Sizing BIG when it matters

This is one of the most important aspects in business or investing: 'Sizing big when it matters.' Often, people are so focused on the win rate of a certain strategy or anything related to business. Generally, saying, this seems to be human nature. Why would anyone not focus on winning more than 50%? Because this is what will make money, right? Wrong! This is something I have noticed a lot over the past and just saw a Warren Buffett clip that inspired me to write this post.

In my opinion, the win rate does not really matter; it's more about how much you make when you are right or how high the expected value is. 'Big opportunities in life have to be seized.' - Warren Buffett. Often, humans are focused on doing a lot of things really fast with mediocre effort or size. Let's hypothetically try to quantify this. Let's say a person will get 1000 opportunities in life; out of those 1000 opportunities, only 20 are really, really great. The person that focuses on all opportunities will size on all of them equally and won't have superior outcomes. The person that practices selectivity and will 'bet the farm' on those big opportunities will perform extraordinarily well. Warren Buffett tries to visualize this with punch cards, and if you only have 20 punches in a lifetime, you will only focus on the ones that are really big opportunities. This is one of the essential principles of Berkshire Hathaway.

Not only is selectivity important, but also having the guts to pull the trigger when you see the opportunity. For many people, it's like shooting at rabbits, trying to hit one until the gun needs to be reloaded, and then the elephant starts walking by, and you can take a shot. Not only from a financial perspective but also from a mental aspect.

I'll try to illustrate the point of the mental aspect in my next post with a story of Stanley Druckenmiller.

Thanks,

Finn