Brett Pulley’s The Billion Dollar BET: Robert Johnson and the Inside Story of Black Entertainment Television chronicles Robert “Bob” Johnson’s journey, his highs, and his lows.

Bob wasn’t a well-rounded founder and didn’t have a well-rounded founding team. Bob had deficits, but he shrewdly got around them to navigate unfamiliar waters. Some people work on their weaknesses. Bob took a different approach: he leaned on his strength, relationships (he was a lobbyist). Here are a few examples:

Satellite

After launching, Bob wanted BET’s programming to expand from six hours a week to 24/7. Through his cable relationships, he learned that HBO had unused satellite capacity. It was worth $2–$3 million a year, money Bob didn’t have. Bob negotiated a deal with HBO: it took a 15% stake in BET in exchange for the satellite time. HBO was owned by Time Inc., a major cable system, so Bob was now partnering with two large cable systems, Time Inc. and TCI (i.e., John Malone). And BET was a 24/7 network.

Sales & Marketing

Bob had no sales or marketing staff, so he struggled to sell advertising or convince cable operators to carry BET. His relationship with Time Inc. solved this problem. For $450,000 a year, Time agreed to manage BET’s marketing and affiliate sales using experienced HBO employees. This deal jump-started BET’s charging per-subscriber fees to cable systems, a new revenue stream. BET also leveraged Time Inc.’s lawyers for negotiations and its engineers for developing BET’s technical skills. After several years, BET gained expertise in these areas. The partnership ended in 1988. Bob hired a sales leader and built a sales team. By 1991, BET reached 53% of US homes wired for cable and reported $50 million in annual revenue and $9.3 million in annual profit.

Finance & Capital Markets

Bob knew nothing about raising money or about capital markets, which put him at a resource disadvantage. Luckily, his first investor, John Malone, was a financial engineer and master capital allocator who sold TCI to AT&T for $48 billion. Bob sought his counsel on capital-related issues. Malone was instrumental in Bob using savvy tactics in the early years, such as paying interest on $8 million of debt by issuing additional BET shares while not diluting Bob’s or Malone’s stakes. Malone planted the idea of BET capitalizing on a booming stock market by going public. He coached Bob through the IPO process, and the company’s stock began trading on NYSE in 1991. He helped Bob navigate BET buying Time Warner’s equity for a discounted $58 million (it was worth $191 million two years later). And he advised Bob to take the company private again, which he did in 1998 at a $1 billion valuation. Malone was at Bob’s side for the pinnacle of his career: negotiating and selling BET for $2.3 billion in stock to Sumner Redstone and Viacom.

Bob’s tactic of leaning in to his natural strength—relationships—was masterful. Using the expertise and assets of his partners kept him from wasting time and making mistakes while simultaneously lessening his weaknesses.

You can listen to audio versions of my blog posts on Apple here and Spotify here.

This weekend I read Brett Pulley’s The Billion Dollar BET: Robert Johnson and the Inside Story of Black Entertainment Television. Pulley details Robert “Bob” Johnson’s path from poor kid from Mississippi to cofounder of BET and billionaire.

When Bob landed John Malone’s investment in BET, he’d never run a business. He asked Malone for advice (after getting the investment check). Malone was direct: “Get your revenue up and keep your costs down.”  Bob took that advice to heart and combined it with a mercenary founder mentality to find a profitable content strategy.

Bob couldn’t afford to produce content on par with broadcast networks like NBC and CBS. He needed something else. Music videos were the new craze, but Black artists weren’t being played on MTV. BET got promotional videos from record labels free of charge and aired them. Viewers loved them, and artists loved getting national exposure.

Bob had hit on a winning strategy: Find a form of entertainment with high Black demand not being satisfied by other networks and a large supply of Black talent. By connecting supply to demand, he added value to both sides. Also important was that the talent valued the national exposure it couldn’t get anywhere else and didn’t expect much, if any, compensation. Bob had found a highly profitable content strategy.

ESPN launched and was a success. Bob noticed that ESPN didn’t broadcast games played by Black colleges. BET began broadcasting football and basketball games from well-known Black colleges such as Grambling and Jackson State. He made sure to broadcast the half-time performances of school marching bands and dance teams, something Black communities enjoy to this day. BET could broadcast games for less than $15,000 per game, while networks like ABC paid up to $50,000 per game. Black colleges enjoyed the national exposure, viewers enjoyed watching games they couldn’t watch anywhere else, and BET got exclusive low-cost programming.

Bob also noticed there were many talented but undiscovered comedians. BET launched ComicView, and the show became one of its most successful shows ever. The show propelled the careers of now-famous comedians such as D.L Hughley, Cedric the Entertainer, and Kevin Hart. Keeping costs down was taken too far, though. The result was a mini public relations crisis. BET learned from this and modestly increased pay to comedians and moved production from Los Angeles to Atlanta, whose comedians were plentiful and non-union. A one-hour episode of ComicView cost $18,500 to produce—while “inexpensive” half-hour sitcoms cost big networks $500,000 an episode and hits like Friends cost over $6 million an episode.

Bob’s focus on entertainment content gained him critics in the Black community. But his goal was clear: generate profits and become wealthy. He aligned his content strategy with that goal. Advertisers were paying BET rates that were less than half of those they paid MTV and other networks, yet when Viacom acquired BET for $2.3 billion in 2000, BET’s profit margins were the highest in the industry and strongly influenced Sumner Redstone’s decision.

You can listen to audio versions of my blog posts on Apple here and Spotify here.

Reading about John Malone and TCI’s early BET investment led me to Sheila Johnson and Robert “Bob” Johnson, BET’s founders. I read Sheila’s autobiography and just finished reading The Billion Dollar BET: Robert Johnson and the Inside Story of Black Entertainment Television by Brett Pulley. The book details Bob’s journey before, during, and after BET.

Bob Johnson grew up a poor kid from Mississippi and was the first person in his family to attend college. But Johnson didn’t let his starting position define him. He found creative ways to overcome obstacles. How he launched BET is a great example.  

Johnson was a cable association lobbyist. He knew Malone needed low-cost programming that appealed to the large Black audience covered by a cable system Malone acquired in Memphis, Tennessee. Johnson saw an opportunity to create a nationwide Black cable network. Johnson understood the cable industry at a high level—but not how to start a cable network. He needed a plan.

Ken Silverman was launching a network for viewers age 50 and older and asked Johnson to lobby for him. Johnson realized that Silverman’s plan was a blueprint that could be applied to the network he envisioned. He got Silverman’s permission to modify and use the plan. Johnson changed “elderly” to “Black” and had a plan demonstrating that his idea made business sense.

Johnson still needed capital. He needed time on a satellite to transmit his channel to various cable systems, which was a major expense. He budgeted $10 million for leasing a satellite and other start-up expenses. An investor was interested in his idea, but $10 million was too much—more than the investor’s entire fund. Raising $10 million wasn’t an option.

Bob Rosencrans had just started what would become USA Networks. Rosencrans was leasing a satellite but had two problems: He didn’t have enough programming to fill time slots 24/7, and he needed to increase subscriber revenue (so he needed more subscribers). Johnson saw an opportunity. He asked Rosencrans to give him two hours on Friday nights free of charge for Black programming. That would help Rosencrans, so he agreed.

Johnson's original plan required a satellite lease and a studio to transmit to the satellite. His agreement with Rosencrans eliminated those costs, so he needed only a fraction of the $10 million he originally sought.

With a business plan in hand, distribution in place, and a lean $500,000 start-up budget, Johnson pitched Malone. Malone was impressed. He invested $180,000 for 20% ownership in BET and provided a $320,000 loan.

Johnson had zero entrepreneurial experience, but nevertheless he managed to reduce the amount of investor capital he needed to raise by 95% and turned his idea into reality by leveraging partnerships. If Johnson couldn’t overcome a hurdle or didn’t understand something, that didn’t stop him—he found someone who could help him and creatively partnered with them. His use of partnerships has been a key strategy throughout his career.

Prefer listening? Catch audio versions of these blog posts, with more context added, on Apple Podcasts here or Spotify here!

I was disappointed in myself for not consistently recording audio versions of my blog. Yesterday I figured out what was tripping me up and what changes were needed. Today I implemented those changes and recorded twelve audio posts. I’m happy to report that I’m all caught up!

Now, I’m focused on staying current and getting reps daily to improve the quality of the recordings and, eventually, my storytelling skills.

A few takeaways from today’s recording session:

• Mindset matters – Shifting my mindset to getting practice reps helped. I felt more relaxed, and the words flowed more smoothly.
• Mistakes – I didn’t sweat the small errors. I rerecorded when I made big mistakes (like coughing loudly mid-sentence). After listening to the small errors during playback, I decided they make the recordings more authentic. I’m not the only person who stumbles over words occasionally, so why take that out? We’ll see if my thinking evolves on this, but right now, I like the idea of being human (flaws and all) in these recordings and not a perfect robot.
• What I like – I now think about recording what I want to hear, not what I think other people want to hear. If I like the recordings, then others will like them too. If I don’t like them, then no one will.
• Talking to yourself – Talking to yourself is harder than I imagined, and listening to yourself talking to yourself is even harder. I have more respect for people who do this regularly at a high level. It’s simple but far from easy.
• Books – I’ve been reading at an accelerated clip lately. The posts sharing takeaways from books are my favorites. Reading and writing about what I learned from my reading is a powerful combination. I knew this already, but hearing these recordings reinforced it and motivated me to do more of this kind of post.

I’m energized about getting this habit formed. I think good things will come from it. I don’t know of anyone who blogs and records their blogs every day. I’m excited to see if I can accomplish something hard that others can’t or won’t do.

You can listen to audio versions of my blog posts on Apple here and Spotify here.

I didn’t record or publish a single audio version of my blog this week. The reasons don’t matter. I failed to do something I committed to doing, and it’s been nagging at me for two days. I expected the audio launch to be like the blog launch on March 9, 2020. I started writing daily and haven’t stopped since.

Today I reflected on what I need to change:

• Accountability – I launched the written blog as part of a 60-day challenge with my friend. The challenge was an accountability tactic and helped me form my writing habit. I need to add more accountability to this audio project. I’m going to tell more family and friends about it. I’ll ask those interested in following to consider subscribing via a podcasting app. I’ll also give those interested permission to ask me how it’s going.
• Rhythm – I’ve been trying to do two audio recordings every other day. That didn’t work because I never formed the habit. The gap between recording days hurt me. My personality is best suited to zero days off until the habit is formed. I wrote for 60 days to form that habit. Now I need to record for 30–60 days straight to form the audio habit.
• Format – I tested reading my blog posts verbatim and summarizing them in a more conversational format. The conversational format sounded better, and I tried to do more of that. It was a mistake. I’m new to recording, so I ended up doing multiple takes for a single post, which was frustrating and time-consuming. I need to start simple and read the posts verbatim. Slowly I can make each daily post a little better than the day before until it’s more conversational—or whatever format I settle on. I need to focus on getting the most recording reps possible, not making each recording perfect. If I do this, over time, the quality will improve. It will be painful to listen to all my mistakes every day in the meantime.
• Editing – After a few recordings, I edited them to make them sound better. That was another mistake. It wasn’t a good use of my energy and time because it didn’t align with my goal. My goal is reps and continual progression. I’m not going to edit a recording until this habit is fully formed. I’ll publish each post as is or rerecord the whole thing if I don’t like it.

It's important to me to form a daily audio blog habit. It’s a stepping-stone to a bigger audio project I want to do. I know what I need to change going forward to increase my chances of getting this habit entrenched and making the bigger audio project a reality. Wish me luck!

You can listen to audio versions of my blog posts on Apple here and Spotify here.

This is my two-hundred-sixteenth weekly reflection. Here are my takeaways from this week:

• Routine – This week, I was forced to change my morning routine. I thought the change served me well. But today, I reflected on my week and realized that it felt good because it was different. However, it played a significant role in my output decreasing. Next week, I’m going back to my normal morning routine. This week was a reminder to think hard before changing a routine that’s working well.
• Audio blog – I made no recordings this week. I’m disappointed in myself for letting this slip so much. I can’t let it happen going forward. I’ll work on catching up and making this a daily habit.
• Gaps – I had the chance to be part of a fireside chat. The audience was small business owners. These entrepreneurs are smart and work hard. The experience was a reminder that early-stage entrepreneurs in traditional businesses have large gaps around strategies for obtaining growth capital, as well as other areas.

Week two hundred sixteen was another week of learning. Looking forward to next week!

You can listen to audio versions of my blog posts on Apple here and Spotify here.

I finished reading Distant Force: A Memoir of the Teledyne Corporation and the Man Who Created It. The book didn’t give me as much detail about Henry Singleton’s struggles as a founder as a biography would have. But it did provide details of strategies that made him a great master capital allocator and entrepreneur and that made Teledyne successful during his tenure as CEO.

Here are a few things about Singleton that stood out to me:

• Age – Singleton didn’t found Teledyne until he was 43.
• Missionary founder – From the start, Singleton was very clear about what he wanted to build. When asked, he replied, “I’m trying to create another GE.” Singleton was solely focused on creating a conglomerate that rivaled General Electric. That mission informed his decision-making over the next thirty years.
• Growing market – Singleton recognized the importance of semiconductors when the technology was still new and unknown. Because of the growth potential of the semiconductor market, he made it the base of Teledyne. In Teledyne’s early days, he bought small companies with growth potential in the semiconductor space. As the semiconductor market grew, Teledyne’s market grew rapidly, too.
• Cloning – Singleton knew that a lot could be learned from others. He was open to borrowing ideas. His foray into insurance was borrowed from a book written by GM’s chairman. The chairman learned, through a painful experience involving failed financing, that a growing public company with a strong financial base needs an internal finance company. Singleton borrowed this idea and expanded by building a massive insurance operation. Years later, Warren Buffett apparently borrowed from Singleton’s insurance playbook for Berkshire Hathaway.
• Zigzagging – Singleton was a first-principles, independent thinker. He was flexible in his thinking and execution. As market conditions changed, so did his thinking and strategy. He quickly adapted to new realities and often took actions others considered abnormal. For example, when the P/E multiple of Teledyne’s stock went from a range of thirty to seventy times earnings (overvalued) in the 1960s to roughly nine times earnings (undervalued) in the ’70s and ’80s, he stopped acquiring companies with Teledyne stock beginning in 1969. He began aggressively repurchasing shares in the ’70s and ’80s. This was unheard of at the time, but eventually it was mimicked.
• Twin tailwinds – Singleton recognized and took advantage of two simultaneous forces. More details on this here.
• Cash flow and profits – Singleton focused on making sure revenue was profitable and that customers were paying promptly. He created a metric to measure this consistently across Teledyne’s hundreds of operating companies. More detail on this here.

I enjoyed learning about Singleton and Teledyne. I’m glad I was able to locate a copy of this hard-to-find book.

You can listen to audio versions of my blog posts on Apple here and Spotify here.

I’m finishing Distant Force: A Memoir of the Teledyne Corporation and the Man Who Created It. The book details Teledyne’s rise from inception to conglomerate with billions in revenue and hundreds of operating companies. This book interested me because I was curious to learn the specifics of how Henry Singleton developed and executed his capital allocation strategy—the same strategy Warren Buffett likely borrowed from to build Berkshire Hathaway.

The book details how Teledyne managed its sprawling operations and evaluated the performance of each operating company. I assumed that Singleton used free cash flow or something similar to measure each operating company’s financial performance. I was wrong. Singleton created his own metric, the Teledyne return, which measured profitability and net cash flow in a single number.

The Teledyne return was an average of net cash flow and profit. The book gives the following example:

• Reported profit: $1,000,000
• Reported cash flow: $500,000
• Teledyne return: $750,000 = ($1,000,000 + $500,000)/2

The company’s thinking was this: Your profit was $1,000,000, but you received only $500,000 in cash. We’ll credit you fully for profits booked and received as cash. We’ll give you credit for some of the profit booked but not yet collected.

This single metric forced company presidents to focus on profit and cash flow simultaneously. It also allowed Teledyne corporate to standardize its comparison of operating company results.

I’ve seen profits or cash flow used to evaluate financial performance, but I never thought a singular focus on either made sense. When I ran my company, I kept a close eye on free cash flow and net income. By looking at both, I was ensuring that we were generating profitable revenue and that we collected revenue faster than we had to pay our expenses.

Singleton’s Teledyne return is a creative way to force managers to focus on what matters most. For entrepreneurs it’s a financial metric worth considering if it makes sense for their specific business.

You can listen to audio versions of my blog posts on Apple here and Spotify here.

After reading The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success, I wanted to learn more about the CEOs profiled in the book. I was especially interested in Henry Singleton, given that Warren Buffett likely borrowed from Singleton’s playbook when building Berkshire Hathaway.

Singleton didn’t do many interviews, and no one has written a biography about him. I managed to dig up Distant Force: A Memoir of the Teledyne Corporation and the Man Who Created It. It’s hard to find, but I got lucky and started reading it.

Singleton went on an acquisition spree during Teledyne’s early years in the 1960s. Two things likely led to Singleton embracing this strategy and making it so effective:

• The stock market valued Teledyne richly in the 1960s, and Singleton shrewdly took advantage. He used Teledyne’s stock as currency. Teledyne traded at a double-digit P/E multiple ranging between thirty to seventy times earnings (i.e., high valuation) as a public company, while smaller, private companies were valued at single-digit P/E multiples of roughly nine times earnings (i.e., lower valuations). Singleton recognized this arbitrage and paid for his acquisitions using overvalued Teledyne stock.
• World War II took place mostly in the 1940s. New technologies were created, and many small companies were founded to help the war effort. After the war, veterans benefited from the G.I. Bill, receiving tuition-free college educations, from which they learned new technologies and methods. This combination of newly educated and tech-savvy veterans and a wave of new technology led to a boom in entrepreneurship in the 1940s and 1950s. By the 1960s, many of these small companies had matured, and the founders were ready to sell or needed growth capital to reach the next level.

Singleton’s genius was in recognizing that he was positioned to benefit from twin tailwinds. Two forces were occurring simultaneously, and he crafted a strategy to take full advantage of both. There was a large supply of entrepreneurs interested in being acquired, and he could fund acquisitions using richly valued Teledyne stock instead of cash. His strategy led to over one hundred companies being acquired in a decade and Teledyne growing from $4.5 million in revenue and $58,000 in profit to $1.3 billion in revenue and $60 millions in profit annually by the end of the acquisition spree.

You can listen to audio versions of my blog posts on Apple here and Spotify here.

Today, I finished reading The Almanack of Naval Ravikant by Eric Jorgenson. The section on wisdom and judgment caught my attention. He starts by defining the two:

• Wisdom – Knowing the long-term consequences of your actions
• Judgment – Wisdom applied to external problems

Then he says they’re tightly linked. You need to know the long-term consequences of your actions and then capitalize on that understanding by making the right decision to get the desired outcome.

Naval says judgment is underrated but most important in the modern leverage age. One correct decision can lead to a massive win.

Entrepreneurs learn from experience—their own or others’. Experience gives them the wisdom to understand what actions are available and the likely outcomes of each.

Wisdom is helpful in itself, but as Naval says, applying it is most important. How to apply wisdom to your situation isn’t always obvious or easy, but the most successful entrepreneurs I know have mastered applying wisdom to get the outcome they want.

Your ability to apply wisdom—what Naval calls judgment—is the key to outsize entrepreneurial success.

You can listen to audio versions of my blog posts on Apple here and Spotify here.