fedex

What I learned from reading Cable Cowboy: John Malone and the Rise of the Modern Cable Business by Mark Robichaux.

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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)

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“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

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What I learned from reading Big Brown: The Untold Story of UPS by Greg Niemann. 

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Casey pursued a Spartan business philosophy that emphasized military discipline, drab uniforms, and reliability over flash.

I had heard stories about the company's tireless founder. He was a living legend. Jim Casey started working from the age of eleven to support a family of five.

Casey began at the bottom. He speedily delivered messages and packages on foot. Casey learned about efficiency by doing.

Seconds saved become minutes over the day and a few minutes each day mean big dollars.

To outsiders the UPS regime has always seemed excessive.

People have always bought more than they could carry, and a hundred years ago they had no cars to help them out. When Jim Casey and his partners began their delivery service, it served only department stores, and the UPS role was to complete the stores' retail transactions.

Humility was one of Jim Casey's most strongly held values.

Our real, primary objective is to serve. To render perfect service to our stores and their customers. If we keep that objective constantly in mind, our reward in money can be beyond our fondest dreams.

Service is the sum of many little things done well.

Good management is taking a sincere interest in the welfare of the people you work with. It is the ability to make individuals feel that you and they are the company–not merely employees of it.

Jim Casey watched the streets carefully. He watched movement. He watched what people sold and what people bought. He was an eternal puzzle solver, his mind constantly preoccupied by every sensory detail involving his core business, packages. He gravitated to them, mesmerized by how they were wrapped and how they were delivered.

When traveling between meetings Casey would frequently tell his driver to stop when he saw a UPS delivery in progress. Without identifying himself, Casey would ask UPS drivers what they thought of their job. He'd listen carefully and consider their answers seriously. These informal "man on the street" interviews became an invaluable way for him to assess the efficiency of UPS delivery operations in a way that a UPS manager's filtered version could not.

Jim Casey's office was a small stark room, occupied only by a desk, several chairs, and a coat tree. His door was never closed.

His answer for sluggish layers of management was decentralization, and his attitude toward employees was an unwavering belief in and respect for the individual.

Money and prestige did not push him. Excellence did.

Casey's personal code was discipline.

Hardly a shining star, Jim Casey was more a steadily burning flame.

Distill Jim Casey's lifelong message to its essence and you get: Neatness, humility, frugality, dependability, safety, strong work ethic, integrity.

This unassuming ascetic with an iron will based his company and his every move on ethics that he learned as a child. Jim Casey's parents greeted hardship with grit and ingenuity.

Jim was by then old enough to apprehend his parents' mounting anxiety, to understand that his father was not healthy by comparison with other men. The worried atmosphere undoubtedly had effect.

At the end of the nineteenth century, the number of American children in the workforce reached staggering proportions. Over two million children worked in mines, factories, and sweatshops, many in appalling conditions.

For the Caseys, there was no alternative. It was critical. With two younger brothers to protect and a mother and an ailing father to support, eleven-year-old Jim Casey had developed a maturity that belied his age. His family was in precarious straits, and it was up to him to solve the problem.

He worked more than ten and a half hours a day, and longer on Saturdays, starting at $3 a week. [He is 11]

He picked up and delivered telegrams, mail, and packages —working from 7 P.M. until 7 A.M.

It wasn't all telegrams. Many of the night calls were drug addicts summoning a messenger to help replenish their stash.

During winters, it rained and rained. Jim was often cold and wet. Wealthy people could afford fancy hotels. Jim often looked with envy at them through the windows, as they sat in the big hotel chairs looking out onto the rain from warm lobbies.

Thompson shot and killed Moritz. [Jim’s partner]The cold-blooded murder left the other two boys stricken.

The company, founded in that six-by-seven-foot basement office, would eventually become United Parcel Service.

Jim wrote to the Chambers of Commerce of every American city with a population over 100,000, asking for names of local delivery firms. He accumulated the names and then initiated a communications link that he called the "Parcel Delivery Service Bureau." The bureau was a means of sharing new methods, ideas, or systems that worked in different cities. Every once in a while, the correspondence disclosed a gem of an idea, which Jim would hurry to implement. [Founders allows you to do the same]

Mr. Carstens told them that he would not fund their venture, but that they should not interpret his resistance as a disincentive. He finished with the words "determined men can gave do anything." That comment became an invocation; Jim Casey would use it as a rallying cry time and again.

We have nothing to sell except service.

Rather than paying up front with cash, they funded these acquisitions by pledging what they had, which meant shares of UPS stock. UPS was to use this strategy numerous times in coming years.

The vision beyond retail store delivery made sense to Casey and he later related “Think of the scores of millions of additional packages we would handle if we delivered all those going into each territory, rather than what goes out of the stores we happen to serve."

UPS would take on the ICC one city, state, or multistate area at a time.

Like Aesop's tortoise, UPS was sure and steady, plodding toward its objective of providing delivery service all over America, moving forward with perseverance and a humility that bordered on stealth. Big Brown was slowly but inevitably taking over the country.

As Jim Casey commented “Employee-ownership is credited by the people inside and outside the company with having done more than any other thing toward making our company and our people so notably successful financially and otherwise."

Fred Smith and his FedEx was sheer genius. That FedEx was established in 1973 as an airline, not a ground delivery company, is an important legal distinction, because the company was exempt from onerous common carrier regulations. Airlines fall under a different regulatory body (the FAA), not the ICC that regulated trucking companies.

And FedEx didn't intend to start up city by city as UPS always had. The concept was hatched nationwide, with its one hub, from the very beginning.

Most UPSers took the ostrich approach, ignoring the new company. Some denigrated it, saying, for instance: How are they going to deliver them on the ground? Their network's too small. People don't need that much delivered overnight. Costs are too high. They'll probably go under.

Business building, to Casey, depended on the hard work and loyalty that the stock ownership inspired. "The basic principle which I believe has contributed more than other to the building of our business as it is today, is the ownership of our company by the people employed in it."

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Transition seldom comes easily. Of course, we cannot clearly see all of the steps ahead. It is always easier to see difficulties than to develop methods of solving them. But first, let us take sight of a goal. The difficulties will be solved in ways we cannot now see.

First is the dream, then development, followed by improvement until the dream becomes a reality. Later a new dream makes the products of an earlier one obsolete. This has been the course of industrial history, and in its path have been the victims and the victors of progress. —Jim Casey

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“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

What I learned from reading Overnight Success: Federal Express and Frederick Smith, Its Renegade Creator by Vance Trimble.

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Come see a live show with me and Patrick O'Shaughnessy from Invest Like The Best on October 19th in New York City. 

Get your tickets here! 

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[0:01] At age thirty Frederick Wallace Smith was in deep trouble. His dream of creating Federal Express had become too expensive and was fast fizzling out. He had exhausted his father’s millions. He was in hock for 15 or 20 million more. He appeared in danger of losing his cargo jets and also his wife. His own board of directors had fired him as CEO. Now the FBI accused him of forging papers to get a $2 million bank loan and was trying to send him to prison. He thought of suicide. 

[1:08] At any risk, at any cost, he refused to let his Federal Express dream die. 

[6:23] I believe that a man who expects to win out in business without self-denial and self-improvement stands about as much chance as a prizefighter would stand if he started a hard ring battle without having gone through intensive training. Natural ability, even when accompanied by the spirit to win, is never sufficient. 

[7:32] It was push and drive he inherited from his father. He had to be doing something all the time. 

[9:19] Fred is one of those people who never gives up if he wants something and you say no. He just goes on and on and on. 

[10:50] And one of the greatest qualities that he has, that anybody can have, is he’s a voracious reader. You could talk to Fred Smith about government or literature, a whole range of things kids his age didn’t know much about. 

[11:38] Like Nike, the idea for FEDEX started as a term paper: There is no great mystery to the “hub and spoke” concept. As Smith visualized the plan, the “hub” would be located in a middle America location with “spokes” radiating out to Boston, Los Angeles, Seattle, Miami, and other cities. Fred Smith thought of his system as similar to the telephone network, where all calls are connected through a “central switchboard” routing process. 

[18:40] He wanted to do something that nobody else had done. That was his main objective. 

[20:18] Smith wasn’t traveling in a straight line himself. He tried first one project and then another. All of them were built around his idea of acquiring and operating a fleet of jets. It [FEDEX] didn’t start out as a package outfit. 

[27:23] Fred Smith was learning not to be disheartened or dismayed by negative reactions. 

[35:43] Fred was in such deep thought all the time. Constantly thinking. Sheer determination. You could walk in and he’d be thinking about something and literally wouldn’t know you were in the room. That is one sign of a great mind—the ability to concentrate. When I read that section it made me think of this great quote by Edwin Land: “My whole life has been spent trying to teach people that intense concentration for hour after hour can bring out in people resources they didn't know they had.” 

[39:00] A great way to think about how hard FEDEX was to start: If you open a Wal-Mart store, and if that formula succeeds and you do well, you open a thousand of them. But you don’t open a thousand of them to take the first order. Which is what you had to do to start FEDEX. 

[47:10] We were first-grade novices. And I think that really played to our advantage because we were not fully aware of the obstacles we faced or the difficulty in overcoming them. I look back on it now and think, Oh, my God, why in the world would anybody try to do something like this! 

[53:18] Fred Smith himself said, “No man on earth will ever know what I went through in 1973-1974. When I read that I thought of this quote on Charlie Munger: “Life will have terrible blows in it, horrible blows, unfair blows. It doesn’t matter. And some people recover and others don’t. And there I think the attitude of Epictetus is the best. He thought that every missed chance in life was an opportunity to behave well. Every missed chance in life was an opportunity to learn something and that your duty was not to be submerged in self-pity. But instead to utilize the terrible blow in a constructive fashion. That is a very good idea.” 

[1:01:30] Fred Smith: You have to be absolutely brutal in the management of your time.

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“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

What I learned from reading Sam Walton: The Inside Story of America's Richest Man by Vance H. Trimble.

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[3:11] Charlie Munger on Sam Walton: It's quite interesting to think about Walmart starting from a single store in Arkansas – against Sears Roebuck with its name, reputation and all of its billions. How does a guy in Bentonville, Arkansas, with no money, blow right by Sears, Roebuck? And he does it in his own lifetime – in fact, during his own late lifetime because he was already pretty old by the time he started out with one little store. He played the chain store game harder and better than anyone else. Walton invented practically nothing. But he copied everything anybody else ever did that was smart – and he did it with more fanaticism. So he just blew right by them all. 

[4:46]  Sam Walton was no ordinary man. He was a genius in business, with an iron mind —some say pig-headed—unwilling to compromise any of his carefully thought out policies and principles. 

[5:08] To him, making money was only a game. A test of his imagination and expertise to see how far he could drive a business concept. Wall Street had a hard time getting the drift of that Sam's idea, he readily admitted was absurdly simple: Buy cheap. Sell low. Every day. And do it with a smile! 

[9:23]  No one in the Walton household worked harder, except his father. ‘The secret is work, work work,” said Thomas Walton. “I taught the boys how to do it.” He was a bear for work, and would not tolerate sons who were not likewise industrious, ambitious, and decent. 

[12:08] Sam was optimistic all the time. He felt the world was something he could conquer. 

[15:13] A lesson the founder of JC Penney personally taught Sam: Boys we don't make a dime out of the merchandise we sell. We only make our profit out of the paper and string we save.” 

[21:42] The lawyer saw Sam clenching and unclenching his fists, staring at his hands. Sam straightened up. “No,” he said. “I’m not whipped. I found Newport, and I found the store. I can find another good town and another store. Just wait and see!”  

[27:09] Sir, I never quarrel, Sir, but sometimes I fight, Sir, when I fight Sir, a funeral follows. 

[28:27] Sometimes hardship can enlighten and inspire. This was the case of Sam Walton as he put in hours and hours of driving Ozark mountain roads in the winter of 1950. But the same boredom and frustration triggered ideas that eventually bought him billions of dollars. 

[34:02]  One of the basic lessons Sam Walton learned at JC Penny was not to be so smug you ignored your competitors, especially their successful policies and practices. “If they had something good, we copied it,” Sam always said with total candor. 

[37:52] To these sophisticated and experienced businessmen in tailored suits and custom shoes, it looked like the tail was trying to wag the dog. What was that Arkansas country fellow’s experience with only a dozen or so stores compared to their thousand outlets and nearly a century of retailing know-how? 

[42:28] His tactics later prompted them to describe Sam as a modern-day combination of Vince Lombardi (insisting on solid execution of the basics) and General George S. Patton. (A good plan, violently executed now, is better than a perfect plan next week.) 

[43:43] I love this mindset: Move from Bentonville? That would be the last thing we do unless they run us out. The best thing we ever did was to hide back there in the hills and build a company that makes folks want to find us. 

[44:13]  The public conception of Sam as a good ol’ country boy wearing a soft velvet glove misses the fact that there’s an iron fist within. 

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“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