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Long-Term Thinking died on Tuesday. His last true friend, Vanguard founder Jack Bogle, was at his side. He was 214 years old.
Long-Term Thinking lived an illustrious life since the start of the Industrial Revolution, when for the first time, people could think about more than their next meal. But poor incentives and the rise of 24/7 media chipped away at his health. The final blow came last week, when a trader on CNBC warned that a 10% market pullback — which has occurred on average every 11 months over the last century — could be “devastating” for investors. “That’s it,” Long-Term Thinking whispered from his hospital bed. “There’s no more room for me here.” He died soon after Bloomberg published its daily tally of how much the net worths of the world’s billionaires changed in the previous 24 hours.
Long-Term Thinking endured the Great Depression, world wars, and spiking interest rates in the 1980s. But the last five years proved too much, as he fought for relevance with cable news, Twitter, and derivatives. He was hospitalised in May 2010 after pundits lost their collective minds over a “flash crash” that made a few stock prices freeze up for 17 minutes. “Computers froze for seventeen minutes and they literally think American industry vanished,” Long-Term Thinking told his psychiatrist. “These people are insane.”
Fifty years ago, the average US stock was held for more than eight years, according to LPL Financial. By 2010, the average stock was owned for five days. Fifteen years ago, S&P 500 companies spent more than 40% of available cash flow on capital investments. That fell to just over 25% by 2007, with the difference going mostly to share buybacks, likely to boost option-based compensation. “Our culture has an endemic problem of short-term thinking,” Long Term said in his final speech in November. “Years have become months, months have become days, days have become milliseconds, and milliseconds have become careers. However much you think you’re winning in the short run, you’re losing in the long run.”
Long-Term frequently blamed some in the media. The number of important financial events hasn’t changed since the business news was covered in one hour per week — just the amount of drivel, gossip, nonsense, and hyperbole. It was too much for Long-Term Thinking to handle. Once the bastion of rational thought, he became the laughingstock of the financial world, repeatedly teased for his indifference to candlestick charts and the 50-day moving average.
Some mourned his passing. Peter Burton, a hedge fund manager from Greenwich, Conn., said, “It’s sad to see him go. Everyone in my field knows he was right. With our own money, we think years out in the future. But with clients’ money, I have three months to be correct, or I’m out of a job.” Shaking his head, he continued: “The dirtiest secret in finance is that few of us are incentivised to do what’s right. Your [superannuation fund] probably has a time horizon measured in decades. But you pay me based on how I perform against my peers every 90 days. It’s such a joke.”
In lieu of flowers, his family asks that you stop reacting to short-term headlines and stop checking your brokerage account.