A common way to lose money is to act on a sound idea too quickly: in the wrong size, at the wrong point in a family’s circumstances, or before the obvious questions have been asked. The analysis can be right and the timing still costly.
Families who manage capital well tend to build a decision in stages. A conversation becomes a memo. The memo is left for a few weeks, and the delay produces questions nobody raised at the start. Capital moves after that, often in a smaller first tranche than the original conversation suggested.
Writing the reasons down
Holding a position through a year in which a more liquid alternative does better is difficult. Families who manage it have usually written down, at the outset, what they own, why they own it, and what would have to change before they sold.
When markets are volatile, our discussion turns to whether anything in that record has changed. Usually nothing has, and the position stays as it is.
Long holding periods change how a portfolio behaves. Illiquid assets become usable, because the capital is not needed back soon. Deferred tax keeps compounding. Relationships with operators develop over years and bring opportunities that are hard to find at short notice.
When we move quickly
We act quickly in three situations: correcting a mistake, meeting a capital call, and taking up an opportunity that is available only for a short time. Ordinary decisions follow the usual sequence.
Naming those exceptions in advance means that when we do move fast, the decision to do so was made beforehand.