74 von 84 Kunden fanden die folgende Rezension hilfreich
- Veröffentlicht auf Amazon.com
Format: Gebundene Ausgabe
Please note, I received a copy of this book for review from the publisher, Harvard Business Review Press, on a complimentary basis.
Capital allocation uber alles
"The Outsiders" rests on a premise, that the increase in a public company's per share value is the best metric for measuring the success of a given CEO, which lends itself to the book's major thesis: that superior capital allocation is what sets apart the best CEOs from the rest, and that most modern CEOs seem to be only partially aware, if at all, of its critical performance to their companies long-term business success.
Notice! This book is examining the efforts and measurements of CEOs of public companies, not all businesses (public and private), so as a result in comes up a bit short in the "universal application" department. Yes, capital allocation is still critical even in a private business, but you can not measure a private business's per share value (because there isn't a marketable security price to reference) and the CEO of a private company is missing one of the most powerful capital allocation tools available to public CEOs, the share buyback (because there is no free float for them to get their hands on at periodically irrational prices).
The CEO capital allocation toolkit
Thorndike describes five capital allocation choices CEOs have:
--invest in existing operations
--acquire other businesses
--pay down debt
Along with this, they have three means of generating capital:
--internal/operational cash flow
With this framework, Thorndike proceeds to review the business decisions of 8 different "outsider" CEOs, so labeled because they tended to use these tools in a contrary fashion to the mainstream wisdom of their time and to much improved effect as per comparison to their benchmarks. Some of the CEOs are well known and oft mentioned and studied (Warren Buffett, John Malone, Kay Graham, Tom Murphy) and a few are known to the value cognoscenti but may have managed to escape notice of the wider public, academic or otherwise (Henry Singleton, Bill Anders, Bill Stirlitz and Dick Smith).
The author tries to tie together the various common threads, such as how,
"All were first-time CEOs, most with very little prior management experience"
and many of which (such as Singleton, Buffett and Graham) were large or majority equity holders in their companies, making them part of the vaunted owner-operator club with its resulting beneficial incentives.
Thorndike also tries to use the hedgehog vs. fox metaphor, claiming,
"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"
Interestingly, the share buyback stands out as a particularly effective capital allocation tool for all and the author claims that during the difficult inflationary conditions and market depression of the 1974-1982 period,
"every single one [emphasis in the original] was engaged in either a significant share repurchase program or a series of large acquisitions"
In broad strokes, Thorndike's efforts to paint these CEOs with a common brush works, but there are numerous times where his attempt to establish commonality in genius comes across as forced and unworkable. Often, one of these CEOs will operate in a way inconsistent with Thorndike's major thesis and yet he'll end up praising the CEO anyway. In poker, we'd call this the "won, didn't it?" fallacy-- judging a process by the specific, short-term result accomplished rather than examining the long-term result of multiple iterations of the process over time.
This is actually one of the things that rubbed me rather raw as I read the book. In every chapter, Thorndike manages to strike a rather breathless, hagiographic tone where these CEOs can do no wrong and everything they do is "great", "fantastic," etc. Unfortunately, this kind of hyperbolic language gets used over and over without any variety to the point it's quite noticeable how lacking in detail and critical analysis Thorndike's approach is at points.
Eventually, I reached a point where I almost wanted to set the book down, take a deep breath and say, "Okay... I get it, this guy is absolutely amazing... can we move on now?"
The editing seemed a bit sloppy, too. Thorndike is a graduate of Stanford and Harvard and runs his own financial advisory. He's obviously an accomplished, intellectual person. Yet his prose often reads like an immature blog post. It's too familiar and casual for the subject matter and the credentials of the author. I'm surprised they left those parts in during the editing process. I think it makes Thorndike's thesis harder to take seriously when, in all likelihood, it'd probably be quite convincing if you happened to chat with the author on an airplane.
From vice to virtue
Something I liked about "The Outsiders" was the fact that there were 8 profiles, rather than one. It was reinforcing to see that the same principles and attitudes toward business and management were carried out by many different individuals who didn't all know each other (though some did) and ALL had huge outperformance compared to their benchmark.
And I think for someone who is just jumping into the investing, management and agency problem literature, "The Outsiders" is a good place to start to get a broad outline of the major thesis which is that companies that are run by owner-operators, or by people who think like them, where the top management focuses on intelligently allocating capital to its highest use (which, oftentimes when the company's stock remains stubbornly low compared to its estimated intrinsic value, makes buybacks in the public market the most intelligent option versus low margin growth) consistently outperform their peers and their benchmarks on a financial basis.
I think if this was one of the first books I had read on this theme, I would've found it quite illuminating and exciting, a real eye-opener experience. As it were, I read this book after reading a long train of other, often times significantly more comprehensive and detailed literature, so my personal experience was rather flat-- I came away thinking I hadn't learned much.
More to the story
There's more to this story in two senses.
In the first sense, I actually highlighted many little comments or ideas throughout the book that are either helpful reminders or concepts I hadn't fully considered myself yet, pertaining to best operational and management practices for businesses and the people who invest in them. In other words, the book is a little deeper than I bothered to share here. As a collection of anecdotes and principles for mastering the concept of capital allocation, it's a good resource.
In the second sense, I think there's a lot more to the success of the businessmen and their companies profiled (along with many others) than just good capital allocation. The text alludes to this with quotes from various figures about how they operated their businesses and managed people aside from the specific challenges of capital allocation. But it never goes into it because that isn't in focus.
And as a business person myself, I know from my own reading, thinking and personal experience that capital allocation IS a critical factor in successfully managing and growing a business over the long-term -- after all, if you can't find good places to put your cash, you'll inevitably end up wasting a lot of it -- but you won't have capital to allocate if you aren't operating your business and managing your relationships with employees and customers well, in addition. The book just doesn't do much in the way of explaining how it was that Ralston Purina, or General Dynamics or Teledyne or what have you, had so much capital to allocate in the first place.
24 von 28 Kunden fanden die folgende Rezension hilfreich
- Veröffentlicht auf Amazon.com
Format: Gebundene Ausgabe
There are countless examples of once-great companies such as Kodak and Sears that became victims of what had once been the reasons for their success. When George Eastman founded Eastman Kodak (in 1901) and Richard Sears and Julius Rosenwald founded Sears, Roebuck (in 1906), they did so with what William N. Thorndike characterizes as a "radically rational blueprint for success." Both companies eventually became among the largest and most profitable in the world. However, for reasons that vary from one company to another in nature and extent, that is no longer true.
The business lessons to be learned from companies such as Kodak and Sears were obvious to CEOs such as Tom Murphy (Capital Cities Broadcasting), Henry Singleton (Teledyne, Bill Anders (General Dynamics), John Malone (TCI), Katherine Graham (the Washington Post Company), Bill Stiritz (Ralston Purina), Dick Smith (General Cinema), and Warren Buffett (Berkshire Hathaway). They are the "outsiders," focal points of this book. As Thorndike explains, there are immensely valuable lessons to be learned from the "radical rationality" of their leadership.
These are among the dozens of passages that caught my eye:
o The Capital Cities culture (Page 23)
o The Cap Cities Publishing Division (Pages 31-33)
o Buffett and Singleton: Separated at Birth? (56-58)
o Postscript: The Sincerest Form of Flattery (80-81)
o The Edifice Complex (88)
o Benjamin Graham's investment strategy during the recession of early-1900s (121-126)
o Stiritz's "fiercely independent mind-set" (145-146)
o A recent example of flattery of imitation: Sara Lee (146-147)
o The "nuts and bolts" of management at General Cinema (159-162)
o How Buffett achieves Berkshire Hathaway's operating results (190-193)
Thorndike includes a mini-profile for each of the eight "outliers." Here is a brief excerpt from the first three:
Tom Murphy (Pages 13-34 plus cross references): He and Dan Burke "were comfortable giving responsibilities to promising young managers. As Murphy described it to me, 'We'd been fortunate enough to have it ourselves and knew it could work.' Bill James was thirty-five and had no radio experience when he took over WJR; Phil Meek came over from the Fiord Motor Company at thirty-two with no publishing experience to run the Pontiac Press; and Bob Iger was thirty-seven and has spent his career in broadcast sports when he moved from New York to Hollywood to assume responsibility for ABC Entertainment." (page 26)
Henry Singleton (37-58+): Arthur Rock's response to Singleton's proposed repurchase strategy, "I like it," launched "one of the seminal moments in the history of capital allocation...To say that Singleton was a pioneer in the field of share repurchases is to dramatically understate the case. It is perhaps more accurate to describe him as the Babe Ruth of repurchases, the towering Olympian figure from the early history of this branch of corporate finance...[Between 1972 and 1984] Singleton defied orthodox thinking, in eight separate tender offers, buying back an astonishing 90 percent of Teledyne's shares." (46)
Bill Anders (61-81+): "When it came to capital allocation, Anders and his associates made coinsistentky often radically, different decisions than their largest peers. At a time when his peers were on an acquisition binge, Anders was an active seller. He made no acquisitions, spent very little on capital expenditures, and made savvy use of dividends and share repurchases, both of which were new to the industry." (79)
There are also mini-profiles of the other five: John Malone (TCI, Pages 83-107+), Katherine Graham (the Washington Post Company, 109-127+), Bill Stiritz (Ralston Purina, 129-147+), Dick Smith (General Cinema, 149-166+), and Warren Buffett (Berkshire Hathaway, 167-195+).
However different the eight may be in most respects, all agreed on certain core principles which serve as the foundation of what Thorndike characterizes as "the outsider's mind-set": the denomination matters when attempting to maximize value over share; maintain feisty independence when making capital allocation decisions; charisma is overrated and (more often than not) self-serving and counter-productive; develop a crocodile-like temperament that mixes patience with occasional bold and aggressive action; and finally, take a consistently rational, analytical approach to all decisions, major and minor.
William Thorndike offers an immensely informative and consistently thought-provoking explanation of how and why eight "outliers" refused to allow their companies or themselves to fall victim to what James O'Toole so aptly characterizes as "the ideology of comfort and the tyranny of custom." As he well realizes, how easy it is to identify the core elements and defining characteristics of a "radically rational blueprint for success"; how difficult it is to then build an organization with that blueprint, one that achieves and then sustains extrordinary success.