The most effective investment strategy is a highly undiversified portfolio when you are right.

Jim Collins, “Good to Great”

Individual investors are told that the way to accumulate wealth is by continually making small investments into a variety of assets. This strategy is called diversification and basically it increases wealth by reducing risk.

As an entrepreneur, the resources that I can invest are my time and my ability to build. Shouldn’t I also invest these resources in a diversified manner?

The most often told tale of entrepreneurial success begins with an entrepreneur identifying a single problem to solve and pouring all of his energy into a solution for that problem. The entrepreneur executes extremely well on his vision and is fortunate to tap into a great demand. When his endeavor begins to show traction the entrepreneur “doubles down” on his investment by allowing other people to invest their time and money into his project as well. This doubling down occurs several more times until the entrepreneur has built something of tremendous value and in the process has amassed a sizable personal fortune.

The truth about these tales of entrepreneurial success is that they are quite uncommon. They are cases of being invested in a highly undiversifed portfolio and being exactly right.

The investing analogy for this type of successful entrepreneur is the investor who bets all of his money on a single stock. As the stock shows initial strong performance the investor borrows additional money so that he can invest yet more into that stock. Fortunately he has identified one of the best performing stocks of the decade and is rewarded with tremendous wealth.

I believe that the entrepreneurial folklore is actually harmful to entrepreneurs and causes them to chase the uncommon success. If an entrepreneur is interested in amassing a large amount of wealth then the most likely way of obtaining that is by investing his time as if it were his money and doing so consistently over a long period of time.

This is the strategy that I’ve chosen to follow. That is, I’m making many small investments in a large number of projects and I’m constantly “rebalancing” my portfolio by spending my time on those projects that are most deserving of attention.

Assuming that each of my projects is self-sustaining and that I retain complete control over each of them, I have unlimited runway to let each of them grow and develop naturally. Of course in any portfolio there will be winners and losers but I’m betting that my collection of projects will grow to be more valuable than any single one of them might have been had I invested all of my resources into it.