The most significant differences between emerging money management firms and large money management firms are not at the level of human capital, research, capital to grow, access to clients and consultants, asset gathering, compliance, back office, etc. The most significant differences between large money management firms and emerging money management firms are determined by scarce resources and how that scarcity - or lack thereof - is viewed philosophically and operationally.

At first blush, scarce resources seem to condemn each and every emerging manager to have to stint on just about everything. A wise emerging manager views scarce resources as a blessing in disguise that dictates a way of business management that can lead to surprisingly robust portfolio and business performance. This is done in several interactive ways such that no one business area suffers unduly because of scarce resources. First, overhead must be covered by management fees, not by borrowing or by capital injections. Borrowing and capital injections are short-term lifelines and should never be made a way of life. As cash accumulates, the emerging firm has the ability to expand, then position itself to pursue its business model of choice. Next, human capital is selected for diverse skill sets, then cross-trained to work singly, or in small groups, to serve three functional areas: research/portfolio management/trading, marketing/client support, and back office/accounting/compliance. This creates depth as well as solving most problems and viewing most processes with more than one set of eyes. Finally, deliberate incremental improvement becomes the way of life for creating quality in every functional area. This is how scarce resources can be the ultimate competitive edge for an emerging manager.

Very few large money management firms view scarce resources - even if resources are not scarce - as the basis for a business philosophy designed to create quality performance. Those that do are exceptional firms. Those that do not may be around for a long time, but are typically plagued by some area of unremitting waste, be it bureaucracy, excessive perks, or lack of portfolio performance, among many others.