Will Thorndike, a private investor and author of “The Outsiders,” was recently interviewed by Rob Vinall at the RV Capital 2025 Annual Gathering. He talked about his career path, some of the key concepts and insights from the book, his appreciation for how they can also be applied to more cyclical businesses and signals for spotting “outsider CEOs” early in their tenure. Worth a listen – some of my notes are included below (these are for personal reference only and not meant as a comprehensive transcript; any mistakes are also my own).
His path into investing: after college, he got hired by a publishing company that was owned by a high school friend of his. This was in the 1980s when the whole world of recruiting was very different to what it is now. You did not need to get your internship as a freshman in order to be headed down an investment path. He worked for the publishing business for four years right out of college, and by virtue of his connection with his friend and the family, he was given undue responsibility very early on, so he had an excellent experience working there. But he knew from very early on that was not what he wanted to do longer term. He had actually read Money Masters by John Train back when he was in college, which was a lightbulb moment for him. So the balance of the time he was working in the operating company, he was reading voraciously and doing what little investing he could afford to do. He went on to Stanford for his MBA and was fortunate enough to study under Jack McDonald, through whom he was exposed to a wide variety of investors. He spent the summer with T Rowe Price and also had the chance to do some work with Tim Bliss (IGSB), who was one of the investors he had met through his class at Stanford.
On his investment career: he was evaluating his options post-MBA when a private investor in the Boston area approached him to help invest some personal capital. It was a very unstructured format where he was paid a ~US$60k salary but was given carry. Over the next 4 years, they made 8 investments, 3 of which they still own some ~30 years later. So he had a very early exposure to long-term holds. From there, he ended up starting Housatonic Partners, a private equity firm that he was involved with for a long time. He has since transitioned to investing on his own via a family office called the Cromwell Harbor Partnership, through which he is involved in a variety of private company boards. He also currently serves on the board of two public companies: CNX Resources, a natural gas company, and Perimeter Solutions, a leading solutions provider for the fire safety and oil additives industry.
On his book The Outsiders: it is a study of 8 high-performing CEOs of publicly traded companies (high-performing meaning they generated exceptionally high returns over their tenures, roughly 15-20 years so that they could see the data over two full business cycles). The returns tended to congregate at around 20% over 20 years. There were two tests: they had to have returns that were better than Jack Welch’s returns when he was CEO of GE, and they needed to have meaningfully better returns than the peer group over their tenure. The second test is perhaps the more relevant one. The idea is that within an industry everyone is basically dealt the same hand, so if one company meaningfully outperforms the peer group, that is worthy of study.
On the specific shared traits of these CEOs: one of the findings that does not get much attention is that they were all first-time CEOs. How they ran their companies was very different to their peer group but very similar to each other. Some specific examples were they did not typically pay dividends (which they viewed as being tax inefficient), they were selective about share repurchases (but when they did buy back shares, they would do so quite aggressively) and they were sporadic users of M&A (but had an excellent track record with acquisitions). They also tended to run extremely decentralized organizations. One of the themes that is perhaps lost a little is that this is a book about resource allocation. A lot of readers focus on capital allocation, which is part of resource allocation, but equally important was their allocation of talent within the organization and how they spent their own time as CEOs. If you look at how they ran their companies, there were very few people at corporate and the autonomy and prestige was pushed down into the local business units, which also likely resulted in a very high retention rate of talent within their companies. In terms of their own time allocation, these CEOs spent almost no time on investor relations, they would schedule a lot of alone time on their calendars for reading and thinking, they tended to have very strong COO-type deputies etc.
On the impact of the book: for him personally, it has led to all sorts of fun and interesting interactions with both CEOs and investors. He also thinks it has perhaps had some impact on thinking amongst CEOs, but less so than you might think. The core of these ideas are similar to how Buffett talks about value investing, people either get it in the first 15 minutes or they never get it. The other issue for some public companies is that even if the CEO buys in, there is the hurdle of the board and that can be increasingly challenging as board sizes have grown in public companies.
Similar companies he has discovered subsequent to writing the book: one of the things he has learnt along the way is the power of these ideas when applied to commodity businesses. For a commodity business, having a capital allocation philosophy and focus on optimizing for long-term equity value per share is in itself a bit of a competitive advantage. You can see it in what he would call cyclical compounders. He would put a business like Credit Acceptance in that category. They are on their own cycle in the industry but they often get traded with their peers, even though they have evolved to a different and much better model. But that provides them with opportunities to repurchase shares aggressively during these recurring downturns. Another example is NVR, which is a homebuilding business. That is a difficult, capital intensive and cyclical business, but NVR stands out in terms of the operating model and capital allocation. In the serial acquisition world, one of the best examples is Mark Leonard at Constellation Software.
Signals of an “Outsider CEO”: he thinks letters are the most powerful signal in the early days. Eventually you can evaluate a track record but in the early years before there is a track record (e.g. when a new CEO takes over), the question becomes what are the signals or markers. He thinks the most predictive one is vocabulary, the way a CEO writes and talks about their business. They get extra credit if they have evolved differentiated metrics or ways for thinking about the business they are in. Of course, you then need to see that the team is executing and following up on that vocabulary. The other interesting signal is extremely decentralized organizations. There are a handful of investors out there who have been onto this philosophy early on and have identified some of these companies in their earliest stages. Thomas Tryforos (Prescott Investors) would be one example. There are a pocket of companies in the Nordics that have come off this family / coaching tree of Bergman & Beving, which have been doing this for decades. Their per share value creation over time has been extraordinary in very decentralized structures with a model around serial acquisition.
On game selection for younger investors (public vs. private investing): he would say public market investing is the easier game relatively speaking, because the ideas are broadly available and it does not require deep networks of sourcing investments. It is difficult to get in the game of buying private companies. It takes a lot of time and there is an upfront cost in a way that there isn’t in public markets. In public markets, you can also get crazy disjunctions in valuation that you just don’t get in private companies. Owners of private companies are generally much more rational in how they think about valuing their businesses. But learnings on both sides can continue to inform investing in the other and can produce interesting edges (e.g. IGSB who started in public markets but have moved into also making private investments).