Sizing Is the Decision
The best investors alive are wrong close to half the time. What separates them is not the hit rate — it is how much was on the table when they were right.
Berkshire Hathaway is named after a failing textile mill. Buffett bought it, could not fix it, and later described the purchase as one of the worst decisions of his career. The most admired record in the business carries the name of a mistake on the letterhead.
That is not an anecdote about humility. It is the shape of the job. Hit rates among serious investors cluster far closer to a coin flip than anyone outside the business expects, which means the hit rate cannot be the variable that explains the outcomes. What explains them is what the losses cost, how large the winners were, and how much was committed to each.
Baseball has the better vocabulary. Batting average is how often you are right. Slugging is how much you make when you are, measured against what you give back when you are not. Only the second one compounds.
Which makes sizing the real decision. The loss is set at entry, not at exit — by the time a position is falling, the size question has already been answered and the only remaining choices are bad ones. So the argument about weight happens before the position exists, not after it hurts.
Conviction has to be earned rather than felt. Every position claims a share of a finite risk budget, and the largest weights belong to the ideas that have survived the most argument, not the ones that generated the most enthusiasm. The correlation check matters as much as the sizing: five positions expressing the same macro view are one position wearing five names.
Then let the winners run. The instinct is to trim what is working and hold what is not, because booking a gain feels like discipline and admitting a loss feels like failure. It is the exact inverse of discipline. The multi-year compounders are where the return actually lives, and selling them early to lock in a modest profit is how a great outcome gets converted into an average one.
The counterweight is that a position which has grown into a weight you would never have chosen deliberately is still a decision — one the price made instead of you. So the size gets re-underwritten on the same schedule as the thesis, which for us is every day.
Being right is the entry fee. What you do with the times you are right is the business.