Podcast Replay: Will Thorndike
“How Skilled Capital Allocators Compound Capital”
In this interview,1 the first part discusses Will’s 8-year research project studying CEOs who were master capital allocators, which is the basis for his book The Outsiders: Eight Unconventional CEOs and their Radically Rational Blueprint for Success.2 The second part of the interview discusses Will’s career in private equity.
Before acting on any of the ideas or advice contained on this recording, please read this important disclaimer.
Topics covered include:
(Listed in consecutive order.)
- When was the first moment Will realized he was interested in investing as a job?
- Will’s book The Outsiders
- What was the journey like that led Will into the private equity space?
- How did the book start as research projects?
- What are the ways to spend capital?
- How The Outsiders CEOs view dividends and how best to use them?
- What is Will’s outlook for the future of dividends?
- Moving to buybacks as a strategy.
- What did the 8 CEOs think of capex and reinvesting in the business as a strategy?
- Why is it so important to set “hurdle rates” and then stick with them?
- How does a CEO with a grand vision (e.g., an Elon Musk) differ from the flexible and opportunistic CEOs in The Outsiders?
- How did the CEOs use acquisitions as a strategy?
- Bob Fifer’s book Double Your Profits in Six Months or Less
- The importance of rationalizing your expenditures.
- The right way and wrong way to use debt as a public company.
- Who is Will’s pick of the 8 outsider CEOs, and which business would he choose?
- The importance of partnerships to make sure the cash flows are coming and allocated in a productive way.
- Will’s experience of this book and what it’s like to see it grow into a best seller.
- If Will had to write another book, what would it be about?
- Will’s day job in private equity, and how he got involved in search funds.
- Any new investing categories on the horizon that are worth exploring?
- Are recaps and buyouts used as strategies today?
- Are there particular industries with economic characteristics that Will screens for, or ignores?
- Will’s most memorable day.
- The strength of an investment firm is often found in the quality of their investors.
- What is Will’s process for evaluating a business?
- What is the kindest thing anyone has ever done for Will?
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- Originally aired on May 9, 2017. See investorfieldguide.com for this and 30+ other “Invest Like the Best” interviews that Patrick has conducted.
- The following is Patrick’s review of The Outsiders:
This book focuses on stories of successful CEOs and their key people who have created huge amounts of shareholder value. The Outsiders contains great lessons for investors because it highlights the importance of capital allocation. CEOs get famous mostly for their ability to build great businesses with revolutionary products and services — but that is only half of their job. The other half is to use their capital wisely. Many don’t. The ones that do are legends in their own right. Pick this up, and then consider buying companies that allocate capital well.