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Chapter 1: Keys on the Table CHAPTER 1 KEYS ON THE TABLE
I had done this a hundred times before in a dozen different bank boardrooms, and each time the scene was the same: a cavernous, wood-paneled room with a long mahogany table polished to a sheen. Around it sit a dozen or so aging men in starched white shirts and neckties, frowning and looking up periodically from the financial numbers on the documents in front of them.
But on this afternoon in 1975, the banks had requested the meeting, not us, and far from a polished boardroom, it was in our brown, flat, single-story office building in the long shadow of the Rockies. I knew this meeting would be different.
The past couple of years had been pure hell for both of us. Bob Magness was the chairman of a struggling cable company on the outskirts of Denver named Tele-Communications Inc., and he had brought me in as the new CEO two years earlier.
TCI had been a bright young star in the rapidly growing cable television business. We were hanging coaxial cable across the country to provide rural areas with better reception of broadcast signals from CBS, NBC, and ABC, and eventually hundreds of new TV channels and the internet.
One day, this would lay the foundation for the largest cable operator in the U.S., serving one out of every four homes, and give rise to a robust, two-way digital communications network in the U.S., providing the platform for the likes of Amazon, Facebook, and Google, and unlocking immense value in a new digital economy.
Bob and I had no idea of any of that potential back then. That morning, we merely were hoping to survive the day. Bob, a World War II vet and part-time rancher and cottonseed broker, had launched his cable company in Memphis, Texas, in 1956, after a chance conversation with two strangers in a cotton gin, where Bob did business.
Sold on the idea, Bob and his loving and loyal wife, Betsy, sold their cattle, mortgaged their house, and jumped in. He and a small team of friends started climbing telephone poles and hanging wire, with Betsy stationed at the kitchen table as head of accounting. Several years later, Bob moved operations to Denver and took TCI public in 1970.
When I first accepted the offer to come work for Bob, the pitch was solid: Come out West and run one of the largest cable operators in this new industry! Long-term contracts to wire big cities were worth millions of dollars. This set off a land grab across the country, and TCI had taken on crushing debt to finance furious growth. Around this time, TCI reached more than 621,000 subscribers through 151 systems in 33 states, with annual revenue around $34 million a year—and $84.8 million in debt.
Almost immediately after I arrived in 1973, several things started breaking the wrong way for us: oil prices quadrupled, the inflation rate shot up to double digits, and interest rates skyrocketed to 12 percent in July 1974, more than doubling borrowing costs year over year. That hit the cable business especially hard, because for us more debt was like rocket fuel. The variable cost of stringing wire from pole to pole above ground had doubled, thanks to new regulations and price increases from suppliers. In big cities, where cable had to be buried underground, the costs could run as high as tens of thousands of dollars per mile.
Now the banks were balking at any more lending, yet we already had pledged TCI to pour half a billion dollars into new construction to win cable franchises from local governments in Tennessee, Washington, and elsewhere. On top of that, in return for franchise agreements to operate there, we had inherited promises made by systems TCI bought to build community centers and parks.
Despite healthy revenue gains and operating margins of 40 percent, our debt was closing in fast, and for the first time in my career, I was scared. To consolidate the loans he had already accumulated, Bob had drawn a $77.5 million bank line of credit in 1972, just before I joined. And we had borrowed $76.5 million of it.
A week earlier, I had called a loan officer to arrange the meeting where we would ask to borrow the final $1 million. Before I could even get the words out, he cut me off.
His tone on the other end of the line struck me as a little rude: “By the way, don’t ask for that other million. If you don’t want the house of cards to come down, don’t ask.”
What was I thinking? I was educated at Yale, I had worked in the most famous laboratory in the world at Bell Labs, I had trained at the fabled McKinsey & Company, and I had been CEO at Jerrold Electronics, the dominant (and highly profitable) supplier and financier to the cable industry. I had turned down a plush job with an absurdly big salary in New York, with a car and driver, to take this job instead.
I had joined a bunch of cowboys and a near-bankrupt former cottonseed salesman who had bet his farm, literally, on a newfangled business called cable TV. I had uprooted my family, moved across the country, and taken a pay cut—on a promise. I had risked everything.
I even had taken out a $60,000 loan from the Bank of Denver to buy TCI stock at $7 a share when I joined—a year later, the stock had fallen to $3, weighed down by high interest rates, wild inflation, and an unrelated industry scandal, briefly bottoming out at 78 cents. My start date at the company should have been my first clue: April Fool’s Day.
We were minding every nickel at the office, and my wife, Leslie, and I were counting pennies at home, using coupons at the grocery store, never eating out, and going for a month without a home phone at one point.
The vise grip of home and work was squeezing my brain. We had already started slashing salaries at the office, and we were doubling up in hotel rooms and flying economy to every new city. I had not expected this.
The worst, though, was that I wasn’t the CEO people had expected me to be, the father I had wanted to be to my kids, or the husband I had promised to be for my wife.
In honest moments, Leslie would let her frustration show: “You promised me after McKinsey and Jerrold you’d be home more, and that we’d have dinner together like a family, and you’re not, and we don’t.”
As we waited for the bankers to arrive, I realized that this one meeting would determine the fate of the company, our employees, and my career. The imminent risk of losing the company and going bankrupt was an existential threat that had resurrected old demons of self-doubt, particularly the fear of letting everyone down.
As the bankers arrived, they fanned out around the table in our cramped conference room. The only friendly face among the gaggle of them was that of Donne Fisher, our treasurer at TCI, and he looked like a man in the back of a long line at the DMV—irked and impatient, yet keeping it all in check.
I opened the meeting with an introduction heavy on promises and light on numbers, because I knew the numbers couldn’t save us. Then Donne and I left them to deliberate privately.
Bob walked into my office and asked how things were going. He still looked every inch the laconic cottonseed salesman he had been a decade earlier, with a molasses-slow Texas drawl and dressed, almost always, in a white Western dress shirt, a bolo tie, and a cowboy hat that was perched atop neatly combed white hair.
As Donne and I gave him a read on the room, he just stared off into the distance. In Bob’s eyes I couldn’t tell if I saw fear or despair that afternoon, maybe a bit of both. He was genuinely stoic, as if he were witnessing an accident in slow motion. In many ways, I guess, he was.
The first thing the bankers decided was that one of their members had to leave: the representative for the Teachers Insurance and Annuity Association of America, which had different agreements than the banks; he was now regarded as being too close to the company. The man walked out of the meeting, stunned and a little stung, and joined Bob, Donne, and me.
As we were all sitting on a couch waiting in my office, with the clock literally ticking, Bob finally stood up and said to no one in particular, “I can’t take it anymore. I’m leaving.” And he drove home.
After an eternity, representatives of two of the largest debt holders, the Bank of New York and Philadelphia National, came to my office. Donne and I looked at each other, then looked at them. Tom Renyi, who would later become the CEO of the Bank of New York, revealed the verdict.
“Well, the banks have conferred, and we’re prepared to give you the extensions that you’ve requested,” he declared. And then came the sucker punch: “However, we think because of the deteriorated nature of the credit, the banks are entitled to an increase in the interest rate.”
The damned fool. When I heard those words, I knew it was over. I lost my breath and felt my skin go numb.
“Tom,” I said quietly, “I was afraid you were going to say that. I’ve got every knob in this company turned down as tight as they’ll go.” Then my voice started to get louder. “We’ve got people working sixty-hour weeks and getting paid for thirty. We’re working overtime to just get over this hump. And that’s all it is—a hump. dWe can get over it.” I sounded like a gambler with a hot tip.
“But if you do this now, it will kill us,” I continued. “It’ll so demoralize everyone. I just can’t continue to run the company if you’re going to do that!”
“And so if you think you can extract this little bit more juice out of the company... here’s the keys to everything.” I pulled my ring of office keys out of my front pants pocket and threw it down on the table in my office. “You run it and let me know how you make out.”
I had pulled the keys out for effect, but the truth was I was dead serious. I also knew that all banks dread having to seize a customer’s business, because they know nothing about running any business; they’ll just screw it up. They know only money.
Plus, in our loan accord with the banks, they were allowed to boost the interest rate on our debt only with our approval. So I told them straight-out: “You can put us in the tank, you can put us into bankruptcy, and you can call a default, but you can’t raise the interest rate unless we agree to it... and we’re not going to agree to it because I think it’s the wrong thing to do at this time.”
Silence.
“Thank you for your time, John.”
And just like that, the meeting was over.
And they all left without saying goodbye. Are we done? Is this the way it ends?
That night I was so wired I couldn’t sleep, my brain busy with unsettling scenarios. We arrived in the office the next day waiting for the phone to ring with the verdict. The call lasted less than a few minutes. The banks had decided to forgo raising our interest rate. It was good news, but there was nothing to celebrate. We could only exhale.
The meeting, and that moment, would stay with me forever, and that sharp pang of fear at the imminent prospect of crushing failure has never really left me. It remains with me to this day, like a nettlesome and negative old friend I must abide, albeit I am better at keeping it in check now.
It made me realize that the adage is true: in every crisis lurks opportunity. So if I could learn something from a near-death experience, maybe the whole thing was worth it. That day, now fifty years ago, I made a promise to myself that I never have broken: If we get out of this alive, I will never bet the whole farm... on anything. No deal is ever worth doing that.
Without saying it aloud, Bob and I knew the bankers saw us as just numbers on a balance sheet—and they would never understand what drove us. Bootstrapping the business over the past two years had forged a strong bond between us all at TCI. This was our life’s work, something built on grit, optimism, and a trust that ran deeper than any balance sheet could reflect.
Wall Street bankers debate which metric is best for divining the intrinsic value of a company. Is it revenue growth or the bottom line? Forward-looking earnings estimates or shareholder equity? What about any one of the alphabet soup of acronyms they so love to spout—EBITDA, ROE, ROI, ARPU, CAGR, EPS, P/E, P&L?
But none of these is right.
I have spent my career negotiating deals in telecommunications, music, sports, horses, land, media, and more. I have been a buyer and a seller, depending on the deal and the moment. Altogether, over a lifetime, I figure I have had a hand in hundreds of transactions, maybe thousands.
Now, in a lot of those deals, we focused hard on one measure: cash flow, or specifically, EBITDA (earnings before interest, taxes, depreciation, and amortization). It gives a clearer picture of operating performance and a firm’s ability to borrow or invest. Some people say I all but invented the term. I can’t swear to it, though it is true that I helped make it a whole new form of currency on Wall Street.
But it turns out that cash flow is the wrong answer, too, in placing a value on a company, or any deal for that matter.
The most valuable assets in any business are people and relationships.
I may have neglected to appreciate this at the time, when we were down in the fray. Now that I am a bit older and slowing down, just a little, I have realized that, all along, the most important element was who was involved, not what. The people whom I befriended, learned from, and fought against—rather than the deals or the payoff—gave me the most satisfaction. And the right people produced the highest upside—giving my journey meaning and enriching my knowledge of the world.
Along the way, I have been the beneficiary of extraordinary mentors, partners, and employees. If not for their support and dedication, none of the experiences I share here would have been possible. This book is a thank-you note to those people. Without these characters, I might be on an entirely different path. But through a few chance encounters, seemingly small at the time, I found myself at the heart of a technology revolution. What started with coils of coax and threads of fiber became the largest private construction project in the U.S. since World War II. And through it all, their influence echoed—proof that the right people, at the right moment, can change everything.
It has been enormously exciting and at the same time gratifying to play a role in the digital revolution. Our original intent was to deliver broadcast TV signals to far-flung rural valleys and mountainous terrain that antennas couldn’t reach. That very same cable evolved into the backbone of the broadband network better known today as the internet, three decades after we at Tele-Communications began laying down lines.
As chairman of Liberty Media and Liberty Global, one of the largest broadband companies in the world, I now have diversified holdings in content, sports, digital media, broadband, ranching, forestry, farming, horses, and hospitality.
Contrary to the clichéd image of a rapacious business titan, I never sought to build a conglomerate, or family empire, and I can just as easily be a seller or a buyer. I believe in creating value while you own the assets you build or buy, and doing it in the most efficient way. All the stakes that I have owned in a wide array of cable channels, overseas cable systems, and other assets are less an empire than a mutual fund with a desirable portfolio of properties.
I built this portfolio with one clear goal—the same one that I believe anyone who is an active member of the management of a public company should share: to maximize the value of the shares of the company over a medium term. Because that is why you were hired—to maximize shareholder returns. The recent fad of “stakeholder capitalism” relegates shareholders to merely one of myriad groups a company is obligated to serve, and it is simply impractical to serve multiple masters and remain productive. You have to honor your obligations to your employees, yes, and you must honor your obligations to your lenders. But you must maximize the value for your shareholders.
I navigate by rational analysis of the hard data, but also by my sense of the people who are sitting at the table in front of me. I have come to appreciate those relationships more. As far back as I can remember, I have always perceived myself as different because I was such an introvert. And for much of my life, I thought of that as an impediment.
I regarded myself as mismatched to the world to some degree, handicapped by an absence of social skills or the drive to socialize, and envious of the people who felt at ease in crowds and parties.
Even the people I think I am close to sometimes see me as cold and aloof. I have come to realize later in life that, like other members of my family, I am a high-functioning autistic.
As a result, I have come to appreciate more and more the lasting connections I have still managed to make with others. I know now what I should have known all along: the people in my life are the most critical asset of all.
People like my most trusted partner of sixty-two years, an auburn-haired beauty with a quicksilver mind who can outwit most executives I know. Everyone in business benefits from a partner who listens, whom they trust, and who will offer unconditional love. I have Leslie. Beyond her beauty and her devotion as a mother and wife, she is blessed with keen intuition. She once saw a visitor for me park his car across three spaces in our driveway and wondered aloud how he treated his partners. Turned out she read him right; the deal didn’t work because there was no reciprocal respect from the start.
People like Monty Shapiro, my first business mentor, when I was in my twenties, who told me, “Son, always ask, ‘What if not?’ What if things do not go as planned?” He taught me to assess the worst that could happen and ensure that we could live to fight another day, advice that I hear in my head thinking over every big deal.
Bob Magness, my first partner, a cowboy from Texas, taught me how to take big risks and fight through the fear of tough decisions by sharing the load, and the confidence that comes with control in a company.
Or Marty Flessner, my assistant of thirty-eight years, who knows more about my business affairs than I do, and has taught me empathy and humility. She is not shy about telling me precisely how I screwed things up when I really need to hear it. I’d be lost without her.
And my first teacher, my father, who taught me an engineer’s love of problems—not to fear them, but to see them as puzzles waiting to be solved. And through it all, he passed on a stoic view of the world, reminding me that strength comes not from avoiding life’s storms but from standing firm in the wind.
Often in business, and in life, I was able to apply the lessons I learned from these people, even as I have made my share of mistakes, including a couple of real whoppers.
To my chagrin, I was unable to convince Netflix founder Reed Hastings to merge his then-upstart company into DirecTV when I was chairman. Waiting for dinner to be served at a party hosted by Herb Allen at his annual Sun Valley retreat in 2011, Reed explained to me that he was betting the entire company on a rapid switch to distributing movies over the internet. I could see that he was close to cracking the code on streaming content ahead of cable TV, satellite companies—everyone. He passed. Sometimes it’s hard to catch lightning in a bottle.
I also have had the rare opportunity to help some gifted entrepreneurs with great ideas, like Bob Johnson, who came to me with a concept for a cable channel appealing to African Americans called Black Entertainment Television (BET). After a thirty-minute meeting, I loaned Bob $320,000 and gave him $180,000 for a 20 percent stake in BET. He later became one of the first Black billionaires in America. And John Hendricks, who called me in 1985 in a last-ditch play to help save his struggling but promising network called Discovery. TCI wired John $500,000 within forty-eight hours after I hung up the phone with him. Prior to its merger with Warner Bros., Discovery reached a market cap of $16 billion and could be seen in more than 220 countries and territories, in fifty languages.
I found a lifelong friend in Ted Turner, a funny and fearless maverick who created a new “Superstation” to compete with the Big Three broadcast networks, which had held a lock on over 90 percent of viewers since television was invented. It was Ted who taught me one of the most enduring lessons in my life: about the power of wealth to do good in society and the absolute necessity to save this planet, specifically the most beautiful open spaces in this country.
News Corp. Chairman Emeritus Rupert Murdoch, who at various times has been my competitor—or my consigliere, gave me a master class in business strategy. I am still learning the black magic of programming from Barry Diller, who is a bona fide genius and a maestro of television and internet content. And I am reminded of my own ambition when I counsel Mike Fries, who is one of the hardest-working, team-building, risk-taking entrepreneurs I ever have seen, helping to build one of the biggest broadband companies in the world with Liberty Global.
All of these people, and the companies they drove, pushed the boundaries of modern communications and helped reshape our world. Woven together, their incredible stories help explain how we have arrived at this moment of disruption and the incredible velocity of change in how we communicate, educate, and entertain ourselves.
It is a rather astonishing business tale. One of the most sophisticated networks in the history of humankind was first laid out by a ragtag group of risk-takers, idealists, and “cable cowboys.” They strung wire across the country, driven by their own aspirations for a better life and fueled by vivid dreams of success in a free market.
Few of those cable cowboys stringing wire from the mountains could have imagined they were laying the infrastructure for the profound transformation in society that continues even today.
I know, because I was there in the beginning.
