Book Review: Confessions of an S.O.B.

Honesty!  How refreshing.  A person usually must be ruthless and political to get to the top of an organization. Al Neuharth, CEO of newspaper conglomerate Gannett (NYSE: GCI) from 1973-86 and founder of USA Today, freely admits in his autobiography Confessions of an S.O.B. that he followed such a path to the top.

In contrast, by reading H. Norman Schwarzkopf’s autobiography, one never learns about the critical role office politics plays in career building. According to Schwarzkopf, he got to the top of the military simply by doing what was right and leading by example.  In fact, he stated that he despised military men who “managed their careers.”  Yet, he probably wasn’t being honest about how he managed his own career. 

Katharine Graham was honest about not knowing the newspaper business when she took charge, but she was the owner of the paper and was born with a silver spoon in her mouth. She didn’t need to manage her career because of her ownership status. 

Roberto Goizueta was born into massive wealth in Cuba. His biography did explain the ruthless backstabbing of peers and flattering of superiors that won him the top job at Coke, but these facts only came out because the book was a biography (without Goizueta’s cooperation) rather than an autobiography.

Al Neuharth is an SOB: Not that there is Anything Wrong With That

Al Neuharth is different. He was born dirt poor in South Dakota and freely admits that he lived on the wrong side of the tracks. His father died when he was a baby.  He had nothing going for him except his wits. A real blue-collar type of guy.  The only way somebody like Neuharth was going to make it to the top was to fight and claw his way there.  He had to be an SOB to succeed.

Of course, his definition of SOB is a street fighter, not a scoundrel. A scoundrel would lie, cheat and steal to win.  I don’t think Neuharth is like that.  He likes to play games, like holding a board vote on Karl Eller’s motion to unseat him as CEO and pretending to Katherine Graham that he didn’t know who would win the bidding for the Wilmington newspapers, but these games were in good fun and were not malicious. Similarly, his “love letters” to his staff that criticized them for screwing up were crude, but they were meant to get results and improve the business and they worked. 

My favorite example of his non-malicious dishonesty involved during his merger discussions with CBS CEO Tom Wyman. In 1985, Ted Turner made a hostile bid for CBS and Neuharth offered to save CBS by having it merge with Gannett. During the discussions, Wyman allegedly told Neuharth that he wanted to be CEO of the merged company after Neuharth retired. Neuharth told Wyman that he would be disappointed if Wyman did not succeed him when, in fact, he vowed to himself that he would do everything in his power to ensure that Wyman never succeeded him! The merger between Gannett and CBS never happened, but the saga was a great example of how Neuharth operated.

Progressive on the Issues

There are many examples of Neuharth’s virtues.  For example, he rails against newspapers (e.g., the Washington Post) that utilize anonymous sources for its stories because it encourages inaccurate and false reporting. The letters between him and Ben Bradlee over the Post’s reporting of the Salomon downgrade of Gannett’s stock are hilarious!  He also criticized editors for imposing their ideological beliefs on the independence of newspaper reporters (e.g. Gannett’s Washington Bureau Chief Jack Germond).

On another front, he supported affirmative action, having changed Gannett’s board from all-male and all-white, to a multicultural mosaic of America.  He wanted Rosalynn Carter on the board, not Jimmy Carter because she was a woman and he already had enough white males!  He also hired Cathie Black as president of USA Today. Interestingly, he criticizes Kay Graham for not doing enough for women.  She was head of the American Newspaper Publishers Association (ANPA), but “should have pushed harder for other women.”

Neuharth attributes his success with women and minorities to the fact that he treats them the same as he would white men. He sure didn’t coddle Ms. Black because in one of his “love letters” to her he said: “Don’t you care how often you screw things up?”

Tactful to Those Above Him, An SOB to Those Below

Neuharth could  be tactful when necessary, especially to people in power.  For example, he sent expensive sunglasses to all the members of Gannett’s board. He also managed their emotions with regards to USA Today, by not telling them his real ambition for two years so that they would have time to absorb the idea in small increments. If he had told them upfront his grandiose plan, they would have rejected the idea.

He also criticized Tom Wyman for not showing enough respect to Walter Cronkite and William Paley, two pillars of CBS’s corporate culture. Wyman’s disrespect is probably one of the reasons Larry Tisch so easily ousted him after Loews acquired CBS. He acted as confidante to Mrs. Holderman of the Cocoa Beach Tribune and convinced her to sell the paper, and did the same thing with Barry Bingham of the Louisville Courier-Journal. He also recognized the importance of managing your boss by making his life easier. He tells the story of how he tried to get Paul Miller to promote him to Vice President by offering to help Miller get himself promoted to Chairman.

To Forgive is Divine

Neuharth was a fan of The Godfather movies (I and II, not III).  He liked the expression “keep your friends close, but your enemies closer.” This was shrewd strategy and helped him when Karl Eller, Chairman of Combined Communications, which merged with Gannett in 1979, attempted his coup d’etat against Neuharth’s leadership. Instead of screaming at Eller when Eller telephoned him of his intention, Neuharth stayed cool and collected and even offered Eller the company plane to go lobby the Board members. He did so in order to learn Eller’s game plan so that he could neutralize him. Very smart. Five months after Eller joined Gannett, he resigned.

Unlike the Al Pacino in The Godfather, however, Neuharth forgave his enemies. John Louis and Tom Reynolds were board members who supported Eller’s coup attempt, and yet Neuharth forgave them and let them stay on the board (Pacino ordered his brother Fredo murdered, by contrast).  Neuharth’s forgiveness paid off as both Louis and Reynolds turned out to be excellent and loyal board members going forward.  

Fortune Favors the Bold

One of Neuharth’s best qualities was his optimism and risk-taking.  He was on top of the world in the early 1980s, making a million dollars per year, company jets, limousines, and meetings with foreign heads of states. Yet, he risked it all to start USA Today, a national newspaper. Why? Because he was bored (a low “boring” point!) and needed a new challenge. I liked his statement that you can’t “save your way to prosperity.”  He also didn’t like lawyers or “bean counter” accountants who were afraid of new initiatives and had no vision. In this way, he was similar to Goizueta who also wasn’t fond of lawyers’ lack of creativity and over-cautiousness. 

Personal Costs of Power

I’m amazed that it took Neuharth less than four years (Sep. 1982 to Feb. 1986) to build USA Today into the second-largest circulation newspaper in the United States. By 1991, it was the top-selling newspaper and held that title until 2009 when News Corp.’s (NYSE: NWS-A) Wall Street Journal surpassed it.

Sadly, it appears that his family life suffered. Neuharth’s two divorces and the hatred his son felt for him throughout adolescence are sobering commentaries on what it takes to reach the top of corporate America and create the first national newspaper.

Gannett is Struggling

Although he retired from Gannett’s executive suite more than 20 years ago, at age 86 Neuharth is still active, writing a weekly column for USA Today called “Plain Talk.” Despite the decline in the newspaper business since his retirement, he told Forbes Magazine a few years ago that he remains optimistic that “newspapers printed on newsprint will be around for a long, long time.” They may stick around, but healthy profits have already left the building.

Even after rebounding 635% from its 2009 lows, Gannett’s stock has still fallen more than 80% from its all-time high in 2004. The reason? – people are getting their news from digital sources like cable TV and the Internet. As Warren Buffett wrote in Berkshire Hathaway’s 2006 shareholder letter:

Fundamentals are definitely eroding in the newspaper industry, a trend that has caused the profits of our Buffalo News to decline. The skid will almost certainly continue.

All newspaper owners realize that they are constantly losing ground in the battle for eyeballs. Simply put, if cable and satellite broadcasting, as well as the internet, had come along first, newspapers as we know them probably would never have existed.

Gannett’s annual revenue has declined for three straight years and I don’t see that changing this year. The company also has a significant debt load ($2.6 billion) which is higher than shareholder equity ($1.9 billion). Although Gannett has promising non-newspaper businesses such as 23 television stations and, the largest job search website in the U.S., newspapers still make up almost 80% of its business.

A declining core business with a heavy debt load does not sound like a great investment.


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