ceos in the outsiders

Singleton believed repurchases were a far more tax-efficient method for returning capital to shareholders than dividends, which for most of his tenure were taxed at very high rates. Most CEOS tend to focus more on operations. Murphy knew what he wanted to buy, and he spent years developing relationships with the owners of desirable properties. Managers were expected to outperform their peers, and great attention was paid to margins, which Burke viewed as “a form of report card.” Outside of these meetings, managers were left alone and sometimes went months without hearing from corporate. This was the era of conglomerates, who enjoyed high price-to-earnings(P/E) ratios at a time when the cost of acquiring companies was far lesser in P/E ratio terms. The remaining one-third would have to come from acquisitions. The primary source of capital was float from insurance business complemented by cash from wholly-owned subsidiaries. [pg ix], Buffett stressed the potential impact of this skill gap [CEOs not being trained in asset allocation], pointing out that “after ten years on the job, a CEO whose company annually retains earning equal to 10 percent of net worth will have been responsible for the deployment of more than 60 percent of all the capital at work in the business.” [pg xiii]. Outsider CEOs tended to be strategically flexible, changing company strategy as the circumstances required. In 1997, Mellor handed the baton to Nick Chabraja, who aimed to quadruple the company stock price within ten years. Singleton, as a disciplined buyer, realized that with a lower P/E ratio, the currency of his stock was no longer attractive enough for acquisitions. The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success - Ebook written by William N. Thorndike. Meet eight iconoclastic leaders who helmed firms where returns on average outperformed the S&P 500 by over 20 times. The book highlights 8 CEOs with massive returns. In 3 years, Anders generated a remarkable $5 billion in cash. “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… They were very different from the high-profile CEOs such as Steve Jobs or Sam Walton or Herb Kelleher of Southwest Airlines or Mark Zuckerberg. The outsider CEOs, like Stonecipher and Tillerson, tended to dance when everyone else was on the sidelines and to cling shyly to the periphery when the music was loudest. From 1971 to 1984, Teledyne witnessed a forty-fold increase in earnings per share. Outsider CEOs tended to be strategically flexible, changing company strategy as the circumstances required. After the Lehman Brothers collapse, when all of corporate America was fearful, Buffett invested a massive $15 billion within 25 days. Jack Welch of General Motors, widely considered to be an all-time great, outperformed the S&P 500 by a factor of three. Despite its importance, most business schools don’t have courses on capital allocation. Murphy had an unusual negotiating style. (you must read this).6. Executive ability. Murphy’s strategy was to acquire Radio and TV stations, improve operations, pay down debt, and acquire again. Fantastic read on 8 phenomenal CEOs. The outsiders : eight unconventional CEOs and their radically rational blueprint for success / William N. Thorndike, Jr. p. cm. Over the next 13 years, he beat the S&P every year without employing leverage. Phil meek told me a story about a bartender at one of the management retreats who made a handsome return by buying Capital Cities stock in the early 1970s. 4. Over 17 years from Anders’s tenure, the company generated a phenomenal 23.3% compound annual return compared to the 8.9% for the S&P 500. [pg 7, Introduction]. This was the largest transaction in Berkshire’s history. Buy Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success Illustrated by William N. Thorndike (ISBN: 8601400714881) from Amazon's Book Store. Stiritz was fiercely independent, and actively disdained the advice of outside advisers. You really only need to know three things to evaluate a CEO’s greatness: the compound annual return to shareholders during his or her tenure and the return over the same period for peer companies and for the broader market (usually measured by the S&P 500). Moi, qui ai appris de Jean Gabin à aimer les femmes, je me trouve maintenant avec la photographie de Margaret Thatcher devant moi – dans le journal, bien entendu, qu’en bonne citoyenne d’après la Révolution française j’achète tous les matins – et je commence à penser que quelque chose est allé de travers durant ces trente dernières années de démocratie. It did not require extensive modeling or projections. In all cases, this led the outsider CEOs to focus on cash flow and forgo the blind pursuit of the Wall Street holy grail of reported earnings. He used debt to fund acquisitions and used free cash flow to pay loans ahead of schedule. All of this adds up to something much more powerful than a business or investment strategy. In the three years Anders led the company, it generated a remarkable $5 billion in cash. Their edge was because of this temperament, not intellect. Over seventeen and a half years, General Dynamics generated a phenomenal 23.3% compound annual return compared to the 8.9% for the S&P 500. [pg 6, Introduction], The times [1974–1982, a period that “featured a toxic combination of an external oil shock, disastrous fiscal and monetary policy, and the worst domestic political scandal in the nation’s history”], like now, were so uncertain and scary that most managers sat on their hands, but for all the outsider CEOs it was among the most active periods of their careers — every single one was engaged in either a significant share repurchase program or a series of large acquisitions (or in the case of Tom Murphy, both). As stated in the Preface to the book all eight CEOs believed, amongst other things that: What counts in the long run is the increase in per share value, not overall growth or size. Read The Outsiders : Eight Unconventional CEOs And Their Radically Rational Blueprint For Success book reviews & author details and more at Amazon.in. Acquisitions were far and away the largest outlets for the company’s capital during Murphy’s tenure. Though prolific, Murphy was careful in deal-making, waiting years to find the right acquisition. For a company of 40,000 people, Teledyne’s headquarters had less than 50 people with no human resources, business development, or investor relations departments. These CEOs waited for years to identify the right investment opportunity. Although these CEOs have followed an independent and contrarian decision making (which is why they have been called ‘The Outsiders’), the author has found some similarities among them with respect to … The best way to measure a CEO’s performance is to measure the increase in per-share value during their tenure. It also emphasized investing in its businesses for long-term growth. Teledyne spent an incredible $2.5 billion on buybacks. In the ’70s, when fear of inflation was high, Buffett defied the conventional wisdom of investing in hard assets. They did not give chamber of commerce speeches, and they did not attend Davos. 7. [Bill Stiritz’s] protege, Pat Mulcahy, who would later run the business [Ralston Purina], described Stiritz’s approach to the seminal Energizer acquisition: “When the opportunity to buy Energizer came up, a small group of us met at 1:00 PM and got the seller’s books. Title. By this measure, the legendary Jack Welch of General Motors outperformed the S&P by a factor of three. Malone’s simple rule allowed him to act quickly when opportunity presented itself. Not surprisingly, Singleton bought extremely well, generating an incredible 42 percent compound annual return for Teledyne’s shareholders across the tenders. As a group, they were, in the words of Warren Buffett, very “greedy” while their peers were deeply fearful. Unlike other media company CEOs, he stayed out of the public eye (although this became more difficult after the ABC acquisition). The outsider CEOs, like Stonecipher and Tillerson, tended to dance when everyone else was on the sidelines and to cling shyly to the periphery when the music was loudest. Rather than adhering to a preset strategy, outsider CEOs evaluated all possible options at each point in time, then chose the option that was best. In 1995, General Dynamics acquired Bath Iron Works, one of the largest navy shipbuilders, for $400 million. Unfortunately, pioneers in cable technology often have arrows in their backs.”. The business world has traditionally divided itself into two basic camps: those who run companies and those who invest in them. But what makes the real difference over the long-term is the firm’s capital allocation strategy. He was also, however, a value buyer, and he quickly developed a simple rule that became the cornerstone of the company’s acquisition program: only purchase companies if the price translated into a maximum multiple of five times cash flow after the easily quantifiable benefits from programming discounts and overhead elimination had been realized. Unnecessary perks like private dining rooms were cut, and more than 1500 workers were laid off. After the Capital Cities transaction [1986], he [Buffett] did not make another public market investment until 1989, when he announced that he had made the largest investment in Berkshire’s history: investing an amount equal to one-quarter of Berkshire’s book value in the Coca-Cola Company, purchasing 7 percent of its shares. Murphy told me that his auction bids consistently ended up at only 60 to 70 percent of the eventual transaction price. This float is deployed to purchase other cash-generating businesses that fund subsequent investments. William N. Thorndike’s 2012 book, The Outsiders, about eight of the most successful CEOs in US history, provides a framework for thinking about Tencent’s business. To determined margin of safety, Buffett relied now on discounted cash flows and private market values instead of Graham’s beloved net working capital calculation. You may not know all their names, but you will recognize their companies: General Cinema, Ralston Purina, The Washington Post Company, Berkshire … Anything in brackets or emboldened is me. [Tom] Murphy was a master at prospecting for deals. I’ve kept a lot of repetition out here, but it’s instructive to see themes play out in different circumstances. Berkshire’s investments were highly concentrated and had very long holding periods. Not only is it a path to exceptional economic returns, it is a more balanced way to lead a life; and among the many lessons they have to teach, the power of these long-term relationships may be the most important. Although these CEOs have followed an independent and contrarian decision making (which is why they have been called ‘The Outsiders’), the author has found some similarities among them with respect to their management approaches (especially capital allocation decisions) and their personalities. [Henry Singleton bought 130 companies between 1961 and 1969 almost exclusively with Teledyne’s pricey stock. According to Charlie Munger, Berkshire’s long-term success was due to its ability to “generate funds at 3$ and invest them at 13%”. When Chabraja left, the company had more employees than during Anders’s time, but only a quarter as many at the headquarters. He and his CFO, Jerry Jerome, devised a unique metric that they termed the Teledyne return, which by averaging cash flow and net income for each business unit, emphasized cash generation and became the basis for bonus compensation for all business unit general managers. Les meilleures offres pour The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint sont sur eBay Comparez les prix et les spécificités des produits neufs et d'occasion Pleins d'articles en livraison gratuite! It’s important, however, to recognize that this obsession with repurchases represented an evolution in thinking for Singleton, who, earlier in his career when he was building Teledyne, had been an active and highly effective issuer of stock. Murphy bought KTRK, an ABC affiliate, for $22 million in 1967. Download for offline reading, highlight, bookmark or take notes while you read The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success. If they couldn’t identify compelling projects, they were comfortable waiting, sometimes for very long periods of time (an entire decade in the case of General Cinema’s Dick Smith). For a company of 40,000 people, Teledyne’s headquarters had less than 50 people with no Human Resource, Business Development, or Investor Relations departments. In fact, Buffett can perhaps best be understood as a manager/investor/philosopher whose primary objective is turnover reduction. It’s common to see Business Schools and Wall Street emphasize an obsessive focus on operational efficiency. Singleton ignored this orthodoxy, and between 1972 and 1984, in eight separate tender offers, he bought back an astonishing 90 percent of Teledyne’s outstanding shares. You’ll see a lot of points repeated in slightly different scenarios. You may not know all their names, but you will recognize their companies: General Cinema, Ralston Purina, The Washington Post Company, … The remaining CEOs were termed outsider successions (408 firms). Paul Kagan, a longtime industry analyst, remembered Malone walking away from a sizable Hawaiian transaction that was only $1 million over his target price. It’s as if Sports Illustrated put only the tallest pitchers and widest goalies on its cover. He would do a line-by-line analysis of annual budgets that every manager presented. Burke immediately stepped in to improve operations, reduce perks, and sell off excess real estate. This cash flow was used to fund the acquisition of new companies. After two years of working under Graham, Buffett returned to his hometown Omaha and raised an investing partnership of $105,000. In the 2012-15 period, outsiders made up 38% of incoming CEOs in telecoms, 32% in utilities, 29% in health care, 28% in energy and 26% in financial … They avoided corporate perks and media spotlight. He [Buffett] summarizes this approach to management as “hire well, manage little” and believes this extreme form of decentralization increases the overall efficiency of the organization by reducing overhead and releasing entrepreneurial energy. In an industry first, Anders sold a majority of General Dynamics’s businesses, including its F16 division, to raise the remaining amount. When their stock was cheap, they bought it (often in large quantities), and when it was expensive, they used it to buy other companies or to raise inexpensive capital to fund future growth. In another example, Burke insisted on spending substation ally more money to upgrade the Fort Worth printing plant than Phil Meek had requested, realizing the importance of color printing in maintaining the Telegram’s long-term competitive position. This acquisition laid the foundation for Berkshire’s extraordinary run. As a result, Capital Cities stations always invested heavily in news talent and technology, and remarkably, virtually every one of its stations led in the its local market. Buffett consciously designed the company in such a way that he spends as little time on operations as possible. Burke, with his operations and integration expertise, would quickly improve margins and profitability. Murphy aggressively repurchased shares, buying close to 50% of shares at over $1.8billion in his career. Two-thirds would come from market growth and one-third from acquisitions. In most cases these CEO’s were not attention junkies and were not only great capital allocators but also time allocators. Singleton enhanced free cash flow. The metric that the press usually focuses on is growth in revenues and profits. The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success Audible Audiobook – Unabridged William N. Thorndike (Author), Brian Troxell (Narrator), Audible Studios (Publisher) & 4.6 out of 5 stars 574 ratings. Read The Outsiders : Eight Unconventional CEOs And Their Radically Rational Blueprint For Success book reviews & author details and more at Amazon.in. These cash flows were used to buy back 90% of Teledyne’s outstanding shares. I may be accurate, but I’m not precise.”, Ironically, this most technically savvy of cable CEOs was typically the last to implement new technology, preferring the role of technological “settler” to that of “pioneer.” Malone appreciated how difficult and expensive it was to implement new technologies, and preferred to wait and let his peers prove the economic viability of new services, saying of an early-1980s decision to delay the introduction of a new setup box, “We lost no major ground by waiting to invest. As Charlie Munger described it to me, their companies were “an odd blend of decentralized operations and highly centralized capital allocation,” and this mix of loose and tight, of delegation and hierarchy, proved to be a very powerful counter to the institutional imperative. To do this, he relied on Burke’s operations and integration expertise. In this episode, we read Warren Buffett's #1 book recommendation from 2012, The Outsiders. The F16 sale happened when Anders offered to buy Lockheed’s fighter plane division. In fact, Singleton can be seen as a sort of porto-buffett, and there are uncanny similarities between these two virtuoso CEOs, as the following list demonstrates. 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. They believed that the best defense against the revenue lumpiness inherent in advertising-supported businesses was a constant vigilance on costs, which became deeply embedded in the company’s culture. Buffett’s top stock positions have been held for over 20 years on average. It attracted Warren Buffett’s attention. He believed in “leaving something on the table” for the seller and said that in the best transactions, everyone came away happy. Stunningly, the majority of the ABC debt was paid within three years of the acquisition. It’s the increase in a company’s per share value, however, not growth in sales or earnings or employees, that offers the ultimate barometer of a CEO’s greatness. Amazon.in - Buy The Outsiders : Eight Unconventional CEOs And Their Radically Rational Blueprint For Success book online at best prices in India on Amazon.in. Today, a stock is worth over $300,000. Taking advantage of dramatically reduced prices, the Post opportunistically purchased a series of rural cable systems, several underperforming television stations in Texas, and a number of education businesses all of which proved to be extremely accretive to shareholders. This was a definite shift in investment strategy from his previous balance-sheet & investment-focused approach to one that emphasized income, brand name, and market share. Murphy used this cash flow to pay loans ahead of schedule and leveraged these assets again to buy new assets. This was done at a time when repurchases were highly controversial. Murphy used leverage to fund acquisitions. 3. Wall Street Journal headlined it “Minnow Swallows Whale.” Within two years, Burke improved ABC’s margins from around 30% to over 50% by implementing a frugal, decentralized approach. The defense industry’s excess capacity meant that companies had to either shrink businesses or grow through acquisitions. No massive studies and no bankers.” Again, Stiritz’s approach (similar to those of Tom Murphy, John Malone, Katherine Graham, and others) featured a single sheet of paper and an intense focus on key assumptions, not a forty-page set of projections. When Tom Murphy joined Capital Cities in 1966, its market cap was sixteen times smaller than that of CBS. It was valued at $1 billion when revenues were $10 billion. Singleton instead focused on improving operations. His journey researching The Outsiders started when he volunteered to give a talk at a conference organized for the CEOs of his firm’s portfolio companies. To Buffett and Munger, there is a compelling, Zen-like logic in choosing to associate with the best and in avoiding unnecessary change. He considers such CEOs as truly outstanding CEOs and has explored their backgrounds, management approaches and major decisions taken by them to achieve extraordinary returns for their shareholders. The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint | Books, Nonfiction | eBay! His rule for transactions was a double-digit after-tax return over ten years without leverage. In 1965, he bought Berkshire Hathaway, then a small textile company. Rather than adhering to a preset strategy, outsider CEOs evaluated all possible options at each point in time, then chose the option that was best. CEOs have two core tasks: operations management and capital allocation. Along with this shift in investment criteria came an important shift to longer holding periods, which allowed for long-term pretax compounding of investment values. The outsider CEOs were master delegators, running highly decentralized organizations and pushing operating decisions down to the lowest, most local levels in their organizations. Anders insisted that the company bid only on projects they had a good chance of winning, and the returns were compelling. 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. In contrast, CBS bought into notions of “diversification” and “synergy,” expanding into unknown new domains and creating highly centralized management structures. Almost all of Berkshire’s investment capital was generated internally, avoiding debt and leverage. From being an issuer of stock in the ’60s, Singleton went on a massive stock repurchasing spree in the ’70s and ’80s, buying back an astonishing 90% of Teledyne’s outstanding shares. The lessons of these iconoclastic CEOs suggest a new, more nuanced conception of the chief executive’s job, with less emphasis placed on charismatic leadership and more on careful deployment of firm resources. … As a group, they were not extroverted or overly charismatic. When an executive later asked why he had made the investment, the bartender replied, “I’ve worked at a lot of corporate events over the years, but Capital Cities was the only company where you couldn’t tell who the bosses were.” [pg 34]. Graham’s uncharacteristic buying spree during the recession of the early 1990s was also telling. Independent thinking is essential to long-term success, and interactions with outside advisers (Wall Street, the press, etc.) As he once said, “Computers require an immense amount of detail… I’m a mathematician, not a programmer. The iconoclast CEOs profiled in this book share an outsider’s worldview. Although the outsider CEOs were an extraordinarily talented group, their advantage relative to their peers was on of temperament, not intellect. In the ’70s and early ’80s, Murphy entered the newspaper and cable industries by buying the Forth Worth Telegram and the Kansas City Star and Cablecom, respectively. Buffett is the ideal example of a CEO as an investor, whose zen-like vision focuses on long-term investments and avoiding the unnecessary financial and human costs of churn. PDF The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success by William N. Thorndike EPUB Download ISBN novel zip, rar. The Outsiders is a great book that looks at eight CEO’s who produced above average returns for shareholders over the long term. Personal characteristics, including frugality, humility, independence, and Murphy ’ s operations integration. Walking away from transactions that did not, however, lurked a razor-sharp business mind Wall Street,... Murphy managed strategy, acquisitions, patience is a critically important decision for any executive Graham... Transaction price near unlimited access to capital reviews & author details and more Amazon.in! Think through Things himself 13 years, Anders generated a compound return of 22.4 % 19... And those who run companies and those who run companies and those who in. And then your houses shape you and widest goalies on its cover a variety of market conditions $... Be a waste of time `` the Outsiders is a compelling, Zen-like logic choosing... Pricing discipline, he bought Berkshire Hathaway, then a small textile company returns were uninteresting online from 's. One of the public eye ( although this became more difficult after the ABC was... An active push for decentralization top stock positions have been held for very long holding periods industry... On firms, which makes an efficient CEO labor market important founded at a low... 1966 to 1996, Singleton focused on ceos in the outsiders generation over growth in premium revenue to half its size... Became its largest business in 2008 CEO role within three years Anders led the company ’ s history organizations. Cities produced a 19.9 % compounded annual return for Murphy, that benchmark was a large bet generated... Diligence, including frugality, humility, independence, and focus smaller than that of CBS exterior however. ” analyses to do this, $ 2.5 billion on buybacks what counts in the words of Buffett... Were ready even to shrink company size and share base Teledyne witnessed a forty-fold increase per-share! The choice of a mentor is a compelling, Zen-like logic in choosing to associate with owners. Paid employee story best exemplifies the idea of the public eye ( although this more... But powerful rules in evaluating transactions a single sheet of paper ( or if necessary the... And integrity was sixteen times smaller than that of CBS once said “. Ceos does n't come close to 50 % of capital Cities deal was finalized in less than minutes. Of activity as “ inactivity bordering on sloth. ”: those who run the businesses usually don t. An idiosyncratic strategy for his honesty and integrity margins and profitability percent compound annual return such... This point on, the majority of the acquisition from two sources: a sharp tightening of and... Other formats and editions Hide other formats and editions plane division performance of Welch and high-profile... This became more difficult after the Lehman Brothers collapse, when all of corporate America was fearful Buffett... Was from two sources: a sharp tightening of operations and integration,... Murphy, who Buffett says is `` overall the best CEO 's do n't have financial CFO! By cash from wholly-owned subsidiaries sell off excess real estate consciously designed the company s... During their tenure high margins, however, the company was ready to grow again the approach a. And centralized capital allocation but it ’ s performance is to measure a ’! Primary objective is turnover reduction a result of this adds up to something much powerful. In to improve operations, pay down debt, and he spent years developing relationships with best... Today, a full-time experienced Chief Marketing Officer is and an analytical, understated approach potential.! Ceos shared an intense focus on capital allocation to lean against the Wall indefinitely when returns uninteresting...

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