Warren Buffett is well known for distilling complex financial lessons into simple, memorable phrases. One of his more colorful remarks captures his long-held views on portfolio concentration: “If you have a harem of forty women, you never get to know any of them very well.” The remark first debuted in his famous 1984 Berkshire Hathaway Shareholder Letter, which outlined a tumultuous year for the company.
At its core, the statement reflects Buffett’s resistance to over-diversification. Unlike many institutional investors who spread capital widely across dozens or even hundreds of holdings, Buffett has argued that true understanding — and therefore higher returns — comes from concentrating on a smaller number of businesses that can be studied in depth. His comparison to a harem was designed to illustrate the limits of attention: spreading oneself too thin inevitably reduces familiarity and insight.
The context for this remark stems from Buffett’s broader investment philosophy, often summed up in his belief that investors should think like business owners rather than market traders. Throughout his career, Buffett has emphasized that careful, concentrated bets on a handful of high-quality companies with durable competitive advantages can outperform portfolios that are diversified merely for the sake of safety. He has often contrasted this with what he views as “deworsification” — a tendency to add investments that dilute overall performance without reducing meaningful risk.
This philosophy carries weight because of Buffett’s track record. As chairman and CEO of Berkshire Hathaway (BRK.B) (BRK.A), he has overseen compound annual growth in book value far exceeding market averages for decades. His reputation as the “Oracle of Omaha” is rooted not just in results, but in his ability to explain financial principles with clarity. When Buffett critiques diversification, it is not a rejection of risk management, but rather a statement of confidence in informed decision-making. He has long argued that investors who truly understand a business should not be afraid to place larger, more focused bets.
In the broader history of financial thought, Buffett’s stance contrasts with modern portfolio theory, which advocates in favor of diversification to maximize returns for a given level of risk. Yet Buffett’s approach — concentrating on a limited number of well-chosen investments — has consistently delivered. His authority on the subject comes not from theory, but from decades of practice. Buffett, throughout his career, has regularly expressed his idea that diversification is a poor strategy. Among other colorful comparisons, it can be distilled into a relatively simple idea: If you have $1000 to spend, and 3 or 4 stocks you love, why would you water down those great holdings with a bunch of good holdings?
In today’s terms, the quote resonates with ongoing debates. As index funds and exchange-traded funds grow, many portfolios now hold fractional shares of thousands of companies. While this provides exposure and reduces volatility, it also means investors are spread across businesses they may never fully understand. Buffett’s warning serves as a reminder that deep knowledge of fewer investments can sometimes offer more security and better returns than surface-level exposure to many.
The imagery may be lighthearted, but the underlying message is serious: spreading attention too widely diminishes understanding. In the world of investing, as Buffett has long argued, true success often comes from focus. His harem analogy endures because it condenses a lifetime of disciplined, concentrated investing into a single, striking line.
