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

Louis Pasteur once observed, “Chance favors . . . the prepared mind,”

The Buffett Test

you can keep your head when all about you are losing theirs . . . —Rudyard Kipling, “If”

What separated these CEOs (and the performance of their companies) was two distinctly different mind-sets. The outsider CEOs, like Stonecipher and Tillerson, tended to dance when everyone else was on the sidelines and to cling shyly to the periphery when the music was loudest. They were intelligent contrarians willing to lean against the wall indef

“Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.”6

These differing results tell an important capital allocation parable: the value of being in businesses with attractive returns on capital, and the related importance of getting out of low-return businesses.

This approach led to lumpy, but highly profitable, underwriting results. As an example, in 1984, Berkshire’s largest property and casualty (P&C) insurer, National Indemnity, wrote $62.2 million in premiums. Two years later, premium volumes grew an extraordinary sixfold to $366.2 million. By 1989, they had fallen back 73 percent to $98.4 million

“The system in place corrupts you with so much autonomy and authority that you can’t imagine leaving.”

Murphy’s approach to the roll-up was different. He moved slowly, developed real operational expertise, and focused on a small number of large acquisitions that he knew to be high-probability bets. Under Murphy, Capital Cities combined excellence in both operations and capital allocation to an unusual degree. As Murphy told me, “The business of busi