Okay but laana:
Should I run a marathon?
5th June 2021
Reading time ~ 3 minutes
Hi there,
Over the past couple of weeks, we've been hearing a lot about the billionaires' race to space - SpaceX vs Blue Origin vs Virgin Galactic, and Google's race to providing affordable phones in India. So in this week's edition, we're going to talk about why companies believe and invest in the future (any future, really), and what we, as investors, should take away from that!
The race to sustain!
Let's first take the case of Google. Under its digitization fund, Google is expected to invest around INR 75,000,00,00,000 (75k Crores) in India over the next 5-7 years to help Indians gain access to digital technologies. As a part of this operation, Google has invested INR 33k crores in Jio, to provide affordable smartphones in the country. Yes, we already have semi-good wifi; they're mostly talking about rural India. Safe to say that Google thinks that their bag of ₹₹₹ will turn into an even bigger bag of ₹₹₹ if they invest in India's rising digital population.
On a different tangent altogether, Bezos had committed to funding Blue Origin (his "pet" project to send people to space in a couple of years) - $1 Billion every year from his personal stash. Virgin Galactic, in May, completed its first-ever human space flight. Billions of dollars are similarly funding Musk's dream to become a Martian, through SpaceX. They believe that traveling to the Maldives is quite meh, all the cool kids are set to go to space, hopefully affordably in the next 5-10 years!
Cool, so lots of money being invested in the future.
Regardless of how bizarre these numbers might seem, what we want to focus on is the common theme among all of the above - the alignment towards "long-term" thinking.
Most of these crazy, over-the-top projects are planned for the long-term, in expectation of massive growth in the future - 5/10/15 years down the line. They invest money now so that they can see that money grow later. It's actually quite usual for businesses to think this way. You've probably seen even small businesses - be it cafes, grocery stores, home kitchens, etc. all invest some amount of money today with a long-term outlook. Long-term for businesses is beneficial as Bezos rightly puts it:
"Just by lengthening the time horizon, you can engage in endeavors that you could never otherwise pursue."
And in this way of long-term thinking, as investors, we all have something to learn.
So, what does this mean for me?
Think about it - a lot of our decisions in the present, are based on what our expectation is from the future.
After completing 12 years of primary education, we decided (or was decided for us) that we should go to college - that was an additional 3 - 6 years. Culturally, socially, etc. we knew the value of a college education and we didn't think twice before putting in those years/ effort/ money. I'd argue that our perception of the long-term value of a college education was so apparent, that we were willing to forgo 3/4 years and put in that effort to earn good returns in the future. Here, we have long-term thinking ingrained because we have seen real life examples of people securing future value from college. Another example where we see long-term thinking is investing in our health - working out, medidating, and the likes.
We don't however always think of our money in this way - the future is uncertain and we cannot accurately predict what the value of our money will be in the future. This is only exaggerated by the constant noise around us - "Stock market is falling," "Nifty is at an all-time high," "Sell your investments today," - you get the gist. However, investing your money is actually very similar to businesses investing in different projects - you are putting money out today to see returns in the future.
In a highly changing and unpredictable world, where we have psychological biases towards losses that we might face in the short term, thinking in the long term provides a few antidotes. It goes something like this:
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First, make an informed decision about your investments based on goals and their timeline. That helps set the foundation for the long term.
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Next, we know that there will be ups and downs - so staying invested (and doing SIPs) helps you balance out those ups and downs. You can sleep well knowing that you don't have to think of when to "enter" and "exit" the market.
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Finally, by starting today and investing even small amounts - you know that compound interest is doing the work for you - and that becomes your best friend in the long term. Have a look below if you're not convinced:
We'll end with Buffett's words (think through this with your goals and timelines in mind):
"If you aren't willing to own a stock [or mutual fund] for 10 years, don't even think of owning it for 10 minutes."
Next time, you face stock market jitters, know that's mostly short-term and you're in it for the long term.
Thoughts?
Reach out to me with your comments or feedback at rujgupta@laana.club.
Additional resources:
One of our favorite blogs, Wait by Why by Tim Urban did a deep dive on why actually moving to Mars makes sense.
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