Thomas Murphy Embodied the Difference Between Good and Remarkable

“Temporary insanity.” That’s how Warren Buffett described his decision to sell his 3 percent stake in broadcasting company Capital Cities in the 1970s. Having made a good return on his investment, Buffett sold early, thus missing out on exponentially greater gains in future years.

The “insanity” quote comes from Douglas Martin’s very excellent obituary written in the New York Times
about Thomas S. Murphy. Murphy was CEO of Capital Cities, and as Buffett later observed about Murphy, “He has none of those complexities of character that screw other people up and make for irrational behavior.” Murphy was also remarkable. Indeed, as the title of this write-up asserts, Murphy was one of the rare people who embodied the difference between good and remarkable.

Some readers are surely wondering at this point who Murphy was. To answer the question is to age oneself a bit, or a lot. Murphy is memorable based on what he so courageously did in 1984. As CEO of Capital Cities, he had the audacity to visit with Leonard Goldenson, the founding Chairman of ABC, only to suggest that Capital Cities purchase ABC. Try to understand how seemingly detached from reality the suggestion was, or at least seemed.

ABC was a major television network in the world’s largest market with properties like Monday Night Football, The Wide World of Sports, Love Boat, Dynasty, and too many other popular shows to list here. Capital Cities was seen as very well managed, but it was local television stations to ABC’s national, and realistically, global stature. Call it the modern equivalent of The Record in New Jersey’s Bergen County presuming to purchase the New York Times.

Still, as the remarkable almost by their descriptor do, Murphy saw the possibilities that others didn’t. Goldenson was eager to connect his creation with excellent management, while Murphy coveted ABC’s local stations. Capital Cities bought the much larger ABC for $3.5 billion. The number reads as small today, but in 1984 it was massive.

Notable about Murphy’s purchase is that included in ABC’s properties was ESPN. Looked at today, the acquisition was a no-brainer for ESPN alone. Except that the ESPN of 1984 wasn’t anything like what it became. It had nearly gone bankrupt just a few years before, and likely would have if not for a $10 million capital infusion care of John Paul Getty’s heirs. Needless to say, the ESPN of 1984 couldn’t claim broadcasting rights to the NFL, NBA, NHL, MLB, and entities like it. It was a known, but was far from reaching greatness.

All of which helps explain why some people grow rich, and some grow superrich. Put Murphy in the latter category. The rich, or well-to-do get that way by prudently saving, only to invest in established companies with credible earnings streams. There’s nothing wrong with such an approach. It’s called wealth preservation, prudent growth, or list your adjective.

Still, these investments don’t pull the world forward. It’s the intrepid ones that do; the risky ones, the courageous ones, the ones that could very easily belly flop, or better yet, the kind of investments made by people like Thomas Murphy. He bought ABC to the wonderment of many, and got ESPN as part of the deal because so few could see its potential. The remarkable are that way because they pursue leaps that 99.9999% of us would not.

Wealth inequality is a logical corollary to the above truth. We see and hear members of the pundit class bemoan wealth inequality as “unfair” and other mindless pejoratives, but the actual truth is that inequality is what happens after the courageous risk the proverbial “all” on what most deem outlandish, impossible, or both. While there’s a prudent, savings-laden path to a cushy, worry-free retirement, it should be stressed that those who create generational, centi-millionaire and billionaire wealth get that way after endless worry of the staring-failure-in-the-face-nightly variety.

The main thing is that their worry, their courage frequently amid deep skepticism or ridicule, is our gain. That’s the case because successful wealth creation born of bold leaps begets the investment necessary for bigger and bigger leaps. Put another way, Buffett learned from his initial investing error, and the high-character Murphy didn’t hold a grudge. Instead, he routinely consulted Buffett about future acquisitions, including the one for ABC. Buffett also became an investor again; purchasing 18 percent of Capital Cities at an admittedly higher price than what he’d sold the company’s shared for the decade before.

As great of an investor as Buffett was and is, it’s not unreasonable to suggest that sometimes the most obvious investments only appear that way after the fact. That’s why they’re so obvious. Applied to Capital Cities, its shares rose over 2,000x
from the time it went public in 1957 to 1995 when Disney purchased it for $19 billion.

A 2000x return. Yes, Thomas Murphy was remarkable. The wealth unequal are by their descriptor remarkable. It’s something worth remembering when unoriginal thinkers decry remarkable wealth.