- Charlie Munger Hagstrom's case for concentrated 'focus' investing, built on the Graham-and-Gates insight that few ideas are worth acting on. Farnam Street records that the book was recommended by both Buffett and Munger on a few occasions. source ↗
Robert Hagstrom's case for concentrated 'focus' investing — the strategy of holding a small number of high-conviction positions rather than diversifying across dozens — built on the Graham-and-Buffett insight that few ideas are worth acting on.
Recommended by both Buffett and Munger, this book codifies the approach Munger described with his 'sit on your ass' arithmetic in the 1994 USC talk: 15% compounded for thirty years with one 35% tax at the end nets 13.3% a year, while paying that tax annually nets 9.75%. For founders, the focus investing thesis is directly transferable to business strategy: it is better to concentrate resources on the few things that work than to spread them thin across many initiatives that might work. Munger's circle of competence — 'it's going to be very hard to enlarge that circle' — is the limiting constraint that makes focus investing necessary: if you can only understand a few things well, you should bet on those few things big rather than spreading small bets across many things you barely grasp.