“Inspired” by Gannon’s post about the book and indirectly Whopper, I read the book, partly also to understand why I got the Kabel Deutschland short wrong.
The book is sketching John Malone’s business history from the early 70ties, when he joined the almost bankrupt regional cable company TCI until the early 2000s when he already was a billionaire.
For me, especially the following points stood out:
Malone as CEO/cable operator
+ Malone is rather a “financier” and deal maker than an operator, although he certainly knows his stuff about cable and media
+ very early, even at university he already developed the concept to use maximal leverage for regulated “quasi monopoly” businesses
+ at his time at TCI, he perfected this business model even further. He used depreciation/amortization aggressively in order to be able to “compound” cable assets without paying a single cent of taxes
+ he was one of the first CEOs to convince investors to disregard earnings and focus on cashflow
+ in his first 15-20 years at TCI, he managed to increase the share price by several thousand percent without ever showing a single cent of profit
+ he perfectly understood competitive behaviour, effectively running a “cable cartel” for many years and extracting the maximal gain for shareholders (would be maybe a very good study for the Bruce Greenwald book..)
Malone as an investor
+ as an investor he is being quoted rather as an “asset collector”
+ this implies that he has extremely long time horizon’s, sometimes 20 years and more and no hurry to cash out
+ his “exits” were usually tax optimised stock swaps into more liquid shares of acquirers
+ his first “genius” stroke was the early spin-off of Liberty media which made him rich. This is also one of the very prominent spin offs Joel Greenblatt wrote in his “You can be a stock market genius” about. I think it also explains a lot why such a special spin off worked so well. Malone structured the spin off in a way that people were not really interested in the spun off shares. With a loan of his employer, he then bought up as many shares as he could.
+ some investments he made were either genius or sometimes monopolistic, for instance buying a struggling network and then allowing it to be distributed over his cable systems. One example was the “BET” network, were he invested 500 tsd USD in the early 80ties as the founder was struggling, distributed it via his cable network and then sold the stake for close to 1 bn USD to viacom in 2003. This shows his patience with such investments and might be one of the best “angel investments” in history.
Although the book clearly has some lengths, I found the book very interesting and highly recommendable from many perspectives. It offers good insights into the cable business as well as into “cutting edge” corporate finance and long term investment thinking.
John Malone is also someone you definitely you want to follow. So if John Malone aggressively buys into German cable, it is maybe not the best timing to short Kabel Deutschland at the same time.
I wish I had read this book much much earlier…….
value and opportunity 