Warren Buffett once used LeBron James to explain the risk of diversification, and compared his return to Cleveland to new Coke's demise
- LeBron James led the Los Angeles Lakers' charge to a 17th NBA championship on Sunday.
- Warren Buffett once pointed to James' critical role on the basketball court to highlight the downside of diversifying as an investor.
- "If you have LeBron James on your team, don't take him out of the game just to make room for someone else," the famed investor and Berkshire Hathaway CEO said in 2008.
- "It's crazy to put money into your 20th choice, rather than your first choice," he added.
- Buffett also compared James' return to the Cleveland Cavaliers in 2014 to Coca-Cola's reversion to its classic formula.
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LeBron James led the Los Angeles Lakers to a record-equaling 17th NBA championship on Sunday night. Warren Buffett, a longtime fan and confidant of the basketball superstar, once used James' outsized contribution to his team to explain the danger of diversification for investors.
"If you have LeBron James on your team, don't take him out of the game just to make room for someone else," the billionaire investor and Berkshire Hathaway CEO told a group of business-school students in 2008.
"It's crazy to put money into your 20th choice, rather than your first choice," Buffett added, according to Dang Le, one of the students in attendance.
Buffett has embraced that approach at Berkshire. Its five biggest holdings — Apple, Bank of America, Coca-Cola, American Express, and Kraft Heinz — account for more than 75% of its roughly $200 billion stock portfolio.
On another occasion, the investor compared James' return to his hometown team, the Cleveland Cavaliers, to Coca-Cola's reversion to its classic formula.
"He loves Cleveland, Cleveland loves him," Buffett said in 2014, according to cleveland.com. "In a sense, it's like new Coke and old Coke."
"Years ago they were going to take away the old Coke so they could make a new Coke, and then all of a sudden everyone remembered how much they loved the old Coke," he continued. "That's the way this is."
Buffett and James first met when the athlete visited Omaha to shoot a skit for Berkshire's annual meeting in 2007. The pair have been mutual admirers since then.
"I'm a kid from Akron who lived in poverty for a long time, and sometimes I send financial statements to one of the richest guys ever," James told Sports Illustrated in 2012.
"It's kind of scary," he continued. "I'm like, 'Why is he talking to me?'"
Meanwhile, Buffett praised James' maturity in a Miami Herald interview in 2012, and the player's "money mind", or financial savvy, in a USA Today interview in 2018.