November
26Ted Turner’s Lesson in Economic Self-Destruction
An important upshot of the current economic crisis is that the so-called experts have finally come to conclude that everything is too damn big. “Citi Faces Pressure to Slim Down,” cries a headline in the Wall Street Journal.
So it’s reasonable to ask, how did we let entities like Citi or AIG grow so powerful as to become unwieldy nation-states onto themselves?
For insights I decided to read Ted Turner’s new memoir, “Call Me Ted,” a tell-all in which the Mouth of the South explains his remarkable rise and fall. Ted had built a formidable news network, CNN, and was busily expanding it when he got caught up in merger-itis.
In his book, Ted explained how things were going great at CNN throughout the mid 1990s – until greed set in. There were sharks in the waters. Jerry Levin at Time Warner was hungry for a deal to get his stock up. Rupert was, as usual, hunting. So was Malone. Michael Milken gave advice to Turner that made him fret about his vulnerability (that was his stock in trade).
So Ted convinced himself that since Time Warner’s stock was trading well below where it belonged, he could safeguard CNN and also make millions more through a merger. Besides, Levin had made him all sorts of promises – Turner could run not only CNN but also HBO and other assets as well.
Of course he lied. Ted was soon basically out of a job. And soon Levin & Co were on yet another path – a $160 billion deal with AOL that ultimately was to pollute Turner’s nest egg (along with everyone elses).
Why did the deal take place? Ted supplies the usual euphemisms: Wall Street craved it. Investors demanded growth. Gurus like Milken were saying that “The AOL-Time Warner deal would create a value substantially more than Time Warner was worth.
Folks within the empire, like Jeffery Bewkes, did not share Levin’s exuberance for the deal. Ted Turner himself learned about it at the last minute at a time when he was consumed with his divorce from Jane Fonda.
Turner explained his misgivings to Levin, who replied by informing him that he was fired. Within two years Ted would loss 80% of his worth.
Hence both Time Warner and Turner ended up transforming companies that were profitable and purposeful into huge corporate blobs whose only purpose was to earn fees for investment bankers.
How does Turner feel about all this? “Sad and frustrated,” he says.
And that’s the way the rest of us feel as we see the Time Warner-Turner scenarios replicated across our economy. Once productive executives become sidelined, productive enterprises become paralyzed.
Ted Turner at least has millions of acres to prowl across and can stare at his herds of bison. Others aren’t so lucky.
(Photo by Thomas James)
So it’s reasonable to ask, how did we let entities like Citi or AIG grow so powerful as to become unwieldy nation-states onto themselves?
For insights I decided to read Ted Turner’s new memoir, “Call Me Ted,” a tell-all in which the Mouth of the South explains his remarkable rise and fall. Ted had built a formidable news network, CNN, and was busily expanding it when he got caught up in merger-itis.In his book, Ted explained how things were going great at CNN throughout the mid 1990s – until greed set in. There were sharks in the waters. Jerry Levin at Time Warner was hungry for a deal to get his stock up. Rupert was, as usual, hunting. So was Malone. Michael Milken gave advice to Turner that made him fret about his vulnerability (that was his stock in trade).
So Ted convinced himself that since Time Warner’s stock was trading well below where it belonged, he could safeguard CNN and also make millions more through a merger. Besides, Levin had made him all sorts of promises – Turner could run not only CNN but also HBO and other assets as well.
Of course he lied. Ted was soon basically out of a job. And soon Levin & Co were on yet another path – a $160 billion deal with AOL that ultimately was to pollute Turner’s nest egg (along with everyone elses).
Why did the deal take place? Ted supplies the usual euphemisms: Wall Street craved it. Investors demanded growth. Gurus like Milken were saying that “The AOL-Time Warner deal would create a value substantially more than Time Warner was worth.
Folks within the empire, like Jeffery Bewkes, did not share Levin’s exuberance for the deal. Ted Turner himself learned about it at the last minute at a time when he was consumed with his divorce from Jane Fonda.
Turner explained his misgivings to Levin, who replied by informing him that he was fired. Within two years Ted would loss 80% of his worth.
Hence both Time Warner and Turner ended up transforming companies that were profitable and purposeful into huge corporate blobs whose only purpose was to earn fees for investment bankers.
How does Turner feel about all this? “Sad and frustrated,” he says.
And that’s the way the rest of us feel as we see the Time Warner-Turner scenarios replicated across our economy. Once productive executives become sidelined, productive enterprises become paralyzed.
Ted Turner at least has millions of acres to prowl across and can stare at his herds of bison. Others aren’t so lucky.
(Photo by Thomas James)
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Let's not forget that in 1985, Turner tried to take over (and failed) CBS. Then he tried (and suceeded) to take MGM/UA away from Kirk Kerkorian's Tracinda Corp. He paid for the deal with $1.4 billion in TBS junk bonds. This left Turner with about $200 million to run MGM for a year. Exactly 74 days later, he was forced to sell UA back to Tracinda, and a few days later sold the MGM name and logo to Tracinda as well. He then sold the back lot and film processing lab to Lorimar.
Don't tell me that Ted Turner was "pushed" or "deluded" or "informed at the last minute." He was deeply involved in corporate raids and mergers long before his deal with Time Warner.
Posted by: Tim1965 | 11/30/2008 6:59:29 PM
Ted Turner said that he wasn't going to transfer his wealth to his children. He said he was going to make them earn it. He used to cut his own hair to make a buck. I think he made his bed but as the biggest land-holder in the U.S. it's a mighty big bed.
Posted by: Scooped | 11/28/2008 11:11:54 PM
Ya never know, in the end he may get the girl back.
Posted by: jack | 11/27/2008 8:30:44 AM
Like Gordon Gekko said in WALL STREET, “It's not a question of enough, pal. It's a zero sum game, somebody wins, somebody loses. Money itself isn't lost or made, it's simply transferred from one perception to another.â€
Posted by: MarkMandel.com | 11/27/2008 8:08:28 AM