Every once in a while, legendary businessman Warren Buffett dishes out a few morsels of advice to illustrate the core investment — and life — principles that helped him achieve success.
In a 1994 commencement speech at the University of Southern California, Berkshire Hathaway vice chairman Charlie Munger revealed one lesson, called the “20-slot” rule, that he says that Buffett loves to teach when lecturing at business schools.
Warren Buffett’s “20-Slot” Rule
Here it is:
When Warren lectures at business schools, he says, “I could improve your ultimate financial welfare by giving you a ticket with only 20 slots in it so that you had 20 punches—representing all the investments that you got to make in a lifetime. And once you’d punched through the card, you couldn’t make any more investments at all.”
He says, “Under those rules, you’d really think carefully about what you did and you’d be forced to load up on what you’d really thought about. So you’d do so much better.”
Again, this is a concept that seems perfectly obvious to me. And to Warren it seems perfectly obvious. But this is one of the very few business classes in the U.S. where anybody will be saying so. It just isn’t the conventional wisdom.
To me, it’s obvious that the winner has to bet very selectively. It’s been obvious to me since very early in life. I don’t know why it’s not obvious to very many other people.
Buffett touched on the rule during a 1998 lecture at the University of Florida, in which he told MBA students that they shouldn’t just assume they’re going to get 20 great ideas in their lifetime.
They can bet on 20 ideas, but only “three or five or seven” might make them rich, he said. “But what you can’t do is get rich by trying one new idea every day.”
The Power of Selective Focus
What struck me about Buffett’s strategy was his idea of “forcing yourself to load up” and go all in on an investment.
The key point is this:
Your odds of success improve when you are forced to direct all of your energy and attention to fewer tasks.
If you want to master a skill—truly master it—you have to be selective with your time. You have to avoid Shiny Object Syndrome and ruthlessly trim away the noise and focus on a few essential tasks while ignoring distractions.
You need to focus, commit and endure.
This ’20-Slot-Rule’ is a concept that doesn’t just speak to making sound investment decisions. It also applies to all areas of life and business that require our decisions to be well informed and incredibly selective.
Very few people however truly go “all in” on a single skill or goal for an extended period of time.
Those who are truly successful in their careers tend to have committed to one idea or area and dedicated themselves to making it work. Most people find themselves distracted by the latest developments of our fast-moving world, those who take time to specialize and build up expertise to really stand out from the crowd.
The point here is that everyone is holding a “life punchcard” and, if we are considering how many things we can master in a lifetime, there aren’t many slots on that card. You only get so many punches during your time. Unlike financial investments, your 20 “life slots” are going to get punched whether you like it or not.
Time waits for no man.
So next time you are making a decision: Think carefully, decide, and go all in. Don’t just kind of go for it. The clarity and focus will make a world of difference.
Don’t waste your next slot.