If you don’t know Eddie Brown you should. One of the world’s top stock pickers, he founded Baltimore-based Brown Capital Management Inc. (No. 10 on the BE ASSET MANAGERS list with $2.5 billion in assets under management) in 1983. Over three decades, he has developed a series of top-performing mutual funds based on the investment philosophy he dubbed GARP (“Growth at a Reasonable Priceâ€) and created a diverse cadre of ultra-competitive portfolio managers. Moreover, he and his wife, Sylvia, have used their vast wealth to become a global philanthropic force, donating more than $22 million to an array of charities to advance the arts, improve health care in underserved communities and increase educational opportunities for Black youth. For those reasons–and more–he earned the distinction of being named one of BLACK ENTERPRISE‘s 40 Most Powerful African Americans in Business in 2010.
When you read his soon-to-be released autobiography, Beating The Odds: Eddie Brown’s Investing and Life Strategies, what will fascinate you about this brilliant, hyper-curious entrepreneur is the distance of his journey. (Better yet, meet him at his book signing at our Black Enterprise Entrepreneurs Conference in Atlanta from May 22-25.) Brown went from being a 12-year-old moonshine runner plying his trade on the back roads of sleepy Apopka, Florida to beating the financial leviathans on Wall Street. That’s why Brown believes anyone has the potential to make it to the top provided they possess brains, moxie and an ability to connect.
I recently gained the opportunity to chat with Brown about his life of triumph and derring-do. Most importantly, he shared some of his strategies for business success for professionals navigating the corporate maze, as well as entrepreneurs trying to vault to the big leagues. Drawing from his 40 years of experience in the investment arena–from becoming the first Black money manager at leading investment firm T. Rowe Price and first African American panelist on renowned Wall Street Week with Louis Rukeyser to launching one of the first Black-owned asset managers–his advice can prove helpful to anyone seeking to achieve. In his own words, Brown offers five of his winning rules:
Versatility Equals Value
For the younger folks who would like to get into, say, the investment business, it really requires the use of a multiple set of skills. You have to have a good sense of psychological trends, social trends, economic trends, and naturally a good sense of analyzing companies and if you’re a portfolio manager, building a mosaic out of all of the conflicting pieces of information and trends to say, “Okay, where should I invest my clients’ money with all of these inputs.” It requires that. I remember that I read that Warren Buffett described the investment business as one of the greatest businesses in the world because you never have to swing. You stand there and, as he put it, you wait for the right pitch. When the fielders are asleep and you’ve got the right pitch, you step up and knock it out of the park. But the beauty is you never have to swing. You just kind of evaluate and think about this one, think about that one. So it’s a good way to think about having good judgment.
Build A Network To Get You In The Door–And Stay In The Room
You have to try to find a job mainly through networking as opposed to just sending in a resume cold to a department in a given company whether it’s Brown Capital, T. Rowe Price or Goldman Sachs or whatever. The best route after you have the right educational credentials is to try to have a network into the organization or firm that you would like to try to get with. That requires a lot of meeting people, talking with people, trying to establish that “in” with the firm. If you have the talent and can make the right connections through networking, opportunities are still present. It’s all people that are already on the inside connecting with people they know with a particular talent and experience that [they’re] seeking. People tend to hire people like themselves. As a person is developing their career [they should] serve on at least one or two charitable boards as a way of not only helping the community but also networking with other business leaders in a different way.
When You Start Your Business, Don’t Run Out of Money
I did a lot of studying of successful and unsuccessful businesses, majority and African American-owned. What I discovered is that many businesses, especially those that are African American-owned, fail because they forget the basic equation: Revenues have to be greater than expenses. They build up a lot of overhead in terms of fancy offices and a lot of other accouterments of success without much revenue. I said, “When I start my business, I’m not going to make that fatal mistake.â€ [I made sure I had] enough financial wherewithal to be able to last without any income for three to five years to give the business an opportunity to make it. In terms of the new business, acquire enough financial wherewithal to do it independently, preferably without loans, or through angel investors or friends and family. Acquire enough capital to have staying power because it takes time to build a business.
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 four 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.” 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.
It’s All About People
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.