Supported by Greenhaven Road Capital, finding value off the beaten path.
Bob Iger’s career began with a lucky break, “I came to ABC thanks to my uncle Bob’s bad eyesight,” and his coincidence in sharing a hospital room with a lower-level ABC executive. With a little more luck, a lot more hard work, and paying attention to the unfolding lessons, it led to The Ride of a Lifetime, the title of his book.
One early lesson came from working for Roone Arledge at ABC Sports, “… we were telling stories and not just broadcasting events…”.
Wild World of Sports worked then and sports works now because of context. Think about how much analysis, breakdown, and backstory exists for the current, 2019 football season. There are more hours of content than hours of the events.
This early lesson is a cautionary tale. Sometimes the story we’re told is too bold. Later in the book, Iger glows about his relationship with Steve Jobs who became a close friend. He joins Ed Catmull, Kara Swisher, and Ken Kocienda who all say there were two versions of Steve; founding Apple Steve and rejoining Apple Steve.
Iger and others take effort to note this difference because they feel the ‘Steve Story’ is the wrong version. It’s incomplete.
In 1985 Iger is surprised when Capital Cities buys ABC. Part of Iger’s good luck is working for smart people and learning the right lessons. From Arledge, he learns about putting on events. From Capital Cities managers Tom Murphy and Dan Burke, Iger learns decentralized management.
The acquisition attitude was, ‘Who are these guys?’ ABC was a major network while Cap Cities was a hodgepodge–but it was a well-run hodgepodge. ABC’s revenue was 3x but earnings were only 1.5x and the companies had similar market caps.
Part of the reason for the economic success was because Tom and Dan paid smaller salaries in dollars but high salaries in trust. Iger writes that some people left after the merger, “But we stayed because we felt so loyal to these two men.”
Why did Bob stay?
“If you stuck to your budget and behaved ethically, Tom and Dan gave you room to operate with independence.”
There we go.
Any situation is filled with different metrics and how – and if – they’re measured matters. Malcolm Gladwell talked to Bill Simmons about how Kawhi Leonard wasn’t drafted because someone thought he didn’t do well under pressure based on an interview. That’s the wrong metric. Tom and Dan paid less in dollars but gave more in autonomy. That mattered.
A decade later and things change for Iger. Disney buys ABC/Cap Cities and the Disney management model “was the opposite of all that.”
That’s not to say Disney was wrong. Strategy is context-dependent. For example, both Iger at Disney and Jason Blum at Blumhouse Productions have successful, profitable, acclaimed movies and both follow their own strategy.
For the next decade, Iger learned good and bad lessons from his boss, Michael Eisner. In the book he’s complimentary of Eisner, noting how he “re-founded Disney.” Eisner understood what Iger writes during his time as CEO: as Disney Animation goes so goes the company.
Charlie Munger commented on Eisner’s reign in his 1994, Worldy Wisdom speech:
That (pricing power) existed in Disney. It is such a unique experience to take your grandchild to Disneyland. You are not doing it that often. And there are a lot of people in the country. And Disney found that it could raise those prices a lot and the attendance stayed right up.
So a lot of the great record of Eisner and Wells was utter brilliance but the rest came from just raising prices at Disneyland and Disney World and through video cassette sales of classic animated movies.
Another positive lesson from Iger was being out in the parks. “I walked miles upon miles with him in advance of the opening of these parks—and in existing parks too— getting a sense of what he saw and what he was constantly looking to improve.”
This was something founder Walt Disney wanted all his Imagineers to do. Marty Sklar is the only person to attend the opening of every Disney park and he wrote, “In the earliest days of Disneyland, when everything was new for the guests and the Imagineers, Walt Disney decreed that every designer was to go to the park at least every other week and stand in the lines (we call them queues) to understand what our guests were experiencing.”
There are two ways of accumulating information about your customers; big data and thick data.
Walking and talking is thick data and it’s been used by Tariq Farid to create Edible Arrangements, by Carl Turner Jr. to build Dollar General, and by Tricia Wang to understand the fall of Nokia and rise of Apple.
Thick data is good but not perfect, so we need big data too. Big data is using base rates, a/b tests, and revealed preferences (actions over words). But both Big and Thick depend on the people being curious, something Michael Ovitz, Iger’s brief boss wasn’t. Iger wrote that it was “the wrong guy in the wrong place at the wrong time.” That same sentiment may be true for Eisner. After twenty years, some good, and some bad, the company needed new leadership and in 2005 Iger became CEO.
At his first board meeting Iger laid out his plan, “In so many respects, Disney Animation was the brand.” And the brand sucked.
Iger’s book is a great complement to Lawrence Levy’s book, To Pixar and Beyond. Levy was the CFO of Pixar through the IPO and the (2006) acquisition by Disney. What’s fascinating was how bad both companies needed each other.
This story is playing out today too as companies experiment with monetizing content. Making movies is a terribly hard business (hence Jason Blum’s angle). However, making movies and then selling character meetings (via theme park tickets), t-shirts, and stuffed animals is a much better business. Hence, The Pixar Business Story:
Iger met with Jobs to discuss the acquisition and recalled their meeting this way, Steve at a twenty-five-foot long whiteboard poised to list the pros and cons.
“Not unexpectedly, Steve was the holder of the pen, and I sensed he was quite used to assuming that role. He stood with the marker in hand and scrawled PROS on one side and CONS on the other. ‘You start,’ he said. ‘Got any pros?'”
Iger writes that he was too nervous and ceded the floor to Jobs.
“‘Okay,’ he (Jobs) said. ‘Well, I’ve got some cons.’ He wrote the first with gusto: ‘Disney’s culture will destroy Pixar!’…’Fixing Disney Animation will take too long and will burn John and Ed out in the process.’ ‘There’s too much ill will and the healing will take years.’ ‘Wall Street will hate it.’ ‘Your board will never let you do it…'”
In the book, Iger goes on longer and wrote, “Two hours later, the pros were meager and the cons were abundant.”
Jobs conducted a pre-mortem. While nothing is foolproof, listing possible failures improves the odds. In the under-emphasized, Sleeping With Your Smartphone it’s called ‘tummy rumbles.’ Daniel Kahneman was praised at a conference to elevating this idea. Mauboussin calls ideas like this low hanging fruit.
Another thing Jobs and Iger did well was to argue well. “He could criticize me,” Iger writes, “and I could disagree, and neither of us took it too personally.” In once instance, Jobs said Iron Man 2 “sucked” and that the value resort, Art of Animation was “crap”. Each time Iger reminded Steve that he wasn’t the target customer.
Joe Russo made Avengers: Endgame for Iger and Disney and talked about how he’s able to argue well with his brother.
“We’ve fallen into these roles and have for years, where, when an idea comes up one of us will just assume the contrary position so that we can vet the idea and we’ll argue about it for an hour and the idea either sustains or we come up with a better idea.”
“It’s to the point now where people will freak out because we’re very passionate – and Italians. When we’re in a room it’s like, ‘No, that’s bullshit, it’s never going to work.’ Then five minutes later we go get lunch.”
“With family, it’s easy to forgive and forget when you walk out the door.”
In addition to the Pixar acquisition, was the Marvel, Lucasfilm, and Fox purchases. Each one repeated themes from Brent Beshore’s book (and podcast!) The Messy Marketplace. What haven’t you told me that I need to know? What part of this is a hustle? Who’s ego is attached here and are they ready to sell? Each one is great.
It’s not a great book in the way Shoe Dog is a great book but it’s solid. If this were a Disney movie it’s Tangled, a strong effort full of interesting moments and something the author should be proud of.