Put your eggs in one basket and watch it
In his opening remarks on day 3 of Family Office Club's 2023 Super Summit, Richard talked about direct investing. He warned against heavy diversification there and quoted Warren Buffett.
Do not spread too thin
Richard says you should not typically diversify heavily in direct investments. Spread too thin and there is no learning, no extra conviction and no exponential result.
Buffett's basket
Richard quotes Buffett: put your eggs in one basket and watch that basket very carefully. The second half matters as much as the first. Concentration only works with very thorough due diligence.
How big families do it
Richard says even multi-billionaire families usually have one to three niches they dominate in direct investments. They also allocate to real estate and public markets. His advice is to build a platform or two.
In Richard's words
"Warren Buffett says, put your eggs in one basket and watch that basket very carefully." (Richard C. Wilson, Super Summit 2023 opening remarks)
"Even multi -billionaire families usually have one to three niches that they dominate in their direct investment portfolio" (Super Summit 2023 opening remarks)
How to use this
- Pick one to three niches for direct deals and go deep.
- Do more due diligence, not less, when you concentrate.
- Keep other allocations, like real estate or public markets, for balance.
- Build a platform in your niche. Skip scattered one-off deals.
Questions and answers
What did Buffett say about eggs and baskets?
Richard quotes him: put your eggs in one basket and watch that basket very carefully.
Should family offices diversify direct investments?
Richard says not heavily. Concentration builds learning and conviction.
How many niches do large families focus on?
Richard says one to three in their direct portfolio.
Is concentration risky?
It can be. Richard stresses very thorough due diligence.