Be Patient No Matter How Much Time It Takes
Successful investing requires immense patience, waiting for rare high-opportunity bets and then acting decisively, rather than diversifying widely or acting frequently.
THE IDEA
Be Patient No Matter How Much Time It Takes
Charlie: “If you took the top ten decisions out, we have a pretty average record. It wasn’t hyperactivity, but a hell of a lot of patience. You stuck to your principles and when opportunities came along, you pounced on them with a vigor. With all that vigor, you only made a decision every two years. We do more deals now, but it happened with relatively few decisions and staying the course for decades and holding our fire until something came along worth doing.
“And the wise ones bet heavily when the world offers them that opportunity. They bet big when they have the odds. And the rest of the time, they don’t. It’s just that simple xx.”
After a while Charlie continued: “Well, here we do have a practical example, I read Barron’s for fifty years. In fifty years, I found one investment opportunity in Barron’s out of which I made about $80 million with almost no risk. I took the $80 million and gave it to Li Lu, who turned it into $400 or $500 million. So, I have made $400 or $500 million reading Barron’s for fifty years and following one idea. Now that doesn’t help you very much, does it? I’m sorry, but that’s the way it really happened. If you can’t do it…I didn’t have a lot of ideas. I didn’t find them that easily, but I did pounce on one xxi.”
The blond young man and others also listed with a fair amount of interest.
“I didn’t expect it would be easy, but I also have in mind a diversification. What are your thoughts on that?”
Charlie: “The Berkshire-style investors tend to be less diversified than other people. The academics have done a terrible disservice to intelligent investors by glorifying the idea of diversification. Because I just think the whole concept is literally almost insane”xxii.
“A lot of other people are trying to be brilliant, and we are just trying to be rational xxiii.”
When to use it
Investment portfolio management: Instead of spreading investments thinly, wait for undervalued assets and allocate a large portion of capital to them.
Business strategy: Focus on a few core products or markets where the company has a clear advantage, rather than trying to compete in many areas.
Career decisions: When a rare job opportunity or project aligns perfectly with your skills, commit fully rather than hedging with multiple options.
Personal finance: Save and research until a high-confidence investment presents itself, rather than constantly trading or following market trends.
FROM THEORY TO EVERYDAY LIFE
In practice
The Barron's Investment
Charlie Munger read Barron's for fifty years and found only one investment opportunity that netted him about $80 million with almost no risk. He then gave that sum to Li Lu, who turned it into $400-$500 million. Extreme patience and betting heavily on a single high-conviction idea paid off.
A MOMENT TO REFLECT
Put it to work.
What decisions in your life or work would benefit from waiting for the right opportunity rather than acting frequently?
How can you distinguish between a truly high-odds opportunity and a mediocre one?
In what areas do you currently diversify unnecessarily, and what would happen if you concentrated your bets?
Often confused with
CONTINUE THE CONVERSATION
Source texts
- The Art of Being Rational Charlie Munger