The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success

If you never picked up a book and only got information through financial media outlets you would think the best CEO’s ever were Jack Welch, Donald Trump, Mark Cuban, and a few others that love media attention. I’ve always been obsessed with reading business biographies, especially on those CEO’s that are rarely interviewed on CNBC. Often times these less visible CEO’s have track records far greater than their counterparts. I want to learn how they grew their companies and built shareholder value. The Outsiders is a great book that looks at eight CEO’s who produced above average returns for shareholders over the long term. In most cases these CEO’s were not attention junkies and were not only great capital allocators but also time allocators. Over 29 years Tom Murphy of Capital Cities produced a 19.9% compounded annual return. Over 27 years Henry Singleton of Teledyne produced a 20.4% compounded annual return. Over 17 years Nick Chabraja of General Dynamics produced a 23.3% compounded annual return. Over 46 years (to 2011) Warren Buffett of Berkshire Hathaway produced 20.7% compounded annual returns for shareholders. These CEO’s as well as four others in the book were not your cookie cutter capital allocators and did not fit the mold of most business books you read today. Every one of the CEO’s was a first time CEO (no past history of success) and more than half had very little industry experience before taking over as CEO. I found these two things very interesting especially has it relates to microcap investing. So often I’m trying to find great management in microcap, which can be difficult if there is no prior resume. In all instances the Outsider CEO’s led decentralized organizations empowering others to make decisions and they were great capital allocators. Outsider CEO’s ran high cash flowing businesses, which allowed them to take on debt (few ever issued equity) to make the strategic acquisition or to buy back stock when it was historically cheap. All but one of the eight companies bought back 30%+ of outstanding shares over a period of time. Some took on debt to buy back shares at depressed levels. For those that did use equity to make acquisitions they always knew when to do it (when the stock was expensive). There are many more takeaways from the book, but you’ll just have to read it. I found the book very easy to read and in many cases reinforced management principles I’ve always felt were important. You will enjoy The Outsiders.

As a businessperson, I have read many, many books over the years that have helped me hone my business thinking and become better at business. As an investor, I also have read so many books that have helped me become a better value investor. Rarely, however, have I found books that have helped me do both at the same time. Roger Lowenstein's book on Warren Buffett, Pat Dorsey's two books on creating protectable value in a business, Howard Mark's book on investing, perhaps the David Clark/Mary Buffet series on value investing, all come to mind. Mr. Thorndike's book not only falls into the third category, but has made its way to the top of my keeper list. it is simply extraordinary, and I could not recommend it more highly. Why did I like it so much? Because it explains, in the most straightforward of ways, in the clearest of prose, (1) the hallmarks of a good business (strong, steady, predictable cash flow, as the sine qua non and core focus), (2) the possible sources of cash and uses of cash in a business that taken together generate cash flow in simple algebra (sources less uses equals cash flow), (3) the strategies flowed by 8 business leaders in managing that flow of capital so that the math works out the right way, (4) the incredible similarities in the strategies pursued by these leaders in working with cash flow and the tight correlation to increases in shareholder value, (5) the mindset of these leaders that separated them from the pack, (6) the ability of this group to decentralize, tune out the outside noise and ignore the "institutional imperative" and (7) the common intense focus shared by these leaders on a small set of metrics (all pretty much proxies for measuring cash flow and thus return on equity. If I had to consolidate those conclusions into a single core principle that came through with crystal clarity for me in this book, it would be that strategic, rational management of cash flow against clear benchmarks may be the single highest priority for leadership in any business. And as a corollary, that so few businesses seem guided by an intense focus on cash flow with its corresponding contribution to shareholder value. I also was so impressed that the conclusions presented in the book were not simply the musings of a very intelligent thinker, but rather were grounded in the most thorough of research. I likely still would have found much of value even without the research foundation, but that aspect provided even more credence to the analysis presented in the book. I spent Saturday of Labor Day Weekend reading through this volume as if it were the latest action thriller (geeky, I know). I simply couldn't turn the pages quickly enough, and look forward to returning to its teachings time and time again. It will have a very important place on both my investing and business bookshelves in the years to come. As Mr. Thorndike says in an interview that I read after reading the book, it would be wonderful if the top business schools would teach more (or, perhaps at all) about management of cash flow as a critical business priority of the CEO that should never under any circumstances be delegated down or away. I think he may have well written the textbook.

Excellent book for those seeking financial advice and examples from leading CEO’s

Une des façons dont Warren Buffett a adapté le style Benjamin Graham de l'investissement a été (outre l'étude des "moats") de prendre en compte la capacité de l'équipe de direction d'une entreprise à allouer rationnellement le capital. La pierre angulaire de cette stratégie consiste à investir dans des actions d'entreprises aux côtés d'équipes de gestion qui ont compris comment allouer ce capital de la manière la plus avantageuse. Cet accent mis sur ces compétences particulières de PDG atypiques est le sujet principal du livre. L'auteur, W.Thorndike, part de huit études de cas de ces gestionnaires exceptionnels qui ont su sortir des sentiers battus en prenant des décisions d'allocation de capital, et ont au final récompensé leurs actionnaires avec d'excellents taux de rendement sur le long terme. Ces PDG ont eu besoin pour cela d'un état ​​d'esprit différent de celui enseigné dans la plupart des écoles de commerce, et d'avoir su ignorer l'impératif institutionnel (cette dernière qualité étant d'ailleurs une de celles que Buffett attribue aux bons dirigeants. Plutôt que de se concentrer sur la gestion opérationnelle quotidienne, ils ont laissé une très large autonomie à leurs équipes et entités opérationnelles (décentralisation extrême, peu de personnel dans le headquarter etc.). En revanche, les décisions d'allocation de capital étaient quant à elles la tâche principale du CEO et les décisions à sa main (centralisation extrême). Une lecture attentive de ce livre vous aidera à mieux identifier les PDG actuels qui partagent le même état d'esprit que les gestionnaires à succès présentés dans le livre, et pourra donc vous aider en tant qu'investisseur. A conseiller fortement aux investisseurs passionnés (en bourse notamment), qui choisissent avec sérieux et passion les entreprises dans lesquelles ils investissent. Julien Delagrandanne, auteur : - Investir en bourse : styles gagnants, styles perdants - L'investissement immobilier locatif intelligent: Itinéraire vers votre future semaine des 7 dimanches - Construisez et gérez votre patrimoine avec succès - Guide pour s'enrichir lentement. . .mais sûrement !

Excellent review of the works of various CEO's with focus on their capital allocation strategies. It objectively looks at various capital allocation tools and discusses their impact on the value of companies in the case studies. It shows how good management can positively impact their company with a long term view, rather than focusing on short term share price. The book provides a great resource for investors and a way of thinking about management's handling of company resources and to evaluate whether they add value.

Super spannendes Buch. Ein Muss für jeden Aktien/Börsen Fan. Die Einblicke in die unterschiedlichen CEOs sind als Außenstehender wirklich interessant. Vorallem die Ziele welche ein CEO verfolgt haben auch mir geholfen mein Portfolio anzupassen