The Competitive Advantage of Patience

“People overestimate what is possible in a year, and severely underestimate what is possible in ten years.”

 

One of the biggest lessons I’ve learned as I’ve matured as an investor and as a burgeoning business person is the value of strategic patience. The ability to act, wait and build not just for the present or immediate future, but for the long term, far off future. If you can withstand the pressures of now, and continue to act and invest in the far off tomorrow, you will create the opportunity for a much bigger, much more enduring win than you ever could if you were just trying to maximize the smartest moves of today.

Strategic patience is what allowed Warren Buffet to rise to become one of the greatest investors of all time, taking advantage of patient, compounding returns that seem not to be much today but over time have resulted in billions of dollars in value and profits. It’s what allowed Jeff Bezos to keep investing aggressively in making Amazon a better, more customer friendly and efficient business even when the markets kept pressuring him to take profits in the present. He always had an eye on the long term and today, Amazon is not only the most dominant name in retail, with twice the value of Walmart, it is also a dominant player in web services, consumer tech, shipping, fashion etc, leading to Bezos being currently the second wealthiest person on earth.

It’s the same logic that I advise investors to take advantage of when they build their portfolios so they can ignore the temporary swings of the stock market and continue to hold their positions. Over time, it almost always works better than trying to time the markets, or trading in and out of stocks based on their momentum. Some of my best performing investments have been ExxonMobil, which I’ve been buying into every month since 2011, Tesla which I first bought in 2012 and now am sitting on enough gains to ignore the daily volatility in the stock and it’s inherent riskiness. These stocks have been in my portfolio for upwards of 5 years. I know people who are chasing the stock that rose 30% in one month, but that is no way to succeed in the long term. I know I’ve done both, and long term wins hands down. A friend of mine whom I advised back in college opened up a portfolio of penny stocks I had him buy and forget. He only put about $300 in these stocks, some of whom were selling for pennies at the time, but he never sold in and out of them. After close to six years, he checked and while most of them had gone nowhere or had wild rides up and down, a few of them had grown over the intervening years that the total value of his holdings have gone from around $300 to over $5,000. He cashed everything out and is now reinvesting that money into a new set of strategic stocks. If you have the ability and discipline, you should commit to a longer term and forget about the present. The rewards you reap will be more powerful.

Even when you start a new business or launch a new product, the same mindset persists. If you are quick to rush to profits, you may succeed in the short term but it will never be as enduring and as large as if you patiently invested in the products, processes, customer relationship, market share, quality, supply chain and branding over and over, taking losses but building a strong base so that when you eventually reach profitability, you have a deep and enduring advantage. I’ve seen too many people want to profit too quickly and so doomed their business to forever being smaller, slower and less defensible than it ought to be.

This understanding has really been reemphasized as I’ve started building out my own business. I see people who started with me, who flamed out or who took the early results that I made them while others stayed as I refined my process and started looking ahead. Those that stayed all are currently reaping higher rewards. Right now, I’m working on processes and projects that are geared towards building a long term base of return but because it doesn’t have the immediate gratification, some people are overlooking it. Meanwhile, I can see clearly the money spinner and wealth producer it’s going to be in the future and I’m willing to take the losses or smaller returns of today in order to get there, and a few people are willing to take that bet with me. In the future, when the potential is finally turned into reality, and the advantage of a long term wealth producing asset makes it easier for us to profit and grow at a materially higher and much more enduring level, the same people are going to wonder why they aren’t doing the same. It’s just a fact that people are often reluctant to take the losses of the present and that is what makes them have mediocre or average results. Warren Buffet said that the stock market is a mechanism of wealth transfer from the impatient to the patient. I’m starting to think all of life is that way.

As a final conclusion, I want you highlight the issue of Lonzo Ball, his father, and their Big Baller Brand situation with Nike. If you haven’t heard of them, Google is your friend and you need to catch up. But really, if you set aside the fact that his father is a bit of a loud mouth and that they’re not as business savvy as you’d like them to be, you’ll see that the path they’re on, while deeply unpopular right now will lead to longer term success than any athlete who ever played the game provided they do it right. It’s one thing to lock into an endorsement contract by one of the major brands, make money off court for a few years and if you keep being a super star, just progressively get bigger checks, but if you aren’t then that’s the end of you. It’s what people expect an athlete to do. Get the check from Nike, wear their shoes, try not to rock the boat. But the Ball family insist that their own company and brand must be part of any endorsement, and that Nike (or any other company out there) pay a billion to own that right too. Is it an outrageous sum? You bet. But the logic behind it is pristine. If no one bites (and I think the offer is designed so that no one will), build your brand yourself and own the shoes that people are wearing because of you. It’s a riskier strategy, of course and it may or may not pay off, and even if it did it will take time but as long as Lonzo keeps balling, and stays popular on the court, and as long as the Big Baller Brand does good business in terms of making great shoes, pricing them right, and moving the needle on sales, they will grow bigger and make more money than anything Nike could’ve paid. People just don’t see it now. All they see is that the Ball family are taking the longer, less popular road. But that is also where the bigger rewards are found.

Of course taking the longer, harder and more patient road is never easy. That is why not everyone does it, which is also why not everyone will enjoy the rewards of it. But if you have the right mindset, and can develop the discipline for it, then that is the way to go in order to do better, for longer, than the average person.

That is a lesson definitely worth learning and I hope you put it to work today.

Peace.

 

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