Diversify or focus?

Ateneo Professor on Entrepreneurship

Rizal Philippines
October 5, 2019

Focus or diversity?

Focus means staying with one business and making only investments related to the business.   Focus is risky because you are putting your eggs in one basket.   The Zurich axiom says that you must bet on few eggs that when they hatch promise big returns.   If you spread too thin across many risks then you get thin returns.

The other is diversity  by investing in various portfolio or lines of business that spreads risks across various businesses.  Ie  that of being conglomorate like ITT or Warren Buffets stocks that span across insurance, publishing, coke, and even trains.    But takes a lot of skills to manage various businesses just like what ITT found after Harold Geneen left.  

But you can see that famous moguls are into focus like Bill Gates - computers and software,  Steve Jobs - computer, Li Kai Shing  real estate development;  Ali Baba -  E commerce.  For many start up young entrepreneurs I have seen many of them diversify so early so soon in businesses that they do not understand, or too risky to make money for them.   I think a good businessman should be able to have a BP in his head even if he sleeping because he/she has focus