Del Frisco's Steak House, Ocean Prime & Mutual Fund Managers

What Del Frisco's, Ocean Prime And Mutual Fund Managers Won't Let Each Other Do

by: Brendan Magee

Two years ago, my wife helped me cross off my bucket list eating at Del Frisco's Steak House. I had read all the reviews and knew that it was a great place to eat and it didn't disappoint one bit. Walking out I told Jennifer,if I were a convicted man with only one meal coming to me before I was executed, please get it from Del Frisco's.

Driving away from the restaurant, another restaurant's sign caught my attention, Oceans Prime. Given it was located right around the corner from Del Frisco's, I figured it was Del Frisco's prime competition and anything that could stand up to Del Frisco's had to be experienced at least once. This past Saturday for my birthday,  I got to see for myself if Ocean Prime was as good as Del Frisco's.I can honestly tell you both are phenomenal dining experiences. Both serve outstanding food and deliver an awesome experience that some how has you forgetting that you are forking over a mortgage payment to cover the tab.

Leaving the restaurant this time I had a couple different thoughts. One was, there are a lot of people willing to pay top dollar for a great meal. Both restaurants, when we were there, were packed with customers. The second was, neither restaurant is going to let the other restaurant win the competition. They are both going to push each other to be better and more profitable. If Del Frisco's sat back and said, "O.k. Ocean Prime, we are going to step back and let you be number one." That would mean Ocean Prime would get all the perks that go with being number one. Those looking for a great steak and willing to pay $50 for a steak are all going to go to Ocean Prime. Ocean Prime would become more profitable and open additional locations. They might be able to lower their prices a little bit and lure more of Del Frisco's customers away. Del Frisco's could lose their business if they failed to keep pace.

So Del Frisco's can't let Ocean Prime have a permanent competitive edge. They will create new dishes, higher better chefs, redecorate their dining room, etc. They can't afford to be number two for very long.

The same competition takes place among mutual fund managers. There is a race for being number one every year, and if say Fidelity sits back and says to Vanguard, American, T. Rowe Price, etc. we are going to be content to eternally stay in second or fourth place all the money is going to flow away from Fidelity to who ever is the perennial winning mutual fund company. When that happens, the fund managers at Fidelity will have their incomes cut or jobs eliminated. They won't get the bonuses they were counting on or the book deals the other top performing fund mangers are going to get.

So if one fund manager has a competitive edge in one year, the other fund managers are not going to let that edge stand unchallenged for very long. If Vanguard struck it rich with tech stocks, the other fund managers are soon to be loading up on tech stocks and there goes Vanguard's competitive edge. The fund managers have effectively cancelled out the others' competitive edge.

This is one of the main reasons why the top performing fund managers do not repeat the following year as the top performing fund manager. If the other guy is winning all the time, that means I am losing all the time, and who wants that?

This is true with restaurants as well as mutual fund managers.

Brendan Magee is the founder of Inevitable Wealth Coaching. With questions or comments e-mail brendan@coachgee.com or call 610-446-4322