University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting

by Daniel Pecaut

Diversification: Twaddle Buffett and Munger took their annual poke at modern portfolio theory (MPT) by zeroing in on popular notions about diversification. Buffett noted that he likes to put a lot of money in things he feels strongly about. Diversification makes no sense for someone who knows what they are doing. “To buy number one on your list equally with number 37 strikes us as madness. Diversification is a protection against ignorance, a confession that you do not know the businesses you own.” Buffett claimed that three wonderful businesses is more than you need in this life and would serve you much better than 100 average businesses. Munger took off the gloves, “Much of what is taught in corporate finance classes is twaddle.”