The Power of Saying No
- “If it doesn’t scream at you, it’s too close” — Buffett walks away from marginal opportunities
- The 20 punch card: Imagine you only get 20 investments in your lifetime
- Doing nothing is a valid strategy — sometimes the best move is to wait
- Most of Buffett’s wealth came from a handful of decisions. Quality over quantity.
The Most Underrated Skill
Here’s something they don’t teach in finance class: most good investing is saying no.
Buffett confirms this:
“If [the value of a company] doesn’t just scream out at you, it’s too close.”
He doesn’t invest in things that are “probably good” or “might work out.” He only invests when the opportunity is so obvious that even rough estimates show a clear bargain.
Everything else? He walks away.
The 20 Punch Card
Buffett’s most powerful mental model:
“I could improve your ultimate financial welfare by giving you a ticket with only 20 slots in it, so that you had 20 punches — representing all the investments that you got to make in a lifetime. And once you’d punched through the card, you couldn’t make any more investments at all. Under those rules, you’d really have to think carefully about what you did.”
Imagine: 20 investments. Total. For your entire life.
How would your behavior change?
- You’d reject anything that wasn’t obviously excellent
- You’d research deeply before committing
- You’d make bigger bets on your best ideas
- You’d stop “trading” and start truly investing
This mental model forces concentration on quality over quantity.
Inaction Is a Strategy
Most people feel pressure to act: - “I have money sitting in cash — I should do something with it” - “Everyone’s buying this stock — I’m missing out” - “I haven’t made an investment in months — am I falling behind?”
Buffett rejects this:
“In allocating capital, activity does not correlate with achievement. Indeed, in the fields of investments and acquisitions, frenetic behavior is often counterproductive.”
Sometimes the best decision is no decision. Wait. Let opportunities come to you.
Buffett compares investing to baseball, with one key difference:
In baseball, if you don’t swing at three strikes, you’re out.
In investing, there are no called strikes. You can let pitch after pitch go by. The market keeps throwing. You only swing when you see a fat pitch right down the middle.
Patience is a structural advantage.
When to Say No
Say No If: You Need Calculations to Justify It
Charlie Munger:
“Some of the worst business decisions I’ve seen came with detailed analysis. The higher math was false precision.”
If you’re building elaborate spreadsheets and running sensitivity analyses to prove something is a good deal, it probably isn’t.
Real bargains are obvious. The analysis confirms what you already sense, not the other way around.
Say No If: The Margin Is Small
From Part 8:
“If we calculate the value of a common stock to be only slightly higher than its price, we’re not interested in buying.”
A 5% or 10% margin isn’t worth the effort and risk. If you’re not getting at least 25-30% below estimated value, keep looking.
Say No If: You Don’t Understand It
From Part 4: No matter how cheap something looks, if it’s outside your circle of competence, pass.
You can’t value what you don’t understand. And no margin of safety protects against fundamental ignorance.
Say No If: The Moat Is Questionable
From Part 5: Even at an attractive price, a business without competitive protection can destroy value.
“Cheap” doesn’t help if the business deteriorates faster than you expected.
Why This Is So Hard
Saying no sounds easy. In practice, it’s psychologically brutal.
Fear of missing out: “What if this is the next big thing?”
Action bias: Doing something feels productive. Doing nothing feels lazy.
Social pressure: “What are you invested in?” demands an answer.
Impatience: Cash sitting idle feels wasteful.
Buffett structures his life to resist these pressures: - No quarterly reviews demanding activity - No clients who can pull their money - Long-term track record speaks for itself
As an individual investor, you have similar advantages. No one forces you to act. Use that freedom.
When to Say Yes
The flip side: when everything checks out, act decisively.
If a stock: - Is in your circle of competence ✓ - Has a durable moat ✓ - Has good management ✓ - Trades at an obvious discount to value ✓ - Offers returns well above your hurdle ✓
Don’t dither. Don’t take a small “starter position.” The opportunity might not last.
Buffett’s largest positions have been 30-40% of his portfolio. When he found something that screamed at him, he bet big.
The Waiting Game
You might go months or years without finding something that screams.
What to do while waiting:
- Keep learning — Expand your circle of competence
- Build a watchlist — Track businesses you’d like to own at the right price
- Stay liquid — Cash isn’t lazy; it’s optionality
- Ignore daily noise — Market movements don’t require response
- Review what you own — Sometimes the best “new” investment is adding to a current position
Buffett has gone years without major new investments. That’s discipline, not failure.
Knowing when to say no is as important as knowing when to say yes.
Buffett’s standard: “If it doesn’t scream at you, it’s too close.”
The 20 punch card mental model forces quality over quantity. Imagine only 20 investments in your lifetime — how many of your current ideas would make the cut?
Doing nothing is a strategy. Cash is optionality. Patience is an advantage.
When the right opportunity appears, act decisively.
Next up: Part 10 — See’s Candies. The 1972 investment that changed how Buffett thinks about value.
References
Munger, C. (1996). Berkshire Hathaway Annual Meeting. CNBC Buffett Archive.
Buffett, W. (2013). Georgetown University Speech. CNBC.
Buffett, W. (1990). Berkshire Hathaway Shareholder Letter. Berkshire Hathaway Inc.