I finished reading Newspaperman: S.I. Newhouse and the Business of News by Richard H. Meeker. The biography is about Samuel Irving Newhouse Sr., who founded Advance Publications. At Sr.’s death, Advance Publications owned multiple newspapers and Condé Nast, which publishes famous magazines such as Vogue, Vanity Fair, GQ, and The New Yorker. Since then the company has grown rapidly, and it owned 26.5% of Reddit when Reddit began trading on the public stock market this year (see here, page 194). Reddit’s market capitalization (i.e., valuation) is just under $12 billion as of this writing.

This book and Newhouse: All the Glitter, Power, & Glory of America's Richest Media Empire & the Secretive Man Behind It by Thomas Maier detail one key strategy the Newhouse family used to grow their wealth: they optimized their tax liability and maximized the compounding of their wealth. The family studied the tax laws and implemented strategies that reduced their tax liability. This gave them more capital to reinvest in growing their companies or acquiring new companies.

Both books contain numerous examples. Their estate tax strategy especially caught my attention. When someone dies, their estate is transferred to heirs and a tax is due on the value of the estate being transferred if it exceeds that year’s federal threshold. When Sr. died in 1979, his sons filed a return valuing his ownership in Advance Publications at roughly $182 million and showing an estate tax due of roughly $49 million. The IRS said his estate was worth somewhere between $1 billion and $2 billion and that the estate tax due was, at a minimum, $600 million, and as high as $1.2 billion. At the time, Advance Publication owned thirty newspapers and various magazines. Its two most prosperous newspaper properties alone were worth more than $182 million.

Sr. had studied other publishing families to understand how death and estate taxes negatively impacted their family empires. Families often had to sell all or some of the company’s assets to pay the estate tax upon the founder’s death. Sr. developed a dual-share-class strategy to avoid that outcome. Sr. owned common shares in Advance Publications but issued preferred shares to his siblings, wife, and sons. His common shares carried voting rights and, essentially, control of company decision-making, but the preferred shares gave holders the right to vote on a company liquidation or sale. Said differently, if a buyer wanted control of the company, the buyer had to get the approval of the preferred shareholders first. The result was a gray area in the tax law. It could be argued that the fair market value of the company—the price a willing buyer and seller would transact at—was significantly lower than the IRS’s figure because there would be fewer buyers willing to buy a minority stake in a family-owned company that had such a bizarre ownership structure. Most buyers spending that kind of money would want majority ownership so they could have control. To gain control, they’d have to convince multiple family members to sell, a prospect many buyers would rather avoid. There’s more to this, but that’s the gist of it.

The IRS took the family to court, and the family prevailed. The result was that the family paid an estate tax bill that was a fraction of what it would have been if Sr. hadn’t planned so carefully. It wasn’t a material amount for the company, so it didn’t have to sell any assets to pay the tax. The Newhouse family’s empire could continue compounding for another generation and grow exponentially under Samuel “Si” Newhouse Jr.’s leadership for the next forty years.

I’m continuing to read a biography of Samuel Irving Newhouse Sr. that describes the empire he founded with Advance Publications. Newhouse was in the media business. He started with newspapers but expanded into magazines, broadcast television, and cable systems before he died in 1979.

Newhouse was in the business of providing information to people, but he was adamant that the information must be unrelated to him. He went to great lengths to make sure there was no reporting on him. Sr. had a “genuine, abiding mistrust of the press,” according to the book.  

I’m sure he had his reasons. I’d imagine a big one was that he didn’t want to be perceived negatively, as most people don’t. Negative publicity could have made his empire-building difficult and his family uncomfortable. Maybe Sr. realized it’s easier to manage public perception if it doesn’t exist. If people don’t know who you are, there’s nothing to manage.

We’ll never know why Sr. was adamant about avoiding publicity, but given his business, I found his disdain for the press noteworthy. And it may have been influential, since his son Samuel “Si” Newhouse Jr. and other descendants felt the same way.

I’m learning a lot from Newspaperman: S.I. Newhouse and the Business of News by Richard H. Meeker. This biography is about Samuel Irving Newhouse Sr., who founded Advance Publications. His son Samuel “Si” Newhouse Jr. led the company after his father’s death. It’s interesting to compare father and son. They led their family business using very different styles, but both were successful.

One difference that stood out to me was how detail-oriented Sr. was. He was happy to get into the weeds on the business side of his newspaper operation (mostly leaving the editorial side alone). He wanted a weekly report for each newspaper detailing metrics, department by department. He walked through each department weekly checking the operations. He even monitored the cost per page to produce each paper every week. He’d notice if the cost went up a thousandth of a cent and ask why.

I wondered why he was such an operationally focused leader and landed on several possible reasons. When Sr. started in the newspaper business, he had to do everything himself. He learned from the ground up and knew every part of the business inside out. He knew what a smooth-running operation looked like and ensured that all his papers ran smoothly. Sr. also understood that local newspapers weren’t a high-growth business. There were only so many people his local papers could reach. Each daily edition had to turn a profit. Knowing this, he focused on maximizing profitability by watching his costs closely and maximizing advertisements in each newspaper. These factors, combined with growing up in a poor household, likely led to his operationally focused management style.

Jr.’s management style was different. When he ran the family empire, he focused on growing the circulation of magazines, which were distributed more broadly than local newspapers. He was aware of costs, but not to the extent his father had been, and some of his magazines ran unprofitably for years if Jr. saw potential. He didn’t get into the specifics of printing operations; he left that to others. Jr.’s upbringing was also different than his father’s. Because of their dad’s success, Jr. and his brother Donald were raised in luxury and encountered minimal challenges early in life.

Both men led Advance Publications, albeit at different times, and both successfully grew the company—but they went about it in very different ways. I’m curious to learn more about Sr. as I continue reading the biography about him.

Last week, I read Newhouse: All the Glitter, Power, & Glory of America’s Richest Media Empire & the Secretive Man Behind It by Thomas Maier. It was about the Newhouse family’s media empire but mainly focused on Samuel “Si” Newhouse Jr. I enjoyed the book, but I didn’t get a good grasp of the empire’s origin story. I’m also curious about the man who founded the empire, Si’s father Samuel Irving Newhouse Sr.

I decided to learn more about Sr., so I started reading Newspaperman: S.I. Newhouse and the Business of News by Richard H. Meeker. I’m still early in the book, but I already see clear differences between how Jr. and Sr. thought and acted as teenagers and young men. Both were great entrepreneurs, but Sr. had a founder’s and hustler’s mentality as a teen, which led him to found Advance Publications. Jr. didn’t really start to excel in the family business until he was in his 40s.

I’m sure there are way more differences between the two. I’m looking forward to finishing this book to compare the two further and understand how each achieved outsize success leading the same company.

As I understand Newhouse: All the Glitter, Power, & Glory of America’s Richest Media Empire & the Secretive Man Behind It, its author, Thomas Maier, said the Newhouse family was in the business of providing information to Americans. They owned magazines, newspapers, and cable systems, but newspapers were the empire's backbone. Growth potential was capped, but profit margins and cash flow were fat.

For many years, newspapers were the best way to distribute localized information, so they captured the attention of many readers. The Newhouses recognized this and executed a local monopoly strategy. Newhouse newspapers were often the only paper in town—the only way consumers could read local news. The papers, which had the attention of an entire community, were a microphone with which to talk to it. Companies paid a premium for the right to use the microphone to speak to the community, which drove highly profitable advertising revenue. Once a local monopoly was established, it was hard to compete with. It would generate predictable revenues and cash flows for years and wouldn’t require much reinvestment from the Newhouse family. The result was an annual stream of cash that the family invested into other businesses.

The book was first published in 1994 so it doesn’t capture how the internet disrupted their local monopoly strategy, but I’d imagine it negatively impacted their newspapers as it did the rest of the industry. The internet made information more readily available and made it easier for companies to reach consumers in a specific community. Meta (Facebook), Alphabet (Google), and others are now enormous companies and still growing quickly. Much of their revenue comes from advertising, which went to newspapers before the internet era.

The Newhouse family still has an empire, but I’m pretty sure that newspapers are no longer its backbone. I’m curious about how the family adjusted their strategy to respond to the internet’s impact and about what business is now the empire’s backbone. The Newhouse family’s companies aren’t publicly traded so information isn’t available via the SEC, but I’ll do some research and see what I can find.

Last week, I shared a post about Roy Thomson’s strategy for growing his media empire. It focused on cash flow. He bought small-town newspapers, many of them monopolies in their communities, that had strong cash flows. The newspapers were low to no growth in some cases but generated healthy cash. Roy then used those yearly cash flows to purchase more cash-flowing newspapers and other media assets.

I’m now reading Newhouse: All the Glitter, Power, & Glory of America's Richest Media Empire & the Secretive Man Behind It by Thomas Maier. It’s about Samuel “Si” Newhouse Jr. and his family’s media empire. This billionaire family owns numerous newspapers through Advance Publications and also owns Condé Nast, which publishes famous magazines like Vogue, Vanity Fair, GQ, and The New Yorker. Advance Publications owned 26.5% of Reddit when it began trading on the public stock market this year (see here, page 194). As of this writing, Reddit’s market capitalization (i.e., valuation) is just under $12 billion.

As I read more about Si and his family’s growth strategy for their media empire, I see that it’s similar to that of the Thomson family and others, including Warren Buffett and Mark Leonard of Constellation Software. The Newhouse family initially purchased cash-flowing newspapers and used the cash from those businesses to buy more businesses. They’ve done this over decades and built a sizable empire.

It’s notable that several people (and families) who’ve achieved outsize business success have used a similar strategy.

I’m curious to learn more about the Newhouse empire and family members, especially the patriarch, Samuel Irving Newhouse Sr.

I’m reading The Thomson Empire by Susan Goldenberg. It’s a biography about Roy Thomson and his son Kenneth Thomson, but it also describes the inner workings of the Thomson empire and its reinvestment strategy through 1984, when the book was published. The books about Roy Thomson that I’ve already read, as well as this one, highlight Roy’s and his company’s focus on growth through acquisition.

Roy and his son heavily emphasized maintaining high profit margins and strong cash flows by tightly controlling costs. That was more important than revenue growth. In fact, they owned dozens of newspapers in small communities where they knew revenue-growth potential was limited but margins and cash flow could be favorable because they were the only paper in town.

Every acquisition of a company was based on its cash flow, not what it could be if they grew it. The Thomson empire typically used that cash flow to acquire more cash-flowing businesses. With this blueprint, they grew their company into a massive empire.

Other entrepreneurs, such as John Malone of TCI and Henry Singleton of Teledyne, have used this strategy. It works well and is the foundation of Warren Buffett’s strategy with Berkshire Hathaway.

The entrepreneurs I’ve read about who embraced this growth strategy weren’t customer focused. They weren’t obsessed with a customer’s problem. They didn’t aim to provide the best solution for a customer’s problem and grow by scaling the solution. They were okay with offering a decent or subpar solution if it provided the cash flow needed to acquire more companies. The result was the ownership and decentralized management of many companies. Some companies didn’t provide good products or services and didn’t have a good reputation with customers. Some did, and did have good reputations. But all of them generated good cash flow.

If growth is an entrepreneur’s goal, these examples highlight different ways to check that box:

• Solve a single problem well and scale it to as many people as possible
• Find businesses that generate cash and use it to buy more businesses
• Take a hybrid approach

The right approach depends on the entrepreneur.

I published a six-part podcast series on Ted Turner, the visionary entrepreneur who created CNN and other cable channels like Cartoon Network and TNT under Turner Broadcasting System. He also owned the NBA’s Atlanta Hawks and MLB’s Atlanta Braves, and had a fortune of $10 billion at its peak. I really enjoyed his autobiography and learned a lot from it. If you're interested in learning more about Ted and his remarkable journey, you can start listening to part one in this series on Apple Podcasts here or Spotify here. Ted's journey is covered in episodes 98 through 103.

I finished reading the biography about Jack Kent Cooke. The book detailed Jack’s journey from high school dropout to billionaire entrepreneur and sports mogul.

How Did Jack’s Early Years Affect His Trajectory?

Jack bet on himself early in life. He dropped out of high school and turned down a college scholarship to play hockey. Instead of pursuing education, he tried many things—and failed at most of them. He ended up going broke, and he and his wife had to move in with his parents. He didn’t give up, though. He picked himself up and kept trying. Experiencing failure and hitting rock bottom at a young age transformed Jack. From that point forward, he was no longer afraid of failure. And he realized he could outwork everyone else to increase his chances of success. With a fearless mindset and a dogged work ethic, Jack positioned himself to conquer almost any challenge.

What Strategy Did Jack Employ to Achieve Success?

Jack was a content master. He had a superior understanding of how people wanted to be entertained in their leisure time and knew how to create or acquire content that captured people’s attention. He started by creating programming for radio stations but eventually moved into magazines, newspapers, and professional sports. The type of content Jack focused on shifted, but the goal was always the same: provide people with something that captured their attention. Once Jack had captured an audience’s attention, advertisers paid him handsomely to make his audience aware of what they were selling.

Jack also understood the importance of distribution. He didn’t just want to create or buy content; he also owned content distribution mechanisms. He started with radio stations but eventually made a fortune in cable systems. The genius in Jack’s distribution strategy was that he preferred to own distribution mechanisms in areas where he could have a monopoly or where the barrier to entry was extremely high. This limited his competition and kept his margins high.

This isn’t unique to Jack, but he used leverage strategically throughout his career to acquire assets and build his empire. He also got extremely lucky when the S&L crisis allowed him to buy back, from the government agency that took over the S&Ls, hundreds of millions in bond debt issued a few years earlier for pennies on the dollar.

Jack achieved outsize success despite humble beginnings. But his health and relationships suffered because of how he went about achieving success. Anyone interested in publishing, broadcasting, professional sports teams, or the early days of cable could benefit from reading this book about Jack’s life.

According to the biography about Jack Kent Cooke, while he was still recovering from his heart attack in October 1973, Jack flew to New York to install himself as CEO of TelePrompTer Corporation to save the company. The stock price suffered after the CEO, Irving Berlin Kahn, was convicted of bribery. Jack’s stock in the company fell in value from roughly $50 million to less than $2 million, stirring Jack to action. Jack split his time between running his sports empire in Los Angeles and TelePrompTer in New York City. He cut 25% of the cable operator’s staff and stopped expanding into new areas. Over time, he was able to get the company back on solid footing.

At the same time, Jack was making winning championships a priority. In 1968, he signed superstar Wilt Chamberlain to the biggest NBA contract ever: $250,000 a year for four years. The Lakers won a championship in 1972. In 1975, he acquired superstar Kareem Abdul Jabbar in a trade. Jack ultimately drafted Earvin “Magic” Johnson in the 1979 draft and set the Lakers up for a decade of dominance.

His sports teams were doing well, but his marriage to Jean was falling apart, and in 1976, she tried to commit suicide again and left him. A contentious divorce and asset-separation process ensued. The divorce was finalized in 1977, but the division of assets wasn’t finalized until March 1979 after Jack’s underhanded tactics to hide information from Jean came to light. After over forty years of marriage, their assets were spilt as follows:

• Jean received their $1 million Bel-Air home, $24 million in TelePrompTer shares, and 28% ownership in Raljon Corporation, an entity that owned the Los Angeles Kings NHL team, the Los Angeles Lakers team, the Forum arena, the 13,000-acre Raljon ranch, and a videotape enterprise.
• Jack received a home in Las Vegas, all of his ownership in the Washington Redskins, and 72% ownership in Raljon Corporation.

Each of them received roughly $42 million in assets. It was the largest divorce settlement up to that point and was included in the Guinness Book of World Records. Three months later, in June 1979, Jack sold the Forum, the Kings, the Lakers, and Raljon Ranch to Jerry Buss for $67 million. The Buss family still owns the Lakers. Looking for a fresh start, Jack promptly moved to Washington, D.C., that summer to be closer to the NFL team of which he was the majority owner.

Jack owned 82% of the football team, and he put his stamp on the team. On the basis of his experience, the team leaned on ads and sponsorships to generate additional revenue. During his tenure as owner, he hired legendary coach Joe Gibbs, and the team appeared in three Super Bowls, winning two titles. The other owner of the team, until Jack bought him out in a contentious battle, was Edward Bennett Williams, an attorney and eventual owner of MLB’s Baltimore Orioles.

Jack also got into commercial real estate when the New York City market struggled. He bought the iconic Chrysler Building there for roughly $87 million in August 1979 from an insurance company that had foreclosed on the property. Jack finished their $58 million renovation project and added another $30 million to the budget. He refinanced his purchase in 1982 with an interest-only loan, paying $553,000 monthly at 10.5% interest on a $60.5 million loan. He refinanced again in 1987 for $250 million. The building was worth an estimated $550 million a decade after his purchase.

The 1980s were a busy time for Jack. He moved forward in his personal life and, in 1980, married Jean Maxwell Williams Wilson, but they divorced ten months later in 1981. In 1981 Jack sold TelePrompTer to Westinghouse for $650 million, netting himself over $70 million and a $4.65 million consulting contract. He won the bid to purchase Elmendorf Farm in Kentucky in 1984 for $43 million, using a controversial add-on bid. And in late 1985, he acquired the Los Angeles Daily News, paying the Chicago-based Tribune Company a whopping $176 million, or roughly twice what other bidders had offered for a paper generating $100 million in annual revenue and $12.5 million in annual profit. His biggest purchase was McCaw Communications, the twentieth-largest cable system with over 464,000 subscribers in forty-two communities. Jack paid roughly $1,800 per subscriber, or $755 million, for the company.

To finance all these deals, he used leverage. He did what everyone else was doing at that time: he used junk bonds to raise capital. In April 1987, he hired Michael Milken of Drexel Burnham, and a $951 million bond offering was completed. Jack used most of the proceeds to pay for the McCaw purchase and to refinance debt on and enhance operations at the Los Angeles Daily News. Jack wasn’t done. In 1987, he bought First Carolina Communications, a cable system with 156,000 subscribers. Jack paid $1,900 per subscriber, or $300 million.

In 1989, Jack decided to cash in. He exited the cable business for good in grandiose fashion. He sold all his cable holdings for a staggering $1.6 billion, or $2,300 per subscriber, likely making himself a roughly $400 million profit. With this deal complete, Jack liked to remind people that he’d become a billionaire. This was a rare accomplishment in the 1980s and early 1990s, even among the fraternity of NFL owners that Jack was part of.

Between 1987 and 1990, Jack married two more women and had a daughter by one of them. Both marriages were messy, making the pages of Washington, D.C., newspapers, and are detailed in the biography. At the time the book was published in 1992, Jack was still alive and running his sprawling empire. He passed away in 1997 at the age of 84.

Jack was a wildly successful entrepreneur whose gift of deeply understanding how people wanted to spend their leisure time allowed him to build sports, cable, and publishing empires.