YouSaid · the spoken record

Will Thorndike

lines on the record: 75
first: 2019-04-30
most recent: 2019-04-30
sittings or episodes: 1
sources: podcast

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“In almost every case, those were acquisitions where they knew they could improve margins through cost-side economies that tended to be the common thread. And the best example of that and the largest example in the book actually is capital cities, media company, it was run by a guy named Tom Murphy in the 70s and 80s and into the early 90s. And in 1986, 85, 86, capital cities, which mostly to that point owned more rural TV and radio stations and operated them exceptionally well, agreed to acquire ABC, the parent company of the network and the largest operator of TV stations in the country. They had stations in all the major markets, you know, New York, Chicago, LA, et cetera. And the entire logic of that deal rested on capital cities being able to take the margins of the”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“So, the general pattern across the group was occasional large acquisitions. Malone is actually the exception to that in the book because he sort of had this central insight relating to the power of scale in the cable television business in the 70s and 80s. And so he was constantly acquiring to develop and maintain scale advantages. And he was doing that within clear disciplined decision rules, but as a result, he had a constant pattern of acquisitions. If you hold Malone aside, all of the other CEOs filed this pattern where they would do very occasional, very large acquisitions. And each of them made at least one acquisition that was equal to 30% or more of enterprise value at the time it was made. So occasional large bets, which they perceived to be very high probability.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“Talking about Singleton, who is clearly one example in Malone, but that would be true of Bill Sturtz at Rawlstone Purina, Anders and his successors at General Dynamics, kind of across that group, that sort of analytical rigor was a very, very common trade”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“They generally as a group, they were not fans of broad long-term rigid strategic planning. They just fundamentally believed in a more opportunistic approach to managing their businesses. Singleton is the most, it has the sort of best quotes in this area, but he basically believed in showing up to steer the ship every day. And that fundamentally, you couldn't predict what the external environment would provide you with in terms of opportunities. And so you needed to be prepared to react to circumstances as they arose, sort of optimize the hands, the cards dealt. That would be true kind of across this group generally. And they were not visionaries. That was not, you know, they were, they prided themselves on the quality of their analytical work and the related processes internally.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“It's tied into a rigorous annual budgeting process in all of these companies in the book had highly decentralized organizations, which is a model that can be very powerful, but it needs to be accompanied by a budgeting process that has accountability sort of front and center so that where targets are enforced and there's an internal sort of audit function that's confirming numbers and making sure that benchmarks are hit and sort of maintained.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“I think that's fair and accurate. And they set intentionally high hurdle rates, and then they enforced them, right? So it's a very common thing for hurdle rates to be set within an organization and then mysteriously all of the models that managers bring forward to justify CapEx show IRRs north of the hurdle rate. So the key thing is having an internal system that retroactively holds them accountable.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“What's the related IRR? You know, we make penetration assumptions. If we pass neighborhoods where the densities are greater than 20 homes a mile, and we have 60% or better penetration, Our IRR is very, very quantitative, and he was constantly toggling back and forth. He was an incredibly active acquirer, and that's what he's best known for. But if you go back and read the quarter-by-quarter analyst reports, internal growth CapEx was a big part of that. And he was quantifying that very specifically. Basically, you know, he wasn't going forward with anything that didn't have a mid-20s IRR or better on the internal organic growth. It was just clear decision rules. So anyway, I think that general approach was widespread throughout the group. And it led in some cases to decisions to shrink businesses.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“25 plus years, which is the we focus in the book on his record running TCI, this large cable company, from the early 70s to the late 90s. He's had a wonderfully fascinating post-TCI career, and he's still active, basically 20 years later, but holding all that aside. If you look at what he did as a cable TV executive, it's fascinating because he had this interesting suite of options where he had very attractive internal organic growth related CapEx opportunities. And he also had very attractive and interesting inorganic acquisition allocation alternatives. So he's constantly toggling between the two. And he would look at what is the cost of building more cable plants.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, well, so if you were going to describe them, so you wouldn't, so they weren't charismatic as a group. They weren't visionary strategists. They were not Elon Musk. I mean, they were not remotely Elon Musk. What they were, you know, again, if they were pragmatic. Analytically oriented, flexible, opportunistic, cool, agnostic. Words like that would fit them much better. So as it related to CapEx, they were very analytical about capital expenditure, organic growth related decisions and investments, right? So they quantified things and they made decisions based on Returns looked at very coolly. And so the best example of this is Malone, John Malone, who is the CEO of the largest cable television company for”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“So, as a group, if you were going to describe the eight CEOs in the book, what's interesting is they came from a wide variety of backgrounds before they became CEOs. So you had two high-level mathematicians, Singleton and Malone, John Mullard. You had a widow who hadn't been in the workforce in 20 years. You had a former astronaut who entered the private sector in his mid-40s. This disparate, interesting mix of people, but they shared some common traits, right? So all of them were first-time CEOs. That's a very surprising finding. Half of them under 40 when they got the job. Only two of them had MBAs. Four of them had engineering degrees And so if you were going to describe them, if you were going to pick a group of select adjectives to describe them, you wouldn't choose the traditional CEO adjectives, right? So this was not a...”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“All of seven of the eight CEOs repurchased 30% or more of shares outstanding during their tenures, all fitting this pattern of sporadic large repurchases as opposed to systematic quarterly programs. The exception, the eighth CEO being Buffett, who Warren Buffett, who for a variety of reasons has never been as aggressive on repurchases, and there's some specific kind of idiosyncratic reasons for that. But it's a very specific pattern.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“Early mid 70s, and as that was all occurring, he completely reversed course and began to aggressively repurchase shares. And so between 72 and 84, he repurchased over 90% of shares outstanding. So no one else has ever been to that level. And he did it across a small number, eight or nine tender offers, very specific points in time. And the average PE he acquired at was high single digits. So just dramatically different. So he's the exemplar, but if you looked across this group”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“Singleton was the pioneer of this, and the pattern that you described, Patrick, is effectively the pattern across this group of eight CEOs that are profiled in the book, which is sporadic, large repurchases, time to coincide with low points in the stock price. And, you know, Singleton, you can look at his history. So Singleton's fascinating because he had great range as a capital allocator when he started Teledyne. It was during the heyday, the sort of salad days of the conglomerate era, and he issued a lot of stock to buy companies. And he typically issued for the decade of the 60s, Teladine's average PE was in the mid-20s, and he typically bought companies at 12 times earnings, right? So it was a very accretive activity. He stopped issuing shares literally in 1969, never issued another share. Stock market went through a lot of turmoil in the”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“The dividend rates increased January 1st, 2013, and actually, oddly, the popularity of dividends has grown since that event, right? So over the last four years, which that's not rational behavior. Interestingly, you could look at a group of companies that decided to pay large one-time special dividends in 2012. That would self select for a group that was very, very conscious of tax impacts, and it's an interesting list, and it would include very prominently the Washington Post Company under.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, so dividends, I mean, it's interesting. The dividends, I think, are as popular now as a capital allocation alternative as they've ever been. Corporate profits are very high, and this mantra of returning capital to shareholders is just everywhere. It's everywhere you turn. And Wall Street sells side analysts are front and center in advocating for returning capital to shareholders via dividends. And so it's an interesting, and this is occurring at the same time as dividends have become substantially less tax efficient over the last four years. So you basically had this period, this interesting period from the early 2000s when George W. Bush was elected until year-end 2012, where dividend rates were the lowest they've been on record in history. And so they were actually tax advantaged relative to history for that period of time.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“So, as opposed to getting on the regular systematic quarterly dividend treadmill, occasionally some of these CEOs would pay large one-time dividends when they didn't have other alternatives. And oftentimes to coincide with favorable tax, the timing relative to tax bills being passed are about to be passed, then we could talk more about that.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“So they were very unconventional in that regard, specifically they generally disdained dividends. They generally either avoided them altogether or they paid a substantially lower, their dividend yield was substantially lower than the peer group. And the reason for that in every case was tax inefficiency. So one of the common threads across the eight was a real focus on tax minimization, optimizing kind of after-tax outcomes. And dividends just are inherently Deeply tax inefficient with the two layers of taxation. The exception to that across the group was the occasional use of special dividends.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“The five alternatives you had as a CEO, as a capital allocator, or you can invest in your existing operations. Are in no particular order. You can buy another company. You can pay a dividend, you can repurchase your shares, or you can pay down debt. There really is a sixth, which is you could let cash accumulate on your balance sheet, but that's just a deferral of an ultimate decision, right? So those are really the alternatives.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“And so just by, and we did, John and I did capital cities, that was the second one. So I just got by happenstance into this really talented sort of layer of top HBS students who did these research projects as independent studies in their second year. And so it just sort of evolved over time. And after about the fourth or fifth year, I thought maybe this is a broader book type project. And after about the sixth year or somewhere in there, it just became clear there was this pattern, a much clearer, stronger pattern than I'd anticipated. Again, one of the models being the money masters where there really is no discernible pattern. There are a variety of different successful investors, but they pursued different strategies to achieve long-term outperformance. So anyway, it evolved over a long period of time.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“And as I was writing it up, Aleem came to me and said, if you want to do another one of these next year, I know a really talented guy in the class behind me is looking for an independent project. And Alim, by the way, was a phi beta kappa in physics from Stanford. That second guy was a guy named John Gilligan, who actually was in here yesterday. He was in town on business and we caught up. He now works for Byron Trot. But John was a SUMA in chemistry from Harvard.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“Research help, and specifically, I needed access to the Baker Library at HBS. I'm not an HBS alum. And we happen to have an HBS student working for us between years in business school. And I asked that individual if you wanted to do an independent study in his second year, and he was a tennis player, and he told me that he just committed to another independent study, but his doubles partner was looking for a project, so I called up his doubles partner, who was an extremely talented guy named Elim Chowdhury, and Elim agreed to do the project, and we did in the first semester of Aleem's second year, we did a very deep analytical dive on Teledyne and all of the comparable companies, sort of the 60s era conglomerate peer group. And in the second semester, we interviewed everyone alive who'd had anything to do with the company.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“So it began, the whole project began as a talk that I volunteered to give at our biannual CEO conference about a dozen years ago, so every other year we host a conference for all of our portfolio company CEOs, as well as alumni, people whose companies we've sold, and people who were wooing to run future businesses, future companies. And we typically have a headliner speaker at those, sort of a Jim Collins Michael Lewis type. And then we have a few more practically oriented, pragmatic, specific talks. And I volunteered to give one of those, and I had read about Henry Singleton. Actually, it goes back actually the first mention of Henry Singleton that I was aware of was in that book, The Money Masters, where Buffett sort of describes him as a uniquely talented CEO. And so I decided I'd do a deep dive on him and then present that to our CEOs. And I realized in order to do that, I needed some...”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so I had a serendipitous opportunity after business school to work with two high net worth investors who were looking to identify private equity opportunities for their personal capital. And so it came about through serendipity. I actually had worked at T-Row Price before that in the public equity area, but sort of a unique opportunity to work for an equity interest for a profit's interest very early on, which is what I was looking for. It was a very entrepreneurial early days situation where I sort of worked out of a closet as we built the business kind of deal by deal, but it just was sort of a circumstance that arose through an unpredictable opportunity.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“We realized that was something I wanted to learn more about and eventually do and began to, I sent off for the Berkshire letters and that sort of began a process.”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source
“Great. Well, thank you, Patrick. So, I did have sort of a light bulb moment as it relates to investing. I was on a vacation very shortly after I graduated from college in Maine, and I had brought, it was as it can be in Maine, the weather was terrible, and I'd brought sort of a set of books with me, and I had made my way through those books, and so I was perusing the shelves of the house that I was staying in. And there was a book on those shelves, The Money Masters by John Train, which I pulled down and started to read in the first chapter in that book. I'm not sure if you've ever read it, but it's a very good book. This is the original, you know, there have been subsequent editions, but this is the original 1980 iteration in the first chapter is on Buffett. It's still a very, very good description of Buffett's investment philosophy. And I just read it and immediately...”
2019-04-30 · Invest Like the Best · [REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36] · IDENTIFIED FROM THE TRANSCRIPT · source