"I have known no wise people who didn't read all the time — none, zero." – Charlie Munger

Limping On Water

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Limping on Water is the story of Phil Beuth’s 40-year career at Capital Cities, the first employee hired by legendary Tom Murphy.  Although not a detailed history on Tom Murphy’s decision making and strategy, the book provides valuable insight (including employee testimonials) on the magic of the Capital Cities culture, which was built on ownership and integrity.  Buffett has said that Tom Murphy taught him how to manage people and that Tom Murphy and Dan Burke were the best managerial duo ever.

Key Takeaways

  • The company’s culture was built on autonomy, financial discipline, integrity over results, and ownership/share appreciation
  • Tom Murphy’s genuinely cared about his employees and their development, as illustrated in Phil’s increasingly responsibility
  • The company strongly encouraged employees to purchase stock – offered at discounts and with loan arrangements
  • Operational excellence resulted in dramatic increase in financial results at acquired companies (entertainment industry was not known for cost discipline)
  • Warren Buffett was somewhat involved in the company’s decision making (more so the culture/attended annual meetings) and Murphy taught him how to manage people


  • “Be sure to pick a business you enjoy. Do not go for the biggest buck, but go where you will be the happiest, because if you are happy, you are successful and do yourself a favor, get yourself involved in the community” – Tom Murphy
  • “Always try to make others look good, because when they profit, so do you. And always leave something on the table” – Tom Murphy
  • “I can accept mistakes, but do not ever lite to me or anyone else in the company. There is no second chance here” – Tom Murphy
  • “We are building a great company and we are all going to get rich. I want you with us, not 8 hours a day, but 24 and we want you to growth us, full-time, all the time” – Tom Murphy to Phil
  • “Some of you fellows may think I tie you to Capital Cities by corrupting you with compensation and stock options. But I’ve decided the reason you are afraid to leave the company is more because our system naturally corrupts you with autonomy and authority.  And I suspect that after living that way for a time, you’re fearful that someplace else might not operating in the same manner” – Frank Smith
  • Quotes from Employees:
  • “The difference between you Cap Cities guys and us is you guys live rich and work poor and we work rich and live poor” – ABC Executive to Phil
  • “There was no denying that money talked to everyone. As individual profit sharing accounts began to grow and when employees began to buy at a discount, ever rising shares through the stock purchase plans, just about everybody was whistling Murphy’s song…all the way to the bank” – Alan Nesbitt (Employee)
  • “Chiseled into our heads every year at our management meetings was Murphy’s reminder that we could make honest mistakes, miss our budgets, but if we put the company, or ourselves, in disrepute, there was no second chance at Capital Cities. Those words were the bible.  Do the right thing was our personal road map.  We were taught to avoid the quick-fix solution and when faced with a tough decision, favor the best long-term interest of the station, person or community” – Alan Nesbitt (Employee)
  • “I’ve never seen another company capture their magic. Much of their culture wen not only unwritten, but unspoken, as well”- Steve Ridge (Employee)
    “The difference (from Westinghouse) was our commitment to letting our managers manage.  Run the station like you own it and by the way, here is some stock to make you an actual “owner” like those at headquarter – Charles Keller (Employee)
  • Dan Burke on Operations
    • “You just have to let your managers know someone is watching”
    • “Be careful what you say to subordinates. You will forget in 24 hours, but they will remember it word for word forever”
    • “Always be careful who does the hiring. Mediocre people tend to hire mediocre people”
    • “Avoid the echo effect. Line managers besieged by MBA-laden corporate staffs hire their own MBA’s, so they can talk to one another”
    • “Do not let lack of experience stand in the way of hiring the right person”
    • “I sense in you, a reluctance to decide something until you have all the facts, so you keep delaying to get more information to make sure you’re right. We don’t have time for that.  Look at what you can, seek your people’s ideas and views and then do something”

Detailed Notes

  • Early Beginnings
    • Lowell Thomas, the famous broadcaster was asked by the Governor of NY about an investment his friend held in WROW-TV, a TV station in Albany, so Lowell asked his manager Franks Smith
    • Frank Smith bought the station when it was near bankruptcy for ~$400K, offering to buy out or give equity at cost to the original owners (this was done largely to avoid future claims that Smith had mislead the investors)
      • Smith thought there was an opportunity for a VHF drop-in (in between Providence and Rochester) that was not being recognized in the value by the current owners
      • Local businessman Goldman was the current owner
    • Tom Murphy was an engineering major at Princeton who spent time in the Navy, then a salesman at Texaco and then went to HBS
    • Tom met Frank Smith at a party at Lowell Thomas’s house and Frank said that he was looking for a salesman to run a station he bought
    • WROW-TV’s headquarters was a rundown building that was originally a home for retired nuns
    • Phil was originally hired as a film editor – $60 a week and on Phil’s first day he was eager to know how and what Phil was doing and he gave him the impression that he was pleased to have him there
    • The company was named Capital Cities because it owned stations in 3 capital cities (Albany, Providence and Raleigh/Durham). Although capital can be spelled capitol, Frank Smith preferred capital, as it stood for money
  • Acquisition Strategy
    • Significant increase in profitability of acquired stations – within three years:
      • Fairchild’s operating profit margins tripled
      • Cash flow doubled at the Kansas City Star and the Star Telegram
      • Operating profit margins at The Kansas City Star reached as high as 35% and cash flow at the paper grew from $12.5mm in mid-1970s to $68mm in 1996
  • Company Culture
    • Ownership
      • In 1957, employees were encouraged to buy in at $5.75 – the company offered loans with a prepayment plans to cover share purchases
    • Autonomy and Responsibility
      • “Corrupted” employees with autonomy
      • Tom had Phil advise Richard’s Nixon’s campaign (then Gov. of CA) on a telethon and Tom positioned Phil as the “expert” on telethons
      • Tom had Phil manage the 50th birthday part of Frank Stanton, President of CBS and plan the annual sales trip to Bermuda
    • Transparency
      • Tom went out of his way to expose Phil to Frank Smith, the Chairman and inform him of the corporations growing fortunes
      • When they acquired the Star, they opened up the company’s books to management, which created trust and transparency
    • Integrity
      • Murphy hammered the value of integrity into the company’s culture – constant reminders
    • Financial Discipline
      • “The best defense against revenue uncertainties area constant, tight cost controls”
      • Focused on investing in the things that mattered – creating a local brand with quality programming –“tip of an arrow pointed at everything that was happening in town”
      • Not afraid to invest in operations where there was good returns – they invested $75mm in a distribution and printing center for Star Telegram
      • After they bought ABC, the difference in cost management culture were very apparent – ABC executives got in a limousine to ride 6 blocks while Capital Cities executives just walked
    • Key Events and Phil’s Career at Capital Cities
      • After WROW-TV station, purchased Raleigh/Durham and Providence
      • 1961 – Purchased Buffalo radio and TV stations for $14mm – capitalized on market in Toronto
      • 1961 – New Jersey stations, 1964 – Detroit and Huntington and reach six radio stations and five TV stations by 1966
      • 1964 – Phil relocated to run the WV station
      • 1967 – Hit the threshold on station ownership and broadcasting was an advertiser-supported medium, so owning one of the principle advertising platforms made good economic sense
        • Purchased Fairchild Publications, which owned fashion trade newspapers, including Women’s Wear daily –also acquired several seasoned executives
      • 1969 – Purchase of New Haven and Philadelphia
      • 1971 – Phil Moved to Fresno to run the station – it was losing $12K a year
      • Purchased Star Telegram, the Fort Worth newspaper
      • 1975 – Phil moved back to run the Buffalo station
      • 1977 – purchased Kansas City Star for $125mm
      • 1985 – Purchased ABC
      • Phil led a turnaround of GMA towards the end of his career
    • Misc.
      • Other book written on Capital Cities – Capital Cities / ABC, The Early Years, 1954-1986: How the Minnow Came to Swallow the Whale (Walt Hawver)
      • Warren Buffett
        • Buffett was involved (much more so than now) in the company’s decision making – after the ABC acquisition, Phil was responsible for reviewing the ABC expense reports and Buffett reviewed the findings (flowers for GMA cost $600K a year when they should have cost $50K)
        • Buffett would attend their annual meetings and sing on stage with employees (soaked up the culture)

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By BoardofBooks
"I have known no wise people who didn't read all the time — none, zero." – Charlie Munger

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