How A Young Buffett Learnt Diversification Doesn’t Pay

If you read through the early letters of Warren Buffett's partnerships, it becomes quickly apparent the young investor wanted to get rich and wanted to do so quickly.

When he was buying securities for the partnerships, he never did anything by halves. If he found an excellent opportunity, he would move quickly and with conviction to buy a substantial position, often devoting more than 40% of the portfolio to one company and occasionally borrowing nearly half of the portfolio's value to increase overall exposure.

In many ways, the strategy Buffett used in the late 1950s and into the early 1970s was very similar to the strategy concentrated hedge funds used today. In fact, I could argue that the young investor's strategy had...