Jeff Bezos reportedly said that the easiest way to eliminate competition is by prolonging your time horizon of focus, as very few businessmen tend to think long term. Ditto for investing, where majority of the market participants have investment horizons of days or weeks or months at best. Warren Buffett put it another way by saying the stock market is designed to transfer wealth from the impatient to the patient investor. In this newsletter trilogy, GV Ravishankar of Sequoia Capital talks about whether in business or in investing or life in general, why it pays to play the long game, why it is inherently difficult to do so and how we can overcome these difficulties. We feature some bits from “Why play the long game?” below but recommend reading all three in their entirety.
“Why play the long game?
The short answer is because it gives us the much-needed edge in a world that is so obsessively focused on the short-term. Playing the long game is like playing with a different set of rules that give you an advantage; one where the short-term scores don’t matter and one where you are not actually competing with people or companies that the world might otherwise compare you with. Whether it is companies or individuals, if you want to achieve something defining and large, I believe the only real way to do this is to play the long game – because the real big goals need time to achieve. If you reach your goal in a short time, you have to ask yourself if it was big enough.
Doing what’s right vs. what’s convenient: When we focus on the long-term, doing the right thing becomes a lot easier. This is because a long-term orientation subdues our enthusiasm for short cuts and patch work. It makes us question the longevity and durability of the outcomes from the decisions we take. For example, a company CEO might wonder whether they should cut prices to increase sales or invest in the product to improve value. A question like this is best answered with a long game mindset.
Getting better at decision-making: When we think of life in the very long-term, we can ask ourselves, “Will I be proud of this decision in 10 to 20 years?” or “Will this decision be one of the few important decisions in my life as I look back?”. Such questions give us perspective and allow us to contextualise the criticality of a decision. This helps reduce stress, and also combat the desire to win the small battles vs. focussing on the larger war. We don’t need to win every point or score every ball to win the match when playing a long game.
Building judgement: They say, at birth we look like our parents; at death we look like our decisions. Our company’s position or our own life is a compounded outcome of the many decisions we take, and no matter how analytically sound we are, our judgement only improves with time and by matching more patterns through experience. We can be knowledgeable in the short-term, but can only be wise in the long-term. Playing the long game ensures you play as a wiser person over time, and as a result the game gets easier and you improve your chances of success.
Building trust: Trust becomes an important currency for success when we play the long game. In a fast and highly urbanised world, companies and people can play foul, and get away with it once in a while. In a short game, words may win over actions, but in a long game you have the time to observe actions vs. words. In the long game, the reasonable and trustworthy win vs. the unreasonable and the glib – because over time people concentrate on fewer and higher quality relationships. If you are the honest and reasonable type, playing long works to your strengths.
Investing in innovation: Short-term pressures often prevent investments in innovations that have a longer payoff. We are wired to discount outcomes hyperbolically, which means we make poorer short-term trade-offs and do not invest in the things that could have sizeable outcomes in the long-term. For individuals, this is akin to not investing in learning future skills because of tough short-term trade-offs on time.
Letting serendipity work for you: In short games, there can be the significant impact of one-off events that put you on the losing side – think of that tailender in a T20 who connected a few swings to the fence to take their team to an unlikely win. If you play a long game and keep at it consistently, you allow for real skills to shine and also increase your serendipity sphere while reducing impact of one-off negative events.
Making compounding do the magic: Albert Einstein referred to compounding as the eighth wonder of the world, yet this concept is still poorly understood – our brain is just not wired to understand non-linearity. But in life, wealth, luck, wisdom, relationships – all the good things – do compound. As Charlie Munger said: “The first rule of compounding is to not interrupt it unnecessarily.” Playing the long game allows compounding to do the work for you without interruption once the base is set!
Building responsibly: When people play the short game, we see the tragedy of the commons at play. Playing the long game focusses us on building responsibly because we care for the long-term, as we believe we will exist to see it and would rather not contribute to our own future being bleak. We may even be forced to think more about the impact of our choices beyond our generation and our immediate family and friends.
Finally, if you play the short game and win at the risk of relationships or quality, you still lose. You will have to find the next game to play and, more importantly, people to play it with! Playing the long game allows you to play infinitely, assuming you like to! It’s the long game we play that helps us move mountains. It’s the long game that tests character. It’s the long game that celebrates the journey vs. the destination. In the next part of this blog, we will see why it is so hard to play the long game and how we can construct our companies and lives to orient towards it.”
“Why play the long game?
The short answer is because it gives us the much-needed edge in a world that is so obsessively focused on the short-term. Playing the long game is like playing with a different set of rules that give you an advantage; one where the short-term scores don’t matter and one where you are not actually competing with people or companies that the world might otherwise compare you with. Whether it is companies or individuals, if you want to achieve something defining and large, I believe the only real way to do this is to play the long game – because the real big goals need time to achieve. If you reach your goal in a short time, you have to ask yourself if it was big enough.
Doing what’s right vs. what’s convenient: When we focus on the long-term, doing the right thing becomes a lot easier. This is because a long-term orientation subdues our enthusiasm for short cuts and patch work. It makes us question the longevity and durability of the outcomes from the decisions we take. For example, a company CEO might wonder whether they should cut prices to increase sales or invest in the product to improve value. A question like this is best answered with a long game mindset.
Getting better at decision-making: When we think of life in the very long-term, we can ask ourselves, “Will I be proud of this decision in 10 to 20 years?” or “Will this decision be one of the few important decisions in my life as I look back?”. Such questions give us perspective and allow us to contextualise the criticality of a decision. This helps reduce stress, and also combat the desire to win the small battles vs. focussing on the larger war. We don’t need to win every point or score every ball to win the match when playing a long game.
Building judgement: They say, at birth we look like our parents; at death we look like our decisions. Our company’s position or our own life is a compounded outcome of the many decisions we take, and no matter how analytically sound we are, our judgement only improves with time and by matching more patterns through experience. We can be knowledgeable in the short-term, but can only be wise in the long-term. Playing the long game ensures you play as a wiser person over time, and as a result the game gets easier and you improve your chances of success.
Building trust: Trust becomes an important currency for success when we play the long game. In a fast and highly urbanised world, companies and people can play foul, and get away with it once in a while. In a short game, words may win over actions, but in a long game you have the time to observe actions vs. words. In the long game, the reasonable and trustworthy win vs. the unreasonable and the glib – because over time people concentrate on fewer and higher quality relationships. If you are the honest and reasonable type, playing long works to your strengths.
Investing in innovation: Short-term pressures often prevent investments in innovations that have a longer payoff. We are wired to discount outcomes hyperbolically, which means we make poorer short-term trade-offs and do not invest in the things that could have sizeable outcomes in the long-term. For individuals, this is akin to not investing in learning future skills because of tough short-term trade-offs on time.
Letting serendipity work for you: In short games, there can be the significant impact of one-off events that put you on the losing side – think of that tailender in a T20 who connected a few swings to the fence to take their team to an unlikely win. If you play a long game and keep at it consistently, you allow for real skills to shine and also increase your serendipity sphere while reducing impact of one-off negative events.
Making compounding do the magic: Albert Einstein referred to compounding as the eighth wonder of the world, yet this concept is still poorly understood – our brain is just not wired to understand non-linearity. But in life, wealth, luck, wisdom, relationships – all the good things – do compound. As Charlie Munger said: “The first rule of compounding is to not interrupt it unnecessarily.” Playing the long game allows compounding to do the work for you without interruption once the base is set!
Building responsibly: When people play the short game, we see the tragedy of the commons at play. Playing the long game focusses us on building responsibly because we care for the long-term, as we believe we will exist to see it and would rather not contribute to our own future being bleak. We may even be forced to think more about the impact of our choices beyond our generation and our immediate family and friends.
Finally, if you play the short game and win at the risk of relationships or quality, you still lose. You will have to find the next game to play and, more importantly, people to play it with! Playing the long game allows you to play infinitely, assuming you like to! It’s the long game we play that helps us move mountains. It’s the long game that tests character. It’s the long game that celebrates the journey vs. the destination. In the next part of this blog, we will see why it is so hard to play the long game and how we can construct our companies and lives to orient towards it.”
If you want to read our other published material, please visit https://marcellus.in/blog/
Note: the above material is neither investment research, nor financial advice. Marcellus does not seek payment for or business from this publication in any shape or form. Marcellus Investment Managers is regulated by the Securities and Exchange Board of India as a provider of Portfolio Management Services. Marcellus Investment Managers is also regulated in the United States as an Investment Advisor.
Copyright © 2022 Marcellus Investment Managers Pvt Ltd, All rights reserved.
