Eight Great CEOs, You Don't Know About. Except Maybe One
The Outsiders by William J Thorndike, Jr. is a fascinating read.
Buy it right now.
Seeking to answer the question – "Who was the greatest CEO in the last 50 years". The Outsiders showcases eight CEOs who don't fit the popular stereotype of "great CEO."
The author uses the increase in the per-share value compared with their peers and the S&P 500 as a metric to identify the CEOs.
The operating performance of CEOs is what is usually under the spotlight. But The Outsiders focuses on a lesser-known but probably even more critical requirement of a great CEO – their capital allocation skills, the process of deciding how to deploy the firm's resources to ensure the best possible return for the shareholders.
Each one of these iconoclastic CEOs:
- Understood the core value within their business very well and organized around it. For example, John Malone understood the importance of scale in the Cable TV system, where programming cost was the most significant part of operating expenses. Or Warren Buffet, recognizing the leverage value of float (premiums) available in an insurance company as a low-cost fund to invest with.
- Focused on cash flow over reported net income.
- Avoided or minimized dividends.
- Made highly disciplined and significant acquisitions.
- Preferred debt instead of equity for raising capital.
- Bought back a lot of stock, always when the market was undervaluing their stock.
- Ran decentralized organizations with skeletal staff at their headquarters.
- Minimized taxes.
Whether you are a manager, business owner, or investor, you will come out significantly wiser, having read this brilliant book!