THE OUTSIDERS by William N. Thorndike, Jr.

Author: William Thorndike is a graduate of Harvard College and Stanford Graduate School of Management. He is the founder and MD of the investment management firm Housatonic Partners. Book: The Outsiders analyses the management and subsequent performance of the eight most successful in the United States. The approach could be a bit counterintuitive for the general public, in fact, the first thing Mr Thorndike explains, is that Jack Welch (General Electric) is NOT an example in this matter (contrary to the popular belief). The author’s key performance indicator is the value creation per share relative to both the S&P 500 and the company’s peer group. The selected companies are General Cinema, Ralston Purina, The Washington Post, Berkshire Hathaway, General Dynamics, Capital Cities, TCI and Teledyne. Opinion: This book has been recommended by some of the best-known investors out there (such as Warren Buffett), however, I think it is a bit overvalued, in spite of agreeing with all its claims, analysis, and so on. Most of the time their capital allocation principles are similar (buybacks when the stock is undervalued, acquisitions when cheap, reinvestment in the business only when ROIC>WACC, etc.) I also believe that the role of randomness could be somewhat underestimated - We do not know about all the CEOs who applied similar principles but bankrupted their companies (survivorship bias). On the good points, I found it interesting to see how different CEOs created value using completely opposite procedures in some cases, such as in M&A activity. In sum, I would say it is an interesting book, but not a great one.

Key Stats: - Pages: 220 - Level: Intermediate - Mark: 7.5/10