From this point on, the company never made another material purchase and never issued another share of stock. 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. Stunningly, most of the ABC debt was paid within three years of acquisition. The book highlights 8 CEOs with massive returns. The Outsiders is a great book that looks at eight CEO’s who produced above average returns for shareholders over the long term. Compre online The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success, de Thorndike, William N., Jr. na Amazon. 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 … Malone’s simple rule allowed him to act quickly when opportunity presented itself. The overall headcount was cut by 60%. Outsider CEOs tended to be strategically flexible, changing company strategy as the circumstances required. What made this possible? 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 decision to welcome Buffett into the fold [on the board of Washington Post] was highly independent and unusual one at the time. 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. Decentralized organizations release entrepreneurial energy and keep both costs and “rancor” down. Warren Buffett bought his first share at Berkshire Hathaway for $7. Cash flow, not reported earnings, is what determines long-term value. 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. 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 The metric that the press usually focuses on is growth in revenues and profits. Burke, with his operations and integration expertise, would quickly improve margins and profitability. The residents of Singletonville, our outsider CEOs, also shared an interesting set of personal characteristics: They were generally frugal (often legendarily so) and humbly, analytical, and understated. They rarely paid dividends and emphasized cash flows over net revenue. Jack Welch of General Motors, widely considered to be an all-time great, outperformed the S&P 500 by a factor of three. Over 29 years Tom Murphy of Capital Cities produced a 19.9% compounded annual return. 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. The conventional wisdom at the time was that hard assets (gold, timber, and the like) were the most effective inflation hedges. They rarely appeared on the covers of business publications and did not write books of management advice. 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. This decision had high symbolic value as it signaled to the Pentagon that the company was ready to grow again. Towards the end of the decade, he made large insurance transactions, buying the remaining half of GEICO for $2.3 billion and purchasing the reinsurer GeneralRe for $22 billion in Berkshire stock. Murphy made the largest non-oil and gas transaction in business history when Capital Cities bought the ABC Network for an astounding $3.5 billion in 1986. The number of bids fell drastically, while the success rate shot up. Sometimes the best investment opportunity is in your own stock. Chabraja’s defining move was the purchase of Gulfstream for $5 billion, a deal that represented 56% of General Dynamics’s enterprise value. The best metric to measure a CEO’s performance is the increase in a company’s per-share value. You’ll see a lot of points repeated in slightly different scenarios. They had familiarity with other companies and industries and disciplines, and this ranginess translated into new perspectives, which in turn helped them to develop new approaches that eventually translated into exceptional results. A book that received high praise from Warren Buffett, The Outsiders chronicles the unconventional techniques that led eight CEOs to outperform the S&P 500 by an astounding twenty times. The Outsiders is about 8 CEOs who have enjoyed far better returns on company stock than their peers or the market due to their ability to allocate both financial and human capital.I really liked this book because capital allocation rarely gets talked about at the C-suite level from my experience. 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]. “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. From 1963 to 1990, he delivered a 20.4% compound annual interest rate to shareholders, thus outperforming the S&P twelvefold. Read The Outsiders : Eight Unconventional CEOs And Their Radically Rational Blueprint For Success book reviews & author details and more at It was an environment that selected for and promoted independent, entrepreneurial managers. As Phil Beuth, an early employee, told me, “The company was careful, not just cheap.”, The company’s hiring practices were equally unconventional. He wanted General Dynamics to remain in business only where it was number 1 or number 2 by market position. Anything in brackets or emboldened is me. Anders retired after naming Mellor as chairman. Bennett this avuncular, outgoing exterior, however, lurked a razor-sharp business mind. Free delivery on qualified orders. One chapter is on director Tom Murphy, who Buffett says is "overall the best business manager I've ever met." Buffett, however, under Munger’s influence and in a shift from [Benjamin] Graham’s traditional approach, had come to a different conclusion. In the three years Anders led the company, it generated a remarkable $5 billion in cash. You may not know some of their names (Henry Singleton, Bill Anders, Tom Murphy)―but you will recognize many of their companies (General Cinema, Ralston Purina, The Washington Post Company, Berkshire Hathaway). Give the CEO the space to succeed. His contrarian insight was that companies with low capital needs and the ability to raise prices were actually best positioned to resist inflation’s corrosive effects. But what makes the real difference over the long-term is the firm’s capital allocation strategy. Fear of inflation was a constant theme in Berkshire’s annual reports throughout the 1970s and into the early 1980s. As he once said, “Computers require an immense amount of detail… I’m a mathematician, not a programmer. Murphy used leverage to fund acquisitions. The CEO Success study shows that outsiders not only are increasingly seen as a viable option in a planned succession but also may perform better. 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. — Winston Churchill. To do this, he relied on Burke’s operations and integration expertise. Today, a stock is worth over $300,000. In most cases these CEO’s were not attention junkies and were not only great capital allocators but also time allocators. Several influential studies argue that the market for CEOs is well described by models with perfect competition and no frictions (Tervio 2008; Gabaix and Landier 2008; Edmans, Gabaix, and Landier 2009). When Nick Chabraja became CEO, he wanted to quadruple stock price in ten years. 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. [pg 7, Introduction]. Most CEOS tend to focus more on operations. When Chabraja left, the company had more employees than during Anders’s time, but only a quarter as many at the headquarters. Another $ 2.5 billion on buybacks of CEOs that performed extraordinarily well bennett this,. Best CEO 's do n't have financial or CFO backgrounds, rising through the careful financing of investment ]. 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