Silicon Valley Wang Chuan: Why is it so difficult to practice long-termism?

Author: investguru

It has been more than eight years since my investment club was established. A few days ago, I was chatting with a friend and mentioned that the group members of the club had their first gathering in City A in 2016. There were about 20 people at the scene. Seven years later, he was the only one still in the group. At a group gathering in city B during the same period, out of ten people present, six were still in the group seven years later. The party in City A was held in a Yunnan cuisine restaurant opened by a group of friends. The environment was elegant and lively. Everyone ate happily and spoke enthusiastically. The room at the meeting place in City B is much smaller, and the atmosphere is obviously more dull. But seven years later, the difference between the group of friends in the two places is so big, it was completely unexpected, and it made people feel a lot of emotion.

In the club's internal discussion, I recommended some investment targets earlier. Because of in-depth research, I have achieved the unity of knowledge and action, and obtained good returns after long-term holding. The most dramatic thing here is Tesla. Since everyone started discussing it in 2015, the pros and cons have been arguing extremely fiercely, and a few people even participated in short selling. There are also some people who can't bear the boring debate over and over again and withdraw from the group. By the summer of 2019, Tesla's stock price was down more than 30% from its 2015 peak. After four years of arguing, the opposing side appears to be right. Then there was a sudden increase of more than 20 times in two years, and everything is history. You can refer to the author's old article.

Why is the practice of long-termism so difficult? Why is there such a big difference between group friends in city A and city B? After much deliberation, my conclusion is:

The key is the scarcity of resources.

The persistence of long-termism requires that you have enough resources to withstand the fluctuations on the surface. If one thing persists for four years, although substantial progress is visible to the naked eye in all dimensions from the first principle, there are still floating losses on the books, and there are various negative noises from the mainstream media, even if the heart agrees, I can't bear the pressure of my boss/client/family and continue to stick to it.

Most of the group friends in City B are private entrepreneurs with a solid foundation, and there is no pressure to make a fortune quickly, nor do they need to rely on investment to earn living expenses immediately; they do not manage assets for others, so there is no pressure on short-term performance, and there is no problem in sticking to it for seven or eight years.

However, many group members in City A are either still in the early stages of entrepreneurship or are still working hard in the workplace. The pressure to achieve short-term performance is very high, and they are always looking for new opportunities that will pay off immediately.

Even if you encounter a good long-term opportunity, you will either sell too early with limited returns; or if you encounter a bear market, even if you admit it in your heart, you can only give up because of performance pressure.

What's more, many people actually don't study things deeply enough. If there is a little bit of negative news in the media, and there is a little bit of attractive packaging outside, they can't keep it.

The direction of the least resistance to the evolution of a person or group is the direction in which he may obtain the greatest positive feedback, which depends on the network characteristics of his connection with the outside world and the choice rights given to him by these network connections.

The lack of resources essentially means the lack of options. The right to choose honestly determines the evolutionary direction of least resistance, which is more accurate than any sworn oath.

Here is a vicious circle that is extremely scary to think about:

Because of the lack of resources, I have repeatedly fallen into various scams that promise to get rich for nothing;

Because of the lack of resources, even if you hit a good opportunity, you can cash out and leave the market after making a little money, and you can't wait patiently for the small sapling to grow into a towering tree;

Or because of the lack of resources, what I hear, see, and input all day long is all kinds of noise and specious and harmful information.

When you see a friend who still uses the same method after several years, doing things laboriously and inefficiently, without any essential progress, or even degraded in essence due to age, and is unwilling to really improve after talking about it, people There will be an instinctive physical pain, and then only a sigh.

Nobody starts out resourceful. How can the resource poor make the long-term leap? Here I strongly recommend a new book by Dan Sullivan and Benjamin Hardy: "10x is easier than 2x" ( 10x is easier than 2x ). Summarize the core spirit of this book:

Because of an unthinking instinct, many people think that the growth of wealth is to redouble their efforts on what they are doing now. This is 2x (twice times) thinking.

10x (multiple of ten) growth is actually easier than doubling in the long run. Because, once you ask yourself with a 10x vision, you will actively force yourself to filter, give up, and reject various opportunities (even scams) with limited long-term growth potential. You will make yourself highly focused and only do what has potential Things that make you grow tenfold. This filtering method is also applicable to people. This kind of giving up conflicts with one's own daily habits at the beginning. Many people are unwilling to give up, and their resistance is serious. Therefore, we must calmly sit down and deduce carefully, and thoroughly understand the necessity of "decisively giving up" low-value behaviors or opportunities for long-term 10x.

Because you decisively rejected many low-value opportunities, you have more time. More time allows you to focus on in-depth research and improve your ability to identify and capture high-value opportunities with first principles at the bottom.

Because you force yourself to accumulate various new and small advantages in architectural design, sooner or later you will make a breakthrough and realize the dream of 10x.

Go back to the first step, re-examine your daily work and study, re-filter and give up the old low-value habits, and start the next 10x chapter.

If you do a thought experiment, you want to increase your net worth by a thousand times in thirty years. The goal sounds ambitious and difficult to achieve, and your first gut reaction is: It's impossible! But to break it down, it increases tenfold every ten years. (The following calculations are for the purpose of simplification, without considering taxation factors). Breaking it down again, it is 3.2 times every five years.

How to achieve 3.2 times in five years?

By simple backward calculation, this requires a return of about 26% per year. But the development of things has never been straight forward, without twists and turns. The reality is that the market often keeps swinging wildly between bulls and bears like a psycho. In order to capture substantial returns, we need to wait for most of the five years, accumulate information and resources, and wait until opportunities come. When everyone is panicking and lacking resources, (after comprehensively analyzing various qualitative and quantitative factors of the fundamentals) Only when you feel that a certain investment has a high probability of a return of far more than 3.2 times within five years, will you make a move.

After understanding this logical framework, you must reject most of the noise and temptation in the market. Say no to most things. For all kinds of invitations and gossips from the outside world, short-term transactions without certainty, things that you don’t understand, things that cost too much research, things whose potential returns cannot be much greater than the downside risks, and things that have not entered into a continuous self-strengthening The monopoly status stuff, wait, say no. At least 3.2 times in five years has become a simple and crude red line. Not touching things beyond the red line has become a kind of conscious self-discipline.

After "saying no", it suddenly became clear. This means that you have a lot of leisure time than before, and you can conduct in-depth research at your own pace. Then continue to discover new opportunities that others cannot really understand and thoroughly practice. That way when outsiders think you're just luck, survivor bias and hindsight, you just laugh and don't explain.

It is further deduced that in order to continue to enjoy the fruits of your labor in the next thirty years, you must invest a lot of time and resources with a rigorous attitude to maintain your health and freedom. Otherwise, at the age of 70 or 80, dementia, rickets, osteoporosis, incontinence, various pains, cardiovascular diseases, etc., even if you have a lot of money, it will be in vain.

So, you will have the time and interest to practice Tai Chi, stance, yoga, running, swimming, intermittent fasting, and continue to pay attention to the latest developments in other cutting-edge anti-aging technologies. This will give you many more years to grow more than tenfold in unexpected and emerging new dimensions.

Science fiction writer Frank Herbert famously said: "Seek freedom and become captive of your desires. Seek discipline and find your liberty. ). The self-discipline of continuous and strict abandonment of low-value things is the liberation path to the long-termism of high-value growth.