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The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success Hardcover – October 23, 2012
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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 CEOcapital 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 provocativeand 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 leadersand aspiring leadersstriving 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, andby keeping their companies out of troublefound themselves free to pounce when compelling opportunities arose. A highly effective playbook for excellence.”
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The eight CEOs studied by Thorndike had remarkably similar approaches to questions such as "should I buy my competitor or should I pay a large dividend to my investors", "should I invest in a new plant/market or should I offer to buyback shares from my investors", "should I spend our excess cash on growing our market share or should I return this cash to investors".
In a nutshell, Thorndike gives you the secrets of eight outstanding CEOs and how they think about whether you should spend your cash to grow the top line, to pay a dividend, or to buyback shares and thereby reduce the denominator of shares outstanding.
If you were a CEO why would you not allocate the capital entrusted to you by your investors (and hopefully partially your own) in such a way that over time it will likely grow larger at an attractive rate? And if you we're an investor, why would you not want to entrust your capital in the hands of CEO's who understand these concepts and show an ability to allocate capital effectively? If you're not doing one of these two things, then what exactly are you doing?
To paraphrase a great investor and dear friend, I would hope one day these concepts were taken to be as much an issue of common sense as saying "rain falls down". Alas, this could not be farther from the case, which makes The Outsiders all the more remarkable a book.
Economic history and the business press are littered with cautionary tales of CEO's (not to mention politicians) who, for any number of reasons ranging from ineptitude to self-interest to political pressures, have squandered the resources entrusted to them and failed to generate the types of self-sustaining economic systems that, in addition to generating attractive returns on capital, provide valuable goods and services to customers, create jobs, pay taxes and are truly the economic bedrock of society.
We who believe that business, when properly and ethically run, has the potential to drive development and progress in society owe Mr. Thorndike a debt of gratitude for his dedication over the last decade to understanding and openly communicating the underlying drivers of this powerful force. At a moment where the global economy, and society at large, appears stuck in a rut, it is helpful to be reminded that the path forward is not to be found by arguing about how to divide the value we have but rather by arming yourself with the proper mental frameworks (of which capital allocation is among the most important), venturing out into the world and, at the risk of failure, trying your best to create value.
While some of the examples (Graham and Buffett) have been worn to death, others are very interesting reading, especially for the smaller companies and those that thrived in the 60's to the early 90's, a period that is often forgotten nowadays. He profiles a number of CEO's who substantially beat the market, using Jack Welch as a (low) benchmark, and looks for traits among them.
The traits he found were intense focus on operations but in a de-centralized manner, and yet big capital decisions (stock buy backs, acquistions) were made by the CEO him (or her) self. These examples also emphasized cash flow, which is a better long term predictor of stock success than EPS, a more widely used measure, as well as tax efficiency.
The ending of the book was a bit weak as he attempted to apply these techniques to an average businessperson say expanding a bakery; the logic is more compelling within the framework of the overall stock market.
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Rationality, patience and decisiveness are their key traits.