they keep expanding over the next 20 years. They're gonna expand to over 200 different markets. I just wanna pull out one or two sentences here. Extreme behavior is found at the very beginning of the industries. They are trying to run wires in very rural areas. This, I think, is in Montana. It says, "New employees were asked, 'Can you walk 10 miles in 10 below zero weather?'" That is the requirement to get the job. This is how Bob managed, and a little bit about the company culture at this point. Every evening, a handful of the TCI Cowboys would sit around Bob's desk and he would

• 19:03David Senra?

  open the bar and review the day's events. Alcohol is a supporting character in this story for sure. This is about 10 years into the business. Bob likened the cable to the oil rush days in his native Oklahoma and Texas. Cable TV systems generated bundles of cash from the installation charges, which were $100 to $300 a customer in the 1970s, and monthly service fees of $5 to $20. This high cash flow could service—this is important because this, what Bob is describing here, the economics of the early cable industry, is what is like the weapon that Malone wields like about a decade from now. So it says, "This high cash flow could service an immense amount of debt, which was used to buy more systems. The companies hardly paid any taxes because of the high depreciation on the equipment.

• 19:47David Senra?

  The average cable system enjoyed a profit margin of 57%, far fatter than most businesses at the time. And this rush to constantly grow and stay ahead of the debt collectors took its toll." Bob's just under an intense amount of stress and pain as he's building his company. This is when he finally snaps and goes and gets Malone. "Bob drank almost daily. Alcohol, however poisonous to his body, dulled the anxiety that gnawed at him. The weight of—" This is so crazy because he doesn't know, this guy's gonna be a billionaire off of what's about to happen here. And he's doing well, this is the early 1970s now, he's doing well, but not nearly, it's like 1/10th, maybe 1/20th of the wealth that Malone's gonna help build for him. So it says, "He drank almost daily. Alcohol, however poisonous to his body, dulled the anxiety that gnawed at him."

• 20:32David Senra?

  The reason I bring that up is because imagine, you and I talk about maybe the best maxim from the history of entrepreneurship, is that excellence is the capacity to take pain. Imagine if Bob did not have the capacity to take pain, to deal with anxiety for decade after decade, and if he stopped here, how different is his life? Not only his life, I just got done saying, when he dies, his two sons are each gonna inherit like 200, I think 200 or 250 million dollars each. How different is their life if he cannot take the pain and he stops here? He dulled the anxiety that gnawed at him. The weight of TCI's debt threatened to topple the empire that he and Betsy had worked so slavishly to build. After 20 years of struggling, the scrutiny was unbearable.

• 21:15David Senra?

  The complexities of running a public company and tracking the performance of more than 200 cable franchises in 21 states, all the while fighting regulators and lawyers, was becoming too much. He skimmed the company's numbers, looked up at Betsy, and blurted out, "I'm gonna hire the smartest son of a bitch I can find." Enter John Malone. Malone's first year at running the company is the company's worst. So, not only did Bob have to demonstrate that excellence is the capacity to take pain, listen to what Malone has to go through in the early days. Malone had the dubious pleasure of presiding over the first loss that TCI ever had reported, $2.1 million. TC ha-- and this is also important to understand, Malone's strategy in growing TCI into the

• 22:00David Senra?

  largest, I think it was the largest cable operator, when he sold it to AT&T. TCI would hardly ever again report a profitable year. Forever after, it would reinvest cash flows to grow the business ever larger. For Malone, all this was painful to his pride and a blow to his personal finances. The fact that he takes his job, turns down other, more lucrative options, and then presides over the worst year in TCI history, that's what they're talking about there. So, it was a blow to his personal finances, and it stunned him. The value of his stock options had sunk by more than half. And instead of reaping great riches, as he had envisioned, Malone was now cash-strapped and deeply in debt. At home, his wife, Leslie, was patient but clearly unhappy. Remember, he moved her across the country.

• 22:43David Senra?

  They lived in the Northeast, now they're living in Denver. She was the love of his life and deserved so much more from him, but they were barely scrimping by. Malone had to cut his own pay to help meet expenses at TCI. They did not eat out, they had no new furniture for their home, and the company, or, and the couple, excuse me, had to go nine months without telephone service because they couldn't afford it. This part was hilarious. Each day, on his drive to the office, Malone passed a feedlot that was filled with cattle. And each day, he saw the same bull standing on a pile of dung. "That's me," Malone told himself, "on top of a pile of bullshit."

• 23:25David Senra?

  In the quiet few moments he had to himself in the drive, a single question tugged at him. Have I made the biggest mistake of my life? So let's rewind in the life story of John Malone and try to figure out, okay, why is this guy who is a rare combination of incredibly intelligent and unbelievably driven? And as you and I have seen before, it's amazing how many of these ideas just repeat over and over again. So back on Founders 242, I read the biography of the legendary director Francis Ford Coppola. And there's a line in that book that says, "You can always understand the son by the story of his father. The story of the father is embedded in the son."

• 24:03David Senra?

  Long after John's father dies, he talks about his relentless drive being a result of trying to gain his father's approval. John Malone's father preached hard work and personal sacrifice. If you didn't try your best, work the hardest, you're a failure. That's what people are put on this earth to do. Dan Malone would tell his kids. More than anyone, Dan Malone would shape his son's destiny. That's just another way of saying the story of the father is embedded in the son. It's crazy that this repeats over and over again. More than anyone, Dan Malone would shape his son's destiny. His father's rigid expectations and private tutorials seemed to inspire John, who would spend a lifetime struggling to prove his worth.

• 24:47David Senra?

  Dan was laconic in doling out anything approaching praise. He set a very high bar. When John came home from school with a report card of all As and one B, he asked about the B. Malone would internalize this model and become very demanding of himself. That part was very interesting because well after Malone is independently wealthy, he is still pushing the limit, he's still working incredibly hard. And I go and listen to that talk that he gave, the one I'll put in the show notes if you want to watch it on YouTube. And he says something interesting how like sometimes you're buying all these companies. And sometimes you have like good managers, but a lot of times you have to like, you have to yank out the management that's in there because you just made them extremely rich.

• 25:30David Senra?

  And he said a line that I think is really a reflection on how abnormal and unusual he is. And he says, once you make a guy rich, don't expect him to work hard. Very unusual people do that. John is one of those very unusual people. So I want to fast forward past college. I want to go to when he's about 29 years old and he's working as a consultant for McKinsey and Company. And I found it very fascinating how he accidentally stumbles into the, what's going to turn into the cable industry. And he's consulting for a cable equipment maker. And he's talking to this guy named Shapiro who just bought the company. And he says, after several weeks, Malone laid out a plan to Shapiro to fix Gerald, which is the company. But Shapiro surprised him with his reply. I've got a better idea.

• 26:13David Senra?

  If you're so smart, why don't you come and do it yourself? Malone was 29 and he accepted the offer. This is important because we talked about this recently where, I think it was last week in the Edison, uh, number 267 on the Edison biography and number 258, which was about Jay Gould. And it was the fact that Jay Gould winds up spotting the telegraph opportunity through his work in railroads. And I think this is a very powerful idea to think about. It's the idea that you can actually identify an opportunity because you have deep knowledge about one industry and then you see another industry developing parallel to the industry that you know about. Malone's career is another example of that because he goes for McKinsey, right? He's working at McKinsey for a cable equipment operator.

• 26:56David Senra?

  Then the guy's like, hey, come run the cable equipment operator. But not only did they make cable equipment, but they also were the third largest cable operator at the time. Then through these meetings, selling and running this cable equipment maker, he's going to meet, one of his customers is Bob Magnus. So it says, in the process of studying Gerald, Malone saw for the first time the potential of cable TV. Gerald was a cable equipment maker that happened to be the third largest cable operator in America. And they're growing fast. And so what's happening is he's seeing the difference that scale. He uses very, you could think of Malone very much, to me, is very similar to like another Rockefeller. And just like Rockefeller was intent on getting as big as possible, as fast as possible, so was Malone. And this is part of the reason. Slowly efficiencies of scale stretched out before him. The bigger you are, the more parts you order.

• 27:41David Senra?

  Remember, he's focused just on the cable equipment making at this point, okay? The more parts you order, the cheaper the parts. Before Malone arrived at Gerald, the company was paying eight cents for each of these tiny connectors they needed in this equipment, right? Malone, as they started to grow, started buying them for one tenth of one cent. Remember this part for later. He literally uses the same idea when he's buying programming from people like CNN and HBO. When we were small, we paid eight cents. Now we're big, we pay one tenth of one cent. I'm gonna read something I said 47 minutes into episode 254. This is, if you haven't listened to episode 254, you gotta go back and listen to it because it's gonna give you the advantage.

• 28:26David Senra?

  How many people have read a 40-year-old obscure biography on Rockefeller, right? And so I got to somewhere in the book and I really, like, you really can break down what Rockefeller was trying to do. And this is very similar to what Malone's doing. So I'm gonna read from 47 minutes into episode 254, okay? And so this is what I said, trying to summarize what Rockefeller's doing. Step one, you raise money so you can increase production. Step two, use your increased production to get better rates on transportation than other refiners. Step three, use your increased profits because you have better transportation rates to buy your competitors. Step four, continue to find secret sources of income.

• 29:10David Senra?

  And it described Rockefeller's approach at building his company and absolutely destroying his competitors as ruthless efficiency and hyper competence. Those same five words can be described for what Malone is about to do. It is ruth, it was ruthless efficiency and hyper competence.

• 29:30David Senra?

  If you read this book, it's obvious how much more advanced Malone was. And some of it, I think, is like natural intelligence. But then there's several times I left this note to myself, because there'll be different examples of the book. And I just wrote, oh, Malone thinks about his industry more than anyone else. And I think that was true for Rockefeller, too. So now Malone is 32 years old. He's running TCI. And TCI's got this very complex web of subsidiaries it owns and all kinds of crazy stuff that Malone is trying to figure out. But this part, this actually took me some time, because I had to go and read through all of, I couldn't find the highlight that I knew was there in Buffett's shareholder letter. So it took me like 20 minutes to find it. I'll read the whole thing to you after I get to this part. But Malone's going crazy, because he is watching every single dollar and rather frugal.

• 30:14David Senra?

  He did not like, he hated wasting money on taxes and inefficiencies. Later on, he's yelling at the CEO of AT&T, because he's like, you guys don't know what you're doing. And so he runs into somebody that, as good as Malone is at his job, this person was bad at theirs, if that makes sense. And so this guy is running this subsidiary of TCI. So technically, Malone is this guy's boss. And this subsidiary is called NTA. And so it says, "NTA was bleeding money. It lost $1 million in 1973, and then $4 million in 1974." And this is how they described it. "NTA is like a cancer on the tail of a beautiful dog. Nobody sees the beauty of the dog." So he's trying to find a way to get it out of TCI. And the way they run the company makes John furious. So it says, "NTA executives flew first class and spent lavishly.

• 30:59David Senra?

  And this only annoyed Malone further." So I wrote underneath this, "This is sloppy bullshit. Jeff Bezos's vein would be popping." There's a great story that I covered back on Founder's Number 179 in the book, The Everything Store, where at the very beginning of Amazon, they're in a meeting, and this guy's like, "Hey, Jeff, why don't you let Amazon executives fly business class? Like, why do I have to fly coach?" And Jeff went buck. He starts like, I think it's hitting the table, he's like, "That's the dumbest thing I ever heard of, that you don't think like an owner." And everybody says, when Jeff would get mad, there'd be like a vein in his forehead that would just absolutely pop out and like, come say hello. It was actually pretty funny. So that's what I meant about, this is sloppy bullshit, and that Jeff Bezos's vein would be popping. So it says, "Malone called Bob. 'Bob, you're gonna have to find two new top executives,' he said, through clenched teeth.

• 31:44David Senra?

  "'Cause I'm gonna throw the NTA president out of the fucking window. And then he'll be dead, and I'll be in jail.'" And so as the author was just describing this like really sloppy way of running businesses on NTA's part, I thought of what Buffett said in his shareholder letters, which I thought was fantastic. And he says, "Our experience has been that the manager of an already high-cost operation frequently is uncommonly resourceful in finding new ways to add overhead, while the manager of a tightly-run operation usually continues to find additional methods to curtail costs, even when his costs are already well below those of his competitors."

• 32:25David Senra?

  So Buffett is describing two polar opposite ways of running a business, and that's exactly how to think about what's taking place in this book right now. Malone is clearly who Buffett would want to invest with, while Buffett is describing the silliness of people like the guy running NTA. So I just want to reiterate the point. At this point in TCI's history, the first few years of Malone is there, it's looking like he made a giant mistake. They're having to start, they're in terrible economic situations. It's like this is during stagflation and everything, but it's also like there's just no way that they're going to be able to keep ahead of how much money they have in debt. Remember, I think when he takes over, they had 19 million in revenue, you know, 160, 150 million dollars in debt, whatever it was. And so you literally have Bob having to like run away when people collecting money comes

• 33:10David Senra?

  to the office. "If a bill collector showed up unexpectedly at TCI's door, secretaries would stall the visitor while Bob made a getaway from his office to the parking lot." You and I have come across something like this before, all the way back on Founders number 151, which is this crazy book about how difficult it was to start FedEx. In the early days of FedEx, I went and found the actual highlight in the book, the FedEx planes were heavily mortgaged, and they were terrified that they would actually seize the mortgage planes. And if the bank seized the planes, then FedEx would be out of business. And so the bank had a young bank officer that was keeping track of like the debt and financial situation in the early days of FedEx. And they said every time he would show up at the airport, which is where FedEx was headquartered,

• 33:53David Senra?

  "We would radio the Falcons," which was the kind of planes they owned, "not to land." That's how tenduous the situation was. Malone would spend his first five years at TCI acting more like a treasurer than a president. He would be fending off lenders, raising money, and sniffing out any angle that would give TCI breathing room. This is a hilarious way that John describes this point in his career. "I'm the head of a little pipsqueak company in debt up to its ass. A couple million dollars in revenue and not creditworthy to borrow from a bank. We're barely making it." But Malone's not the type to give up. Says while he could still see an upside in TCI, the bigger motivator that pulled Malone out of bed in the morning was the fear of failure. If TCI failed, Malone felt that he would lose much more than the company.

• 34:37David Senra?

  He would lose the respect of his colleagues, the trust of his family, and the approval of his father. And so what he does is he stops trying to grow so fast and then just ruthlessly controls every single expense. The way out was simple: stop expanding so quickly. To meet budgets, Malone cut back office hours and salaries and took to personally signing any company expense over $500. And this is where he comes up with the blueprint that he's going to use to make TCI the biggest cable operator. "Think about it," he'd say. "Because TCI had high interest payments and big write-offs on cable equipment, it produced losses. And because it produced losses, it paid hardly any taxes to the government. As long as cable operators collected predictable monopoly rent from customers, met interest

• 35:22David Senra?

  payments, and grew from acquisitions, why worry?" Malone liked the mathematics of it. Tax-sheltered cash flow could be leveraged to land more loans to create more tax-sheltered cash flow. A standing joke around TCI was that if TCI ever did report a profit, Malone would fire the accountants. Malone's theory of value was anathema to many investors, but it was a result of months and months of turning the issue over in his mind. There's a big difference between creating wealth and reporting income, Malone liked to say. Investors who held a long view, rather than focusing on quarterly earnings, would be rewarded handsomely.

• 36:04David Senra?

  And this is where he starts to repeat what I was mentioning earlier in that Twitter thread. If you're gonna ask about quarterly earnings, you're at the wrong meeting, and you probably own the wrong stock, he told one group of TCI investors. What we care about is value. We want to create value for our shareholders. So it takes him a while to find the right shareholders for his business, but once it does, it changes forever, because then he doesn't have to borrow from banks anymore. A year later, institutional investors discovered the company's stock and started to take the price up. TCI was finally able to go to the equity markets to raise capital. From that point forward, Malone never looked back. This is 1978, so he's six years into the job. And then, something that I think about all the time,

• 36:48David Senra?

  and I think is very obvious if you read a bunch of these biographies with me, I wrote down on this page, "Stay in the game long enough to get lucky." Now, I want to move ahead to one of his main ideas. This actually becomes really controversial. And a lot of this is where he becomes accused of, rightly, most likely, to be a monopolist. So this is where he decides, like, we're not just gonna make money on the piping and owning the wires, we're gonna make money on the content, too. And part of this is what I mentioned earlier. Like, I really do believe that Malone thought about his industry much more than anybody else inside the industry. Rather than just owning the cable that delivered the new programming, TCI needed to own a piece of the cable channels themselves, thereby sharing in a whole extra upside.

• 37:30David Senra?

  Malone thought that TCI could own both the pipe and the water flowing through it. Eventually, this gets him into some antitrust trouble, and he actually does something smart. He preempts that by breaking himself up. So it says Malone thought that TCI could own both the pipe and the water flowing through it, the cable wire and the cable programming. He started out small, in 1979, with a bet on a company called Black Entertainment Television, BET. The founder of BET is this guy named Robert Johnson. Robert has a meeting with Malone. And this goes to what I said, what we mentioned earlier, is the fact that he did, what did he do, like 500 acquisitions? Like, one deal every two weeks for more than 15 years, something like that? If you're gonna do that, you have to act really, really fast. This is an example of that.

• 38:13David Senra?

  So Johnson wants some money to start BET. So it says Johnson replied that he thought it would take $500,000 to get it started. This is what Malone said. "I'll buy 20% of your company for $180,000 and I'll loan you the rest Malone offered." The entire transaction took about 45 minutes. And not only since he owns equity, he can participate in the upside of all these investments, but he also can guarantee, he just comes with immediate distributions like, hey, do you want to be in 2 million homes? I can do that right now. The channel investment deals would eventually make Malone vulnerable to charges of extortion and anti-competitive behavior. This is why everybody says he's a monster, right? He's just, I would not have wanted to compete with this guy. His TCI system reached 2 million viewers by 1981. So when John Malone came calling, did these channels really have any choice but to hand

• 38:58David Senra?

  over a piece of the action? If they didn't let him become a partner, he might not allow TCI's cable system to offer the new channel. For a small equity stake in the channel, usually well below a majority share, TCI would add the new service to its cable systems and give that channel a fast start in gaining critical mass. Malone also had a bit of an ego and arrogance in him. And what he would do is he would be convinced that, and he usually was right about what he's about to say, the fact that there's like these peaks and valleys in his industry, like every other industry, and when they're at their peak, he would abstain from doing any kind of deal making. And his thought process was like, I know you're overpaying for that, you don't know you're overpaying for that, so I'm just going to wait a few years till you realize that

• 39:41David Senra?

  you overpay for it, and then you sell it to me at a hefty discount. And so he would grow in these economic downturns by buying assets that were maybe 50 or 100% higher. It says Malone relished the role of bargain hunter amid the spoils of bad deals made by his competitors. I have no idea when I read that sentence, but it made me think of something I learned from the co-founder of Nike, or about the co-founder of Nike, Bill Bowerman, back on episode 153. And what he would notice is he was one of the first track coaches to actually emphasize the importance of rest and recovery in his athletes. And so his athletes would actually perform better by not beating up their bodies. And his competitors, Bowerman's other fellow track coaches, were really late to that same realization.

• 40:24David Senra?

  And so this was Bowerman's response about other coaches, which I feel is very similar to Malone's response to other cable operators. "As a coach, my heart is always divided between pity for the men that they wreck," meaning the actual track athletes that they're supposed to be coaching, "and scorn for how easy they are to beat." The history of entrepreneurship is very clear on the benefits to frugality. People that are not resourceful usually don't stay entrepreneurs too long. Their wastefulness eliminates them from competition. Malone was extremely frugal and lean. TCI was a lean company. When they flew from Colorado to New York, they slept in the company's Spartan two-bedroom apartment, doubling up two to a room.

• 41:07David Senra?

  They shared secretaries, and an automated service answered the phone. "We do not believe in staff," John said. "Staff are people who second-guess people." Malone also refused the conventional thinking that TCI needed to have a brand name or a Madison Avenue image. The company had no human resources department. So this is very frugal, very lean. Spartan is actually a great way to describe the way Malone built his business. That's also the way that you would describe Jim Casey, who was the founder of UPS, Spartan and disciplined. The men who ran TCI cultivated a Wild West image. In the eyes of John Malone, they were nothing like the effete East Coasters who ran bigger cable companies. The TCI men were cable cowboys. That's where the book gets its title, obviously.

• 41:51David Senra?

  Though the term was repeated in derision by the bankers and politicians who coined it, so they meant it as an insult, John and his team take it as a compliment. The TCI team wore the nickname like a badge. This is Malone's philosophy on building wealth. I've already mentioned it once to you, but it appears over and over in the book, and I think it's central to understanding him. All the while, TCI had consistently failed to report any earnings. As the stock continued to climb, Malone pointed out that it was the accumulation of valuable assets over time, not the flow of reported after-tax earnings, that was making TCI shareholders so wealthy. "Forget about earnings." That's a priesthood of the accounting profession, he would preach unrelentingly.

• 42:35David Senra?

  What you're really after is appreciating assets. Malone also built an extremely tight-knit inner circle and management group. I don't think he lost one, I don't think one main executive left for the first like 16 years he was in charge. They say stuff like this, Malone's the kind of guy that you want to run through walls for. This is an emphasis of Malone's, Malone put on decentralization. TCI was beginning to run the way Malone had wanted it to run, highly decentralized. He had cut the company to six separate operating divisions. Each was nearly autonomous, with its own accounting and engineering departments. What, this is now him describing why he's doing this. "When you've got it running right, when you've got it decentralized, when you've got it structured

• 43:15David Senra?

  properly, it's like flying the most powerful fighter jet in the world," he liked to say. So, last time, we checked in on his idea of, hey, if you control distribution, you get equity in return. He's controlling the distribution for cable companies, right? He would, he could be able to jumpstart your channel and put you in front of 2 million people. In return, you're going to give them equity and upside, right? But now, he's got 8 million subscribers. Malone controlled lines into 8 million homes. In exchange for that distribution, TCI drove a tough bargain. He demanded that cable networks allow TCI to invest in them directly. TCI gave any programmer immediate access to nearly one-fifth of all US subscribers in a single stroke.

• 43:56David Senra?

  I would summarize that idea, that if you control distribution, then you get equity in return. I mentioned earlier that I thought when I was reading this book, I was like, oh, I'm just reading Rockefeller's strategy in cable. This is an example of that. TCI was the largest cable operator. It paid 90 cents a subscriber for HBO. A small cable operation paid $5 per subscriber, and that's on a monthly basis. John is paying 90 cents, you're paying $5, and you're doing that every month for every one of your subscribers. CNN cost 2 cents a subscriber to, for John. It cost 29 cents per subscriber for cable operators that had fewer than 500,000 subscribers.

• 44:40David Senra?

  So at this point, Bob is still alive. He's going to pass away a few years before John sells the company to AT&T. But this is what I was mentioning earlier, that no wonder I can't find a biography on him because bad boys move in silence. Bob liked to keep his life as private as his poker hand, and he felt the same way about TCI's business affairs. "Keep your cards to yourself," he would mutter to Malone. Whenever Malone shared a tactic with a fellow cable operator, Magnus would admonish. "Hell, we've got it figured out. Why are you sharing it with these guys for?" This is one part of his strategy I think actually serves as like an anti-model. I think Henry Ford's maximum service at minimum cost is actually a better framework to use, and this is why, you know, everybody hated their cable operator.

• 45:24David Senra?

  And Malone didn't, again, goes back to why I said that earlier, I spent so much time talking about, hey, you really got to think about why he believes, what he believes, that he thinks like the building of wealth is a moral achievement. The problem is, some of that wealth came at the expense of his customers instead of in-service of his customers. So it says to Malone, "The outcry over lousy customer relations and price increases was merely a byproduct of good business. Charge as much as you can for a product or service and spend as little as you can get away with in providing it." Now, that's not a direct quote, that's the author's description of his philosophy, but that's terrible. The reason I think Henry Ford had it right, because of what I mentioned on the, a couple of episodes ago when I reread his autobiography, is because you want, like, we're only building one company, right?

• 46:08David Senra?

  But we're patrons or customers of thousands over our life. And clearly, it would be beneficial for us if the companies that we're giving our money to actually had Henry Ford's philosophy and not John Malone's. This idea was like, oh, the outcry over lousy customer relations and price increases was merely a byproduct of good business. Charge as much as you can for a product or service and spend as little as you can get away with in providing it. That's how you know that he owned a monopoly. And this idea was actually picked up, because I had stopped paying for cable, what, over 10 years ago? And I think cord cutters were usually younger people because they're like, oh, I can just use the internet, why would I pay for cable? And it's this abuse of the customer that carried on for decade after decade in the cable industry because they had essentially a government-regulated monopoly.

• 46:53David Senra?

  You're not going to have two different companies run wires underneath the ground into your house, right? So at this point, TCI is so large that he has the idea, he's like, okay, well, I should break myself up because I know this is coming. This is also going to be extremely good financially for him because he's going to get a higher equity upside in this spinoff called Liberty than he had of TCI. So it says Malone suspected that government regulators would try to force him to split TCI in two. A distribution company owning all of TCI's cable systems and a content company owning interest in cable channels. So Malone decided to do it for them. In 1991, he formed a new company, Liberty Media, and planned to stock it with more than 600 million worth of assets from TCI.

• 47:34David Senra?

  And so not only is he trying to dodge being broken up, but this is also, you know, he realized, hey, I'm the most advanced player in this industry and I'm making the least amount of money. And it has to do with the fact that the only path to wealth is ownership. And Ted Turner actually gets him to start thinking in this direction. Ted Turner is like a huge character in this book. I've skipped over most of those parts. I will eventually read his autobiography because he's kind of this crazy character. But I do want to fill you in on this conversation that they're having. His equity investment in the company he built into the biggest cable operator was puny. It was a tiny fraction of 1% in 1991. Oddly, it was Ted Turner who forced Malone to sit up and take notice that he was lagging behind his peers in personal wealth. Gee, John, Turner told Malone, I'm getting rich and Bob's getting rich and the only

• 48:19David Senra?

  one that's not getting rich is you. Turner's words stung more than Malone cared to admit. His contemporaries were accumulating vast wealth and he wasn't. And in his mind, he was working harder and contributing more than anyone else. So not only is Liberty going to provide him more upside, but he wants to get out of the cable operating business because that job comes with all kinds of things that he doesn't like, like lobbying and being forced to call in front of Congress and forced to testify, villainized in the media. So for like 50, maybe 75 pages, you can see it coming where he's like, I gotta get the hell out of here. And this is a little preview of why he's going to want out eventually. As he put it years later to an interviewer, "Any kind of regulatory decision that went against us could be enormously damaging to our economics and it could be imposed on

• 49:04David Senra?

  us by politicians who don't understand or who don't give a shit. I always felt that we never had the political power in our industry to protect ourselves, that we were always small fish in a big pond and that our survival was always a function of our being dragged along behind other big fish."

• 49:25David Senra?

  So he does something that's smart, of course. Malone is incredibly intelligent. Well, what he does is he's like, figure, like, this is the note I left myself. Figure out what you want your life to be and then work backwards from that. Steve Jobs quote about looking in the mirror, which I'll get to in a minute. So he weighed his life at 52. Here he was, leaving his family in Maine, hemorrhaging inside over the draconian regulation of the cable industry under a new law and not enjoying any of it. What he really liked was Liberty. And what I, Liberty, I guess that's a, in the dual meaning of the word. He wants the freedom to choose to, how to live his life, but also Liberty, the company that he started. And what I really don't enjoy, what I really hate, is this politically based, regulatory afflicted cable business, he told himself.

• 50:11David Senra?

  Maybe he should just take Liberty and go run it, arranging an exit from Bob and TCI. He pulled out a yellow legal pad and at the top wrote, John and Leslie's Goals and Objectives. And then he makes a list. I'm just going to pull out a couple of ones. To reduce stress, he's obviously under an insane amount of pain. To have more fun. Remember that for later when his partner's dying, to have more fun, that's important. To reduce government, media and legal exposure by taking myself out of the public eye. He then started a second list. There's other things on the list, but those to me were the most important. He then started a second list, reciting actions to reach those goals. At the top of that list was retire from TCI, which he's going to have to wind up selling.

• 50:54David Senra?

  Remain chairman and controlling shareholder in Liberty, which is the business that he really likes. Stay on the Turner Broadcasting Board because it was a big TCI investment and because the old cable gang was in it with him. What he did not like is, as he's a few years younger than the, like the cable cowboy, the original cable entrepreneurs. And so all of these dudes that survived got stupid wealthy. And they start getting bought out by these giant conglomerates. And so then he starts having meetings and going even to his own office and, and like other industry functions. And it's like, there's no more cowboys. There's no pirates. They're all gone. And so we see that here where he's like, hey, I want to stay with this. I want to keep this in my life because it's the old cable gang.

• 51:39David Senra?

  These are my guys. So it says, he studied the list and knew the conclusion was inevitable. He must sell TCI. And part of this is understanding like, what do you actually like to do? A great life is just a string of great days. And if you go to work every day, hating what you do, don't be surprised that you get to the end of your life like, oh, I fucked this up. I am filled with regret because my days were filled with things I didn't want to do. And so that's when he's like, I'm a dealmaker. I'm not a manager. And he realizes this because IBM tries to, to get him to come be CEO. So it says IBM approached Malone about the job. He responded that he had his fill of running big corporations. Malone had known something about himself all along, that he was a dealmaker,

• 52:22David Senra?

  a strategist, a fund manager, anything but an operator. He loathed simply running a company. He could not handle the duress of running a regulated monopoly for years to come. And so that's why I said this part, when he's 52, he's on the plane and this, that's where the story is taking place. And he's like, I'm going to write down like, what the hell do I want out of life? And then make a list of the things that he wants. And it was like, let me compare how I'm spending my time. None of this shit is matching up. So therefore I have to make a change. So why did I say at the very beginning, Steve Jobs quote? Because in his commencement address at Stanford, Steve gave a great framework in dealing with this.

• 53:03David Senra?

  And he says, if you live each day as if it was your last, someday you'll most certainly be right. That quote made an impression on me. And since then, for the past 33 years, I have looked in the mirror every morning and asked myself, if today were the last day of my life, would I want to do what I'm about to go do today? And whenever the answer has been no, for too many days in a row, I know I need to change something. That is exactly what is happening in John Malone's life at this point in the story.

• 53:33David Senra?

  And so he goes and sells TCI and the deal falls through. And this is his response. John Malone fell into a deep depression in the months after the collapse of the biggest deal of his career. Malone couldn't shake an oppressive cloud of disappointment. He did something he hadn't done in 20 years of running TCI. He took his eye off the ball. He let his number two, Brendan Clauston, run things day to day and came to view TCI as an anchor around his neck. In his mind, he had already sold TCI and when the deal unraveled, he seemed to avoid the responsibility of control. Malone dropped out of sight and stopped coming into the office.

• 54:15David Senra?

  So in between the first failed attempt at selling the company, there's several years and then they eventually are successful selling it to AT&T. There is this, he's having this interview with Tom Brokaw and it goes back to this idea from the very beginning of the book. The story of the father is embedded in the son. I am driven by my desire to please my dad. In a one-on-one interview, anchor Tom Brokaw asked Malone, "Brokaw, did you always think that you privately had an edge on those you competed against and were you always driven to win?" Malone, "You know, I think I'm primarily driven by insecurities." "You? Insecurities?" "Yes, me. Any psychologist would tell you that I suffer from the inability to please my now-dead

• 55:00David Senra?

  father." So his real dad is dead. He comes to view Bob as like another father and another mentor and Bob is dying too. And so I think there's two lessons on this page. Let me read this first. John Malone struggled to quell the queasy feeling of going it alone without Bob to bounce things off and tell him that everything would be okay. And so lesson number one there is like Malone isn't some weak guy. He isn't soft. It is incredibly normal to have extreme negative and depressive feelings about work and people that you've put a lot of energy into. So this idea where he's like, "I don't know if I can make it without Bob." From the outside, that may seem crazy, but it's very real.

• 55:43David Senra?

  He's experiencing the death of somebody that he loves. And then the second part is the last day of Bob's life. He had a stroke and then he's sent to the hospital. Everything that constituted Bob had left the man's body.

• 55:57David Senra?

  The sharp wit, the sense of humor, the sheer appetite for life. In his last hours, he greeted visitors in the hospital silently, with eyes which now conveyed his profound sense of loss. The 72-year-old surely felt that he was taken too soon. And I know I left myself when I got to this part is no one gets out of this alive. Enjoy it before it's too late. And so, once he dies, we see the contents of his will. Remember what I said about his grandfather? So, his dad, which is obviously the grandfather of the kids, are about to inherit a ton of money, right?

• 56:38David Senra?

  That $2,500 loan turns into hundreds of millions of dollars for his grandson. And I wrote, "Holy shit, that is one rich cowboy." Bob had left the lion's share of his estate to his two sons, who got about $225 million each. And so, Bob dies, John's gonna run TCI for a few more years before he sells it to AT&T. And he takes this 14-hour flight with the CEO of Comcast, his major competitor, who I think, if I remember correctly, is the son of the original founder of Comcast, and so, a couple of years younger than Malone is. And so, they take this 14-hour flight to Asia together. And this is what I meant, that Bob just knew, he just thought about his industry much more than anybody else. And so, it says, "From the time they took off,

• 57:23David Senra?

  neither man took a nap, watched a movie, or had a drink of anything other than coffee. Malone gave Roberts an earful, sometimes in excruciating detail, the tax logic of liberty, where cable stocks were headed, and a strategic analysis of the DBS industry. It was the kind of high-level briefing that would have driven Bob crazy. Why let our rivals know all this sophisticated stuff? He discovered him alone a shrewd mentor." This is what he said. "He's giving you a lot of theories, and a lot of them are conflicting. And you get the idea that he's working them out with you while he's talking to you. And that's part of the engaging style that he has. It is also the knowledge that there's a lot going on inside his brain that you're not totally on the same plane with. People say John has a three-dimensional chess-type of mind,

• 58:08David Senra?

  and it's true. And a lot of time, you feel like you're still playing in one dimension." And so after he sells TCI to AT&T, he realizes the difference between the way AT&T is going to run the company than he would. And really, what Malone's talking about here is the difference between owners and managers, and control and economics. I thought this part was fantastic. Malone believed that much of the core problem with the company was that the managers of AT&T were not owners. "A guy who rises to the top," this is now a direct quote from Malone, "a guy who rises to the top of a big corporation and owns none of it, is much more interested in control than he is in economics. It is just the nature of humanity. A guy who owns his business is already used to control.

• 58:51David Senra?

  He never has to fight for control. What he has to fight for is economics. But a bunch of entrepreneurs find it much easier to collaborate and create economic value. They have something beyond control. They have economics." So I already mentioned this earlier, how he started disliking the industry more and more, the cable operating industry more and more, because the cable cowboys were out of there. I'm going to read two sentences, and this made me think of advice that I read in Mark Andreessen's blog one time. So it says, "The cable industry was an industry where few original cable entrepreneurs were still around. They were now owned by corporations with no ties to the first generation of cable cowboys." So all the way back on Founder's Number 50.

• 59:35David Senra?

  I read Mark Andreessen's 200-page blog archive, which you can get it for free online. It's actually, the link's in the show notes of Episode 50. But I thought it was interesting. He said, "The rule of thumb for young people when picking an industry to work in, you should look for an industry where the founders of the important companies of that industry are still actively involved." At this point in the story, that is no longer the case in the cable industry. And so after he sells TCI to AT&T, there's speculation, is he going to retire? People that knew Malone well were like, "That's a ridiculous assertion." True to form, Malone wanted nothing more than to build liberty. Sailing past retirement age, he was still hell-bent

• 1:00:16David Senra?

  on finding the right combination of partners, currencies, and desperation to put together another showstopper transaction. John Malone was nowhere near done yet. The work of Malone's mind, the never-ending days, the negotiation, the clashes, the fat profits and the losses, had been fueled by nothing less than absolute passion. 25 years in the public spotlight had been enough. John Malone was finally ready to be alone. And that is where I'll leave it. For the full story, buy the book. I think this book should be in every entrepreneur's library. If you buy the book using the link that's in the show notes and also available at founderspodcast.com, you'll be supporting the podcast at the same time.

• 1:01:00David Senra?

  If you want to remember more of what you read and you want to use the app that I use to save all my highlights and all my notes, go to readwise.io/founders and you can get 60 days free. That is 268 books down, 1,000 to go, and I'll talk to you again soon.