Agency Diversification and Concentration

You want to diversify to maximize your expected return.

Why would you or anyone else want to be concentrated?

If you have control over your outcomes then it is obviously helpful to be able to be concentrated Why would you actually believe that you are better than the average accross the market though

This covers a few distinct situations 1) Being able to choose what few stocks you own 2) Being able to enact change on the success of the company

In some way it is like moral enhancement you will get what you deserve if you are concentrated if you pick your stocks well or you make them perform better/worse you will get the returns associated with that.

What is the non-market analogy? - Not having particular opinions, i.e. indexing on the "market" opinions of the broader society. - Following the path set out for you, there are good reasons for these things often, they will often be low risk stable and promote median out comes, opting out of this is analogous to concentrating your stock portfolio if you choose and or execute well you may well end up with well more than your measure of success however you define it but you will also have taken it into your own hands in a way that may fail. - Being disagreeable, you may do better to get what you want or you may fall on your face because people think you are an asshole - Starting a new business venture perhaps really a special case of the stock concentration above you may do well or you may fail you will sink and swim on your own efforts

Going and doing stuff acting in a high agency way can be very powerful, but the flip side is you could fall flat on your face.

Our internal bias is generally against doing these sorts of risky destabilizing into the unknown thing (with perhaps the notable of hobby stock picking...)

If we harp on the starting a new business venture, what is the diversification of working a 9-5 job, in a way you are the diversification not your portfolio. Starting your own enterprise its' performance is (as far as internal factors) solely dependent on your performance. Whereas working for a going concern it is dependents on all employees and while everybody has individual roles that may be a different compensation and performance levels the business and more broadly nobody has the attribution of the performance of employees and their impact on the success of the enterprise. So you get the return of someone in your role at your company rather than the return associated with the effectiveness of your efforts, since you do not know either, you may be happy with that del, or because the other affordances of the circumstance (the role only existing within larger orgs, not being amenable to entrepreneurship, the work life balance, the support, the social environment of the office, the healthcare plan). The index is the performance of the company across individually and that downwardly being translated to your pay.