Concentration vs Diversification: Betting on Yourself Wins

I was listening to an audiobook of Warren Buffett and Charlie Munger’s annual reports when a single phrase stopped me cold.

They said that diversification is protection against ignorance. It makes little sense if you know what you are doing.

This went against everything I hear daily. Open any financial independence forum and the gospel is always the same. Diversify. Buy the whole market. Do not take risks. Play it safe.

How could the most successful investors in history call the safest strategy a sign of ignorance?

Redefining Ignorance

I realized they were not calling people stupid. They were defining ignorance strictly as lacking specific information.

If you do not know which company will win then you buy all of them to guarantee you do not lose. That is a rational hedge against uncertainty. It protects you from variables you cannot control.

But what if you do control the variables? What if you are the operator?

Betting on Me Inc.

This validated the last three years of my life.

While my peers are diversifying by putting portions of their salary into stocks or savings accounts, I have been doing the opposite. I have been intentionally foregoing a steady salary range of 2000 to 5000 a month to go my own way.

There is a distinction here. An investor risks capital but a founder risks time. I was not just betting money. I was betting my prime working years and my professional identity.

To the outside world this looks reckless. It looks like I am unemployed or drifting.

But through the lens of Munger I viewed this not as recklessness but as calculated concentration. I was taking all my energy and opportunity cost and betting it on the one asset I know better than anyone else. Myself.

The Prerequisites for Concentration

I want to be clear that this strategy is not for everyone.

Concentration requires specific conditions to be viable. I have the privilege of a low burn rate here in Slovenia. I have a roof over my head and low fixed costs. This acted as my safety net.

If I had high debt or dependents then this same strategy would have been gambling. But because I had favorable conditions I could afford to remove the safety rails. I could turn down the immediate gratification of a salary to build long term equity in my own name.

The Reality of the Grind

Even with those advantages, concentration is just a fancy word for stress if you do not deliver.

For three years it was mainly crickets. Silence.

I was working through the holidays. I even hosted a party for New Year's Eve yet I was back at my desk on January 1st. This is not a complaint. It is simply the reality of building something from scratch. When you put all your eggs in one basket you have to watch that basket very closely.

There was no guarantee of success. Most people starting something new fail. I had to accept that I might be one of those people. That is the price of asymmetric upside.

The Dividend

Last quarter the silence broke.

After years of pushing content and refining my craft the inbound engine finally turned over. A single lead came through the website and turned into a substantial 5 figure project.

That one deal validated the years of lost income.

If I had diversified my attention by working a regular job and trying to build this on the side, I never would have had the depth to close a deal of that magnitude.

The Verdict

The standard advice is not wrong. It is simply calibrated for a different game. It is designed for preservation, not creation.

But if you possess the specific advantages of time, low overhead costs, and high conviction, the equation changes. Diversification becomes a brake on your potential.

I chose to remove the brake. The speed came because I finally had the runway to handle the acceleration.