The Intelligent Investor's Mistakes: Warren Buffett: 38 Buffett’s Investment Stories, Gain Wisdom, Master Risk and Maximize Profits to Build Enduring Wealth

by Balaji Kasal

Fort Worth NBC had been running a TV station since 1948. The station had a different name then. Tom Murphy ran Capital Cities Communication and planned to buy the Dallas-For-Worth NBC station. The Carter family owned it. The offer came with the Fort Worth paper. In 1974, the USA's Federal Communications Commission (FCC) made a ruling, prohibiting “cross-ownership” in the same region. Murphy turned to Buffett to sell the station for $35 million. Buffett didn’t take the offer. Murphy was Buffett’s friend. He knew Buffett’s investing style and was sure the Station would add value to Berkshire. Also, Buffett admired Murphy for his business acumen and character. Buffett knew TV stations needed little capital to operate and would have an excellent future. Murphy himself was an expert in the station business and understood the ins and outs of it. In short, he offered future cash flows and assets to Buffett… but, Buffett just ignored it. Fast forward to the 2007 Berkshire annual report: Buffett valued the property at $800 million. The station was earning $73 million before taxes and it earned up to $1 billion since he had turned down the offer. Buffett's own words [2007 AR]: “I knew that TV stations were See’s-like businesses that required virtually no capital investment and had excellent prospects for growth. They were simple to run and showered cash on their owners… In effect Murph whispered “buy” into my ear. But I didn’t listen… Why did I say “no”? The only explanation is th...