Leveraging Expertise

jan-gottweiss-Pe8s76xOOhA-unsplash2c

The earliest NFL players were jacks of all trades, with many players playing multiple positions on both offense and defense and sometimes playing every down.

George Blanda was one of the best players of his era in the ’50s and ’60s, and he was one of these jacks of all trades. On one play, you’d see him throw a touchdown and then on the next play kick the extra point.

Economics had something to do with teams keeping their rosters low and maximizing the use of every single player to minimize payroll.

But since those early days, as the NFL has become one of the most lucrative sports on the planet, it has since evolved into a league of highly specialized players skilled at one position and not multiple. NFL teams want to win and to give them the best chance of winning; they want to assemble the best group of specialists possible.

Because NFL teams make so much money from attendance, TV rights and merchandising, they can afford to attract some of the best players at their positions to achieve their goal of winning the Super Bowl.

Physical attributes aside, teams from the early days of the NFL don’t stand a chance against the teams of today because of the gap in skill levels. A team with the best quarterback and running back in the league is going to have an advantage over a team with a so-so quarterback who also happens to be a so-so running back.

As with the NFL, so is the case in business where “jacks of all trades masters of none” are at a disadvantage against competing businesses with highly experienced and skilled executives at every level.

A company where the CEO surrounds him- or herself with the best CFO, COO, Controller, CIO, General Counsel, HR Director, etc. will be more efficient and profitable than the company where one person spreads themselves thin trying to do the job of several individuals.

In the investing world, some of the most affluent and successful investors recognize the value of leveraging the expertise of others.

To that end, ultra-wealthy investors prefer to avoid the volatile Wall Street sandbox. They prefer the alternative investment class where they can screen and tap experts through investments that will generate income, offer long-term growth, and preserve capita that the public equities can not offer.

An interesting point about most of these sophisticated investors is that most of them made their money in an industry other than the one they are heavily invested in now.

Investing in private investment funds in alternatives like commercial real estate, private equity, commodities, and agriculture enables sophisticated investors to put together a dream team of experts in their asset classes and geographic concentrations to maximize returns on their investment.

If you wonder why many affluent investors leverage the expertise of others by teaming up with investing partners – it’s simple.

While they focus on their own business endeavors and ventures within their wheelhouse of expertise, experience, and passion, they let their investment partners operate within their own wheelhouse of expertise, experience, and passions in order to maximize returns.

The most important lesson we can learn from the ultra-wealthy? They are aware of what they don’t know.

The owner of a niche shoe company maybe passionate about high-end hiking boots and may know the market inside and out. Still, he may not know anything about multifamily investments in the Midwest or affordable housing in secondary markets.

He may know that the earning potential from these commercial real estate niches can be highly rewarding. However, he knows that he doesn’t have the time to become an expert in not only particular asset segments but also in specific geographic locations.

He would prefer to stick to what he knows best – shoes – and funnel his investable assets to private funds run by experienced managers expert in particular asset classes and geographic locations.

By relying on others, the ultra-wealthy leverage the expertise of others in asset classes and geographic locations they do not have any experience or knowledge.

By leveraging the expertise of others accomplishes two goals:

  • To maximize efficiency and return.
  • To optimize diversification.

By assembling a dream team of experts through funds spread across multiple asset classes and geographic locations, sophisticated investors can maximize returns.

They do this all while enjoying multiple levels of diversification that will shield them against downturns in the broader markets.

They do this to ensure continued cash flow, appreciation, and downside protection – even through recessions.

Mike Ayala

Leave a comment

You must be logged in to post a comment.