No Points for Degree of Difficulty

AUTHOR: Noah Murad

In my first investment company, we had a very complex structure with multiple layers of investors (five, to be exact), with various types of security and returns. I was excited about the business. I admired how complex it was and that we were able to manage everything. We patted ourselves on the back for being able to build such an interesting business case study.

While this was going on, I read one of Warren Buffett’s letters. He had a quote in there that said something to the effect of “unlike Olympic diving, there are no points for degrees of difficulty in investing.”

Sure enough, though the investment company succeeded, we made far less money and worked far more than anyone who bought Apple stock over the same period.

Difficulty, complexity and hard work sometimes feel satisfying. It certainly did to me. At the heart of it, Buffett’s quote means that even though it feels like you are accomplishing a lot (and you may very well be), it isn’t part of the game that you will be paid for it.

Most businesses you’re thinking of investing in won’t do much better than if you invested in some of the best names out there and then sat on your ass.