Barry Diller’s System, Part I: Diller’s Roots.
"You won’t be able to imagine the level of energy and commitment and the things you have to give up if you really want to do something like this."
This is the first piece of a two-part deep dive on Barry Diller. Part II.
Why Diller? Yesterday, I heard a quote by Dan Zwirn: “the best value investors are as comfortable with securities as they are with operating companies.” I agree. Great businesspeople often straddle the worlds of investing and operating. They are capital allocators, leaders, and creators. Guided by a set of principles they defy the labels of the investor, the entrepreneur, the Chief Executive, the operator. They are multi-faceted and multi-dimensional: they express themselves and their craft in public and private markets, through control and minority stakes, by building, acquiring, and selling assets.
I found Barry Diller to be a great example of someone who married the operating and investing worlds. After rising to the top of Hollywood, he left to take a road trip to the future and built IAC, the “anti-conglomerate,” which acquires, incubates, operates, and spins off technology companies. He has been highly successful: an investment in IAC’s predecessor Silver King, at the time that Diller took control, would have compounded at 16%.
After starting his career at a talent agency, much of Diller’s success can be traced back to his ability to cultivate a different kind of talent. His ability to find, mentor, and develop executives was crucial to his success. He leveraged generations of hungry managers to source ideas and opportunities. He routinely gave his people a hard time, something he called “creative conflict” (and that has been described as an “aggressive advocacy and yelling system”), to unearth their highest conviction ideas. Finally, he “pushed responsibility down” the hierarchy to train and test his people. Diller gained responsibility at lightning speed, was often promoted “out of his competence.” He practiced the same in his companies, “throwing people into the water” to get a “window into their real character.” He let his people take risks and responsibility and promoted them when they flourished. And in the same way that IAC spins off companies as they mature, Diller now finds himself with a diaspora of execs he once mentored.
Diller’s arenas were television, Hollywood, and the Internet. But the lessons of his unique style are relevant to anyone trying to solve the universal business puzzle: the combination of ideas, people, and capital.
Here is how an experienced showrunner described the parallels between making a TV show and starting a business:
“This is what actually happened when a show got on the air: an inventor (I mean "a writer") had an idea. Through a series of channels ("agents") the inventor went to a venture capitalist ("a studio") and got some guidance about developing the product. Together they then took it to a retailer ("network") who agreed to front money to build a prototype ("pilot"), and later, based on that prototype and their extant successes and projected needs (the "shows that they kept from last year and the ones that got cancelled"), they decided to put the entire product line (the "series") on their department store windows (their "air").”
IAC’s CEO Joey Levin wrote “the IAC Way pairs scrappiness and big ambition with the rational patience of permanent capital.” We can find the origins of this philosophy all over Diller’s career.
This first piece will highlight key moments from Diller’s life prior to IAC. In a second (premium) piece I will dive into his system of discovery, debate, and development and highlight some example stories. (For a quick primer on IAC, check out The Generalist. For a perspective on IAC and other stocks in Diller’s universe, take a look at Andrew Walker’s writings. This is not investment advice!).
“What we do to exhaustion, irritation, and, finally, insanity is make arrangements, not movies.”
“I got hired with no experience, no nothing, somebody just took the flyer, as they say. So I have always believed to hire people, bring people into your organization who are young, and who are inexperienced for the job that you give them. And sometimes that works, and sometimes that doesn't work.”