Lesson No. 4
Never change your success formula.
[At one point, Brown Capital] lost a lot of assets, a lot of clients because we got away from what had made us successful for so many years. That’s not only doing good research and analysis on companies but also focusing our investment selections on longer term prospects, the next three to five years, as opposed to shorter term, the next few quarters or year. When our performance suffered, in 2004 in particular, but subsequently it continued for another three years, because we started to react to client pressures for performance, consultant pressures for performance in the shorter term and began to react to that in a dysfunctional way. Finally, we said, “Let’s go back to the basics that made us successful for so many years and forget about trying to respond to these pressures.â€ It led us to select clients more carefully, clients that not only believe and buy into our investment philosophy, this growth at a reasonable price philosophy, but also the fact that we are longer term investors.
Lesson No. 5
Treat your people right.
Some of the principles that T. Rowe Price, the man, had for T. Rowe Price Associates I adopted very early in the history of Brown Capital. That is, the most important assets of a financial services business leave and go out of the door every night. One of the very important things is to retain talent because this is a knowledge-intensive business not a capital-intensive business so you really need to retain that exceptional talent. This was T. Rowe Price’s principle. That is, you treat them very well as human beings and respect them as human beings, you give them a great work environment and you compensate them very well. You offer them a piece of the action, some ownership in the firm. If you do those four things, this exceptional talent will tend to stay with you.