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I've read that there were several times in your investing career when you were confident enough in one idea to put a lot of your money into it, say 25% or more. Uh I believe a couple of those cases were American Express and the Washington Post in the 70s and I've heard you discuss your thinking on those, but could you talk about any of the other times you've been confident enough to make such a big investment and what your thinking was in those cases?
Charlie and I have been confident enough if we were only running our own net worth I'm certain a very significant number of times if you go over 50 years there have been a lot of times when you'd have put at least 75% of your net worth into an idea wouldn't aren't there well but 75% of your worth outside Bergkshire has never been a very significant amount
well but I'm going back let's just assume it was let's let let's just assume you didn't have Bergkshire in the picture there. There have been times I mean we've seen all kinds of ideas we would have put 75% of our net worth in Warren. There have been times in my life when I've had more than 100% of my net worth invested in things.
That's because you had a friendly banker and I didn't Oh, that there have been times well initially I had 70 I several times I had 75% of my net worth in one situation. There there are situations you will see they over a long period of time. I mean you you will you will see things that it would be a mistake if you're working with smaller sums.
It would be a mistake not to have half your net worth in. I mean they're they're you really do sometimes in security see things that are led pipe cinches and and uh you're not going to see them often and they're not going to be talking about them on television or anything of the sort but there there will be some extraordinary things happen in a lifetime where you can put uh 75% of your net worth or something like that in a given situation.
The problem has been the guys that have put 500% of their net worth in. I mean you uh you know I mean if you look at just take LTCM very smart guys very decent guys some friends of mine uh high-grade knew their business but they put you know maybe 25 times their net worth into things that were a cinch if they hadn't have gone in that heavily.
I mean they they they were in things that had to converge but they didn't get to play out the hand. But if they'd had 100% of their net worth in them, it would have worked out fine. If they'd had 200% of their net worth in it, it would have worked out fine. But they instead went to, you know, maybe 2500% or something like that.
So there are there are stocks I mean actually there's quite a few people in this room that have close to 100% of their net worth in Bergkshire and some of them had it for 40 or more years. Uh Bergkshire was not in the cinch category. It was in the strong probability category, I think. But but I saw things in 2002 uh in the junk bond field.
I saw things in the equity markets. If you could have bought cap cities with Tom Murphy running it uh in the early in 1974, it was selling in a third or a fourth what the properties were worth. And you had the best manager in the world running the place. and you had a business that was pretty damn good.
Even if if if the manager wasn't uh you you could have put you could have put 100% of your net worth in there and not worried. You could have put 100% of your net worth in Coca-Cola uh earlier than when we bought it, but certainly around the time we bought it and that would not have been a dangerous position.
Be far more dangerous to do a whole bunch of other things that brokers were recommending to people. Charlie, you want to come? Yeah, I if you the students of America go to these elite business schools and law schools and they learn corporate finance the way it's now taught and investment management is the way it's now now taught and some of these people write articles in the newspaper and [clears throat] other places and they say well the whole secret of investment is diversification that's the mantra they've got it exactly back assert The whole secret of investment is to find places where it's safe and wise to non-diversify.
It's just that simple. Diversification is for the no nothing investor. It's not for the professional. And there's nothing wrong with the no nothing investor practicing it. It's exactly what they should practice. It's exactly what a good professional investor should not practice. But that's, you know, there's no contradiction in that that uh a no-n nothing investor will get decent results as long as they know they're a no-n nothing investor.
Diversify as to time they purchase their equities and as to the equities they purchase. That's crazy for somebody that really knows what they're doing. And uh you will find opportunities that if you put 20% of your net worth in it, you have wasted the opportunity of a lifetime, you know, in terms of not really loading up.
And uh we've had the chance to do that way way in our past when we were working with small sums of money. We'll never get a chance to do that working with the kinds of money that Bergkshire does. We try to load up on things uh uh and there will be markets when we get a chance to from time to time, but very seldom do we get to buy as much of any good idea as we would like to.
I'm 45 years old and have achieved financial independence in that I'm able to manage the money of my spouse and myself full-time. Uh and that goes to marrying well part of that I was that could that could be a big part of it marrying well in the sense that I received the encouragement and the confidence to pursue that.
That's terrific. Um, I was going to ask you a question more along the lines of diversification, but I think I will put it this way. I'll skew it a little differently. Each of us has a traditional IRA, a Roth IRA, and together we have a brokerage account. Should the assets in those accounts be separated or better managed as a whole pile?
In other words, have overlapping securities in each account or different types of securities relegated to a specific account? Yeah. Well, I would say your marriage sounds like it's going to last. So, I think you should think of yourself and your husband as a unit. And I would you should in my view, you should look at your overall financial condition and not worry about where the location of the assets will be.
So if you have a net worth of X and you have 20% of it in your in in a 401k and 30% outright and so on like that, just look at the whole picture and decide what mix of assets, what type of assets you want and and don't treat them as being in in separate pots. I mean at at Berkshire, you know, we own stock we we own stocks in a whole bunch of different in that our insurance companies own stocks in separate portfolios and we even have a portfolio in Cologne as mentioned earlier.
Uh I don't even think about what entity anything is in. You know, it's all working for Berkshire and I think you should the way to think about your situation is to think about it all working for your family. Now, if you're uh you know, you strike me as having a a very solid marriage, and I think your husband would be crazy if he split with you.
But the uh if you're if you're just starting out, you may want to keep your money uh separate for a while. So, you'll see how how it plays out because a significant percentage do end up in divorce. This is I don't get into marriage counseling very often. So I'm I I can feel I'm I can feel the ground sort of disappearing between my feet here, but I will turn it over there for to our marital expert Charlie Munger.
Yeah, they occasionally you'll find an investment that is going to produce a huge amount of taxable income. It's a junk bond paying a high yield that's taxable or something. So some items are more suitable for those t uh retirement accounts that get tax deferral benefits. But apart from that, it's all one pot. Sure.
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