Privat Capital holds a concentrated portfolio of 16-17 stocks. This strategy forces deep conviction in each position and ensures that winners have a meaningful impact on fund performance. Over-diversification can dilute both research focus and the potential returns from a fund's best ideas.

Instead of making large initial bets, a more effective strategy is to take small, "junior varsity" positions. Investors then aggressively ramp up their size only when the thesis begins to demonstrably play out, a method described as "high conviction, inflection investing."

Keynes successfully managed a concentrated fund for King's College but was pushed out of an insurance company for the same strategy. This demonstrates the institutional imperative to minimize tracking error, which pressures managers to conform to the index and "fail conventionally" rather than risk the short-term underperformance needed to succeed unconventionally.

Many investors wrongly equate high conviction with making a large initial investment. A more evolved approach is to start with smaller at-cost positions, allowing a company's performance to earn its eventual large weighting in the portfolio. This mitigates risk and improves decision-making.

Even with big wins, a venture portfolio can fail if not constructed properly. The relative size of your investments is often more critical than picking individual winners, as correctly sized successful investments must be large enough to overcome the inevitable losers in the portfolio.

The firm's "Capital System" combines top ideas from various analysts and portfolio managers into a single fund. This structure deliberately avoids exposure to any single manager's low-conviction holdings, creating what is effectively a "best ideas" portfolio.

Acknowledging he was susceptible to self-sabotage by trying to be overly clever, Keynes evolved a systematic process. By investing in fewer positions, holding them longer, and focusing on clear criteria, he deliberately reduced opportunities to act on his worst impulses, mirroring Buffett's "one-foot hurdle" approach.

Allocate more capital to businesses with a highly predictable future (a narrow "cone of uncertainty"), like Costco. Less predictable, high-upside bets should be smaller positions, as their future has a wider range of possible outcomes. Conviction and certainty should drive allocation size.

To pursue massive upside, one must first survive. Gardner mitigates risk by never allocating more than 5% of his portfolio to any new position. This discipline prevents catastrophic losses from a single bad idea, ensuring he stays in the game long enough for the big winners to emerge.