> "usually people hold onto things they think are valuable and sell those they don't."
Usually, investment strategies are more complex than this, involving risk management of various sorts.
You've no doubt heard the phrase "don't put all your eggs in one basket"; or, as the Bible says, "Divide your merchandise among seven or even eight investments, for you do not know what calamity may happen on earth" (Ecc 11:2, NET). The naive investment strategy of simply buying whatever you think is the "best deal" or "most valuable" carries with it considerable risk -- if your whole net worth is in widgets and the market shifts to sprockets, all of a sudden you're stuck with a bunch of widgets nobody wants. Or if your whole net worth is in crops and then there's a storm that wipes them out, now all you've got is dirt. The naive investor thinks that because they work for a profitable company, they should invest everything in their company -- but if their company suffers (whether due to fraud like Enron or a simple market shift like many real estate companies in 2008) they lose their job and their investments all at the same time.
The idea behind diversification is to target things that are valuable and which are not strongly correlated to each other, such that even if you're wrong or conditions change in some areas, your losses can be offset by gains elsewhere. Diversification is not a "weasel word" (though some may occasionally misuse it); it's a widely understood concept that's described by pretty much every personal finance writer out there.
(Note that I'm not specifically saying Pincus is a good guy. Just that it makes a lot of sense for CEOs and others to swap some of their equity for equity in non-correlated assets.)
> You've no doubt heard the phrase "don't put all your eggs in one basket"
Buffett and Munger's response to that is to "put all your eggs in the same basket, and watch that basket".
At various times both men have been very heavily concentrated in their best ideas (Buffett was once about 75% into GEICO many decades ago -- admittedly that's extreme even for him, but many value investors aim for less than 10 investments). They say that diversification is often "diworsification" (I think that's a Peter Lynch phrase... or maybe Phil Fischer) because it's impossible to know that many companies well enough to have high confidence, and because your 20th best idea will never be nearly as good as your best and second best ideas, so it's often better to just add more to your best ideas.
Of course, the caveat of this is that you must know what you are doing. Diversification is insurance against not knowing what you're doing, and index funds are probably the best strategy for someone not putting in the time (which is most people). But if you take investing seriously, high diversification is not always necessary or even desirable.
I can understand the reasoning if one is an outside investor with no ability to influence the company, but anytime I see active managers selling stock it is a bad sign. They can give any reason they want, but most owner operators will keep as much ownership as they can if they feel comfortable with the direction of the company. Of course I'm not talking about starving and living in a motel room because you don't want to lose ownership. In these cases where existing cash wealthy managers sell off parts of their ownership they're saying that they think cash/other investments are worth more than their company's stock; actions speak for themselves.
Usually, investment strategies are more complex than this, involving risk management of various sorts.
You've no doubt heard the phrase "don't put all your eggs in one basket"; or, as the Bible says, "Divide your merchandise among seven or even eight investments, for you do not know what calamity may happen on earth" (Ecc 11:2, NET). The naive investment strategy of simply buying whatever you think is the "best deal" or "most valuable" carries with it considerable risk -- if your whole net worth is in widgets and the market shifts to sprockets, all of a sudden you're stuck with a bunch of widgets nobody wants. Or if your whole net worth is in crops and then there's a storm that wipes them out, now all you've got is dirt. The naive investor thinks that because they work for a profitable company, they should invest everything in their company -- but if their company suffers (whether due to fraud like Enron or a simple market shift like many real estate companies in 2008) they lose their job and their investments all at the same time.
The idea behind diversification is to target things that are valuable and which are not strongly correlated to each other, such that even if you're wrong or conditions change in some areas, your losses can be offset by gains elsewhere. Diversification is not a "weasel word" (though some may occasionally misuse it); it's a widely understood concept that's described by pretty much every personal finance writer out there.
(Note that I'm not specifically saying Pincus is a good guy. Just that it makes a lot of sense for CEOs and others to swap some of their equity for equity in non-correlated assets.)