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

I highly recommend reading this book if you have not done so.  A lot of investors have already read this book, so I’m a little late to the game however it’s a very useful look into the details of 8 CEOs whom have  provided exceptional returns over a long period of time for their investors.  Everyone is familiar with Warren Buffet and his amazing record of running Berkshire Hathaway, however, most will not recognize all of names of the CEOs that are covered in the book.

• General Cinema – Dick Smith
• Ralston Purina – Bill Stiritz
• The Washington Post Company – Katherine Graham
• Berkshire Hathaway – Warren Buffett
• General Dynamics – Bill Anders
• Capital Cities Broadcasting – Tom Murphy
• TCI – John Malone
• Teledyne – Henry Singleton

The common attribute of all of the people included in the book is their outstanding capital allocation skills.  The CEO is responsible for determining the best possible use of cash and investments for the company that they run.  To obtain outstanding returns on investment a CEO must determine how to invest the resources of the firm appropriately and that’s the theme of this book.  Decentralizing management of the ongoing businesses to skilled managers while centralizing allocation of capital has allowed these CEOs to outperform the S&P 500 for many years and decades.

This isn’t your typical investing book, but is a great blueprint for finding companies that will compound their returns over many years.  Companies that offer these types of returns are rare as CEOs with strong ego’s will make poor financial decisions and overpay for acquisitions, dilute shareholders, and hold on to assets with subpar returns.  Finding executive management teams that employee few resources at the corporate level while decentralizing authority to talented managers while making prudent business decisions is a path towards long-term investor returns.  Decisions to sell assets when prices are high, buy assets when prices are low, buy back stock when other investments don’t make financial sense are attributes of a strong management team.  Finding such companies are very lucrative to invest in as seen by the companies covered in the book.

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