First, Ovide gives us the familiar legend concerning Diller's career. How he rose from the mailroom of some entertainment-related firm to eventually run Paramount Pictures. Recently, he drew attention for his very public fight with investor John Malone, culminating in a law suit, over the management of IAC/InteractiveCorp, Diller's latest media-related creation.
In answer to the question, "Why did you decide to break up IAC?," Diller replied,
"Because I thought the company was overly complex and unmanageable. What I've learned over the years is that focus and singular purpose is the best approach for businesses. How can you function across 12 different businesses from financial services to dating?
If you're going to run a public company, be absolutely certain of what the parameters are, what the clarity is, that you can explain it to yourselves and explain it externally."
Pardon me for noticing, but I don't think Diller has any classical management training whatsoever. And it shows.
Did it really take Diller some 40 years to realize what financial research has known for at least the past 30? I guess the silver lining is that Diller is very explicit as an apparently newly-converted apostle of focus and simplicity in business endeavors.
The interviewer goes on to ask, "If, as you say, having operations across multiple businesses didn't work for IAC, why does it work for General Electric Co. or Walt Disney Co.?" To which Diller answered,
"Companies like GE and Procter & Gamble have been in business for a long time. Over decades or a century you're bound to figure out a management structure that works. Disney is a single brand in essence, but then you can say, wait a minute, what about ESPN? Tell me why ESPN belongs in Disney. I don't think it gives Disney anything. It gives Disney money, but I think that money is discounted. Its true value, I think Disney would say, is disguised.
I don't have answers for anybody else. What I know is that internal complexity makes for superficiality. There's never essentially a pure story unless there's a pure product line that has its own shining clarity."
It's noteworthy that the Journal writer and Diller both confuse the issue of which other companies are 'operating across multiple businesses.' GE, P&G and Disney are far from similar in their business mixes.The nearby, Yahoo-sourced chart illustrates my point. Stretching back to roughly 1962, it compares equity value growth for Disney, P&G, GE, IAC/Interactive and the S&P500 Index.
Disney is the best of the lot, followed by P&G. IACI is above P&G, but given it's late start, it's not clear that the beginning point for it is correct.
In any case, leaving aside IACI for now, Disney has been mostly about entertainment with a theme. Only with the purchase of CapCities/ABC and ESPN did it extend that interest, but those are still media/entertainment properties.
P&G has always had a consumer retail food, beverage and, more recently, cosmetics focus. It's not a diversified conglomerate.
GE, as I have written frequently, is diversified and, thus, a good example of Diller's and the writer's intent to identify a company with unconnected businesses.
What I find extremely disappointing, and a little frightening, is that Diller, who has run large companies for years, cannot distinguish the obvious and crucial difference between the nature of P&G and GE.
I'm not saying that every trained CEO with an MBA practices good, enlightened or inspired management. But I am saying that, observing Diller's rather primitive views on business structure, after so many years in senior positions, it gives one pause to consider letting an uneducated person run a large company.
It's one thing to perhaps have a flair for creating entertainment programming. That doesn't make a person skilled in the arts of leading a company to consistently superior total return performance.
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