[REPLAY] Will Thorndike - How Skilled Capital Allocators Compound Capital - [Invest Like the Best, EP.36]

**SPEAKER_1** (0:00)
Hi, this is a replay of the Will Thorndike interview, which originally aired on May 9th, 2017 We will be back next week with a brand new interview for Invest Like the Best.

**Patrick O'Shaughnessy** (0:14)
Hello and welcome everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, methods, stories, and of strategies that will help you better invest both your time and your money. You can learn more and stay up to date at investorfieldguide.com.

**SPEAKER_2** (0:35)
Patrick O'Shaughnessy is a principal and portfolio manager at O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast.

**Patrick O'Shaughnessy** (0:57)
This week's guest is Will Thorndike, an author and investor whose book The Outsiders is an all-time favorite of mine. Our conversation is in two parts. First we dive deep into the lessons of his eight-year research project studying CEOs who are master capital allocators. These CEOs include Henry Singleton, John Malone, Tom Murphy, Katherine Graham and Warren Buffett. We discuss how these CEOs tended to be contrarians on topics like dividends, buybacks, acquisitions and the use of debt. As we go through each of the tools in the capital allocators toolkit, you'll hear several useful lessons for running or evaluating a business.
In the second part, we cover Will's career in private equity. Will founded and continues to run Housatonic Partners, investing in buyouts, recaps and search funds. Will has been one of the most active search fund investors for decades. And given how much time I've spent in past episodes on the searchers or operators in the micro cap permanent equity space, it was great to get the perspective of an experienced LP. As always, we also take time to survey the dangers and opportunities in today's private equity market.
You can find show notes for this episode at investorfieldguide.com forward slash Thorndike. And now please enjoy my conversation with Will Thorndike.
So Will, thank you very much for doing this with me. I always like to start somewhere a little interesting, a far field from what you're doing today. And I thought it would be fun for us to start with an origin story of sorts and go back to maybe the first moment or the first experience when you knew that you were deeply interested in investing as an avocation. If you could bring us back and kind of describe the early setting, that would be a neat place to start.

**Will Thorndike** (2:38)
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 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, and 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 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.

**Patrick O'Shaughnessy** (3:43)
One of the things I found interesting was that your book obviously talks a lot about public markets, CEOs and allocators, but your firm is predominantly private equity.
So what was the journey like kind of deciding from that first chapter reading about Buffett? How did you get from there to the founding of Housatonic in 1994? What drove you into the private equity space?

**Will Thorndike** (4:03)
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 that it came about through serendipity. I actually had worked at T. Rowe Price before that in the public equity area, but sort of a unique opportunity to work for an equity interest, for a profits interest very early on, which is what I was looking for. It was a very entrepreneurial early day 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.