Four-way diversification for century-long horizons
For ultra-long-term holding periods of 50 to 100 years, the guest argued against relying on a single stock like Berkshire Hathaway, recommending a diversified four-part index strategy instead.
The argument
Pabrai suggested allocating capital equally (one-quarter each) among the S&P 500, Berkshire Hathaway, and two broad international indices with exposure to high-growth regions like Asia and China to mitigate single-entity risk over generations.
The thesis, stress-tested
✓ What validates it
- ✓Rebalancing performance over multi-decade horizons
- ✓Growth of Asian markets outperforming domestic US markets
▸ Risks discussed
- ▸Underperformance of international indices relative to US equities
- ▸Potential structural decline of Berkshire post-Buffett over a 100-year span
Hear it yourself
"So it's all base, and then I don't know if Buffett has nudged able or probably not, but he takes his entire conversation after tax and then buy Berkshire in the open market. If you are on the board, if you are God, how would you incentivize Greg Abel to align him most with shareholders? Well, for the last several years, both Greg and Ajit have been vice chairman, and they've both, every year, gotten exactly the same amount of compensation down to the last dollar. And I think the reason Warren and Charlie did that is to avoid envy and avoid anything I mean, even though these two guys are very high quality individuals, they didn't want to go anywhere near the envy kicking in or whatever else."
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