Why you need to play the long game

I’m a very patient man.

Anyone who knows me will tell you.

(Though don’t ask my wife. Or actually anyone who knows me.)

But even my legendary patience can be tested if there's an inanimate object out to get me.

For example, if a chair sticks out its leg. Or a glass of water gets in the way of my elbow. Or the kitchen island slides into my big toe.

Then fuck you and fuck that chair/glass/cupboard.

I do have a lot of patience, but only in some areas of my life. And nowhere near as much as my wife. She’s been waiting 25 years for me to become ‘better’.

She’s still waiting.

The ability to wait. To let time pass. To play the long game is a superpower. And it’s the only one you really need.

But hardly anyone has it. Here’s why you (and I) need to try harder.

Patience

You may think that letting time pass is a waste of time. Think of all the things you could be doing?

Taking action. Doing stuff. Achieving things. Now. That’s what’s important.

Or at least that’s all you see on the internet at the moment.

Become a millionaire by 25
Build a business in a weekend
Invest in crypto if you want to get rich quick
Start a side hustle

It’s all action. Very modern. Very easy to sell.

And very stupid.

Taking a long term time horizon is often the most important thing.

But it's harder than you think.

The real value of a long term approach - the skills required, the mentality needed - is easy to minimise and often summarised with a simple phrase like "Be more patient", as if that explains why so many people can't.

Investing

If your job is to manage other people's money and one of your clients wants to know what you've done with his investments this quarter, a typical answer would be:

"Well, we've deep dived into the global pan-equity universe to assess cross-border inflationary and FX risk and took the opportunity to re-balanced your portfolio to take account of the increased geo-political risk factors we predict will hit equities but not risk-adjusted AAA rated non-governmental secondary debt."

This is, of course, total bollocks.

And really stupid. Buying and selling shares and bonds costs money and if you do it a lot then this frictional cost will, over time, erode any above average returns that your investment manager may have been able to achieve.

It also assumes that your investment manager (or indeed any of us) can predict the future.

But the biggest risks, the biggest events that will impact your investments (and your life) are always those that nobody predicted.

The January issue of The Economist publishes a forecast of the year ahead. It does this every year.

The January 2020 issue does not mention a single word about COVID-19.

The January 2022 issue does not mention a single word about Russia invading Ukraine.

And anyway, the best investment strategy has been known for a long time:

Buy good companies
Don't pay too much
Hold them forever
Let the power of compounding make you rich.

But if this was your strategy, then most of the time, in any particular quarter, you would have to tell your clients that you've done nothing. Nada. Zilch.

"I haven't bought anything. I haven't sold anything. I've basically done nothing."

This would (most of the time) be 100% the best strategy. But it would also (most of the time) get you fired.

Information

A long term view also affects the information you consume.

When you're reading the headlines in today's papers, try to answer the question: "Will I care about this a year from now?"

Most of the time, the answer's no.

This type of information is short term and has little to no influence on the future. For example, information such as "How much profit did Apple make in 2023" expires quickly.

But there's a lot of this type of information about. It's thrust at us from all sides in today's digital world and it keeps our short attention spans occupied.

Permanent information is the type of knowledge that never expires. Such as "How do people react when they encounter an unknown risk?"

That kind of knowledge has huge benefit because we'll always encounter unknown risks. And we can learn how to react in the future from how people have reacted in the past.

This kind of knowledge isn't shouted at you from Instagram. It's hidden in books. But it compounds over time, like your investments, as you gather more of this permanent knowledge.

This can help you develop better filters and frameworks of the world.

It's why I encourage my children to read non-fiction as much as possible.

And, because they're teenagers, they ignore me.

But maybe you won't.

I still read newspapers and books every day. I can't tell you anything I read in a newspaper in 2019 but I can tell you about some of the great books I've read over the last decade and how they've changed the way I think.

If you need me, I'll be busy reading.

Have a good weekend.

Jon "The Long Game" Kaye