in Behavorial Psychology, business models, Charlie Munger, feedback loops, gamification, intrinsic value, investment concentration, long term, reframing, Warren Buffett

Being “Long Term”

In almost every single personal finance and/or investment piece of advice somewhere in it is some form of a need to think “long term”.

We hear it in the form of the benefits of compounding, the benefits of delayed gratification and the effects of making decisions based on what are inherently volatile signals/signs.

Don’t do it.

There’s only so much self control. Also the reason why it’s repeated a virtual so much is because people don’t normally think or be long term. It certainly is a temperament (just as Buffett and Munger has said.)

It’s not something we change too much to be more long term. That’s what my gut tells me, but we must try because it’s what makes the most outsized returns and outcomes financially and personally.

Thinking of ways to do this:

  • Something you value “intrinsically”.
  • Something you’ll love, no matter what.
  • Something you “believe” in.
  • Something where the means justify the ends (only if you can think that is true).

There’s the other bits that are external to ourselves:

  • Guardrailing (finding someone to scold you when you’re offtrack)
  • History (something that has existed for a long, long time and has stood the test of time.)

Then there’s psychological “tricks”. While I think they can work for some time, they don’t work for the “long term”:

  • Nudges
  • Gamification
  • Reframing
  • Full-on analysis
  • Incentivizations for the long-term
  • Review progress(ion)

What is surprising is that none of any one of these is fool-proof. We’re all susceptible to the opposite of long-term thinking. Hopefully being aware of this helps a little bit and hopefully piling on more than one tactic can improve your odds.

What has worked for me (as it relates to investments):

  • Finding something intrinsically valuable. Even through the thick-and-thin, you can stick with it. If the price drops you know management and the way the business is structured can enable them to handle it (or even think about buying back stock.)
  • Analysis. Analysis-paralysis, no. But the proper type of analysis helps you keep your north star and on track.
  • Finding the truly great businesses. Those great businesses are often perennially great, in any season, in any climate. Hopefully their lead in the markets they serve will last a long, long time, in which case those are the best businesses to invest your time and energy in. One signal of this is simply that the business has existed for a long, long time.
  • Remembering (painfully) how I cashed-out too early and for what?! It doesn’t necessarily guarantee that it’ll be the same this time around but if all the quantitative and qualitative factors point to the right decision then just hold it for the long term. This applies to life, business and careers — anything that is worth compounding.
  • Lastly a reminder that there are sometimes looooong feedback loops. I continue to make this mistake when it comes to so many decisions, but I find the only way for me to fend off my doubts is to choose only the best ‘X’ to hold, to take on, to be with. In a world where things move at breakneck speeds, moving fast and break things seems like the status quo in tech investing and business life. But some tech business are glacial but worthwhile. Make sure you know which iceberg you’re piggy-backing on.