John Malone: Media Maverick & Unconventional Leader

John Malone is a name synonymous with media and telecommunication, a visionary whose fingerprints can be traced throughout the DNA of the U.S. cable industry. But beyond the boardroom deals and multi-billion-dollar acquisitions, Malone stands out as an emblem of unconventional leadership. For those diving into the history of corporate leadership, William Thorndike’s acclaimed book "The Outsiders" ranks Malone among eight Unconventional CEOs who reshaped industries and yielded unparalleled shareholder returns. Here, we explore Malone's storied career and the lessons it offers.

John Malone, while initially trained as an electrical engineer at Bell Telephone Laboratories, had an underlying passion that transcended circuits and blueprints: business strategy. Even amidst the technical work, Malone’s vision for navigating the business world was taking shape. Recognizing the need for a formal business education, he pursued an MBA from Johns Hopkins University, positioning himself to delve deeper into the intricacies of the media sector.

In 1973, a big opportunity came knocking. Malone was offered the role of CEO at Tele-Communications Inc. (TCI). At the time, TCI was navigating choppy waters, being a cable company plagued with challenges and inefficiencies. Malone however, viewed this as an opportunity. He started working for TCI on April Fool’s day in 1973, and as his 50% pay cut and personal investment in TCI stock signifies, he was greatly incentivized to maximize shareholder value. Bob Magness, founder of TCI even told Malone: “I can’t pay you very much, but you’ve got a great future here if you can create it.”

At TCI, Malone’s approach was methodical yet innovative. Drawing from his engineering background, he integrated the latest technological solutions to enhance operations. But more than just tech enhancements, Malone recognized the importance of strategic partnerships, mergers, and acquisitions. He fostered alliances with potential competitors, acquired budding enterprises that complemented TCI’s vision, and streamlined services to cater to evolving customer demands.

In the 1980s and through the 1990s, TCI was purchasing an average of one cable operator per day, rapidly expanding its footprint. This while many competitors were diversifying into content creation. Malone’s primary focus remained on to continue expanding and enhancing TCI’s cable infrastructure, and he believed that owning the “pipes” – the distribution channels – would give TCI significant leverage in negotiations with content providers.

By the end of Malone’s tenure, TCI wasn’t just revived; it was redefined. From a cable operator once on shaky ground, TCI emerged as the leading entity in the U.S. market. From having a modest subscriber base of around 100,000 in 1973, to over 13 million subscribers in 1999 by the time of the merger with AT&T. As of revenue, it increased from $3 million to over $10 billion during the same time period.

While many CEOs avoided debt, Malone recognized the potential of using it strategically. He knew that the cable industry had steady cash flows, so he used debt as a tool, borrowing money to fuel TCI’s acquisitions. A bold yet smart move – like buying a house with a mortgage, knowing you have a stable job to pay it off.

Reflecting a trait underscored in “The Outsiders,” Malone was a proponent of decentralized operations. He didn’t believe in a top-down approach where all big decisions were made at the head office. Instead, he gave a lot of power to local managers. Why? Well, they knew their areas best. They understood their customers, knew what worked, and what didn’t. This hands-off approach meant faster decisions that made sense locally.

Even though Malone was all for local decision-making, when it came to capital allocation, he was in charge. This meant that he decided how the company’s money was spent, ensuring it was put to the best possible use. It’s a bit like letting your kids decide what games to play at their birthday party, but making sure the budget for gifts and cake stays under control.

Malone was always on the lookout for smart acquisitions. Under his leadership, TCI would expand its reach by buying other companies that fit well with its goals. Malone wasn’t just about getting bigger however; he also wanted to get better. He knew the value of his company’s stock and would buy back shares when he felt they were undervalued, optimizing for shareholder value.

The cable industry, especially in its infancy, was a maze of regulations. Malone not only knew the rules inside out but also knew how to use them in his favor. While others were tripping up or getting bogged down, Malone was adept at using the regulatory environment to get ahead, ensuring TCI not only played the game but often won.

As mentioned above, Thorndike’s “The Outsiders” offers a deep dive into CEOs who defied conventional wisdom and delivered extraordinary returns. Thorndike highlights Malone for being a really smart capital allocator, and instead of just running the company, he knew where to invest money to get the best returns. And boy, did it pay off!

From 1973 to 1999, under Malone’s watch, TCI’s stock price soared. It grew at a compound annual rate of 30.3%. Just imagine putting your money in a bank and getting 30.3% interest every year! That's the kind of growth TCI shareholders saw.

TCI was just the tip of the iceberg. Malone wanted more, and dreamt of his own vertically integrated media empire. Recognizing the symbiotic relationship between content and distribution, Malone started partnering up with content creators. From investments in Turner Broadcasting to the establishment of Liberty Media, Malone soon had a say in almost everything in the entertainment business.

Perhaps one of his most strategic moves came in the late ‘90s. When most people thought cable TV was the future, Malone saw something else coming. He saw a future where everything was digital and global. So, what did he do? He sold TCI to AT&T for a mind-blowing $48 billion. This move wasn’t about cashing out however; it was a strategic pivot, marking Malone’s foray into the world of content, digital technology, and international media.

For Liberty Media, started by Malone in 1997, investments in companies such as News Corp, SiriusXM, and Discovery Communications soon made it one of the largest media companies in the world.

Today, John Malone's legacy towers over the media and telecommunications industry. He is one of the richest people in the world with a net worth of over $10 billion, and for anyone running a business or dreaming big, there’s a lot to learn from his story:

• Vision Over Convention: Time and again, Malone defied conventional wisdom. His strategies, whether leveraging debt or decentralizing operations, were rooted in a vision that transcended industry norms.

• Flexibility in Strategy: Malone’s leadership was not about rigidity. As the landscape evolved, so did his strategies. From aggressive acquisitions to timely divestitures, Malone showcased the importance of adaptability.

• Commitment: Through the ups and downs, Malone never took his eyes off the prize. He believed in his big dream and kept pushing forward, no matter what stood in his way.

In the world of business, where success stories are everywhere, John Malone’s journey stands out. It’s not just about reaching the top, but about doing things your own way. “The Outsiders” by Thorndike tells us that Malone wasn’t one to just follow others. Instead, he made his own tracks, even if they seemed different. And guess what? Those tracks led to huge success. For anyone today trying to lead in an ever changing world, Malone’s story offers timeless lessons. It tells us to dream big, think out of the box, and lead with heart.