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The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success by [William Thorndike]

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William Thorndike

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

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“An outstanding book about CEOs who excelled at capital allocation.” — Warren Buffett

#1 on Warren Buffett’s Recommended Reading List, Berkshire Hathaway Annual Shareholder Letter, 2012

Named one of “19 Books Billionaire Charlie Munger Thinks You Should Read” in Business Insider.

“A book that details the extraordinary success of CEOs who took a radically different approach to corporate management.” — Charlie Munger, Vice-Chairman of Berkshire Hathaway Corporation

“Thorndike explores the importance of thoughtful capital allocation through the stories of eight successful CEOs. A good read for any business leader but especially those willing to chart their own course.” — Michael Dell, chairman of the board of directors and chief executive officer of Dell

What makes a successful CEO? Most people call to mind a familiar definition: “a seasoned manager with deep industry expertise.” Others might point to the qualities of today’s so-called celebrity CEOs—charisma, virtuoso communication skills, and a confident management style. But what really matters when you run an organization? What is the hallmark of exceptional CEO performance? Quite simply, it is the returns for the shareholders of that company over the long term.

In this refreshing, counterintuitive book, author Will Thorndike brings to bear the analytical wisdom of a successful career in investing, closely evaluating the performance of companies and their leaders. You will meet eight individualistic CEOs whose firms’ average returns outperformed the S&P 500 by a factor of twenty—in other words, an investment of $10,000 with each of these CEOs, on average, would have been worth over $1.5 million twenty-five years later. You may not know all their names, but you will recognize their companies: General Cinema, Ralston Purina, The Washington Post Company, Berkshire Hathaway, General Dynamics, Capital Cities Broadcasting, TCI, and Teledyne. In The Outsiders, you’ll learn the traits and methods—striking for their consistency and relentless rationality—that helped these unique leaders achieve such exceptional performance.

Humble, unassuming, and often frugal, these “outsiders” shunned Wall Street and the press, and shied away from the hottest new management trends. Instead, they shared specific traits that put them and the companies they led on winning trajectories: a laser-sharp focus on per share value as opposed to earnings or sales growth; an exceptional talent for allocating capital and human resources; and the belief that cash flow, not reported earnings, determines a company’s long-term value.

Drawing on years of research and experience, Thorndike tells eye-opening stories, extracting lessons and revealing a compelling alternative model for anyone interested in leading a company or investing in one—and reaping extraordinary returns.

Print length

274 pages
Language

English
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On Kindle Scribe
Publisher

Harvard Business Review Press
Publication date

October 2, 2012
File size

1454 KB
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From the Publisher

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

the outsiders, ceos, warren buffet, quote, success, achievements, talent, managers, chief executive

Editorial Reviews

Review

“An outstanding book about CEOs who excelled at capital allocation.” — Warren Buffett

“One of the Most Important Business Books in America.” — Forbes

“This book completely changed my business life... If you want to build a company that generates incredible returns, this book should be on your required reading list.” — Dave Morin, Founder & Partner, Slow Ventures as seen on Medium

“… easily the best investment or business book published in the past few years…” — Brendan Matthews, Motley Fool

“…an important insider’s perspective, an unapologetic glimpse into the hard-core investor view of what success looks like.” — Forbes.com

"It focuses on the less sexy but equally important job of a CEO—capital allocation." — Mebane Faber, CIO and portfolio manager at Cambria Investment Management (Business Insider’s Wall Street Reading List for 2014)

“Thorndike wants to give any manager or business owner the confidence to occasionally do things differently from your peers … to make the most of the cards they’re dealt and to delight their shareholders.” — Financial Times

“[Thorndike's] findings turn received wisdom about CEO success on its head. It’s not revenue and profit growth, but the increase in a company’s per share value that offers the ultimate barometer of a CEO’s greatness… Thorndike may have discovered an alchemic formula for CEO success. But will existing CEOs listen?” — economia

“Thorndike has done extensive research on each of the people features, and their success story makes for an inspiring and most definitely, compelling read.” — The Hindu (India)

“An extremely instructive read…well worth the effort.” — Business Traveller magazine

“This is an eminently readable volume with plenty of lessons.” — The Irish Times

ADVANCE PRAISE for The Outsiders:

Jim Collins, author, Good to Great; coauthor, Built to Last and Great by Choice—
“Will Thorndike dissects an eclectic and fascinating group of business leaders who created exceptional long-term value. He takes the unique angle of examining great CEOs as chief allocators of capital, so disciplined in their empirical rationality as to be nonconformists in the very best sense. Thorndike’s take is fresh, smart, and provocative—and well worth learning.”

Michael J. Mauboussin, Chief Investment Strategist, Legg Mason Capital Management; author, The Success Equation—
“Will Thorndike provides management principles that are as rock solid as they are rare and shares the engaging stories of eight CEOs who lived by them. The ideas in this book provide both executives and investors with the North Star of value. Follow it and prosper.”

Mason Hawkins, Chairman and CEO, Southeastern Asset Management—
“The Outsiders is a must-read for leaders—and aspiring leaders—striving to become exceptional CEOs, and for investors interested in partnering with exceptional stewards of corporate capital.”

Walter Kiechel, author, The Lords of Strategy—
“If creating wealth for shareholders is the ultimate test of a CEO, meet the champions. The names of these ‘outsiders’ may come as a surprise, but you will learn valuable strategic lessons from their iconoclastic ways.”

Thomas A. Russo, Partner, Gardner Russo & Gardner—
“The Outsiders celebrates leaders who kept their firms focused, rewarded their management despite long periods of inactivity, and—by keeping their companies out of trouble—found themselves free to pounce when compelling opportunities arose. A highly effective playbook for excellence.”
--This text refers to the hardcover edition.

About the Author

William N. Thorndike, Jr. is founder and a managing director of Housatonic Partners, a private equity firm. He is a graduate of Harvard College and the Stanford Graduate School of Business and has been a guest lecturer at the Harvard and Stanford business schools. He is a director of eight companies and two not-for-profit organizations, and lives in the Boston area with his wife and two children. --This text refers to an out of print or unavailable edition of this title.

Product details

ASIN ‏ : ‎ B009G1T74O
Publisher ‏ : ‎ Harvard Business Review Press (October 2, 2012)
Publication date ‏ : ‎ October 2, 2012
Language ‏ : ‎ English
File size ‏ : ‎ 1454 KB
Text-to-Speech ‏ : ‎ Enabled
Screen Reader ‏ : ‎ Supported
Enhanced typesetting ‏ : ‎ Enabled
X-Ray ‏ : ‎ Enabled
Word Wise ‏ : ‎ Enabled
Sticky notes ‏ : ‎ On Kindle Scribe
Print length ‏ : ‎ 274 pages

Best Sellers Rank: #49,864 in Kindle Store (See Top 100 in Kindle Store)
- #22 in Business Systems & Planning
- #36 in Strategic Business Planning
- #81 in Systems & Planning

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4.6 out of 5

1,858 global ratings

5 star		75%
4 star		17%
3 star		5%
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1 star		1%

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Tina

One of the Best books.

Reviewed in the United States 🇺🇸 on November 17, 2022

Verified Purchase

This is a great book because every time you read this book you can learn some new knowledge.

You can learn that why great people are great from this book

When I read this book, I can feel that I received a lot of positive energy from the great person in this book.

so it is a legend book which you should read for many times.

Reviewed in the United States 🇺🇸 on September 27, 2022

Verified Purchase

The Outsiders looks at CEOs who behaved more like investors than as operators. They focused their business to be financially optimal and delegated the running of the business to others. This approach is interesting in that the business is always run tightly with investments being made only when there is a clear ROI that meets a hurdle rate.

Further, the businesses also grow and shrink as the CEOs buy and sell pieces of the companies for optimal rates. Definitely a good book to understand the CEO as Capital allocator mindset.

One person found this helpful

Helpful

R. Reynolds

Extraordinary Book

Reviewed in the United States 🇺🇸 on September 2, 2013

Verified Purchase

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.

10 people found this helpful

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El Artesano

Unique but Imperfect.

Reviewed in the United States 🇺🇸 on August 15, 2018

Verified Purchase

In my opinion, this is a book on Applied Corporate Finance. As those who ever took a Corporate Finance class know, the basic premise on which that discipline is built is Maximization of Shareholder Value. Well, this book is about exactly that. According to Corporate Finance theory, the maximization of shareholder value is achieved by following three principles -the Investment Principle, the Financing Principle, and the Dividends Principle. The Investment and Dividends Principles are what in the book the author calls Uses of Cash (Capital Allocation). The Financing Principle has more to do with what the author refers to as the Sources of Cash (asset divestitures, issues of equity/debt, etc). Questions related to operations efficiency are only covered superficially, but that's fine. From the get go, the author is honest about the focus and scope of the book.

The book is unique in the sense that there are not many books on Corporate Finance case studies. This book is exactly that. Each of the CEOs/Companies profiled here is a separate case, dealt with in separate chapters. I like that.

It is also a well-written, well-researched book. It is an entertaining read and, on top of everything, it has the endorsement of Warren Buffett. You cannot ask for much more than that. Oh wait! Yeah, the presentation is pretty nice. I like good looking, elegant hardcover books.

Now, why am I holding back one star? See below:

1- The book is kind of dogmatic about certain rules deemed as universal (e.g., never pay dividends, never issue new shares, etc). If things were so simple, then Corporate Finance would not exist as a discipline.

2- The author kind of pounds on Jack Welch as someone who, even though successful, has not accomplished the same level of results that the CEOs included in his book did. Well, guess what, you cannot compare apples to oranges. Jack Welch was the CEO of GE. These other CEOs took over when their companies were very small, and completely unknown. I'm not saying the they do not deserve credit for what they accomplished. All I'm saying is that you cannot expect GE's stock price to grow at the same pace small cap stocks grow. Scale is important. So, when adding Jack Welch into the mix, the relevant question is no longer who grew the stock price the most, but who generated the most profits (in absolute dollar value) for their shareholders. Again, scale is important. It's not the same to be the president of the US than the president of Uruguay.

I guess the ultimate goal of the book is not so much to teach Corporate Finance lessons but to help value investors select good CEO's. "Good" in this sense means CEO's who are focused on maximizing shareholder value in the long term. In other words, CEO's whose interests are in line with those of the owners of the company. Now, this might be an outdated approach since good Corporate Governance practices are nowadays widespread, which ensures that the compensation of executives is tied to business results. Not to say that there are still not principal-agent issues around, but it is definitely not as pervasive of a problem as it was decades ago.

Hope this helps.

Cheers!

76 people found this helpful

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Travis B Klein

Love this book

Reviewed in the United States 🇺🇸 on October 25, 2022

Verified Purchase

I'm 50% of the way through and I absolutely love this book I have learned so much about value investing and how these people were able to compound people's money at such high levels

Helpful

Top reviews from other countries

Sergio

Flawed and badly written

Reviewed in the United Kingdom 🇬🇧 on March 24, 2019

Verified Purchase

The book is repetitive and badly written. This should have been a 7-9 pages white paper, not really a book. His measure of how good a CEO is, is also deeply flawed. While stok price returns is an important metric, it should not be the only one. It does not even consider how leveraged the companies were, so he compares apples and oranges. This becomes evident with companies like GE. For example, he expresses much admiration for Jack Welch, who did generate high returns for a time by building what it now appears to have been a house of cards.
The ony reason to give two stars instead of one is that he did choose 8 interesting CEOs to analyse.

9 people found this helpful

Ulo Kallas

Tips for effective long-term management

Reviewed in the United Kingdom 🇬🇧 on April 28, 2017

Verified Purchase

These are the main methods practiced by the CEOs profiled in the book:
1. Full decentralization of operating management;
2. In contrast, capital allocation is kept strongly centralized;
3. Aggressive, big-ticket acquisitons, however these are usually done rarely, or significantly less frequently than in other companies;
4. Share buybacks done infrequently and in bulk. So not a certain amount each year but a few big tender offers for shares at the time when the shares are cheap;
5. Asset sales are used also aggressively, sometimes resulting in a substantial shrinking of the company.

What I found useful and interesting was the description of the work of five CEO-s that were unknown to me before (Tom Murphy, Henry Singleton, Bill Anders, John Malone, Bill Stiritz, Dick Smith). Katherine Graham I knew from her biography. However the author talked a lot about Warren Buffett and there was even one chapter devoted to him. For me this was a bit of a waste as so much is already written about Buffett that it a bit watered down the rest of the material.

As a separate issue I have to mention that from time-to-time I got the feeling that the author was not fully on top of the subject. For example:
1. On page 159 under the chapter „Optimising the Family Firm“, the author describes the added table 7-1 as „outlining sources and uses“. But if i check the table then it is not a sources-and-uses table but rather a description of how much each class of security holders in the acquired distressed HBJ got;
2. On page 174 in the Buffett chapter, the author mentions that the See’s Candy original investment did not really matter because if they would have doubled the acquisition price the return would „still have been a very attractive 21 percent“. This is a bit funny statement -the difference in capital accumulated between 21% and 32% over 27 years is over 10 times!.

16 people found this helpful

Michaela B Kettl

Recommended for anyone who thinks outside the box and runs a business or thinks of running one

Reviewed in the United Kingdom 🇬🇧 on March 13, 2017

Verified Purchase

Very worthwhile book for anyone who believes in the likes of Warren Buffett, the late Katherine Graham, etc. and who does not buy into the conventional wisdom that individuals like Jack Welch are the only worthwhile managers.
Book is incredibly well written, very succinct.
In my humble opinion a book that is a necessary read for anyone who is self-employed, runs a business - small or large, etc.
It is one of the 9 recommended 'must reads' by Warren Buffett.

2 people found this helpful

Joy W

Informative and Well Written

Reviewed in the United Kingdom 🇬🇧 on December 14, 2020

Verified Purchase

Picked this up as part of my continuing professional development and learned a lot. He identifies a number of corporate finance concepts that contribute most towards successful investing and profiles a couple of interesting companies to illustrate. Would recommend

Guilherme Neves

outside the limelight is the real value

Reviewed in the United Kingdom 🇬🇧 on April 19, 2017

Verified Purchase

This is an out of the box book, in the era of Teslas and Netflix'es, companies that burn a lot of cash but a worth more than companies with a sound track record of profitability and billions of profits and cash flow. This book is just about that ceo's of companies that passed out of the Limelight but produced astonishing returns.

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