The outsider CEOs were master delegators, running highly decentralized organizations and pushing operating decisions down to the lowest, most local levels in their organizations. This led him to invest in consumer brands and media properties — businesses with “franchises,” dominant market positions, or brand names. Murphy and Burke had a clear division of labor at Capital Cities: Murphy as CEO, managed strategy, acquisitions, and capital allocation, while Burke as President and COO, managed operations. Like others in this book, relied on simple but powerful rules in evaluating transactions. The CEOs he ended up profiling were Tom Murphy of Capital Cities, Henry Singleton of Teledyne, Bill Anders of General Dynamics, John Malone of TCI, Katharine Graham … As a group, they were, in the words of Warren Buffett, very “greedy” while their peers were deeply fearful. In 1986, he made a massive $500 million investment to help Tom Murphy of Capital Cities acquire ABC. After the Capital Cities transaction , 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. Learn how their approach generated exceptional returns across industries and market conditions. “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… 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. [pg 7, Introduction]. This company generated vast amounts of floats, premium income in advance of losses, that Buffett effectively invested in securities and purchasing companies like the Omaha Sun. Singleton did not reserve any day-to-day responsibilities for himself. 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 services. Rather than optimizing for Wall Street’s preferred benchmark of reported earnings, Singleton took the unconventional approach of improving free cash flow. (you must read this).6. As he once said, “Computers require an immense amount of detail… I’m a mathematician, not a programmer. Murphy had an unusual negotiating style. In this vein, Bill James, who had been running the flagship radio property, WJR in Detroit, was tapped to run the cable division, and John Sias, previously head of the publishing division, took over the ABC Network. 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. Their situations and circumstances, however, are not remotely similar (nor are the lessons from their careers remotely transferable) to those of the vast majority of business executives. Over 29 years Tom Murphy of Capital Cities produced a 19.9% compounded annual return. Bennett this avuncular, outgoing exterior, however, lurked a razor-sharp business mind. 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. 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. In pursuing per-share value, they were ready even to shrink their company size and share base. Until Anders took over. It attracted Warren Buffett’s attention. “Tom Murphy and Dan Burke were probably the greatest two-person combination in management that the world has ever seen or maybe ever will see.” -- Warren Buffett. Chief Outsiders CMOs help CEOs address their need to keep appropriate focus on both the short term and long term strategies needed to maximize growth. 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. 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. 3. Once Roberts joined the company, Singleton began to remove himself from operations, freeing up the majority of his time to focus on strategic and capital allocation issues. Outsider CEOs have an advantage in creating a “new day” by resetting expectations and redefining roles with senior executives or with new executives if needed. ISBN 978-1-4221-6267-5 (alk. This single decision underscores a key point across the CEOs in this book: as a group, they were, at their core, rational and pragmatic, agnostic and clear-eyes. Neither had ay prior industry experience; both produced excellent results. He would do a line-by-line analysis of annual budgets that every manager presented. Capital allocation is a CEO’s most important job. In this episode, we read Warren Buffett's #1 book recommendation from 2012, The Outsiders. Buffett’s top stock positions have been held for over 20 years on average. He wanted General Dynamics to remain in business only where it was number 1 or number 2 by market position. This was done at a time when repurchases were highly controversial. As her son Donald has said, “Figuring out this relatively unknown guy was a genius was one of the less celebrated, best moves she ever made.”. Two thirds would come from market growth and improving margins. Over the long term, this systematic, methodical blend of low buying and high selling produced exceptional returns for shareholders. In a defense industry with highly centralized, bureaucratic organizations the trio made an active push for decentralization. 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. Anders transformed the company’s mindset from building faster, more lethal weapons to emphasizing shareholder value and return on equity. Learn how their approach generated exce… July 1, 2015 at 2:02 PM EDT. can be distracting and time-consuming. At bottom, these CEOs thought more like investors than managers. Read this book using Google Play Books app on your PC, android, iOS devices. Unfortunately, pioneers in cable technology often have arrows in their backs.”. The key elements are: What matters in the long term is the increase in per-share value, Long term value is determined by cash flows not reported earnings, Organizational decentralization improves efficiency and reduces costs, Rely on independent thinking over expert opinion, One of the best investment opportunities is the company’s stock, Patience, with occasional swiftness in deal-making, is the strategy for acquisitions. As a result of this pricing discipline, he never prevailed in an auction, although he participated in many. And 74 percent of all the incoming outsider CEOs in 2012 - 2015 were brought in during planned turnovers, up from 43 percent in 2004 - 2007. Decentralized organizations release entrepreneurial energy and keep both costs and “rancor” down. Chabraja’s defining move was the purchase of Gulfstream for $5 billion, a deal that was 56% of General Dynamics’s value. [Tom] Murphy was a master at prospecting for deals. The Outsiders is a great book that looks at eight CEO’s who produced above average returns for shareholders over the long term. He emphasized extreme decentralization, driving managerial accountability to the lowest levels. Buffett’s insurance operations focused on float generation over growth in premium revenue. The two core tasks CEOs have are management of operations and deployment of capital. Buffett spent little time on traditional due diligence and handled all deals personally. Read The Outsiders : Eight Unconventional CEOs And Their Radically Rational Blueprint For Success book reviews & author details and more at Amazon.in. 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. They did not give chamber of commerce speeches, and they did not attend Davos. [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). HD38.2.T476 2012 658.4′09—dc23 2012012451. The outsiders also shared some personal characteristics, including frugality, humility, independence, and an analytical, understated approach. During Warren Buffett’s tenure of 40 years, Berkshire’s returns outperformed the S&P by over a hundredfold. Many of the distinctive tenets of Warren Buffett’s unique approach to managing Berkshire Hathaway were first employed by Singleton at Teledyne. After the Lehman Brothers collapse, when all of corporate America was fearful, Buffett invested a massive $15 billion within 25 days. For a slightly expanded tl;dr scroll to the bottom for a 10-item checklist. Apart from these individual annual meetings, managers were left alone. 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 … These geniuses are the Isaac Newtons of business, struck apple-like by enormously powerful ideas that they proceed to execute with maniacal focus and determination. — Warren Buffett, “We believe that a policy of portfolio concentration may well decrease risk if it raises, as it should, both the intensity with which an investor thinks about a business and the comfort level he must feel with its economic characteristics before buying into it.” [Warren Buffett]. The F16 sale happened when Anders offered to buy Lockheed’s fighter plane division. 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. 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. His rule for transactions was a double-digit after-tax return over ten years without leverage. Get the culture working with you. Burke [COO] was responsible for daily management of operations, and Murphy [CEO] for acquisitions, capital allocation, and occasional interaction with Wall Street. As stated in the Preface to the book all eight CEOs believed, amongst other things that: Capital allocation is a CEO’s most important job These CEOs shared an intense focus on maximizing value per share. This was the largest transaction in Berkshire’s history. 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