Barry Diller has been famous since the 1970s as a television pioneer (Cheers, The Simpsons, the Fox Television Network), as a Hollywood executive (at Paramount, he green-lighted Saturday Night Fever, Raiders of the Lost Ark, and Beverly Hills Cop) and, more recently, as an internet mogul-as chairman of both the online conglomerate IAC and travel-services company Expedia.com.

The 65-year-old college dropout and former William Morris Agency mailroom clerk has managed over the last four decades to position himself at the forefront of whatever has been new in the popular culture.

 "What I don't want to do, and I think I'm incapable of doing, is quote ‘hanging on,' " Diller tells Portfolio.com in an exclusive interview. "I will continue to do whatever, so long as I'm curious about it. The only thing that's ever driven me is curiosity."

Diller sat down for an interview on September 19, the day after he defended the mixed performance of Expedia.com and IAC (notably the flagging fortunes of LendingTree.com, the Home Shopping Network and TicketMaster), to investors at the Goldman Sachs Communacopia XVI conference. He also announced the acquisition of a majority stake in GarageGames-which Diller reveals to Portfolio.com was a $50 million-plus investment to develop high-graphic videogames on the internet, without the need and expense of those pesky consoles

In the  interview, Diller discussed the endless possibilities of the internet (including Matt Drudge), the bleak future of ink-on-paper newspapers, his likes and dislikes among media executives (he likes former G.E. chairman Jack Welch, but not necessarily DreamWorks C.E.O. Stacey Snider), his addiction to megayachts, and his relationship with his celebrity fashion-designer wife, Diane von Furstenberg.

 

Lloyd Grove: (Entering Diller’s sun-dappled office in IAC’s Frank Gehry-designed headquarters building overlooking the Hudson River) Wow.

Barry Diller: Yeah. It’s pretty good.

L.G.: So your stock went up 93 cents. Was that a result of your brilliant performance yesterday?

B.D.: Hardly.

L.G: Or was it the Fed, or—

B.D.: I think we can attribute this to the Fed. I think one thing that I did say—which I think investors were listening to, looking for—was that for one of our largest segments, which is H.S.N. [Home Shopping Network], the trends were much better. So I think that’s what probably helped. But who ever knows about the market?

L.G.: But that was believed.

B.D.: I think everybody was believed yesterday.

L.G.: Really?

B.D.: Yeah, I think everyone at the Goldman Sachs thing [the Goldman Sachs investor conference]. I think everybody yesterday got this incredible shock from the shock of a greater cut than people had anticipated.

L.G.: So you’re not going to take too much of the credit for this.

B.D.: A day, you know. A day in, a day up, a day down. Honestly.

L.G.: Wall Street hasn’t been particularly kind to you. Why is that?

B.D.: Well because we’re complicated. We’re hard to understand. And they’ve been, over the long term, very kind to us. Because if you invested a dollar when we invested, you’ve done extremely well.

L.G.: When would that have been, Barry?

B.D.: Well that’s now 10 years ago. It’s a good return. But if you look at our stock graph over three years or five years or whatever, it’s very volatile. And the reason is that what we’re doing—trying to do—is so much more complicated than having a one-product company. There are 60-plus products in this company. We have 12 discrete business divisions. We do everything from finance, mortgage business, to dating, to search, to invitations, to commerce, to TicketMaster, live events, etcetera. So we are an interactive conglomerate, so it’s hard for people to understand. It’ll take time. And we’re patient.

L.G.: And now games.

B.D.: And now games, yes. We keep adding things. I mean, every month we’re adding a few things here or there, so we’re tremendously acquisitive and opportunistic about ideas, and we have a system that internally tolerates it. Externally, I think, until things come through, people are skeptical, and that’s okay with me. It just gives us an opportunity to buy more stock, because we throw out so much cash.

L.G.: What attracted you to GarageGames and this whole idea of getting games off the internet, not having to deal with the manufacturing of consoles?

B.D.: Well, because if you go over there [pointing to a large flat-screen TV and a couple of videogame consoles in his office] and see there are—well one is not, they took it away—there are three different game consoles.

L.G.: What have you got here? The Xbox?

B.D.: The Xbox and the PlayStation—and of course they’re incompatible with each other. And they’re whiz-bang on graphics—they’re beautiful. But on both sides of it—on the equipment side of it that you have to purchase in on, the production side where you make a game—you’re spending huge amounts of money. The Web, as is proven in so many other areas, is a pretty good distribution mechanism for programming. And very few people have done really high-graphic Web games in a system that will have—in InstantAction.com, which is a gathering place both for people who make the games and for viewers to get them—where there’s one easy-to-use, fast place to do pretty sophisticated games. So we think it’s a really original and good idea.

L.G.: Does this attract you because you know there’s a market for games and people like to do it, or is it because you yourself enjoy them?

B.D.: No. I mean, I enjoy doing it. I enjoy playing games, but I am not the audience, you know. I’m too old and I have too many other things that I do. But I shouldn’t even say that. Even if I had nothing to do I still wouldn’t be playing games hour upon hour. But, you know, if you get me started, it’s great—it’s great fun. And it really is, because I think there’s an opportunity for what we have expertise in. This company has expertise in all different areas of the internet, deep and wide, and this company has 20,000 people; we have 3,000 engineers, meaning people who do programming, internet programming of various kinds. We’re very big players in advertising, both buying it and selling it, we have expertise in how to search the internet, search engine authorization, which is how you get people to come to your site, so you have all these levels of expertise. So when something comes along we think is an original idea or something that we think is interesting to do because of the experience and expertise we’ve built up, we plunge in. And in this case, this investment is more than $50 million dollars.

L.G.: I was going to ask you to show a little ankle on that.

B.D.: It’s not a little start-up.

L.G.: As you mentioned, there are 60 odd units in this company. Do you have any favorite children?

B.D.: Yes, I have favorites and I have things that drive me nuts. But it would not make me feel better—or any of the other people who are engaged in the ones not, or probably in whatever scale it would be, or whatever area anybody played in—it wouldn’t do anybody any good to tell you what they are.

L.G.: Well don’t tell me the things that drive you nuts, that would just hurt people’s feelings. But what are the things that excite you?

B.D.: Well by definition, that would tell you other things too. Look, in a company like this, the problem is I’d go on too long. There are dozens of things from embryonic to fully developed that I adore, so—

L.G.: What are the characteristics of the things that sort of get you excited?

B.D.: Things that haven’t been done before. I mean, all my life, it’s been my pleasure and curse—which is that I’m only interested in things that, not of original thought necessarily, but things that are either difficult to do, or that nobody’s pulled off before, or that nobody’s done before. And that’s what I get excited about.

L.G.: That’s just your own personality?

B.D.: Pure nature. I have nothing to do with it.

L.G.: Some people wonder, just looking in from the outside, they would’ve thought that things like running a movie studio, starting a television network, being an enormous influence on what today is our culture, popular and otherwise, and being responsible for so many things that we just take for granted as part of our daily intake of entertainment, would be much more glamorous and exciting than selling shoes [as with Shoebuy.com]. Or being in the financial-services business [LendingTree.com].

B.D.: Well that would be if you were after glamour. It’s not something I want to be after....  The brilliance of Shoebuy [is that] it is one of the first companies that found out to have a virtual inventory, meaning they have no inventory of their own, what they have figured out is how to get the inventory from hundreds of people who sell shoes in a way that one person can come and access all of it and then get instantly—find out instantly—whether that product is available and buy it instantly. And that’s fascinating to me. Each of the things that we do, we’ll find in there some different, new way of doing things. And that really has interested me since the moment that I kind of got involved in it 13 or 14 years ago. So to the people who say that isn’t making a movie and all of that—I ran movie companies for 20 years. If I wanted to repeat myself, it seems quite boring. It doesn’t seem glamorous to me, it seems repetitive.

L.G.: Is there an upside in not having your life so dominated by dealing with agents and movie stars?

B.D.: The truth is my life has never been dominated by anything. I don’t mean that at all arrogantly. But what it means is that when I was consumed, as I tend to get with things that I do, like when I was consumed by film and the television business, the challenge of this person or the challenge of that person and having to deal with them and being stimulated and irritated by them is the same. You know, you could put anybody else from any other function and just because of their public role, that doesn’t make it any different in terms of dealing with them than dealing with the person who runs Shoebuy.

L.G.: What do you think IAC will look like five years from now?

B.D.: Well, I think one of the things about this company is that’s unpredictable, which is why I think some investors who have not been with us long—who have been in and out—it makes them nervous. I don’t think you can predict what IAC will look like five years from now. You can certainly say that we’ll be some form of an interactive conglomerate, but IAC three years ago had its principal business of being Expedia, leading travel online.

L.G.: I use it all the time.

B.D.: IAC is no longer Expedia, it’s now its own independent company. So I think that’s the good news.

L.G.: When you tried to do the buyback of Expedia a few months ago and the credit became unattractive—

B.D.: —It didn’t become unattractive it became unavailable—

L.G:—was that the first indication that we were going into a credit crunch period for you?

B.D.: Yeah. Well, I had thought that this all can’t continue—all this access to tremendously easy, non-tethered credit. And yet, when we got commitment to borrow $3.5 billion, I thought that was good money. It turned out three weeks later it wasn’t, and we were, I think, the first; we were the first I think that actually got caught. We ended up, out of our own funds, buying back close to a billion dollars in stock. It was just, to me, a lost opportunity. I would’ve liked to buy back more.

L.G: Were you already seeing problems in the mortgage markets by that point?

B.D.: Oh problems, sure. That’s not news. It’s just been continuing rolling bad news for six months.

L.G.: You talked a little bit about LendingTree yesterday. What’s the prognosis there?

B.D.: Well, LendingTree is only a mortgage originator. In one part of its business, it’s essentially an exchange, and LendingTree did not have very much subprime business and LendingTree also didn’t hold loans, it sold them off instantly. So we had very little exposure.  The position of Lending Tree is that it’s had to do something very painful,  because the market has been so wounded. It’s had to cut back a large part of its workforce. It has had to cut over 500 jobs. That’s painful. But LendingTree itself, it will have a profitable year, much less than last year, and it will emerge much stronger from this than it entered this crisis. And that’s partly because it has a very good brand name, and partly because it had so much less exposure. During this period, it can work to gain market share, so that it can, when this is over—and it will be over in some undetermined time—LendingTree will emerge very well.

L.G.: By the way I’m not a big reader of quarterly reports.

B.D.: That’s good.

L.G.: I did note in the most recent quarter, you actually said basically “We’ve had a lousy quarter and we’re dissatisfied.”

B.D.: It’s true.

L.G.: Right, and it just struck me, that’s not the most popular way companies use to deal with bad quarters. They usually try and find something positive, and hit that really hard.

B.D.: Well, I don’t know. If you look at our statements over the years, we’re very direct. I have always believed, long before it became popular, in what I think is a great rule, which is: bad news first, good news you can wait for. And we’ve always given much, much more information, we were very criticized for giving too much information, which I always found amusing. And we’ve always also been very direct in trying to express ourselves in plain, direct English.

L.G.: On internet news sites, [Vanity Fair writer] Michael Wolff—

B.D.:—Hmmm—

L.G.: —wrote recently that he pitched you on his Newser.com site and you didn’t bite. Do you think any of these are viable? I mean, obviously, you’re involved with Huffingtonpost.com, but what’s your interest in these sites?

B.D.: Well I think everybody’s interest—and probably I have a little more interest because I think maybe we can participate, but our chances of figuring it out are probably slim—is somebody is going to figure it out at some point. Huffingtonpost has done a very good piece of original work, in being early at organizing the dread word blogs, and it’s expanded from there. But someone is going to figure out between aggregating news, and adding to the aggregation of news, editing, and making a product that uses the tools of the internet, uses the resources of what the internet does, to deliver a news product that is compelling for people. I mean, there have been the attempts we all know about, but nobody really has pulled that one off. I think it’s inevitable. And no newspaper has done it, I don’t think any newspaper website. Some are far better than others. Washingtonpost.com is one of them, but the I’m biased because I’m on the board. No newspaper, I think, has done an interesting job online.

L.G.: Of course, Matt Drudge will claim that his news site is the sixth most visited.

B.D.: Matt Drudge is purely an aggregator—an aggregator and quasieditor. It’s certainly edited. But Drudgereport.com is a great resource for lots of people. It doesn’t really use the internet—I mean, it uses the internet as a distribution mechanism, it doesn’t really use the internet tools...

L.G.: He has more traffic than People.com. He has much more traffic than the Washington Post.

B.D.: He doesn’t have much more traffic than the Washington Post. He has huge traffic. I don’t know what his uniques are a month, but look, I take Drudgereport as a very important Web resource.

L.G.: What news sites do you visit?

B.D.: Oh my god, too many. A lot. I’m a scavenger.

L.G.: Let’s talk about the future of newspapers. You’re on the board of the Washington Post, as you’ve mentioned. It’s been losing circulation for, what, 15 years now solidly?

B.D.: Not solidly. I think that you have to say “solid” is in the last period, when for every newspaper it’s been particularly tough, it’s very difficult. I don’t think there are easy solutions. It’s hard when you use the word newspaper. If you mean news-gathering, or just news, take the paper off, then I’m very hopeful. But the current print system is going to continue to decline. To what extent? I can’t really predict, but it’s going to continue to decline. But there are endless analogies to this. I mean, the railroad business, or the horse business, you would say that if you defined them as those businesses, or those paths of commerce, you’d be for a period in chaos and have to go through an awful lot of rejuvenation over decades—which has happened, certainly with the railroad business. If instead you said you were in the transportation business, who knows what would’ve happened to those companies? So the problem for print is print. I mean, it’s paper, it’s current distribution, and it’s going to be supplanted by other paths. So I’m optimistic about the paths but you certainly can’t be optimistic if you’re running a newspaper.

L.G.: But they’re also losing revenue sources. Classified advertising is dropping, with Craigslist and suburban newspapers.

B.D.: Sure, all of those things. It’s part of the creative destruction of the internet. But there are paths out from there. If you have an audience, and you are of service to that audience, then there’s value in that—different values, different ways of obtaining revenue. As I say, I think that the print business, the ink business, is deeply challenged. But I also think that’s just the distribution mode. I think that the work that is done produces value, and it will produce value in the internet and in other forms. I mean, I now get the Washington Post printed on my own little printer on my boat every morning via the internet...
 
L.G.: The good news is there are still people like you who actually want to have the paper in their hands to read it.

B.D.: Yes, it’s tactile, but that’s for an aging population, and we can’t predict what form people will want the news to be in. But people are going to absolutely want edited, informed products of journalistic process. So if you organize that on the kind of scale that great papers have done, and do, there’s a future for you, I believe.

L.G.: What do you think is going to happen with the Los Angeles Times? Do you think David Geffen will end up with it at some point?

B.D.: I don’t know, you have to ask David.

L.G.: I talked to him. I ran into him a few months ago and he was still hopeful, or at least that’s what he told me. He thought Zell [Sam Zell, who bought the Tribune Co., the Times’ corporate parent] would have to get rid of it.

B.D.: I think it’s unpredictable because of the nature of how Mr. Zell bought the Tribune Company. I don’t think it’s so easy to offload the L.A. Times. I don’t even know if he’d be interested in doing so.

L.G.: You have a famous management style.

B.D.: Yeah.

L.G.: I was just reading an article: the president of Expedia [Dara Khosrowshahi] talking about how it’s generally people sitting around a table shouting at the top of their lungs.

B.D.: Well, he exaggerates.

L.G.: I mean you’re reported to have once made [DreamWorks C.E.O.] Stacey Snider cry [when she was running Universal Studios and Diller was grilling her in a meeting].

B.D.: Oh please! Stacey Snider cries for effect in whatever room she might be in. I mean, I didn’t make Stacey Snider cry! Stacey Snider wanted to cry for her own demonstrative purposes. But, there’s no question that our process, my process, is one in which I believe that in order to get to the truth of something, you have to argue it passionately. It’s not a Socratic process by any stretch. But in any situation, you know if you have all the information, it’s easy to make a decision. But with almost every decision, particularly the ones that get tougher and tougher, you don’t have all the information; you’re never going to get all the information; it isn’t there to get. What you’ve got to try and do is listen for what truth you can hear out of the passions of people arguing what they believe in. Because it’s what they believe in when you don’t have the facts, where you can maybe find something that will give you a lead on what’s more interesting to do, what’s the right course to make a decision.

But it does get intense, and it does get into conflict—the conflict of ideas. And when people get exercised about that, there’s no device to get them to do it, but just the fact that that’s what you’re really mining for, that’s going to sometimes be noisy and sometimes confrontational. There are those that love that, and thank God there are enough people like that—those are the people I like to be around. I’m very uncomfortable when I’m in rooms with people, as they are uncomfortable with me, if they don’t like this process. And there are people who don’t like it, and that’s fine. I don’t think there’s a value judgment here, I just think it’s something that is either enjoyable and stimulating for people or they want to run out of the room. And people who want to run out of the room, should. I’m happy that there are enough to stay.

L.G.: The quality of someone who works for you is someone who is thick-skinned but also very obviously has to be smart—

B.D.: Well, when you say obviously has to be smart and thick-skinned, yeah, as I say.

L.G.: But don’t take things personally.

B.D.: Well, I think everybody takes things personally, and to some degree you get to a point with people where there’s no way not to take it personally. And in fact it comes simply down to people who like that process, and people who don’t, for whatever reason, whether it makes them insecure or whether it just frightens them or whether they simply just don’t want to do that.

L.G.: I want to ask you about your wife Diane von Furstenberg—what her influence, her role, has been on your own sense of business and yourself as a business person.

B.D.: Well, I’ve never made a big decision without involving her in it. She’s not shy. We’ve been married for five years now, but when we started, we met in ’75 and spent six years completely together and then we separated, and now we’ve come back.

L.G.: What are her qualities, insights? I mean if you can categorize.

B.D.: [Laughs] It’s not describable, but powerful. She’s fantastic.

L.G.: For instance, what influence and role did she have in the design of this building? I mean just in your thinking about it.

B.D.: No, this wasn’t a big influence from her, as I had none in her building, but—

L.G.: You each have buildings, right?

B.D.: [Laughs] We do, but we’re endlessly over advantaged. But the kinds of things I’m talking about are decisions we both make about the central things to our lives rather than what color the wall is going to be.

L.G.: But you consult her about, you know, “there’s this gaming company in Oregon . . .”

B.D.: Oh, no, no, not like that, no.

L.G.: She doesn’t consult you about matters of fashion?

B.D.: You mean, whether to do a wrap dress or a ball gown? No, by no means. Diane’s on our board and she’s a great board member because of her pure pitch, a distinctive pure pitch on what makes sense or what doesn’t make sense. But, again, at our board level, we don’t discuss investments like GarageGames or things like that.

L.G.: Is there any particular thing about what you’re doing now that you would say is because of Diane?

B.D.: No, no, no, no, no. Look, directly and indirectly, we are influences on each others lives. And we listen to each other when we’re sometimes not listening to each other.

L.G: By the way, I noticed that you’ve given money to Barack Obama. Is he your guy?

B.D.: You’ll have to expand the “guy” thing. What I mean is this: We’ve given money to Obama; we’ve given money to Hillary Clinton; we’ve given money to John McCain. In this cycle. So I don’t have a guy yet. I’m not ready yet. I want to stimulate—I don’t want to stimulate, my maxing out is of no big stimulation—I want to be supportive in this period to people that I know and like, and I want to go through the process like everybody else and see what the fall brings, when I think this thing is going to get really serious.

L.G.: Who are the business leaders you admire? Who would you look at and say, I’d like to do things like that guy does?

B.D.: Well there are so many people, and so many parts of what people do that I really admire. I don’t think you can really emulate anybody, I think the best thing you can do is you learn things from just sucking up the world and then you apply it in your own way of going through life. Going through business. So there’s so much that I’ve taken from so many different people and so many people that I admire for different reasons. If this were to emulate, I wouldn’t be capable of it. Jack Welch is a great business leader and is close with us because he is involved with our company, we’re one of a couple of companies he’s a consultant to. And Jack’s a full participant, and there’s no way to emulate Jack Welch, I mean he is his own force, as is, just riff through all of the names you’ve come up with in this area, and you can learn a lot, but you can’t walk in anyone’s footsteps, I don’t think. Or in anybody’s mold.

L.G.: But someone like the guy who followed you yesterday [Rupert Murdoch, at the Goldman Sachs event], who’s 11 years older than you.

B.D.: I’ve worked for Rupert, Rupert was in my life for a long time, eight years, and I like him enormously and I think he is a unique force. I mean, I can do it with so many different people, that it’s what’s the value add here? I can’t add anything to the conversation.

L.G.: Where do you see yourself in 11 years, or if you look at Sumner Redstone, in 20 years?

B.D.: I couldn’t begin to tell you. What I don’t want to do, and I think I’m incapable of doing is, quote “hanging on.” And I will continue to do what I do, I will continue to do whatever, so long as I’m curious about it. The only thing that’s ever driven me is curiosity. I’ve never been driven by any other big force other than biological. I’m biologically ambitious, but for me it really is curiosity and everything I’ve ever done has been that. And I’ve changed what I’ve done frequently because of the pull of curiosity and serendipity, and I hope I continue to do so.

L.G.: What is your response to this notion of the “Killer Dillers”—these people that you mentored and have been given that nickname? Jeffrey Katzenberg, Michael Eisner, etcetera?

B.D. I’ve been lucky that I’ve had, coursing through my life—I started with really great people, and how they developed and what’s happened to them continues to make me smile.

L.G. Explain to someone who doesn’t own a car by choice the attraction for you of yachts?

B.D. [Laughs] Well, it really has to do with water, which is either a pull for you or it isn’t. And for me it’s always been something that I can’t intellectualize, and since I’ve been in and around boats all my life, I have an inexplicable love for anything that moves through the water.

L.G. So it starts there.

B.D. Yeah, it starts and ends there. In other words, there’s no more to it than that.

L.G. But you’re purported to own the largest sailing vessel in the world now [the 300-foot-long Eos, for which Diller paid an estimated $200 million to build last year]. What’s that about? I mean, people have all kinds of theories on why rich guys buy big yachts.

B.D. I promise you, it’s not about size, it really isn’t. I mean, it’s not for me. I’ve had sailboats, and when I started to think about building a boat, I wanted to have a boat that had really good sailing characteristics and at the same time I wanted a boat that could hold my family and friends and be as comfortable as I could conceive it. And when we put those things together, it just dictated the length of the boat. It wasn’t backwards, like I said “I want the biggest boat.” It’s inconceivable that I’d say that. And I’m sure that at some point fairly soon I won’t have the biggest boat.

L.G: [Laughs] That's for sure!

B.D.: But I wanted a three-masted schooner. By definition it had three sticks in the air, it's going to be a little large, because that was the kind of sailing craft I wanted. It's not huge, Eos, and as a matter of fact one of the great things about it is its profile is not imposing, certainly not from some big white refrigerator. [Laughs] Big motor boats are usually white, and they're big, they're very imposing. That's not bad, but that's not my sailboat.

L.G.: If you like big white refrigerators!

B.D.: Whatever. Some of them are beautiful. But, you know, in this thing of boats, it's like planes. There's no justification for this, it's just I'm lucky enough that I got to build something that I had more fun than anyone deserves in building it, and now I'm having even more so in me and my family enjoying it.

L.G: Is that it for you, you think, in terms of being happy with this one for a while?

B.D.: No. I'm sure I'll get hungry for doing another boat as well at some point, another stripe of another kind. Once you're in boats, you either go bankrupt or you keep going.