#328 Tom Murphy (Buffett's favorite manager)

**David Senra** (0:00)
You might be able to hear this in my voice in the episode that you're about to listen to, but I just got over either COVID or the flu. I had been traveling way too much, and I've been sleeping terribly, and it finally caught up to me. I've been home now for almost a week, and I feel way better. And one thing that actually helped me feel a lot better is my eight sleep. Before I had an eight sleep, I never had the ability to change the temperature of my bed before, and I had no idea how much that affects and improves the quality of my sleep. I keep my eight sleep ice-cold. It's cold before I even get into bed. This helps me fall asleep faster and wake up less during the night. And when I had this fever and these flu-like symptoms, I kept it even colder, and it actually helped me recover from this sickness faster than if I didn't have an eight sleep. I had been feeling terribly for a day or two before I got back home, and I was forced to sleep in a hotel bed that it cannot make cool, and I slept terribly. It was impossible for me not to notice my eight sleeps absence, and I think that's a definition of a great product. A great product is when you notice its absence. There's a lot of founders that have actually spoken publicly about their love for eight sleep. People like Elon Musk and Mark Zuckerberg have both tweeted and posted publicly about the fact that they own and use and enjoy an eight sleep mattress. I know Matteo, who is the founder of eight sleep, spent a bunch of time with them. We live in the same city. He listens to founders. I know he has a complete dedication to the constant improvement of his product. I believe that there are very few no-brainer investments in life, and eight sleep is one of them. Normally, when you go to eightsleep.com, four slash founders, you actually get $150 off. But right now, if you do this now, you get $500 off because eight sleep is having a holiday sale. If you wanted to see why so many high quality people are raving about eight sleep, why I hate traveling without it, and you want to test it for yourself, now is the best time to do that. Get $500 off of your own eight sleep by going to eightsleep.com forward slash founders.
Warren Buffett said Tom Murphy and Dan Burke were probably the greatest two person combination in management that the world has ever seen or maybe ever will see.
When he speaks to business school classes, Warren Buffett often compares the rivalry between Tom Murphy's company, Capital Cities Broadcasting and CBS to a transatlantic race between a rowboat and the QE2. QE2 is the Queen Elizabeth II. It is this giant transatlantic liner, much, much larger than the Titanic. So he compares it to a transatlantic race between a rowboat and the QE2 to illustrate the tremendous effect management can have on long term returns. When Murphy became the CEO of Capital Cities in 1966, CBS was the dominant media business in the country with TV and radio stations in the country's largest markets, the top rated broadcast network, and valuable publishing and music properties.
In contrast, at that time, Capital Cities had five TV stations and four radio stations, all in small markets.
CBS's market capitalization was 16 times the size of Capital Cities. But by the time Murphy sold his company to Disney 30 years later, Capital Cities was three times as valuable as CBS.
In other words, the rowboat had won decisively.
That is an excerpt from the book I'm going to talk to you about today, which is The Outsiders, Eight Unconventional CEOs and Their Radically Rational Blueprint for Success. It was written by William Thorndike. And specifically, I'm going to focus on Chapter One, which is about Tom Murphy and Capital Cities broadcasting. And the name of the chapter is A Perpetual Motion Machine for Returns.
And before I do that, I'm going to actually put this book down for one second. I'm going to pick up last week's book, which was Ted Turner's Autobiography, and read this section because he appears, Tom Murphy and his partner, Dan Burke appear in Ted Turner's Autobiography as well, because they also built, they essentially built Capital Cities from a small broadcasting company into a multi-billion dollar media conglomerate. And so this is what Ted Turner said about them.
I like the Capital Cities people a lot. Dan Burke and Tom Murphy really understood the business. They had built their company up by buying TV and radio stations, as well as newspapers and magazines, and operating them efficiently. That is not the first time I read Tom Murphy's name in one of the books that I've covered for the podcast, all the way back on episode 286 I did an episode on Warren Buffett and Charlie Munger. Warren Buffett and Charlie Munger talk about Tom Murphy over and over again. They met him in the shareholder letters. They met him when they're answering the Q&A's at their annual meeting. But this is what they said in the book, all I want to know is where I'm going to die, so I'll never go there, that I covered back on episode 286 This is Warren Buffett.