Operating a Young Startup: Lessons from Tom Murphy and Warren Buffett

Running a young startup can be an exhilarating yet challenging experience. The excitement of building something from scratch is often tempered by the challenges of securing funding, maintaining focus, and executing on ideas with limited resources. As young startups like ours navigate the fast-paced world of innovation, competition, and the pursuit of quick success, it’s easy to lose sight of the values and principles that will lead to lasting success.

Among the many influential figures in business, Warren Buffett has long been admired for his ability to see beyond the surface and identify true leadership. One such leader Buffett admires is Tom Murphy, the former CEO of Capital Cities/ABC. Buffett often calls Murphy the best manager he has ever met. So, what makes Murphy’s approach so remarkable? And how can young startups like ours benefit from his methods?

1. Exceptional Capital Allocation: Growing with Wisdom

At the heart of Tom Murphy’s success was his ability to allocate capital effectively. He didn’t simply buy up companies or assets to expand quickly; he made strategic investments that maximized long-term growth. His most notable move was the 1985 acquisition of ABC by Capital Cities, where a smaller company bought a much larger one, a bold move that Buffett called “one of the most brilliant business combinations in American history.”

For young startups like ours, the lesson here is to focus on the strategic allocation of resources. Every rupee you spend should be directed towards building a sustainable and profitable future. In the early stages, it may be tempting to pour money into marketing or scaling up operations quickly, but it’s essential to think long-term. Invest in building strong foundations, whether it’s in hiring the right talent, developing your product, or securing the right partnerships.

By being selective and purposeful with where you allocate your capital, young startups can set themselves on a trajectory of sustainable growth rather than relying on quick, risky wins that may not pay off in the long run.

2. Operational Discipline: Efficiency Without Compromise

Tom Murphy was known for his extreme operational discipline. He ran lean teams and kept costs under control while ensuring that quality was never compromised. Despite being at the helm of a large media company, he wasn’t driven by excess or waste. Instead, he embraced efficiency and made sure that every part of the organization operated at its highest potential.

For young startups like ours, this principle is especially important. Resources—whether human or financial—are often limited, so operational efficiency becomes crucial. Focus on maintaining a lean structure, streamlining processes, and eliminating unnecessary expenses. As a young startup, there will always be a temptation to overspend, but the most successful entrepreneurs understand that maintaining operational discipline allows you to build a more resilient company in the long run.

The true measure of operational success isn’t just about cutting costs, but ensuring that every effort you make has a direct, meaningful impact on your business goals. Strive for simplicity and efficiency while never compromising on quality or the customer experience.

3. No Ego, All Integrity: Leading with Humility

One of the most admirable traits that Buffett highlights in Tom Murphy is his humility. Despite his success, Murphy never sought the spotlight. He didn’t focus on self-promotion or chasing external validation. Instead, he dedicated himself to leading with integrity and treating others with respect. He made sure that he was always accountable for his actions and that he treated shareholders’ money as if it were his own.

For any startup, especially young ones like ours, humility and integrity are essential qualities. While the business world often celebrates aggressive self-promotion and ostentation, true leaders know that success comes from working with others, being transparent, and staying grounded. By leading with integrity, you can build trust within your team, your investors, and your customers.

The ability to lead without ego is especially important in a startup, where a leader must wear many hats and build a culture of openness and accountability. Trust is the foundation of any successful team, and it begins with integrity from the top.

4. Long-Term Value Creation: Playing the Long Game

Tom Murphy understood that sustainable success doesn’t come from chasing trends or focusing solely on quarterly earnings. He resisted the temptation of short-term gains and instead focused on creating long-term value. This mindset was essential to Capital Cities/ABC’s growth and profitability over the years. Murphy didn’t chase the latest fads; he made decisions that would pay off over decades, not months.

For young startups like ours, it’s easy to become obsessed with hitting short-term targets—whether it’s increasing sales, growing your user base, or securing the next round of funding. But true value is built over time. The startups that endure and thrive are those that keep their eyes on the long-term prize and don’t get distracted by the day-to-day pressures of immediate results.

A focus on long-term value means making decisions that might not yield instant rewards but will set the foundation for a company that can stand the test of time. Whether it’s building a strong company culture, creating a product with lasting appeal, or fostering deep relationships with customers, focusing on the long game will always deliver stronger results.

5. Trusting Your Team: Building the Right People

Warren Buffett has often said that the key to successful business operations is finding people you trust and giving them the autonomy to make decisions. Tom Murphy was particularly good at building strong, capable teams and then trusting them to execute. Buffett himself invested in Capital Cities because he had complete confidence in Murphy’s judgment and leadership. He often remarked that if Murphy called him with a deal, he would back it “without reading a word.”

For young startups like ours, this principle is invaluable. The strength of your team is the backbone of your business. In the early days, every hire counts, so it’s crucial to find people who are not only talented but also share your vision. Equally important is creating an environment where your team can thrive. Give them the freedom to innovate, make decisions, and contribute to the company’s success.

A startup’s success is never the result of a single individual; it’s the culmination of many talented people working together toward a shared goal. Trusting your team and empowering them to excel is one of the most important investments you can make in your company’s future.

Building a Startup with Purpose and Principles

The principles that made Tom Murphy one of the most respected business leaders in history offer valuable lessons for any young startup. From intelligent capital allocation and operational discipline to leading with humility and focusing on long-term value creation, these principles provide a roadmap for sustainable growth and success.

For young startups like ours, building your business around these core values can set you on a path of lasting impact and meaningful success. It’s not about flashy moves or chasing immediate wins; it’s about staying true to your principles, focusing on building something of value, and trusting in the process.

By operating with integrity, efficiency, and a long-term vision, young startups can create a strong foundation for growth, ensuring that the journey will be more rewarding and the end result far more meaningful. These timeless principles will guide us not only to success but to a place where our impact will stand the test of time.

p.s. Drafted with assistance from OpenAI and image used above has been generated with the help of Sora.