11 Unconventional Lessons from John Malone on Empire-Building


Table of Contents

John Malone is one of the best-performing CEOs of all time.

At his peak, he was buying one company a day.

Today he is the largest private landowner in the US with 2.2 million acres.

Most of this comes from:

11 unconventional lessons from the master of empire-building:

Identify an Opportunity

  • Cable was software before software.
  • - Recurring revenue
  • - Fast-growing
  • - High margins
  • He saw the opportunity and left a cushy job at McKinsey to pursue it.
  • Then hammered the opportunity for years.

Simple Math Deals

  • Malone looked for obvious deals.
  • He bought when the purchase price was below five times cash flow after benefits from their usual playbook & synergies were considered.
  • Malone could do this math on a napkin.
  • No fancy modeling necessary.

Avoid Competition

  • TCI focused on rural areas and smaller cities where there was less competition and city officials had lower expectations for their licenses.
  • Many competitors were overbidding for cable licenses in large cities.
  • TCI grew in the shadows.

Lever to the Teeth

  • Debt magnified financial returns & interest payments could be written off for taxes.
  • Malone focused on cash flows and was in a regulated industry so he knew exactly what he could afford.
  • Little upfront equity was required to purchase new systems.

Bet on Up-And-Comers

  • Malone realized early on the value of betting on young & talented entrepreneurs.
  • He wrote Bob Johnson, the founder of BET, a $500,000 check during their first meeting.
  • TCI owned a piece of BET, Turner Broadcasting, Discovery, Encore, QVC, and many others.

Find an Operating Partner

  • Malone saw himself as being a capital allocator first, manager second.
  • He delegated most of the day-to-day responsibilities to his COO.
  • This freed Malone up to focus on more acquisitions.
  • Cash Flow Focus
  • Malone realized that maximizing earnings per share didn’t work w/ the pursuit of scale.
  • Higher net income meant higher taxes.
  • So Malone invented EBITDA. A proxy for cash flow and ignored earnings.
  • Interest & depreciation kept his net income & taxes negligible.

Hire Good People & Pay Well

  • Incentives & autonomy create a strong culture.
  • TCI was known as a place for frugal, action-oriented cowboys.
  • TCI’s employee stock purchase program made many millionaires down to his secretary.
  • Not a single senior exec left in the first 16 years.

Avoid Taxes at All Costs

  • Malone hated taxes. They offended his libertarian sensibilities
  • He never paid dividends & rarely paid down debt.
  • All extra cash flow was reinvested in more acquisitions to grow the company.
  • Virtually all his sales were in equity to avoid taxes.


  • The large amount of debt forced operational discipline.
  • They were the last adopter of new technologies.
  • With acquisitions, they would move their fancy offices from a downtown skyscraper to a tire warehouse.
  • The company's office was spartan.

Risk Minimization

  • With each new system he bought, the debt was secured by a TCI subsidiary, not by the parent company.
  • If a cable system defaulted on a loan, only one subsidiary would be threatened.
  • TCI was a ship with bulkheads. Built to withstand battle damage.

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