They were one of the most well-funded public pension plans in the US.
But with over $90 billion to invest and a 30 year time horizon...
They were exiting long-term investments at a penalty to stock up on cash.
Not because they believed the market was about to tank or anything ... But because their treasurer had run for office on an efficiency and cost reduction platform and cash had the lowest fees.
As one of my contacts would go on to say, "It's pennies and paperclips over here, Rachel. Pennies and paperclips."
Let's just say it didn't pan out well. They paid hard penalties and burned bridges with top tier investment managers. They were apologetic about handicapping what contributions we could make. Their best talent quit.
(I just looked it up and they're now at a significant deficit. A major turnaround in just a few years for what was once a thriving plan.)
Don't Let Efficiency Take You Astray
A focus on efficiency and cost reduction can lead even very large, very well-funded businesses astray.
Cost reduction and efficiency gains may feel like a pain point you can solve, and certainly it's easy to hone in on, but it's generally not a tactic that grows your business.
So if it's not efficiency that wins, what is it?
Instead of Efficiency, The Efficient Frontier
Let's call it the Efficient Frontier. Or at least, that's the concept in investments we'll use (and that that treasurer decided to ignored).
The Efficient Frontier represents, in graphical form, the idea that there is an investment that maximizes expected return at every level of risk.
Picture here. For the math inclined, the data points are available investments plotted for expected return (Y axis) versus standard deviation (X axis). And the line (the Efficient Frontier) are the investments that maximize your expected return for the level of risk you take on.
Think about your business for a moment. Because it's honestly just a different kind of investment portfolio.
You spend money? That's a risk.
You spend time on something? That's a risk.
The thing you get out of spending that time or that money? That's an expected return.
You aren't in business so you can file an annual LLC report or pay self-employment taxes.
It's so you can make money. Lots of money. More money and wealth and impact in your community than you might get in your closest alternative, employment.
(Or for the more civically minded, so you can help others more money, more wealth, and more impact than they could otherwise).
When we focus too much on "efficiency" as it's commonly defined - cutting down time and expenses - it's like using a blunt force instrument. And not a very good one!
When we focus on efficient investing, we're focused on growth.
There's optimization to it. And there's an intelligent approach.
So let's simplify how you create more of an Efficient Frontier for your business without actually getting too caught up in the weeds or killing your growth trajectory with plain old "efficiency".
Get Some Data Points On The Board
One of the tenets of the Efficient Frontier is that we don't optimize in isolation. More milk in the pitcher (more ideas) means more cream that rises to the top (quality opportunities to take action on).
At Upward Acceleration, we use Design Thinking with our clients to figure out where your frontier sits (focused actions) while also bringing in the data points (ideas).
For purposes of this discussion, let's assume you have some clear desired outcomes, not just a to-do list, that define where you're going as a business, brand and individual.
Kind of like choosing the risk level you actually want in an investment portfolio, this tells us what you want. Now we figure out what mix of actions (via people, process, and tools) that will get you there in the best possible way.
The Design Thinking approach can take a couple quick rounds. But as you shift from desired outcomes (Goals) into actions (Tactics), we encourage you not to narrow your field of vision too sharply.
In other words, don't go back to that to-do list too fast. Look at the entire "investment universe" as you throw ideas on the board.
And more ideas.
And more ideas.
HINT: physical index cards or post-it notes will be helpful for the next step.
I love a few silly ideas on the board to get this going. Like if the desired outcome is to generate 30% more leads in 2026, throw something like "fly a plane around with a banner that says 'hire NAME now!'".
You won't do it but it opens the creative pathways and moves you out of the boxed-in 2-3 ideas you always gravitate to.
Sifting Ideas For The Efficient Frontier
Now for all of you itching to be a realist (or cynic - your choice), hold on a sec. Before you pull yourself into the reality of costs and resources and reality check, rank those ideas for how amazing and effective they are.
How likely is it that each idea will get you to your goal? Top to bottom, most amazing and effective to least.
(If you need a visual here... think soon-to-be 4-box chart with the most effective ideas at the top).
Only AFTER you do that is there room for the reality check. Keeping your effectiveness rankings in place, shift right to left the most accessible ideas.
Months of work, more budget than you have revenue for? Send it to the left.
Easy peasy? It's delegatable to your Fractional COO or another resource to get it done this week? Send it to the right.
If you've kept your effectiveness rankings in place, you now have a top right quadrant of ideas that are both easy to implement AND predicted to be amazingly effective at getting you to your goal.
By the way, don't forget to consider the ugh-ness factor in your left/right rankings. Something that's accessible and affordable but that you'd hate doing or it just isn't your vibe or brand, be honest about it. There are almost always ideas that are just as effective but easy to implement.
Just keep in mind that if you have the resources, almost anything can be delegated.
Also, for those of you that hate saying no to anything, remember this is a no-not-right-now not a no forever.
Now here's the caveat. Don't spend too much time optimizing what's next!
Just like there's no investor with the perfect portfolio (professional investors are like baseball players - a good one bats about .300)... There's no business strategy that's exactly perfect for you. At least not when looking forward.
But you can still get outsized returns by being smart about it and getting some strategies really really right.
For Ideas In Progress: Push The Frontier Higher
Now let's look at how you push out the Efficient Frontier with the ideas you've chosen and/or those already in progress.
Let's say we're making some operational improvements together, building out infrastructure that saves you time on otherwise administrative tasks.
This is where we really see the difference between owners who think about spending vs investing and brute force effort vs leverage (not the debt kind). And it means a huge difference in scaling your profitability and your freedom.
Let's also say that implementing this has saved you personally 6 hours per week.
You could simply enjoy this time back. No one would fault you if your pickleball game needs a little work or you'd like to spend more time volunteering in your kid's class.
But you could take this up a level or two.
You can punch up the expected return for the investment you made by doing the following:
1. Redeploy Into Billable Hours
If you're charging $500 an hour, you just opened up $3,000 a week in capacity (6 hours x $3,000). Over the year, that's $150,000 (+ 2 weeks of vacation).
We can do better than that though.
The numbers provided are for illustrative purposes. There is no guarantee of any of these results.
2. Reinvest Into Business Development
This math depends on how much money or time it takes you to get a new client.
Let's first share an example where you reinvest your time into something like networking.
Maybe you get a new client for every 12 hours of networking + consultation calls (your 2 weeks savings to keep the math easy). That "costs" you $6,000 per client (in what could have been billable hours) but if every client is worth $25,000 on average, you've just earned yourself $20,000 net and you get a new client on average every 2 weeks.
That's worth $500,000 a year.
Alternatively, instead of reinvesting the time, use the billable hours to reinvest into your business development.
You start with the extra $3,000 per week and instead of pocketing it, you add on a new strategy (ideally one you got to with the Design Thinking).
You hire a marketing agency for $2,000 per month + $10,000 in ads. They get you a ROAS (Return on Ad Spend) of 4:1, costing you $12,000 but returning you $40,000.
That's worth $480,000 a year.
3. Stack & Scale For Compound Growth
Finally as you keep "stacking and scaling", you get to invest in strategy and higher value tactics. Ones that compound over time.
Leverage your time to consider some of the following and more:
How can you can move your average client value from $25,000 to something higher?
How can you improve the conversion rates on the above?
Are there other channels you can be expanding into? Other pricing structures that might expand either your market or your revenue per client?
How are you positioned versus your industry? Do you have the loyalty and market share for your next stage of growth?
Do you have a personal brand? Do you want one?
A couple hours invested and you could be making more on every engagement or on subsequent engagements you weren't even able to consider before.
Advance Your Efficient Frontier As You Evolve
As the market evolves, so does your business.
It's not that the problems go away, but you'll now be able to solve better problems.
Remember? More money, more wealth, more impact. It gets pretty exciting.
And those things you had to say "no" to before? You can put those back on the table now. You've earned your way there.
Speed is great. Cost cutting has its place. And immediate relief from a painful problem always feels nice.
But getting caught up in cutting minor subscriptions or shaving off time can break even the most well-built businesses.
By leveraging the mind of an investor and the Efficient Frontier (vs plain old efficiency and cost cutting), you can have a thriving business today with more value built for you tomorrow.
If you're ready to stop optimizing for small and start investing for big, let's talk about where your frontier sits.
