 I hadn't read a business book in a while, so when Ryan Holiday recommended The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success by William Thorndike, I decided to check it out.
It was a quick, enjoyable read. It reminded me of The Millionaire Next Door, which I read in 2011. It's interesting how some of the best CEOs (by performance against peers) have a lot in common, and these common behaviors are NOT well known (or common) outside their group. Their contrarianism helped them succeed, and they shied away fame on purpose. My biggest takeaways:
Preface Better performance than peers Jack welch not best Ceo Context matters Capital allocation and business operations top jobs Conventional CEOs rarely beat their peers What counts is per share value growth not overall Cash flow matters more than reported earnings Decentralized organizations keep entrepreneurial energy up and costs down In acquisitions, patience is a virtue as well as boldness Value investing Share buybacks Independent thinking, not advisors or consultants or Wall Street Nondescript locations Frugal Humble Devoted to families Quiet Not famous or charismatic Did not write books Outperformed peers by 20X Intro Positive deviants First time CEOs New to their industry Old fashioned values Iconoclasts Low or no dividends Thinking more like investors than managers When ur own stock cheap buy it yourself When expensive use it to buy other companies Greedy when others fearful Mastery is different from innovation Simplicity of focus Optimize long term value per share Trying to shrink share bases through repurchases Growth doesn't go with maximizing share value Key is cash flow 1 perpetual motion machine for returns: Tom Murphy (capital cities broadcasting) Opportunistically buying companies Don't diversify into unrelated businesses Don't build up fancy hq No former broadcast experience Removed limos and perks and did layoffs at acquisitions Flat organization Local managers with power Long periods of inactivity with periodic big acquisitions Eschew diversification No investment bankers No delegating investing or buying decisions Sourcing deals from direct contact with sellers Self deprecating style Pricing discipline Manager autonomy my 2 Henry singleton and teledyne No dividends Decentralized operations No Wall Street discussions Math and chess background Focused on cash flow not reported earnings Investor relations or guidance poor use of time No conferences Board consists of owners Tender offers 3 turnaround, bill Anders, general dynamics Engineering degree Should only be in business where can be number 1 or 2 Rational Asset sales 4 value creation, John Malone, tci Tax minimization focus Simple rule to buy companies only if price no more than 5X; no projections 5 widow, Katherine graham, Washington post Dividends tax inefficient because double taxed Lots of acquisitions and diversification Brought on Buffett as mentor to board when he was unknown 6 public lbo, bill sturitz, ralston purina Grassroots experience Leverage to boost returns Spin offs 7 optimizing the family firm, dick smith, general cinemas Diversifying acquisitions 8 investor as CEO, Buffett Switch in philosophy from net capital value investing to brand names Cigar butts to franchises Decide which businesses best to get rid of If in chronically leaking boat, devote energy to changing vessels than patching leaks Investment concentration Long holding periods Hire well, manage little Blank calendar No computer Reading 5 newspapers Detailed annual reports 9 radical rationality Introversion Humility Patience for right opportunity Long term perspective Epilogue Outsider's checklist Allocation process Ceo led Start by determining hurdle rate Calculate expected return for all internal and external projects Calculate return for stock repurchase Focus on after tax returns Calculate conservative cash and debt levels and stay within them Consider decentralized org model Retain capital in business if confident can maintain return above hurdle rate If do not have high return projects consider paying dividend but hard to reverse and tax inefficient Ok to sell business when prices high. Ok to close bad businesses without required return.
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