Life Is Too Short Not To Fire The Miserable Client

I have never regretted invoking the life-is-too-short rule in business.

A giant oil company hired me to manage a teeny tiny sliver of their pension fund. We were on a farm team of “emerging managers” (small and minority-owned shops) who were hired to promote diversity. It also didn’t hurt that research showed small new firms deliver better investment results. 

Our portfolio was behaving precisely as advertised. 

We owned a concentrated portfolio consisting of no more than 35 stocks. Every stock earned its keep, though no position was more than 6%, and in practice rarely hit 5%. We invested in small-cap stocks, which are smaller, more obscure companies. 

Our performance was volatile, driven by individual stocks.

If we were underperforming, the client was uncomfortable. If we were crushing our benchmark, the client was also uncomfortable. No amount of death-by-meeting or conference calls were enough.

We concluded our client would ALWAYS be uncomfortable.

It wasn’t personal. It was a matter of investment philosophy. Our client had a quantitative approach and was used to large firms with many small positions. They weren’t used to stock pickers.

We could hardly afford to lose such a prestigious client, but we resigned the account after a few months. It just wasn’t worth the time spent and energy squandered in head cramps going around in circles. 

A buddy on the farm team thought it was stupid that we’d invoked the life-is-too-short rule. Then our mutual client fired him a few months later for doing exactly what they hired him to do. 🤣

James Jacques Joseph Tissot, Public Domain