“Wide diversification is only required when investors do not understand what they are doing.” ~Warren Buffett
Posted on Facebook–May, 2008
When I was a graduate student working on my MBA, it felt as though we were always talking about diversification or competitive advantage. And when it comes down to the essence of those topics, it can best be described as strategic management; finding the optimal mix of risk versus profit.
In a corporate environment, the ultimate indicator of success, whether reasonable or not, is its ability to maximize shareholder value. Many people seem to actively attempt to carry this philosophy into their personal lives. But like many corporations, we too often have a myopic vision, rarely running decisions through the gamut of time. We may forecast the impact of a decision for a year, or maybe even five years, but rare is the instance where we search for the ‘enduring impact’ of a decision.
We move quickly to remedy ‘losses’ in the interim, though sometimes the best answer when confronted by challenges is to stay the course; to persevere the unexpected doldrums of declination that strike us in life. Baseball players are great examples. While some professional baseball players are constantly changing their swing, most of the best hitters work on maintaining the swing that got them into the professional ranks. They realize that through 162 games, they’ll have hot streaks as well as fall into hitting slumps; slumps that can rattle a player’s confidence to the point where he does decide to change his swing. Though often, these quick fixes produce short-term results, and the player typically falls into a more pronounced slump with even less confidence; now further removed from that optimal swing that had brought him so much success.
Baseball, in many ways, is analogous with life in general. If we’re successful thirty percent of the time, we’re doing pretty well, and in most of those successes we will not be hitting grand slams. More often than not, we’ll hit some singles and doubles. On occasion, through exhibiting sharp vision and demonstrating wise judgment, we’ll ‘walk’ away from a bad situation presented to us. Other times, we’ll strike out because we fail to see those good opportunities that are offered to us. Sometimes we’ll have to make ‘sacrifices’ for the betterment of others. And like baseball, human error will often play a part in outcomes. Moreover, if you want to win over a long season, it is necessary to demonstrate character, fortitude, and consistency.
Moving from baseball to the topic of sports in general; more and more youth are no longer participating in multiple sports. Instead, by the time an adolescent reaches high school, they are devoted to one sport. Encouraged by parents, money, and fame to specialize in one sport, the boy or girl does so with the belief that total commitment in one sport will propel them further than if they were involved with numerous sports. It is their belief, as is mine, that in many cases, if not all; diversification in many things does not lead to excellence in anything. While true, you may become good at a plethora of activities, it is unlikely you’ll reach a personal pinnacle of performance with any.
How does this philosophy impact our approach to God and to our relationships? I believe it requires us to go “all in” with people that we consider friends. Rather than have friends for certain ‘seasons’ or for participating in certain activities; I see the need to seek friends who are my friends in an absolute sense. I make sacrifices for them and they do the same for me. If I need someone to speak to, regardless of the topic, they are willing to lend an ear. If I am moving in a dangerous direction, they will do what is in their power to stop me from continuing towards self-inflicted harm; even, potentially, to their own detriment.
And given that God is the most important thing in my life, He must be the central focus in EVERYTHING. Whether it be in how I handle my relationships, my work, my social activities—anything—He must be atop my pyramid of considerations. And just like the one-sport athlete, I may never excel in another area, but I will have the potential to reach my personal pinnacle as it pertains to my Faith.
Sometimes I think that I must feel as Solomon did at times with the Wisdom God provided him in governing His chosen people. Through God’s Word, I, as all of us, can speak great truths (see Bible), but then in my personal life I fail to even adhere to my own advice. As Solomon made compromises to satisfy political, physical, and monetary initiatives; he failed to reach his potential as a Follower of God. How often have I made a compromise and realized my error, only to do it another time?
In proverbs, Solomon gave the best advice anyone could give, yet failed to listen to it himself:
Trust in the Lord with all your heart, on your own intelligence rely not; in all your ways be mindful of Him and He will make straight your paths. (NAB)
While in many instances, such as in retirement planning, diversification makes great sense, as it limits risk. However, diversification is not applicable to faith, as it prohibits complete submission to God. Many would consider such submission the ultimate risk, to put ultimate Faith in a God many do not believe exists; and to Trust in Him. But in making that true and ultimate leap of faith, consider the rewards that await those who have correctly put their trust where it should have always been placed?