I like to think I am well read. When Lindsey and I started this journey of newspaper ownership over seven years ago, we didn’t do it blind.
We read “The E-Myth” by Michael E. Gerber and “Brewing Up a Business: Adventures in Beer from the Founder of Dogfish Head Craft Brewery” by Sam Calagione before we ever signed the dotted line for our first paper, The Clarion.
Since then, I have read anything I can get my hands on about Mark Cuban and have read books like “Extreme Ownership: How U.S. Navy SEALs Lead and Win” by Jocko Willink and Leif Babin, “Shoe Dog: A Memoir by the Creator of Nike” by Phil Knight, and even “The Snowball” by Alice Schroeder, which is a very intense biography of Warren Buffett.
Those books above are just a few of the things I have taken in over the years and some of my favorites, and they are part of my effort to constantly be learning about business and leadership as we forge ahead in our entrepreneurial journey.
“The Snowball” gave great insight into Warren Buffett. What made him tick, what sorts of investments he has made and why, mistakes he has made throughout life, and genuinely shows why he is one of the true geniuses of our time.
He just gets investing. On top of that, my draw to Buffett was partially his overwhelming love for newspapers. He is an avid reader of the Omaha World-Herald, one of his later properties, and of the Wall-Street Journal, where he would get advance copies flown to him wherever he was so he would make sure he could read it in the morning if there wasn’t a copy.
Buffett, as a child, used to have a newspaper route as one of his many hustles and managed to make pretty good money doing that and several other brilliant things, including setting up pinball machines in local barber shops as a way to bring in passive income. He did this before he was out of high school.
The guy, for all of his flaws, is someone who has always known how to make money.
So, with my obvious admiration, it would be suitable for most to assume that I am nervous about my own future in the newspaper business now that Warren Buffett has thrown up his hands and moved on, selling his newspaper holdings to Lee Enterprises recently.
While I had hopes that Buffett would figure out how big public companies like Berkshire-Hathaway could make national newspaper chains work in a public investment environment, I was dubious it would work when he got into the business. Newspapers aren’t textile mills, Coke, or insurance companies.
Everything I know about newspapers is that when investors are involved at a national level, with no connection to the communities the newspapers serve, there isn’t a lot of hope for success.
Great companies like Knight, which used to own the Wichita Eagle, got overwhelmed by the pressures of being a public company when they merged with Ridder and became Knight-Ridder and opened up the business to public investing. There is a great book about this called “Knightfall” by Buzz Merritt.
While public investing brings in plenty of cash in the short term, investors expect returns quarterly to keep their money in the company. That formula regularly doesn’t work with a newspaper, which is more of an intimate thing with a community.
While it’s nice to have scale for national advertising and the purchase of paper and ink, national strategies cooked up from thousands of miles away don’t always work in each market. What people in Omaha want out of their newspaper is different from those who live in New York, for example.
When our industry was rocked by the digital disruption that is the Internet and now social media, the markets just couldn’t wait for companies to figure it out. They still wanted those fat returns.
So, big public newspapers companies ,with nowhere to turn for new revenue in the short term and many with huge debt loads because they couldn’t see the digital disruption on the horizon, did the only thing they knew how to do with the public breathing down their necks for returns.
Then the implemented strategies for cut-down staffs to still put out a newspaper—just a more cookie-cutter and easy version. They made them look the same with national design hubs. Some even went as far as outsourcing design overseas.
They asked reporters to tweet, shoot video, and write a certain number of stories a day to stay employed.
They pounded the very people who made the local newspapers great into the ground and then asked for more, all so the investor would be happy.
The thing is, while I hoped Buffett wouldn’t be like the other public chains, he ended up doing exactly what they did to make things work for his company. There was no cure-all for the publicly traded companies, at least not one Buffett and Berkshire-Hathaway would figure out.
Through my observations, I have figured out that the secret sauce to owning and operating a newspaper is to have a good handle on what is happening in the communities you serve, serve them, and cover government like a bulldog.
We aren’t perfect at these things, even at our scale, which is regional at best. I have made plenty of mistakes that have cost our company thousands of dollars. We tried to start a paper in Maize that fell hard on its face.
If we were public, our overall company wouldn’t have survived any of that. We didn’t provide enough returns for a few quarters, so we would have cut limbs off to make it happen, instead of bootstrapping ourselves back into a profit.
The thing is, the Knight group wasn’t really wrong when they went public so long ago. They knew that they could bring in a lot of capital easily without giving up control of their papers. What’s wrong with that? When they went public, it kind of made sense.
Things change, though, and newspapers don’t have the license to print money like they used to prior to the digital disruption in the 1990s, and people investing still want returns like they do. This requires change, and it requires things to go back to the way they used to be when newspapers were held by people who lived in the communities they served and were accountable to those who lived there.
Why is that?
Those are the papers that are still churning a profit and making things work, that is why. They know that a 30-percent return isn’t going to happen, so they ride out a few years at an eight-percent return and work toward better days while trying to pay down debt.
Those publishers care about the communities they serve, so cutting to the bone just to eke out a few dollars isn’t smart business. It’s about the longterm vision. They have to see those subscribers in the local store the next day, so it better be.
So, am I worried that Warren Buffett sold his papers? Of course not.
The big public chains, on the other hand, should be.