He's The Nations Largest Landowner

GM! It's Thursday, April 6th - Today, we're featuring the "Cable Cowboy" himself, one of the most successful business magnates of our time - John Malone 🤠.

These tactics have made him:

• The largest landowner in the USA with 2.2m acres - bigger than Delaware 🤯.

• The owner of F1 🏎️

• The captain of a $90M yacht called the "Sea Owl".

Here's exactly how he did it...

- Callum

FEATURE

The Largest Landowner In The USA

Do you know who the largest private landowner in the United States is?

His name is John Malone and he owns a whopping 2.2M acres. He’s known as the “Cable Cowboy” for his prize-winning horses, ranching and beef company, and his multi-billion dollar cable television roll-up, Liberty Media.

Malone has a net worth of $9.2B and at times has been a more successful investor than Warren Buffet.

What is Liberty Media?

At the age of 29, Malone became the CEO of Tele-Communications (TCI), a cable television company with only 400K subscribers and $132M in debt.

It wasn’t long until Malone became known as the lowest-paid, best-performing CEO in the nation. His take was a minuscule 1% stake in TCI, but he turned the business into the second largest cable company after Time Warner and sold it to AT&T in 1998 for $55B.

1% of $55B is...a lot ($550M to be exact).

But through the deal with AT&T, Malone got something even better. He secured Liberty Media, his own stand-alone company.

With Liberty Media, he recreated the path to success he used for TCI– gobbling up smaller cable operators and acquiring minority stakes in other providers.

Why did Malone stick with the cable industry?

• Steady cash flow: Cable TV systems have consistent cash flow from installation charges and recurring monthly service fees. High cash flow allows for the acquisition of more cable systems, a positive feedback loop.

• Tax write offs: Cable providers hardly pay taxes as there is a high depreciation of their equipment, allowing them to write them off as losses for tax purposes, sell the depreciated equipment, and enjoy an average profit margin of 57%.

The Roman Empire Approach to Acquisitions

While some industry giants, like Mark Leonard of Constellation Software, allow their acquired companies to operate as though they were never bought, Malone takes a different approach.

With TCI and Liberty Media, Malone used an acquisition strategy he calls the “Roman Empire approach”– kill the leadership of the acquired companies.

Malone immediately “retires” anyone in management positions and selects the company’s brightest people to become the new leaders.

There are two primary reasons for doing this:

1. Acquisitions make founders and shareholders, who are often in management positions, rich. As Malone says, “Once you make a guy rich, you can’t expect him to work hard.”

2. As you build horizontally, you don’t want cultural clashes. By removing the old guard, it is much easier to create homogeneity and synergy across all acquisitions.

The Playbook: Building Horizontal and Vertical Integration

Orchestrating an industry roll-up is no easy task, but here’s how Malone executes his.

• Find a business that generates consistent profits– for Malone, that was cable systems.

• Use those profits to build horizontally– under Malone, TCI made an acquisition once every two weeks and acquired 1,000+ local cable systems.

• Once you’ve scaled your business, increasing financial capabilities and synergies between the rolled-up companies, you then build vertically.

By building vertically, you expand your business into new arenas– Liberty Media acquired Formula 1 racing and utilized its horizontal synergies to increase the value of F1 by $15.6B in 6 years.

Wild...

ON TREND

The East Coast Is Thriving, As The West Coast Tanks

You Should Know

Home prices on the East Coast have surged while they’ve plunged more than 10% on the West Coast.

This regionally differentiated boom and crash is unprecedented and seems to be largely due to the COVID-19 pandemic, increased demand for housing, and soaring mortgage rates.

The Takeaways:

• The East Coast has seen an increase in home prices: Miami (12%), Buffalo (8.3%), Orlando (9.3%).

• The East Coast’s larger supply of affordable homes combined with an increase in mortgage rates has led to an average increase in home price.

• On the West coast, home prices have conversely fallen: San Francisco (10.3%), San Jose (10%), and Seattle (7.5%).

• West Coast home prices had room to fall– San Francisco home prices increased 112% between 2012 and 2020.

• Tech hubs on the West Coast have seen the sharpest decline as a result of tech bubble bursts.