Something set us off this week.
And we think this is common wisdom to anyone reading this blog … but just in case, here goes nothing:
“Everything in moderation”
“A little of this and a little of that” (not even sure if that one is a saying – I may have just made it up)
It’s all bull crap.
And it hurts perfectly innocent people.
I’ve never met ANYONE, who has achieved ANYTHING via diversification.
Yet, it’s routinely accepted as common wisdom…
“A diversified portfolio is wise. X % of your assets in Y. Another % in Z and yet another in @#$.”
Or something like that.
What the heck is that crap?
Has that actually worked for anyone? Seriously, has it?
Maybe once they’ve made their money it’s a weak way to try and not lose it … but to make money in any real way, has that approach EVER worked?
I vividly remember the very TOP sales reps at Oracle being supremely focused on ONE SINGLE strategy to attract and close sales.
Some zero’d in on relationships with resellers. Others would master referrals. Others would only work with prospects who proved they had budget, time frame and need … they hung up and even ignored tire kickers. Some even ran their very own, very specific, marketing campaigns.
The “average” sales reps entertained all comers.
Anyone who had a pulse made it into their sales “forecast” … often with wonderfully over blown expectations of actual deals to follow.
It was amusing to watch and very instructive.
Sometimes I think my time at Oracle in the middle of 100 or so sales reps was like a huge physcology experiment that I got to live in the middle of … for years.
The top guys/gals didn’t “diversify” their approach.
I’ve also noticed that this idea of diversification doesn’t work in fitness either.
The very best athletes that I’ve been able to watch closely or learn about have a one track mind.
They are OBSESSED with their scheduled workouts, their nutrition, their mental focus … everything.
They don’t go into a practice or gym workout “when they feel like it” … they are supremely focused.
They may mix their training disciplines but they’re focused on one single thing … training.
Someone recently said this to me, “Boy, it’s never a good idea to put all your eggs in one basket … you should really diversify out of real estate more.”
Neither of us have EVER seen ANYONE make any progress in building their wealth through diversification.
You can’t get to the point of mastery with anything when you diversify.
“Everything in moderation” is a huge cop out in our opinion.
Have you ever met anyone who masters trading options but can also flip properties like Donald Trump?
Neither have we.
Have you ever met anyone to succeed on a diet when they “diversified” and went on and off it like a game of hot potatoe?
Here’s where we think the bad “diversification” advice comes from:
A) Financial Advisors who don’t have the guts to recommend a single asset class because it requires tons of research and conviction to do so.
B) Newspaper reports that illustrate the holdings of top investors who outline their diversified holdings.
For example, recently we interviewed Eric Sprott … a Canadian Billionaire … if you look at his asset base today it’s full of different businesses, different stock holdings, different commodities and other wonderfully interesting things.
But when you’re worth a billion dollars you can have all these things and still be super focused on a single asset class. His favourite? Precious metals.
He famously publicly stated at one point that 90% of his assets are in gold and silver.
That doesn’t seem too diversified to us.
Single, often obsessive, is required to really break through your current level of anything.
Richard Branson didn’t diversify into a million business until he hit it big with one (‘Losing My Virginity’ is a great read about him by the way).
In the real estate world we’ve watched many people buy a property, become frustrated with a situation, get discouraged … go away for a while to trade stocks, then come back when that doesn’t work out to investigate a different type of real estate investing, dabble in that … go away again to greener pastures.
They are wasting precious time.
They aren’t mastering anything.
Mastery in any subject matter is a lost art.
We all Google a subject, read two sentences in Wikipedia about the topic and feel we know it.
Starting a business requires little diversification as well.
You need singularity of focus to create enough momentum to start a brand new business.
You almost need to put blinders on and ignore the world for a little while.
So many new business owners lose their way because they try to be all things to all people.
Figuring out who you are, what you are about and stating that to the world has a certain attraction to it.
And it lets you focus on mastering your business processes on one single thing.
After that first business process is humming you can then add others … but not until the first is mastered.
Becoming great at one single thing allows you to charge a premium for it – and then you can be happy 🙂
The common wisdom of diversification freaks us out because it could be holding a lot of people back from achieving the results they want.
If you see a shredded Saturday newspaper on the floor at your local coffee house it may be because there was yet another article about the value of diversifying your portfolio and we shredded it to pieces.
(for the record I swear we’re nice people)
Until next time …. Your Life! Your Terms!