Entrepreneur profile: Craig McCaw - cellular phone industry grand-father
May 19, 2014
It’s fair to say that some entrepreneurs are born with money or into dynasty’s that stretch a long way back – although we tend to call them heir’s and heiresses more so than entrepreneurs. However, like many successful entrepreneurs they only reach the bench mark of “made it” after learning a series of lessons that has shaped their business career, thoughts on how to invest strategically or read market trends.
One such person is Craig McCaw. Born in Centralia (Washington State) he was one of the earliest pioneers of the cellular industry in the United States. Craig is the second of four sons of Marion and John Elroy McCaw. McCaw's father was a broadcasting magnate. He was in the business of buying and selling TV and radio stations, which brought in wealth but also incurred significant debts. Elroy entered the cable television business in the 1960s, and his four sons worked as linesmen and door-to-door-salesmen.
When Elroy died, the only company not sold to repay the debt was the small Centralia cable company with estimated 2,000 to 4,000 subscribers, which was in trust. During his senior year at Stanford, Craig took the helm of the cable company and set out to rebuild his family name. He used the cash flows from his growing cable company to purchase other remote cable companies, resulting in a profitable conglomerate. By the 1980s, McCaw Cablevision was the 20th largest cable carrier in the United States. By snatching up undervalued cellular licenses in the 1980s, the wireless pioneer built McCaw Cellular into one of the largest network providers in the U.S. The company sold to AT&T for $11.5 billion in 1994. Later ventures with Teledesic, a satellite communications venture launched with funding from Bill Gates, and broadband provider NEXTLINK, both ended in bankruptcy. Efforts with Clearwire and Nextel fared better. McCaw is currently worth $1.5 billion.
In an earlier article Charlie Munger outlined a dozen lessons he learnt from Craig McCaw when they both worked in the same industry and then as a partner at Eagle River which was a private equity form established by Craig. Eagle River Investments LLC is a venture capital firm. The firm typically invests in telecommunications and technology companies. Eagle River Investments LLC was formed in 1993 and is based in Kirkland, Washington.
Take a look at the dozen lessons learnt from this serial entrepreneur:
1. “If you aren’t scared you probably aren't doing anything.” Life is filled with risk, uncertainty and ignorance. If you are doing something and aren’t a little scared you are not paying attention. Ben Horowitz made the same point in his new book: “… being scared didn't mean I was gutless. What I did mattered and would determine whether I would be a hero or a coward.”
2. “We are trying to make as few mistakes as we can.” A great way to be smart, is to not be stupid. This is a highly underrated approach advocated by people like Charlie Munger.
3. “Being first is not always best.” Craig McCaw said to me more than once: “Pioneers often get arrows in the back.” You can learn from the many people who have failed before you. Nassim Taleb calls this via negativa. Sometimes all of the forces in the business and engineering worlds are perfectly aligned to create financial success and sometimes that is not the case. Timing can be everything.
4. “Flexibility is heaven.”Having the option to make the best choice at a later point in time when you have more information is valuable. Craig McCaw often spends money to preserve his ability to have multiple options.
5. “You make decisions on long-term planning, not on short-term changes in the environment.” The world is unpredictable enough that making decisions based on short term changes in markets is unwise.
6. “I hate the orchestration of life. Most executives die frustrated (because) they have been orchestrated into boxes.” There is a lot of optionality in serendipity. Having the option to change your schedule and activities has great value. Craig McCaw enjoys nothing more than going for a ride in his seaplane to a beautiful spot for lunch. Getting out of the office makes you think differently. Some of the happiest times in my life were afternoons I spent in that seaplane.
7. “I approach things differently than other people.” “A dyslexic tends to be more conceptual and do things which other people wouldn’t see as obvious. So maybe it’s a strategic asset . . . I can’t go to a piece of paper and organize things as most people would in a way that they could understand and come up with a plan. “I have to explain conceptually what we want to accomplish, and then somebody else has to translate that into a concise organized plan.” “I think the way I look at things gives me a different perspective. I’m most valuable when I work with a team of bright people who complement my weaknesses with their strengths.” “I think I had trouble fitting as a dyslexic. I don’t think like other people, so I don’t fit very well in a clique. As a result of that I have trouble quantifying people as directly as others. I look at their ideas, rather than at them so much as individuals… if you pass autonomy as far down in any grouping of people as you can, you will get extraordinary results if you ask for a lot. The greatest burden you can put on someone is trust.” There is huge value in team diversity in the broadest possible sense and in knowing your limitations. Hiring people who complement your skills is wise. Ben Horowitz said in his book: “Looking at the world through such different prisms helped me separate facts from perception.” I would expand on that to say a diverse group of people on a team accomplishes much the same result.
8. “We have always tried to have the discipline of being over financed so if you had a problem over a period of time you could survive it.” “Borrowing money was a tool for us because of the businesses we were in –cable television, cellular telephone, paging — all were very capital intensive. In a perfect world, you don’t have that. It’s easier if you don’t have it, but it’s the leverage to make a lot happen, either pro or con. As long as you believe in the pro, and you've thought out how not to run out of money if things don’t go as you expect, then indebtedness, as it were, ups the ante and makes everybody work harder, because you know the consequences of failing to deliver on your promises.” Debt destroys optionality, but if it is non-recourse, debt can give you optionality.
9. ‘’If you are going to set out on a voyage, remember the Titanic. The captain took risks he did not have to take, for ego.’’ Hubris can result in big problems. Being humble, especially when outside of your circle of competence, is wise.
10. ‘’My father was a visionary who did not hire great people. The company was too dependent on one person.’’ Craig McCaw hired extremely able managers to run his businesses and it showed. John Stanton, Jim Barksdale, Steve Hooper, Wayne Perry, Dan Akerson, Tom Alberg, John Chapple, Peter Currie, Tim Donahue, Maggie Wilderotter are just a few examples.
11. “When products aren’t right, people won’t buy it… people won’t come until there is something moderately rational. As you begin, you don’t expect it to be viable… This isn't an AK-47 [holding up a classic large brick phone], it was the original phone. You couldn't hold it for more than 15 minutes. It had 30 minutes of talk time, but you couldn't hold it up for that long. Things started slowly. The car phone was even worse because you had to take the car apart, and keep his car for a whole day….” If you give something to people in their interest, they will eventually realize it. If they don’t know it on day one, it really isn't important. It’s your job to think almost anthropologically about humanity and say, “What would be in their best interest?” “With cellular telephony… we saw an enormous gap between what was and what should be. I mean, [the fixed phone system] makes absolutely no sense. It is machines dominating human beings. The idea that people went to a small cubicle, a six-by-ten office, and sat there all day at the end of a six-foot cord, was anathema to me.” ”Human beings from the time they discovered seeds have been enslaved towards places.” Craig McCaw has a fantastic intuitive sense of what consumers will find valuable. When you watch him pick up a new product or use a new service for the first time you can see his mind racing.
12. “The industry is commoditizing when you look at one cent a minute. Is it even worth keeping track of?” Like Bill Gates, Craig McCaw understands that supply kills value. He also understands that selling something adjacent to that amazing increase in supply can allow a business to create huge profits.
Material contribution from: http://25iq.com/2014/04/19/a-dozen-things-i-learned-from-craig-mccaw/
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