Top critical review
Should have emphasized more on conceptual explanations instead of repetitive examples
3 May 2018
The author, William N. Thorndike Jr., has mentioned eight CEOs during whose tenures the returns generated by their shares have outperformed those of industry peers and the broad market by a wide margin for very long duration of time. 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. 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.
Although there are no strict formula, the ‘outsider’ CEOs mentioned in the book did the following: They disdained dividends, made disciplined (occasionally large) acquisitions, used leverage selectively, opportunistically bought back a lot of stock at cheap prices, minimized taxes, decentralized operational decisions, centralized capital allocation decision, and emphasized cashflows instead of reported net income. Personality wise these outsider CEOs have been generally frugal, humble, analytical, understated, not-so-charismatic and did not seek much spotlight.
The book has been written in a very simple and readable manner and conveys its message very clearly. However, I felt that there may be survivorship bias in author’s viewpoints at several places. Also, I felt that although the book is more informative in nature, it is not highly insightful. There is too much repetition of some aspects such as buybacks, decentralized operational decisions, large & opportunistic acquisitions, etc. I felt that these concepts can be better instilled in the reader’s mind with conceptual explanation rather than repetitive examples, whereas the author has adopted the latter.