Forced diversification dilutes rare compounding returns
The guest argued that trimming high-performing, resilient compounders simply to maintain arbitrary concentration limits is a mistake that dilutes long-term wealth generation.
The argument
He compared highly resilient, multi-business compounders like Constellation Software favorably to traditional giants like Walmart, arguing that great managers compounding capital are too rare to trim. He noted that successful entrepreneurs and families routinely keep the vast majority of their wealth in a single, high-conviction asset.
The thesis, stress-tested
✓ What validates it
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▸ Risks discussed
- ▸Extreme single-stock downside if the key manager departs or the business model fails
- ▸Lack of liquidity during market panics
Hear it yourself
"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. And so Greg has been paid 20 odd million for several years. Warren has said about Ajit that many times when he's paid him, he felt he left out a zero. Ajit is responsible single handedly for creating more than 100,000,000,000 maybe $150,000,000,000 in value for Berkshire shareholders, So we can never compensate him enough."
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