Strategy Lenses · Frameworks
Capital Allocation Like Buffett
A CEO's five choices for cash (reinvest, acquire, pay down debt, dividends, buybacks), how to judge them by return on capital and per-share value, Buffett's rules, and Thorndike's 'Outsiders' CEOs who beat the market by allocating well.
Step 1 of 5 · Overview30 min read ·
Key idea
Prereqs: Berkshire Hathaway; ROIC. Next: Founder vs manager; why great companies fail. Sources: William Thorndike, *The Outsiders* (2012); Berkshire Hathaway shareholder letters (esp. 1984, 2011, 2022); Michael Mauboussin, 'Capital Allocation' (2022).Next: 1. Five choices