Warren Buffett’s ‘20 Slot’ Rule: How To Simplify Your Life And Maximize Your Results.

Charlie Munger settled into his seat in front of the crowd at the University of Southern California.

It was 1994 and Munger had spent the last 20 years working alongside Warren Buffett as the two men grew Berkshire Hathaway into a billion-dollar corporation.

Today, Munger was delivering a talk to the USC Business School entitled, “A Lesson on Elementary Worldly Wisdom.” (1)

About halfway through his presentation, hidden among many fantastic lessons, Munger discussed a strategy that Warren Buffett had used with great success throughout his career.

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.

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