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Do you know about the Lindy effect?
The longer something has been around, the longer you can expect it to stay around.
Let’s see why this is so powerful and how we can use it to become better investors.
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The Lindy Effect
Do you know Lindy’s Delicatessen in New York City?
It was a restaurant on Broadway that performers would often eat at.
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The story goes that comedians used to joke that if a Broadway show had been running for two weeks, it would probably last another two weeks.
If it had been running for two years, it would probably last another two years.
Well… It turned out that they were right.
How the Lindy Effect works
If you're 80 years old, the Lindy Effect doesn't mean you'll live to 160.
The Lindy effect only applies to things that are lasting long:
Ideas
Technologies
Art
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These things don’t age like human beings.
Every day something survives, it proves it is useful and resilient.
That makes it more likely to survive another day.
Think about these examples:
Books: Marcus Aurelius’s Meditations is much more likely to still be read in 100 years than the latest business strategy book to hit the New York Times bestseller list last week
Technology: The bicycle has stayed almost unchanged since the 1800s. Meanwhile, trends like Segways, hoverboards, and electric scooters have come and gone.
Food: Every few years, a new diet or supplement becomes popular. But people have eaten olive oil, bread, and fish for thousands of years. They’ll probably still be eating them 100 years from now. The latest diet products may not be around anymore.
You can use this concept in your daily life too.
You’ll probably still wear a quality pair of classic leather shoes in 10 years .
But the newest trendiest pair? Unlikely.
But did you know that The Lindy Effect an also help you in investing?
The Lindy Effect In Investing
Capitalism is brutal.
50% of all businesses fail within 5 years
80% of all businesses are gone within 10 years
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But a small number of exceptional businesses have survived for more than 100 years.
Some companies in Japan have even been around for over 1,000 years.