“Remember, it’s the quality of your ideas not the quantity that will result in the big money.” -Joel Greenblatt

Joel Greenblatt, a well-known investor, hedge fund manager, and author, emphasizes the importance of focusing on high-quality investment ideas rather than spreading resources across numerous mediocre ones. When he says, “Remember, it’s the quality of your ideas, not the quantity, that will result in the big money,” he advocates for a concentrated investment approach.

Here’s what he means by this:

1. Focused Investing: Greenblatt believes identifying a few outstanding investment opportunities and allocating significant capital can yield substantial returns. Instead of diversifying too broadly across many investments, he suggests that investors thoroughly research and invest in a smaller number of high-quality, high-conviction ideas.
2. Deep Understanding: High-quality ideas stem from a deep understanding of the business or asset you are investing in. This means doing extensive research, understanding the company’s competitive advantage, and having a clear thesis on why the investment will be successful. By focusing on quality, investors are more likely to find opportunities where the market has undervalued a company’s potential.
3. Risk Management: While it might seem safer to spread investments across many ideas, Greenblatt argues that this can dilute the potential for significant gains and often leads to mediocrity. Investors can better manage their risks and reward potential by concentrating on fewer, higher-quality investments, provided they have done their due diligence.
4. Long-Term Success: Greenblatt’s philosophy aligns with the idea that long-term investment success comes from making a few significant decisions rather than trying to find many good ones. Quality ideas, if correct, will compound over time and result in substantial wealth creation.

In essence, Greenblatt is advising investors to be selective and to prioritize deep research and conviction over sheer numbers. Focusing on quality increases the probability of achieving substantial returns, as these ideas are more likely to be undervalued by the market and have the potential to outperform.

Joel Greenblatt (born December 13, 1957) is an American academic, hedge fund manager, investor, and writer. He is a value investor, alumnus of the Wharton School of the University of Pennsylvania, and adjunct professor at the Columbia UniversityGraduate School of Business. He runs Gotham Asset Management with his partner, Robert Goldstein. He is the former chairman of the board of Alliant Techsystems (1994–1995)[1] and founder of the New York Securities Auction Corporation. He was a director at Pzena Investment Management, a firm specializing in value investing and asset management for high-net-worth clients.[2]