The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success

These acquisitions each represented 25 percent or more of the company’s market capitalization at the time they were made.

Interestingly, Murphy never borrowed money to fund a share repurchase, preferring to utilize leverage for the purchase of operating businesses.

Murphy’s approach was highly differentiated from his peers. He eschewed diversification, paid de minimis dividends, rarely issued stock, made active use of leverage, regularly repurchased shares, and between long periods of inactivity, made the occasional very large acquisition.

The hallmark of the company’s culture—extraordinary autonomy for operating managers—was stated succinctly in a single paragraph on the inside cover of every Capital Cities annual report: “Decentralization is the cornerstone of our philosophy. Our goal is to hire the best people we can and give them the responsibility and authority they need to perform their jobs. All decisions are made at the local level. . . . We expect our managers . . . to be forever cost conscious and to recognize and exploit sales potential.”

“We just kept opportunistically buying assets, intelligently leveraging the company, improving operations and then we’d . . . take a bite of something else.”

methodical blend of low buying and high selling produced exceptional returns for shareholders

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.

corporate equivalent of teenage peer pressure, that impelled CEOs to imitate the actions of their peers

• 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.

CEOs have five essential choices for deploying capital—investing in existing operations, acquiring other businesses, issuing dividends, paying down debt, or repurchasing stock