Byron Wien has one of the longest running and most successful careers as an investment strategist on Wall Street.
In his latest monthly market commentary for Blackstone clients, he spends some time discussing an unnamed influence he calls “The Smartest Man in Europe.”
“People often ask me if I have a mentor, someone who has influenced my thinking over my career,” he writes. “I have had many, but over the past thirty years I have learned a great deal about investing from the person I have come to refer to as The Smartest Man in Europe.”
Wien shares some of the Man’s wisdom.
“The most important lessons he taught me were (1) that the primary force behind good performance is recognising important changes before or just as they are starting to happen, and (2) when something significant is happening, put a lot of money behind it. Concentrate on the big ideas; don’t over-diversify. “
The former point seems obvious. However, it’s worth noting that our behavioural biases often force us to anchor ourselves in our positions and only make minor adjustments to news. This is often a mistake. When you see a big change happening, you should probably make a big change to your portfolio.
The latter point is a bit more controversial. Financial advisors repeatedly reiterate the importance of diversifying portfolios in order to prevent substantial losses. But exposing yourselves to big opportunities usually means exposing yourselves to big losses.
Bill Gates, Larry Ellison, and the billionaire entrepreneurs of the world are extreme example of folks who concentrated on the big ideas. They didn’t spend their lives putting money into index funds. Rather, they put it all on the line on single bets.
Here’s some more background on the Smartest Man In Europe:
…He has a mercantile background and hundreds of years ago his ancestors sold food, supplies and weather protection to travellers along the Silk Road. He grew up hearing talk of investment opportunities around the dinner table. He received a European education and, after an apprenticeship in New York, returned home to take advantage of the post-war recovery taking place there. I have written annually about his views since 2001.
Read more at Blackstone.com.