Managing Big Money vs Managing Small Money – The Difference
1) In one experiment People were first asked to imagine walking along a twenty-foot plank on the floor
2) And most of them were confident they could do it without falling off.
3) They were then asked to imagine walking along the same plank, but this time with it suspended between two buildings 100 feet above ground
4) And most of them didn’t believe they could do it.
5) In short, when the potential outcome of a particular action became frightening, people were less likely to think they could succeed.
6) When you are asked to Manage Rs 1 lac, it is like walking on the wooden plank placed on the floor
7) But when you are asked to manage Rs 1 Cr. the situation changes and although the plank remains the same, it is now placed between two tall buildings
8) The same activity of crossing over the plank seems more difficult when the context changes and this is exactly what happens with Money Management when the ticket size changes the context
9) The same activity now requires different skills, attitude, understanding, processes
10) Managing small money and managing big money have one thing in common and that is the word “Managing”
11) Other than that everything else is different
12) A loss of 10% in 1 lac is 10K and the same 10% in 1 Cr. is 10Lac
13) Clearly one needs add more shock absorbers to cushion the jerks when it comes to big money
14) Small money can be left to itself to bounce back
15) The role of Structuring Solutions, Asset Allocation, Rebalancing, Algorithms that are sensitive to Market Valuations and shepherd money towards safe zones on a continuous basis assume higher significance as ticket sizes grow
I rest my case
