Warren Buffett in his 2012 annual letter to investors, recommended William Thorndike’s book The Outsiders. Buffett called it an outstanding book about CEOs who excelled at capital allocation. The eight terrific CEOs that featured in the book have generated exceptional results across a wide variety of industries and market conditions. We had written about Outsiders in April 2016 as part of VIA bookworm series.
Saurabh Mukherjea’s book is the answer to The Outsiders. Mukherjea writes —
The book [The Outsiders] changed the way I perceived and analysed companies which have been successful over long periods of time (we are talking decades here). What Thorndike helped me grasp was that the truly great companies take the surplus cash flows created by their sustainable competitive advantages and then either return those to shareholders or reinvest those in their core franchise, or — and this is the litmus test of greatness — reinvest those successfully in new activities or markets. It is in those latter set of investments outside the core franchise that a great company assures its future regardless of how economic circumstances and customers’ tastes pan out. Without that insight from The Outsiders, there would be no The Unusual Billionaires.
- Spotlight: Big ideas from Value Investing and why applying them in your investment decision making will be a great deal
- InvestorInsights: Interviews with experienced value investors, learners, and deep thinkers
- StockTalk: Thorough analysis of business models of companies (without any recommendations)
- Behaviouronomics: Deep analysis of human behaviour and how it impacts investment decision making
- BookWorm: Reviews of the best books on Value Investing and related subjects
- Free Course – Financial Statement Analysis for Smart People (otherwise priced at Rs 5,900)
- Archives: Instant access to our huge archive from the past three years