We think diversification as practice generally makes very little for anyone that knows what they're doing. Diversification is a protection against ignorance. I mean if you want to make sure that nothing bad happens to you relative to the market, you own everything, there's nothing wrong with that. That has a perfectly sound approach for somebody who does not feel they know how to analyze businesses.
But if you know how to analyze businesses and value businesses, it's crazy to own 50 stocks or 40 stocks or 30 stocks probably. Because there aren't that many wonderful businesses that are understandable to a single human being in all likelihood. And to have some super wonderful business and then put money in No.30 or 35 on your list of attractiveness, and forgo putting more money into No.1, just strikes Charlie and me as madness.
You know, if all you have to achieve is average, it may preserve your job. But it's a confession in our view that you don't really understand the businesses that you own. I could pick out three of our businesses and I would be very happy if they were the only businesses we own. I love it the fact that we can find more than that and that we keep adding to it. But three wonderful businesses is more than you need in this life to do very well and the average person isn't going to run into that.
