Will Thorndike, author of "The Outsiders" and founder of Housatonic Partners, shares insights into successful capital allocation. He discusses iconic CEOs like Warren Buffett and their contrarian views on dividends and acquisitions. The conversation highlights the importance of strategic decision-making in private equity, the value of flexibility in leadership, and the evolving landscape of search funds. Thorndike also reflects on his experiences with Asurion and the growth of recurring revenue in investments, emphasizing the significance of partnerships in driving success.
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question_answer ANECDOTE
Origin Story: A Vacation Spark
Will Thorndike's interest in investing sparked while reading John Train's "The Money Masters" during a vacation in Maine.
The book's first chapter on Warren Buffett's investment philosophy resonated deeply, inspiring him to explore investing further.
insights INSIGHT
From Talk to Book: The Outsiders' Genesis
Thorndike's book, "The Outsiders," emerged from an 8-year research project, initially a talk for portfolio company CEOs.
The project involved deep dives into the careers of exceptional CEOs, revealing common patterns in their capital allocation strategies.
insights INSIGHT
Unconventional Wisdom: The Dividend Disdain
Outsider CEOs generally avoided regular dividends due to their tax inefficiency, prioritizing after-tax returns.
They occasionally used special dividends strategically, timing them with favorable tax laws, optimizing shareholder value.
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In 'The Outsider,' Colin Wilson examines the psyche of the Outsider through the lives and works of various literary and cultural figures such as Albert Camus, Jean-Paul Sartre, Ernest Hemingway, Hermann Hesse, and Fyodor Dostoyevsky. The book delves into the Outsider's experience of dislocation and his struggle to find meaning and purpose in a world that seems devoid of it. Wilson argues that the Outsider is a metaphysical man who seeks a transcending meaning and purpose for human existence, often feeling isolated and disconnected from society. The book is both a study of the Outsider's predicament and an impassioned call for a new form of existentialism that could provide a satisfying and objective religious understanding of life.
The Masters
C. P. Snow
The novel follows the contest for the Mastership of a Cambridge college as the old Master dies of cancer. The two main candidates are Paul Jago and Crawford, each with their own strengths and weaknesses. The narrative, told through the eyes of Lewis Eliot, delves into the politics and personal issues of the college's faculty, providing a meticulous study of power dynamics in an academic setting during post-war Britain[2][5].
This week’s guest is Will Thorndike, an author and investor whose book The Outsiders is an all-time favorite of mine. Our conversation is in two parts. First, we dive deep into the lessons of his 8-year research project studying CEOs who were master capital allocators. These CEOs include Henry Singleton, John Malone, Tom Murphy, Katherine Graham, and Warren Buffett. We discuss how these CEOs tended to be contrarians on topics like dividends, buybacks, acquisitions, and the use of debt. As we go through each of the tools in the capital allocators toolkit, you’ll hear several useful lessons for running or evaluating a business.
In the second part, we cover Will’s career in private equity. Will founded and continues to run Housatonic Partners, investing in buyouts, recaps, and search funds. Will has been one of the most active search fund investors for decades, and given how much time I’ve spent in past episodes on the searchers or operators in the micro-cap, permanent equity space, it was great to get the perspective of an experienced LP. As always, we also take time to survey the dangers and opportunities in today’s private equity market.
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