The Outsiders summary

The story of Henry Singleton spans a century, more or less. Born in 1916, he cofounded Teledyne, a semiconductor manufacturer which became a conglomerate focused across a range of industrial and aerospace products. He steered it – profitably – from the red-hot markets of the ’60s all the way through the ’90s downturn. How profitably? Let’s just say a dollar invested in Teledyne in 1963 would have been worth $180.94 in 1990, outperforming an investment in a comparable company ninefold.

Here’s what Singleton did differently:

He diversified discriminately. Unlike his competitors, who bought failing companies to “turn around,” Singleton favored high-performing companies which were market leaders.

He was all about niche opportunities. He was a generalist – but he didn’t want a portfolio of generalist businesses. It was said of Singleton that he preferred high-margin products sold by the ounce rather than the ton.

He leveraged stock. In the early ’60s, he perceived that Teledyne’s stock was overvalued, at nearly 60 times earnings. He used the overvalued stock to buy more subsidiaries.

He didn’t synergize; he decentralized. Conventional conglomerates had huge management staffs, were based in centralized headquarters, and tried to find synergies and opportunities for integration among their subsidiaries. Singleton viewed each subsidiary as a separate component and drove managerial responsibility as far down into each component as possible. At its peak, Teledyne had over 40,000 employees – 50 of whom were management.

He pioneered large-scale share buybacks. In the late ’60s, the market cooled on conglomerates and Singleton believed Teledyne’s share price was undervalued relative to its revenue. So, at a bargain rate, he bought them back. In fact, between 1972 and 1984 he bought back 90 percent of outstanding shares, spending $2.5 billion in the process. Money well spent – Teledyne saw a 40-fold increase in earnings per share.

Singleton didn’t take on day-to-day responsibilities. His approach to time management was typically idiosyncratic. He took on no responsibilities so that he could respond to each day’s challenges and opportunities as they arose, and eschewed long-term planning, preferring to strategize on the fly. It would seem that, with a flexible and innovative CEO at the helm, even an outfit as unwieldy as a conglomerate can keep its agility and outperform its competitors.