Book Summary — Outsiders: Eight Unconventional CEOs And Their Radically Rational Blueprint For Success

Michael Batko
Published in
5 min readApr 25, 2023


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1 paragraph summary:

Personally not the biggest fan of the book.
Very dry read, but one key concept that I enjoyed — the idea of the CEO as an investor.

You really only need to know three things to evaluate a CEO’s greatness: the compound annual return to shareholders during his or her tenure and the return over the same period for peer companies and for the broader market (usually measured by the S&P 500).

The other important element in evaluating a CEO’s track record is performance relative to peers, and the best way to assess this is by comparing a CEO with a broad universe of peers.

When a CEO generates significantly better returns than both his peers and the market, he deserves to be called “great”.

CEOs need to do two things well to be successful: run their operations efficiently and deploy the cash generated by those operations.

Basically, CEOs have five essential choices for deploying capital

  1. investing in existing operations,
  2. acquiring other businesses,
  3. issuing dividends,
  4. paying down debt,
  5. or repurchasing stock

and three alternatives for raising it — tapping internal cash flow, issuing debt, or raising equity.

Capital allocation is a CEO’s most important job.

  • What counts in the long run is the increase in per share value, not overall growth or size.
  • Cash flow, not reported earnings, is what determines longterm value.
  • Decentralized organizations release entrepreneurial energy and keep both costs and “rancor” down.
  • Independent thinking is essential to long-term success, and interactions with outside advisers (Wall Street, the press, etc.) can be distracting and time-consuming.
  • Sometimes the best investment opportunity is your own stock.
  • With acquisitions, patience is a virtue . . . as is occasional boldness.

1986 Berkshire Hathaway annual report, Warren Buffett looked back on his first twenty-five years as a CEO and concluded that the most important and surprising lesson from his career to date was the discovery of a mysterious force, the corporate equivalent of teenage peer pressure, that impelled CEOs to imitate the actions of their peers. He dubbed this powerful force the institutional imperative and noted that it was nearly ubiquitous, warning that effective CEOs needed to find some way to tune it out.

Effective CEOs

Each ran a highly decentralized organization; made at least one very large acquisition; developed unusual, cash flow–based metrics; and bought back a significant amount of stock.

None paid meaningful dividends or provided Wall Street guidance.

All received the same combination of derision, wonder, and skepticism from their peers and the business press.

All also enjoyed eye-popping, credulity-straining performance over very long tenures (twenty-plus years on average).

Fundamentally, they had confidence in their own analytical skills, and on the rare occasions when they saw compelling discrepancies between value and price, they were prepared to act boldly. 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.

There are two basic types of resources that any CEO needs to allocate: financial and human.

Outsider CEOs shared an unconventional approach, one that emphasized flat organizations.

There is a fundamental humility to decentralization, an admission that headquarters does not have all the answers and that much of the real value is created by local managers in the field. At no company was decentralization more central to the corporate ethos than at Capital Cities.

“The system in place corrupts you with so much autonomy and authority that you can’t imagine leaving.”

I change my mind when the facts change.

What do you do?

— John Maynard Keynes

Prior to the early 1970s, stock buybacks were uncommon and controversial. The conventional wisdom was that repurchases signaled a lack of internal investment opportunity, and they were thus regarded by Wall Street as a sign of weakness.

Singleton ignored this orthodoxy, Singleton believed buying stock at attractive prices was self-catalyzing, analogous to coiling a spring that at some future point would surge forward to realize full value, generating exceptional returns in the process.

As Charlie Munger said of Singleton’s investment approach, “Like Warren and me, he was comfortable with concentration and bought only a few things that he understood well.”

One of the most important decisions any CEO makes is how he spends his time — specifically, how much time he spends in three essential areas: management of operations, capital allocation, and investor relations.

Singleton eschewed detailed strategic plans, preferring instead to retain flexibility and keep options open. As he once explained at a Teledyne annual meeting, “I know a lot of people have very strong and definite plans that they’ve worked out on all kinds of things, but we’re subject to a tremendous number of outside influences and the vast majority of them cannot be predicted. So my idea is to stay flexible.”

“My only plan is to keep coming to work. . . . I like to steer the boat each day rather than plan ahead way into the future.”

The CEO as investor. Both Buffett and Singleton designed organizations that allowed them to focus on capital allocation, not operations. Both viewed themselves primarily as investors, not managers.

Decentralized operations, centralized investment decisions. Both ran highly decentralized organizations with very few employees at corporate and few, if any, intervening layers between operating companies and top management. Both made all major capital allocation decisions for their companies. • Investment philosophy. Both Buffett and Singleton focused their investments in industries they knew well, and were comfortable with concentrated portfolios of public securities.

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-eyed. They did not have ideology. When offered the right price, Anders might not have sold his mother, but he didn’t hesitate to sell his favorite business unit.

Luck is the residue of design.

— Branch Rickey

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