Book Review: The Outsiders by William N. Thorndike, Jr.

The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success by William N. Thorndike, Jr. details the commonalities among the 8 CEOs (also referred to in this book as the outsiders) who significantly outperformed their peers. William stated the commonalities right off the bat and used the remaining chapters to go over each outsider’s experience much more in-depth.

You can tell that a lot of work went into this book. Many interviews were conducted and a lot of financial data were analyzed and presented.

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Capital Allocation

Capital allocation: the process of deciding how to deploy the firm’s resources to earn the best possible return for shareholders

CEOs have 2 key responsibilities: running their operations effectively and deploying the cash generated by those operations

CEOs generally have 5 choices for deploying capital:

  1. Investing in existing operations
  2. Acquiring other businesses
  3. Issuing dividends
  4. Paying down debt
  5. Repurchasing stock

And 3 options for raising it:

  1. Tapping internal cash flow
  2. Issuing debt
  3. Raising equity

The outsiders are focused primarily on making capital allocation decisions and usually delegate running the company operations to a trusted partner. When making capital allocation decisions, these CEOs are very aware of the various tax implications. And contrary to their peers, they did not avoid repurchasing stocks and also did not pay any meaningful dividends.

There is no right option for deploying capital. The key message here is to evaluate all the available options and its implications for your organization.

Develop and Trust Your Analytical Skills

One of the key differences between the outsiders and their peers is that the outsiders trust and act on their own analytical skills. They do not fall prey to the Wall Street’s conventional wisdom and their decisions aren’t impacted by the public opinion. The outsiders have their own method of determining whether a business including their own is under or overvalued. Once they determine a business is underpriced, they are able to act swiftly and acquire the business or its shares if it’s the best capital allocation option.

William examined the stock repurchases events made by the outsiders and these events all happened when the share price was undervalued. On the other hand, when the shares were expensive, they often used it to buy other companies or to raise inexpensive capital to fund future growth.

Decentralized Organization

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.

Besides allocating financial resources, CEOs also need to allocate human resources. The outsiders all emphasized decentralization except when it comes to capital allocation decisions. They hire the best people and give them the responsibilities and authority to do their job. The goals set for the local managers are clear and if they meet their goals they often won’t hear from the headquarters.

Turnovers are costly. So when you hire great people, let them do what they do best. Giving them the responsibility and opportunity to learn and grow will be one of the best ways to retain your talent.

Investor Temperament

In both insurance and investing, Warren Buffett believes the key to longterm success is “temperament”, a willingness to be “fearful when others are greedy and greedy when they are fearful”.

What set the outsiders apart from their peers is their temperament. There are numerous CEOs who have the analytical skills who make poor capital allocation decisions. Like in life, it’s one thing to know what the right thing to do is, it’s another thing to do it. Going against the public opinion isn’t easy and this is what the outsiders have done throughout their careers.

Often times, the popular decision is the wrong decision. Be able to evaluate the options yourself and understand that your job is not to please the public but to bring value to your company and its shareholders.

Summary

The book is very organized and does not stray away from the key messages. However, I also find that too many examples are used to convey the same key messages. It’s not a book I’ll recommend but if you are interested in the insights I discussed and the numbers behind it then this is a book you might enjoy reading.

 
I’m currently reading The Intelligent Investor by Benjamin Graham.

2018 Mid-Year Reflection

This is the first year in which I have set resolutions. Due to my coworkers switching departments, I was thrust into more responsibilities. I have learned a lot so far and since we are halfway through the year I’ll reflect on my progress and see what I can further improve on.

On a side note, I started video blogging for the first time. Improving my communication skills has become a priority for me in the recent months. Even though it’s essentially just me speaking into a camera, it’s still a great way for me to improve how I articulate and communicate my thoughts. Like every habit, I’ll start small and aim to do one every month. There will be no editings involved so please bear with me as I improve my communication skills gradually. 😀

Thank you in advance to anyone who watched my first video content. And if you prefer written content, please feel free to skip the video and thank you as well for your time! 🙂

Complete My Vocab Project

My Vocab is an Android vocabulary builder application that I’ve been spending the past few years working on and off. While learning Spanish a few years back, I needed an app to help me record, translate, and review the vocabulary I wanted to learn. At the time I just finished my commerce undergrad degree a few months ago and wanted to learn more about programming. So naturally, I decided to build a vocabulary builder application to help me learn more effectively and I’m glad it has been able to help others as well.

A few weeks ago, I’ve finished developing all the key features that are beneficial for what the app was set out to accomplish. I have addressed all the reported bugs as well as redesigned the screenshots for the app store listing.

I’m glad to say I’ve completed this project! It has been a great journey up to this point and I’ve definitely learned a lot from this experience.

Be Conversational in Spanish

Up until two months ago, I was watching anime in Spanish every day as well as reading Spanish books during my commute. However, since then, I’ve opted for reading personal development books in English instead. Therefore the time I’ve spent on improving Spanish is considerably less than before even though I still watch anime in Spanish every day.

In order to reach my goal, my action item on this front is to find a Spanish meetup for me to have Spanish conversations on a weekly basis.

Read 20 Books

I’ve read 6 books so far. For a few months, I was dedicating 1 hour to read every other day. I was reading at a good pace, but it has slowed down considerably since. In the past month, I have only been reading during my commute. As improving my communication skills and finishing up My Vocab project became a priority, I put less and less emphasis on reading.

One thing about setting goals that I’ve learned is to reflect and readjust your goals periodically. I thought about readjusting my goal to 15 books instead. However, If I can dedicate 30 mins each day for reading as well as getting better at skipping materials that aren’t beneficial, I can still accomplish my 20 books a year goal. We’ll see how I do at the end of the year, but for now, I’m still sticking with 20 books.

Build Personal Brand

After reading Crush It! by Gary Vaynerchuk, I learned the importance of building a personal brand. I have since been posting articles once every 2 weeks on my personal blog as well as Medium. I don’t have any goals in terms of wanting X number of followers since my content is for me to document my learnings and to connect with people. I’m happy with my progress and as long as I keep posting content on a regular basis I’ll consider this goal accomplished.

Start a New Project

This was my fifth and final resolution for the year. It was made due to My Vocab project coming to a close. I wanted to improve my technical skills off of work which is why I wanted a new project to work on.

However, my focus for the year has changed since. I’m going to put a stronger emphasis on improving my communication skills rather than my technical skills. If I were to start a project, it will be because I have a good idea or an opportunity that I’m passionate about. So until then, this resolution has been crossed off my list.

Improve My Verbal Communication Skills

This is the area which I have dedicated the most time for in the past month. Communication skills have always been something that I need and want to work on. And public speaking specifically is an area where I struggle the most. I want to be able to speak in public confidently but more importantly, I want to be able to articulate and communicate my key messages effectively.

I have been taking an online public speaking course by TJ Walker. By recording myself speaking and getting feedback from TJ Walker, I can see the improvements I’ve made. However as helpful as the course has been, it is still an online course. To complement the course, I’ll look for and participate in either a toastmaster club or a public speaking meetup at least once every two weeks. And as mentioned, my video content will be a channel for me to practice as well as share my progress with you.

I’ve made some good progress but there are some action items I need to take in order for me to reach my goals. I’m very excited to see how much progress I can make by the end of the year! Thank you for dropping by and I’ll love to hear your thoughts and feedback. 🙂

 

What I Learned from Steve Ballmer’s Keynote on Leadership

A few weeks ago Index Exchange, where I’m working at as a solutions engineer, held an annual executive summit in Santa Monica. Steve Ballmer was the guest speaker invited who gave a keynote on the principles of leadership.

For those who don’t know, Steve Ballmer was the CEO of Microsoft from 2000 – 2014 and is the owner of the Los Angeles Clipper. As an NBA fan, I would love to get a chance to meet one of the most passionate NBA owners and learn from his experience. I didn’t get to attend but luckily for me, I was able to learn from the recordings and share my takeaways with you!

Ideas Matter

The worst leader of all is the charismatic leader who takes you in the wrong direction

The most important quality of a leader is having the right vision and ideas. What’s the proposition around which you are trying to lead people? Your team won’t buy in if they don’t believe in the direction you are leading them. There are many great ideas, but you need to choose the idea that your organization has the capability to execute on.

Get the Team Right

Talented people are talented people but they got to love where you want to go and collaborate in the right way

Start with ideas first. The team that you will want to put together will be dependent on your ideas. When picking the team, pick great people who believe in your vision and who can work well together.

Passion, Optimism, Persistence

Optimism is a force multiplier

If you don’t have passion, optimism, and persistence, then it’s hard to be in the game for the long term. In the road to accomplish great things, there will always be obstacles along the way. You will need passion to be focused on your goal, optimism to enjoy the journey, and persistence to get through the hard times.

Own the Results

The first step to owning the results is to know what the goal is. Measure your results against the goal. Understand how and why mistakes are made and learn how to prevent it from happening again. Start with yourself, but also hold your team accountable as well. Everyone makes mistakes but enforcing accountability is a must.

Magic of Time

Deciding timeframe for what success looks like and how long you give for ideas to develop is an important part of leadership
Everything has to be in a context of a timeframe that you think is relevant to what your team is working on.

Summary

This is one of the best keynotes I’ve watched. Steve Ballmer is an amazing speaker and all his points are concise and effective. He uses a story to demonstrate each of his key messages, which is something I’m learning to do more of. Unfortunately, the keynote recording is only shared internally, but this video I came across has very similar key messages. I’ll recommend it if you want to learn more about his leadership principles as well as how he communicates on stage.

I’ll love to hear what your thoughts are. 🙂