Society seems to be wanting to emphasize inclusion, diversity, and engagement as concepts, while seeming to ignore the need to make fast decisions that are “good enough” very quickly. If you want to thrive, you have to take action quickly, so I will simply state: Diversification is for stupid people.
How many times have you encountered these ideas?
- Don’t put all your eggs in one basket
- You cannot time the market, so spread your money around to avoid losing it all
- Let’s get input from the whole team to help with this decision
While there is some truth in these statements and some are even “common sense”, a contrary approach has merit that we should consider, so I will unpack each with some questions.
Don’t put all your eggs in one basket.
How many baskets can one person safely carry? If you try to carry 3 baskets, it becomes more likely that you will drop one of those baskets and lose a lot of eggs. If you mindfully carry one sturdy basket, the risk of losing eggs is smaller.
You cannot time the market, so spread your money around to avoid losing it all.
Is losing money in the stock market the result of investing in too few stocks, or is it the result of trying to keep track of too many stocks, and buy and sell all of those at exactly the right time? Or is losing money caused by our human nature that encourages us to sell a stock that just lost a bunch of its value (before we lose it all)? If we are diversified in a lot of different stocks, it will require much more work to stay on top of how those are performing. Maybe to avoid losing money in the stock market, we need to select a smaller number of investments carefully, and not try to game the system.
Let’s get input from the whole team to help with this decision
This idea is special to me. It is a great idea to gather input from people you trust who have different specializations and perspectives than you do. This will help you have fewer blind spots when you make decisions. However, there is no evidence that an ever larger number of opinions will result in a better decision. Even when gathering information from other people to get more perspective, the group you solicit input from should be quite small, and carefully selected. The not-so-nice way to say this is that if you add 100 idiots to the discussion, you will either get a worse decision, or it will take longer to arrive at the right decision because the decision makers will need to filter out all the extraneous and useless input from the idiots. Why not just ask a few trusted people for their input, and make a good decision quickly, without the frustration of talking to the idiots?
The goal of a business activity is to make money for the owners, and probably also to provide a useful product or service.
If you are collecting eggs to sell, you should walk the shortest/safest path to the hens and collect the eggs in a sturdy, appropriately sized basket for the task, and do not play on your smartphone while carrying the eggs, as the lack of attentiveness is probably the biggest risk to your egg profits.
If you are hoping to profit from stock market investments, you should identify the source of your risk and avoid those things first, then you should seek ways to improve your odds and making profits with the least investment of your personal time. You are probably scattering your money in too many places that you have too little knowledge of, and you probably do not have enough time to keep track of all the daily changes to the value of your positions. Some very successful investors focus on purchasing really good companies that they are sure will go up in value, and they hold for a long time to make profits safely, with less daily interruptions to their lives.
If you are trying to make a difficult decision, do not take a survey from a bunch of people. Instead, pick one thoughtful, competent person from a number of disciplines or perspectives and get weigh their opinions. With this approach, you will learn something, and you will build relationships with smart people.
Good luck in your next venture!