Why this order
The Outsiders first and deliberately: capital allocation is the frame everything else in the path hangs on, and most candidates arrive with the model and not the frame. Rubenstein separates the seats so you stop conflating buyout with growth. Then the deal, then the downside, then the way of thinking that survives both.
The 6 of them, in order
1
The Outsiders
William N. ThorndikeEssentialBookStart here
The frame. What a sponsor is actually paid for, and the vocabulary for saying so.
What to notice. A chief executive is a capital allocator first and an operator second.
Eight chief executives judged on capital allocation and nothing else. If you read one book before a private equity interview, make it this one.
Where it shows up in a roomWhere it shows up in a room
It gives you the vocabulary for what a sponsor does after the close, which is exactly where most candidates run out of things to say.
2
How to Invest
David M. RubensteinRecommendedBookStart here
Second, because conflating buyout, growth and credit in a first round is a common and avoidable loss.
What to notice. Each seat on the buy side is a different job, not a different asset.
Interviews across every asset class, conducted by someone who built one of them. The fastest way to learn what each seat on the buy side does all day.
Where it shows up in a roomWhere it shows up in a room
It is the cheapest way to stop confusing private equity, growth and credit, which candidates do constantly.
3
Barbarians at the Gate
1993EssentialFilmStart hereAn evening
The auction, the management conflict, and what fees quietly do to advice. The film before the book if time is short.
What to notice. A management buyout puts the seller on both sides of the table.
The RJR Nabisco buyout played as farce, and still the quickest way to understand why a management buyout creates a conflict of interest. Read the book afterwards for the auction mechanics.
Where it shows up in a roomWhere it shows up in a room
Every private equity conversation eventually reaches management incentives. This is where the conflict becomes obvious rather than theoretical.
4
The Caesars Palace Coup
Max Frumes and Sujeet IndapEssentialBookDeeper diveA long haul
The downside case. Covenants stop being a bullet on a term sheet at roughly page fifty.
What to notice. A capital structure is a set of rights people will litigate over.
A restructuring fought from the creditor side. Dense, and the best introduction anywhere to covenants, fraudulent conveyance and how a capital structure gets torn apart.
Where it shows up in a roomWhere it shows up in a room
Restructuring groups ask what a covenant actually does. This is the book where covenants stop being a bullet on a term sheet.
5
Am I Being Too Subtle?
Sam ZellRecommendedBookIntermediate
The other side of the same trade: who is forced to sell, and who has liquidity when nobody else does.
What to notice. The buyer with liquidity when nobody else has any sets the price.
Real estate, distressed assets and a plain account of buying when nobody else will. The most direct voice on the list.
Where it shows up in a roomWhere it shows up in a room
Distressed and special situations interviews want to hear that you understand who is forced to sell and why.
6
Thinking in Bets
Annie DukeEssentialBookStart here
Last, and the one that changes your answer about a deal that went wrong.
What to notice. A good decision and a good outcome are separate things.
Separating decision quality from outcome quality. This is the single most useful idea on the whole list for an investing interview, and the cheapest to acquire.
Where it shows up in a roomWhere it shows up in a room
Asked about an investment that went wrong, the answer that separates the process from the result is the one that gets a second round.