Compromising on Quality
Getting pickier over time
Compromising on Quality
Chris Mayer recently penned an article1 discussing how one’s investing universe recedes as we mature. The hurdles for entry into the portfolio become higher, and you will find fewer ideas.
It seems counterintuitive at first. If you spend a lot of time studying businesses all over the world, you would think your circle of competence would widen over time and you would find more ideas, not fewer ideas. However, it doesn’t work that way in my experience. Over time, you get pickier. Your checklist grows longer. And so naturally the list of companies that hit all those boxes starts to get shorter.
Chris Mayer
While the circle of competency ought to expand with age, with newfound knowledge and experience, this shouldn’t be conflated with an increasing library of promising ideas. On the contrary, as an investor refines their acquisition playbook, the number of truly promising ideas that meet this criterion should decline. We are able to cast a wider net, but we are not sim…