I recently attended Liberty Media Day. I’ve known about John Malone for a long time, but never saw him in person. A couple things stick out in my mind:
- The importance of a long term mindset
- Dr. Malone talked about where he sees the media and cable industries going. His vision, as I interpret it, is the cable companies and the wireless companies eventually merging. In the meantime he believes distribution companies should focus on incorporating Netflix and Amazon’s product offerings into their distribution channels. So, in Malone’s ideal world the cable company would drive traffic to Netflix and Amazon and receive a referral fee. It’s an interesting concept but Netflix and Amazon aren’t suffering from a customer acquisition problem. Therefore, I don’t know how receptive they would be to this proposition. Regardless, Malone turned down an offer for his cable company at a substantially higher value than it trades at today. He seems unfazed as he believes over the long term Charter will create more value than the offered price.
- Malone started his career at a smaller cable operator. He left McKinsey to take a shot at building a company. The company was called TCI and the road to success was uncertain at best. That said, he stayed focused on his goal and thought strategically about the long term despite the short term outlook. Today he has significant influence over a legitimate media empire that contains SiriusXM, Live Nation, Formula 1, Discovery Communications, Charter Communications, Trip Advisor, The Atlanta Braves, and he is the largest land owner in the US. Time plus focus can accomplish astonishing things. As Tony Robbins says, “People overestimate what they can accomplish in a year and underestimate what they can accomplish in 10 years.”
- Some management teams just win.
- Listening to John Malone and his CEO, Greg Maffei, it’s pretty clear they are playing chess and the other guys are playing checkers. Malone’s control of the entities enables Maffei to take a long term outlook. Contrast that to AT&T, which has a substantial asset base but also has the pressure of meeting quarterly earnings estimates and worrying about a substantial dividend payout. The guys at Liberty and their companies have a structural qualitative advantage AND the skill to exploit that advantage. Those are situations I want to align myself with. See also Berkshire Hathaway, Markel, Brookfield Asset Management, Constellation Software.
- Setting Yourself Up For Success Matters…A LOT
- Liberty Media issues tracker stocks. Tracker stocks are derivatives that are used to highlight the business value of the business segment within Liberty Media. I never understood why people were comfortable owning them. Now I have a better understanding. Malone uses tracking stocks because he likes the entities under one umbrella because “there are antitrust and tax benefits on intercorporate dealings.” To begin, its pretty astonishing to hear him say that out loud. Second, it’s exactly how Buffett thinks about antitrust and tax as well. But Buffett doesn’t say anything like that publicly. Tax avoidance is a large part of why Malone is so wealthy. Lesson: set yourself up for success on the front end in order to take advantage of long term success.
In closing, I didn’t know what to expect from “Liberty Day.” I knew other people loved Malone and Maffei, but I never understood the following. After watching them for a day I began to understand why people follow them so closely. I intend to read everything I can get my hands on to better understand how they see the world.