Go Ahead, Take a Shot...
January 10, 2026
This past week I had lunch with a young friend, let’s call him Reed, who is building a successful career in the hedge fund world. He is smart, well-educated, engaging and insightful. Apart from all that, however, what struck me was how differently he approaches the investment landscape. Our discussion reminded me of an investment class I had back when I was a graduate student. The class gave repeated emphasis to the importance of diversification… much as I have frequently written about here. At that time, my personal financial was inferior to the present - I was a graduate student after all - and I remember sitting there thinking that being broadly diversified will help preserve wealth, grow it steadily hopefully, but if you want/need to create real wealth, you have to make larger investments and less of them… concentrate your bets as it were. I was surprised when, in response to my making a comment to that effect in the class, the professor readily agreed with me.
Back to Reed. That is exactly his strategy – raise tens of millions of dollars and then invest it all in just a handful of large cap stocks. The investments will not create an income stream to live off and are not expected to be traded quickly. The projected time horizon for holding these investments is three to five years and, if a successful investment turns out to be one of those wildly successful ideas and just continues to perform, much longer than that. Controlling the urge to protect the gains and selling too soon. Think of how much an investor might have left on the table if he bought Microsoft when Satya Nardella took over from Balmer and sold at any time before now… or if you bought Google just after the IPO and were not still holding onto it.
That is not just convenient hindsight. These opportunities do occur with some regularity. Wasn’t Netflix kind of an obvious winner less than 4 years ago, trading for $17? Meta (Facebook) also could have been bought then for less than $100. There are many other examples... you get the point. There were, and are, outsized gains to be had if you look.
Highly concentrated investing is not for the faint of heart. It requires real understanding of a company, its industry and its competitive, structural, advantages. And ultimate success requires total conviction, even if/when the market misses the point and the shares decline significantly. It often requires patience and having other capital/income to live on. If you find that wonderful idea, however, especially if you find it early or when it is misunderstood, it can be very impactful. Six years ago, Nvidia shares could be had for $5…even three years ago they were still trading for $12. The gains to the current moment for an investor would be 3700% and 1500%, respectively.
I offer this commentary today as a contrast to the usual Lava Wealth fare of being reasonable, not greedy, taking some profits from your winners, diversifying and letting compounding grow your portfolio. That is an approach more suited, I expect, to most readers who are probably sitting on substantial retirement portfolios and additional capital. But there are other ways to invest and if you have a financial cushion and risk tolerance, maybe you want to consider watching for that seemingly brilliant opportunity and, apologies to Lin Manuel Miranda, ‘not throwing away your shot.’
In a truly similar vein, the link below is to a delightful article highlighting a truly brilliant idea. Inspired by some initial bad luck, an engineer proposed a change so simple and yet so incredibly useful, it was immediately adopted by his normally slow to change company…and then copied quickly by all the competition. Though all of us continue to use it to this day, you, like me, almost certainly can’t name it though you continue to be its beneficiary to this day. That’s as good a tease as I can supply.