Daily Human – The Power of Patience in investing

I read this in Morgan Housel’s book. That liquidity is the biggest strength of an investor. Don’t worry if all your money is not invested somewhere and not giving you atleast market level returns. It might hurt you in the short term. But your liquidity will allow you to take full advantage when the big opportunity comes. And the big opportunity always comes.

I saw this very clearly in this book called ‘Americana’ which covers the 400 year old history of American businesses. The sub prime crisis or the Great Depression were not isolated incidents of market crashes. Bubbles and crashes and recoveries have happened with consistent regularity. One, which I found particularly fascinating was the bubble created by the rise in slave prices.

Nassim Taleb was absolutely right about Black Swans. You just have to patiently wait for their sightings.

I got further validation, when I heard one of India’s greatest investors say the same thing with a beautiful analogy. He said investing is like a cricket match. You can’t hit every ball for a four or a six. But if you wait patiently, you will get enough loose balls to hit for boundaries. He didn’t say this but I am sure he was talking about test cricket.

That also echoes another point that Housel makes in his book. That everyone is playing a different game. So don’t get FOMO if people around you are playing Twenty -20 and trying to smash every ball out of the park. Good for them. I am going to learn to survive and be ready when the inevitable loose ball arrives.

I also read something about Warren Buffet that adds an interesting wrinkle to this. Buffet acquires public companies and makes them private. This allows them to employ long-term strategies which aren’t available to public companies with shareholders who demand quarterly results. Who aren’t going to be patient. Warren Buffet is also using the superpower of patience.

I heard Jeff Bezos say the same thing slightly differently. He said that by deciding to play the long game and thinking about business from a 7–8 year timeframe, he already had a big advantage over everyone else who was thinking in the 1–4 year range. Because he can employ long term strategies which the other people can’t even think about. They can only do things which will give them a positive impact in their shorter time frame. So many impactful actions and strategies are out. But Jeff can still do that. Because he has more patience in waiting for the rewards to come.

If so many super successful people are saying the same thing then clearly it’s worth believing in and practising. It’s very clear that when it comes to business and investing, patience is a superpower. As important as all the investing and business skills that one might have.

There is nothing new or path breaking about this. This is ancient wisdom. But it takes a lot of work to build this superpower.

P.S – This corroborates another life theory that I have. That there is no new wisdom in this world. The ancients had figured out everything.

The people of today just find interesting new ways to apply that ancient wisdom. Or find specific use cases which apply in certain situations. I am not demeaning their efforts though. Their work is not trivial. The people who come up with these things are innovative and intelligent. But at its core, these ideas about life are not NEW.