1987

Buffett wrote that Berkshire's policy was to hold a small set of businesses it understood and admired, and that the test for inclusion was not whether a position had risen in price but whether the underlying business still met the original standard. He compared the portfolio to a group of permanent holdings — the kind of business one would be content to own if the stock market closed for a decade — and warned that the temptation to trade in and out of such businesses was the chief way owners harm themselves.

On the 'permanent holdings' framing and the futility of trading wonderful businesses.

After the October 1987 crash, Philip Fisher made the rare decision to liquidate nearly all his personal stock holdings in a matter of days, concluding that the systemic backdrop had changed too much to trust the market's structure. The episode became one of the most discussed departures from his own buy-and-hold doctrine, showing that his rules were rooted in conditions rather than dogma — when the plumbing of the market itself looked broken, he chose survival over consistency.

Buffett argued that diversification, beyond a point, is a concession that the investor does not understand the businesses. He wrote that anyone who understands a handful of industries can do well by concentrating in them, and that broad diversification is primarily a defense against the consequences of ignorance — necessary for the uninformed, but a drag on the returns of those who genuinely know what they own.

The 'diversification is protection against ignorance' framing.

Members of Fisher's family later recalled that his 1987 sale was not a valuation call but a recognition of what portfolio insurance and program trading were doing to market behavior. The lesson his son Kenneth drew from it was about humility under regime change: a framework built in one market structure may need to be suspended when the structure itself mutates.

Fisher's grandson Ken Fisher has written that Philip regretted aspects of the timing but never the logic of reassessing everything after a structural break. The incident is usually cited as a counterpoint to the caricature of growth investors as permanent holders, and as evidence that Fisher treated his fifteen points as tools of judgment, not a religion.