Our business depends on this one little joke

Jon and I were talking about a deal we’re considering doing.

We were going through the pluses and minuses, trying to make sure we were both comfortable with it.

One of us said: “…, and we would be putting out a ton of capital.”

We both paused, laughed, and then shook our heads.

The reason this line is funny has to do with reasoning which may be a little unfamiliar to people who aren’t used to doing deals with other peoples’ money.

You see, in the money management business, you work under two, conflicting mandates:

  1. Invest all of the money entrusted to you as quickly as possible; but
  2. Don’t do stupid deals

It’s pretty obviously where the conflict is, right? To invest the capital quickly, you need to do deals, and the bigger, the better. But, if you just buy any old thing that comes along, you’re likely to lose your investors’ money (or, at least, to make them less money than you could have).

So, when we’re looking at a big deal that may or may not be worth doing, either Jon or I usually makes the joke about how at least we’re putting out a bunch of capital.

The reason it’s funny is because, if it’s a stupid deal, the fact that you’re putting out a lot of capital is not a benefit; it’s a disaster.

Our joke is kind of how we remind ourselves not to fall in love with the big ones.