Local failure is obviously much more common than catastrophic failure (although the latter does have a much greater impact). I like to think of it in terms of

Local failure is obviously much more common than catastrophic failure (although the latter does have a much greater impact). I like to think of it in terms of car crashes and catastrophes. Companies are represented by cars - I pick good cars, with good people driving them, surrounded by a safe environment and hope they don't crash - it's how risk works. Hurricanes destroy everyone - no matter how good the driver is - no exceptions. The whole point of investing is to make above and beyond the S&P 500 benchmark over the long term - and that requires taking concentrated risks where one must bet on the right drivers with the right cars in awesome environments (most critical) and watching the horizon warily for distant hurricanes (debt crisis/nuclear war/WWIII/currency devaluations/governmental collapse). I really can't do any more than that. It's a trade off obviously. I understand local failures quite well - I rely on my ability to make decisions to mitigate that risk and the fact that I'm still young (older people should not do this).