Murphy taught Buffett the Berkshire business philosophy: hire great people and enforce strict cost-cutting controls.

How Murphy ran a $19 billion company

"Most of what I learned about management, I learned from Murphy. I blame myself because I should have applied it much earlier."

–– Warren Buffett

When Tom Murphy joined Capital Cities, it was a failing TV station. Before selling it to Disney (30 years later):

• Turned it into a $19 billion empire • He ended up becoming the owner of the ABC network • Increased profit margins to 50%

Murphy was 29 when he joined Capital Cities, a struggling TV station.

He had NO broadcasting experience and NO management experience.

But he realized that the station's problem was not scheduling but cost efficiency.

To attract advertisers, Murphy asked to paint only the sides of the TV station that faced the street.

He made executives share hotel rooms, refused to build a fancy office and cut expenses wherever possible.

Before hiring someone, Murphy calculated the real cost: salary, benefits, raises, and even “extra toilet paper” needed over a lifetime.

A $20,000 hire wasn't a $20,000 decision. It was a $3 million lifetime commitment to Murphy.

Most CEOs demand more control as they grow. Murphy did the opposite.

His instructions to managers were simple: Run your station however you want. Just send the profits back to headquarters.

This is what Level 5 delegation looks like.

You'll see the same thing with Berkshire Hathaway.

Buffett spoke of "Delegation almost to the point of abdication" in his 1999 letter to shareholders.

By 1966, CBS was 16 times the size of Capital Cities and began acquiring everything from the Yankees to toy companies.

But Murphy only bought businesses he understood: TV stations, newspapers and publishing houses.

In 1995, Capital Cities was worth 3 times more than CBS.

While others diversified wildly, Murphy remained focused.

Each acquisition followed the same manual:

• Cut the corporate bloat • Give autonomy to managers • And watch the costs obsessively

Murphy has perfected a brutal but effective system: buy assets with debt, dramatically improve operations, pay down the debt, and then repeat.

His stations generated so much money that in the 1970s he bought back nearly 50 percent of his company's shares at bargain prices.

By 1985, Murphy had proven that his system worked at scale. Capital Cities bought ABC for $3.5 billion.

He cut 1,500 jobs, sold his Manhattan headquarters for $175 million and transformed a bloated network into a lean machine.

The lesson is clear: as companies grow, most founders add layers of control.

But the real secret is to do what Murphy did: hire exceptional people, give them real control, and then get out of their way.