As humans continue to live longer, it is not inconceivable that we could live up to 100 years. Monaco's life expectancy is at 89.5 years, with females hitting 93.5 years! It is also well researched that people living in Blue Zones lived more than 10 years longer vs the rest of the world and this brings their life expectancy in the late 80s as well.
In the world of investing, the investment horizon is usually 5-10 years. We create models with 5-10 year forecasts, but we rarely hold them for as long. We trade them. We look for exits in 3 years to boost the IRR. It is a true conundrum.
To be honest, 5-10 years is a very long time. Humans live day by day and we thrive on activity. Therefore our monkey brains cannot comprehend in 5, 10, 15 year time frames, let alone 100 years. 5 years ago, nobody could predict that Taylor Swift could make a billion dollars doing concerts, Jensen Huang could become a demigod giving signatures on bosoms and we may have 10 trillion dollar companies in 2024 and none of them from China.
Looking things from this time frame, anything that happens in 1,2 or even 3 years matter very little. In the moment when the going gets tough, it could be very long. For example, NS is two years. In the middle of it, some wished we were never born in Singapore. But when it is over, we look back and say, it was nothing.
It is very sad when we hear about teenagers taken their own lives. Whatever they were going through, it wouldn't be an issue in 10 years. It is not about belittling their troubles. Even WWII, it was a long and arduous 5 years. But then, things change and improve. Somehow, I think we need to train ourselves to truly think long term.
I heard a firsthand account about a primary school reunion gathering of people in their 70s. The lives that schoolmates lived could really give us perspectives in life. People who did not do well in primary schools could thrive in secondary and then later in lives.
There are others who fumbled through but succeeded in strawberry farming in their 60s. Conversely, smart teenagers struggled later in their lives because of ego, lack of social skills, lack of friendly support. The morals of these stories are really to live our lives truthfully and rightfully, always.
Coming back to investing, perhaps we should adopt the same approach, if something is only going to be bad for 1-2 years, then it is not an issue. The crux is then to determine if the issue is going to last 5-10 years. Secular changes and multiple contractions would last that long. So we need to be careful of those.
One example that comes to mind would be the rise of the smartphones and the collapse of digital cameras and before that, how digital cameras themselves replaced film. Today, it could be EVs destroying gasoline cars and renewable energies replacing fossil fuels.
The other long term impact that comes to mind is lawsuits. Bayer being the case-in-point. The lawsuit that came with the M&A of Monsanto took almost 10 years and it is still not being resolved. It was difficult to established back then but now armed with such knowledge and benefit of hindsight, let's be careful with lawsuits!
The other point about being long term is really establishing habits that help us compound the quality of our lives over 100 years. In investing, this would be dollar cost averaging, monthly into portfolio opportunities and quarterly into ETFs. In our normal course of work, it would be good daily habits such as exercising, reading, writing to nourish the body and mind.
Hope this helps!
Huat ah!
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