How opera made me a better investor

High finance and grand opera may seem far apart. To be sure, they both involve larger-than-life characters and constant drama. But there are other parallels, and lessons, that can be applied.

In 2001, I was given the opportunity to serve as the president of the San Francisco Opera. I had worked in the investment business for many years and I was looking for a new challenge, so I agreed.

This began what was to become one of the most valuable learning experiences of my career.

Even under the best of circumstances, an opera company has a difficult business model. It has high fixed costs and it forecasts its budgets years in advance.

In the wake of the dotcom bust and the attacks of September 11th, the Opera was headed for trouble. Expenses, based on plans made during the heyday of the late 1990s were on the rise, and ticket sales and contributions were on the decline. It had all the makings of a great opera, the only question being how it would end.

We had several things going for us. First, the San Francisco Opera was a great institution with a strong franchise in the community. Nobody wanted it to fail. Second, we faced an unambiguous situation. It was clear to all involved that significant changes needed to be made.

We created a plan to get back in the black, and then articulated it to major constituencies. Because people valued the institution and believed in the plan, with determination, hard work and sacrifice, we dramatically altered the company's course for the better. Today, the company has a first rate management team, an engaged board and is financially more vibrant than ever.

A little over two years ago, with the opera firmly back on track, I returned to the investment field. My experiences working on behalf of the Opera have helped to reinforce my most deeply held beliefs about management, investing and running an investment firm.

Lessons learned and relearned

You are invested in the real economy. This practical reality is often ignored by the financial services industry which likes to slice, dice, and abstract ownership in the capital markets. At the end of the day, advisors are investing in the same real economy with real companies and real people, launching new products, entering new markets and facing difficult challenges. Invest as a business owner.

Not all businesses are created equal, and one doesn't have to own every business. An Opera company is an example of a bad business model but a wonderful and worthwhile endeavor. As investments, some businesses are clearly better than others. They have greater competitive advantages, are more profitable and have greater potential for future growth. Invest in fewer, better businesses for a longer period of time.

Companies with strong franchises tend to overcome periods of adversity. They often end up stronger as a result. They fix their own problems or others come in to help. When out of favor, they can represent compelling investment opportunities.

In investing, passion and creativity are as important as process and discipline. People don't work for an opera company for the money. They do it for the love of the art and for the joy of creating something extraordinary. Similarly, I believe great investors are those who love what they do and would do it for free. Company managers who lack creative passion and a sense of ownership should be avoided.

Finally, focus is critical to success. The more an organization tries to be all things to all people, the more it drifts towards mediocrity. The greatest companies and investment firms tend to do relatively few things very well. They focus on their strengths with the knowledge that less is more, at the Opera, on Wall Street and everywhere in between.

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