My Favorite Mistake: Eli Broad
On his billion-dollar cable screw-up.
You always learn lessons in business. Fortunately, I haven't made too many mistakes in life, but this was the biggest one measured in dollars.
Back in 1966, Kaufman and Broad Corp., which I founded in 1957 as a home-building company, formed Nation Wide Cablevision. That was very early in the cable industry. We saw a future in the cable business, but we never thought it would be as big as it has become. In those days, people were paying about $5 a month for cable services.
We kept it until 1972 and were able to get all sorts of franchises, primarily in California but with two in other states. Back then, we had three main businesses: home building, life insurance, and cable. They all demanded a great deal of capital. We looked at our finances and we didn't have enough for life insurance, home building, and cable, so we had to divest one of the three. I figured something had to go, and the executives around me and I made a choice.
We ended up selling Nation Wide to Tele-Communications Inc, and we then owned 15 percent of TCI--which we foolishly and immediately cashed in for $23.5 million. At any rate, TCI went on to become the nation's largest cable provider. It was later acquired by AT&T, which then sold it to Comcast. Comcast is worth about $78 billion today. It was a mistake selling it. We should have sold the home-building business and kept cable.
The cable industry started as an antenna service for people who couldn't get TV stations, but we also saw the future and its potential including many channels and new cable networks. This was before the Internet, and we thought someday it could be used for the telephone and all sorts of things. …