The Mathematics of Longevity
Survival Comes First, And Only Then Does Compounding Take Over …
You might be wondering ‘Why would I be writing on Longevity on a blog that’s about Investing?’. My reason is very simple, Longevity ALONE allows compounding to work its magic. Any interruption in the process jeopardizes the gains that time could bring in. Let’s look at a few examples from Morgan Housel’s recent book #
Buffett began serious investing when he was 10 years old. By the time he was 30 he had a net worth of $1 million, or $9.3 million adjusted for inflation.16 What if he was a more normal person, spending his teens and 20s exploring the world and finding his passion, and by age 30 his net worth was, say, $25,000? And let’s say he still went on to earn the extraordinary annual investment returns he’s been able to generate (22% annually) but quit investing and retired at age 60 to play golf and spend time with his grandkids. What would a rough estimate of his net worth be today? Not $84.5 billion. $11.9 million. 99.9% less than his actual net worth.
Please do read this again, again if you’d like. This example demonstrates profound wisdom inherent in the choices made by some legendary investors like Buffet, Rakesh Jhunjhunwala, George Soros, or Founders like Jeff Bezos, Steve Jobs, Ratan Tata, or Visionaries like Mahatma Gandhi, Nelson Mandela, or Martin Luther King.
None of the 2,000 books picking apart Buffett’s success are titled This Guy Has Been Investing Consistently for Three-Quarters of a Century. Few emphasize Mahatma Gandhi’s 40 + years of struggle for India’s Independence or 27 years of imprisonment for Nelson Mandela. The books highlight the accomplishments of these extraordinary human beings but the truth is they let TIME weave its magic on the work they were putting in.
Good investing is not necessarily about making good decisions. It’s about consistently not screwing up.
Compounding only works if you can give an asset years and years to grow. It’s like planting oak trees: A year of growth will never show much progress, 10 years can make a meaningful difference, and 50 years can create something absolutely extraordinary.
And hence the game isn’t about ‘How Smart You Are’, or ‘How Rich You Are’, or ‘How Many Trophies You Have Won’ or ‘How Many Houses You Own’ !! This apparently is the game most indulge in consciously and unconsciously; not realizing that competition and comparison take over your psyche and become your Primary Motivating Factor.
And when this happens, the 2 biggest enemies of an Investor take charge of your Life i.e. Expenses & Emotions(E&E). I will share with you a video to hint at how these 2 play havoc with you throughout your life. Enjoy 😃
As funny as the video is, but that's how exactly E&E make your experience of life burdensome instead of exciting. Let’s look at a few more examples #
India’s biggest bull, Rakesh Jhunjhunwala bought into shares of Titan in 2002 when it was trading at INR 3/- and over the years has accumulated more than 4.9 crore (49 million) shares of the entity, making him the largest individual share holder in the company with 5.55% stake.
At current rate of INR 1501, this stake alone amounts to INR 7354 crore i.e. USD 1 billion. This makes 1/3rd of the Wealth of Mr. Rakesh Jhunjhunwala but there is a message here i.e. Emotions and Expenses, if kept in check, can reap huge gains in time to come.
As seen in the stock chart of Titan below, the stock was up to INR 6 by Dec 2003 i.e. 100% gains from his purchase price of around INR 3 , but he continued to hold. The stock reached INR 30 (10 bagger) in Nov 2005, but he still held on. It reached INR 300 (100 bagger) in May 2014, he still held on. It’s trading at INR 1501, he still hangs on.
That’s what Buffet did with his ownership of Coke, American Express, Washington Post, GEICO and many others. That’s what Ramesh Damani did with his ownership of TV Today and Sundaram Finance. That’s what legendary investors do — LET TIME WEAVE IT’S MAGIC ONTO THEIR WORK.
But Emotions and Expenses isn’t easy to control , purely because both are choices you need to make on daily basis and that takes a toll on you (scientifically known as Decision Fatigue) . How would it be if you had to decide on following questions on daily basis :
Should I buy, sell or hold?
Should I upgrade my lifestyle or save more?
Should I say YES or NO ?
Should I bite into the temptation of being/buying fancy or stay simple?
Should I trade regularly into something new or should I play according to my strengths?
Should it be done now or later?
Should I express myself or should I refrain?
Should I stand up to what I believe in or take a short cut and keep quiet?
Should I do this since many others doing it or should I do what is right ?
Should I choose instant gratification or delay it ?
If you thought that emotions experienced by these kids isn’t what adults go through, then I really think you need a cup of coffee before you think about this real hard. This is part of being Human and it comes with our biological package, whether you like it or not.
And hence you will go through them, and you will bite into your temptations, indulgences, desires and wishes or give into your fear, anxiety, doubts or instant gratification. And that’s where your choices get expensive with damage done, money lost, opportunity ruined, career derailed, relationships failed and other faux pas.
Now the most natural choice is to regret these choices, blame self or someone, feel sad or guilty, hold onto grudges — BTW, these are lazy choices as it’s easy to resort to these, without any self control or will power being exercised.
But there is another choice, LEARN FROM IT so that it allows you to add one more principle in your tool kit which could help you later to choose well. Bad mistakes is also part of the game called LIFE, and everyone does it.
In 1993, Buffett bought a shoe company called Dexter Shoes. Buffett’s investment in Dexter Shoes turned into a disaster because he saw a durable competitive advantage in Dexter that quickly disappeared. According to Buffett, “What I had assessed as a durable competitive advantage vanished within a few years.” Buffett claims that this investment was the worst he has ever made, resulting in a loss to shareholders of $3.5 billion.
Amitabh Bachan, India’s most respected movie star and a global icon, has made many mistakes with his choices to act in Boom and Nishabd which dented his image quite a bit. His production house ABCL suffered severe losses and almost made him bankrupt. He has made many errors of judgement in politics and media too.
But if you were to listen to these greats or read their letters, you would realise they learnt valuable lessons from these and added those experiences to their tool kit, never to repeat again. An experience could be bitter but lessons could be profound and profitable, if used in time to come.
Nassim Taleb put it this way: “Having an ‘edge’ and surviving are two different things: the first requires the second. You need to avoid ruin. At all costs.”
But the million dollar problem is — Life is Short and You Don’t Have Time !!! And hence the pain of wrong choices hurts more (adding to the loss aversion bias we feel), hence the anxiety of making things happen now, hence the constant worry about outcomes tomorrow.
But think for a moment, what if you knew you could live 100 years long (and healthy). Don’t get me wrong here, I am not saying Life Insurance is not needed or you shouldn’t enjoy now 😃
But what if you did have 100 more years to live, then would it help in making rational choices today ? Then would it help in delaying gratification for later? Then would it help not getting sucked into temptations to look good in front of others? Then would you have a brain that processes choices well ? Then would you worry less?
As seen in the video, ageing will bring it’s own share of problems/challenges eg. Sensory changes, Muscle Strength and Fat Changes, Immunosenescence, Somatic Disease and Multiple Chronic Conditions, Physical Function Changes and many more (as provided in this article by US National Library of Medicine
National Institutes of Health).
What is most instrumental in your decision making abilities will be the cognitive decline that will come with age eg. memory loss, word finding difficulty, slower processing speed, rates of dementia. Psychological and cognitive decline affect your finance, retirement, relationships, significance to community at large and this in turn makes old age insufferable or painful for most.
But Amitabh Bachan is 78 years old, Warren Buffet is 90 years old, Ratan Tata is 82 years old, Charlie Munger is 96 years old, Joe Biden is 78 years old, Arnold Shwarzenegger is 73 years old — WOW !!!!
The very thought that I could have 50 more years to live is so fascinating. I could make mistakes, get derailed, lose a friend, lose credibility, lose money — BUT IF I LEARNT MY LESSON WELL, I COULD BOUNCE BACK , given my mental and physical health supports it !!!
When Fire Phone had a failed launch, Jeff Bezos said “If you think that’s a big failure, we’re working on much bigger failures right now. I am not kidding. Some of them are going to make the Fire Phone look like a tiny little blip.”
And it’s this urge for living life well and long, has made me explore many habits and hacks for healthy living. I travelled to Finaland for a Biohacking convention and I will be travelling again in 2021 to Amsterdam for the same in June (hoping COVID comes under control by then).
I learnt various meditation methods eg. Isha Foundation’s A-U-M practice, Oneness Academy’s Soul Sync and Osho’s Silent Meditation. I learnt Work Out techniques from books such as 4 Hour Body by Tim ferriss, Bigger Leaner Stronger by Michael Mathews. I learnt anti-aging hacks from Dave Asprey’s blogs, podcasts and his 4 books (waiting for his 5th one on Fasting).
And the journey is still on. I am still learning the subjects around Sleep, Supplementation, Sound, Movement, Radiomagnetic Frequencies and so much more that could help me to increase my Healthy Life Span. I implement most things that I learn. Though on my wife’s insistence, I have stopped providing unsolicited advice 🤦🏼 Though, I can use this blog to pass on the message.
Survival is the Key !!! Longevity allows one to experience life without pressure to make it to the top in everything you do, YOU WON’T. YOU WILL FAIL. YOU WILL FALL. YOU WILL LOSE. YOU WILL CRY. YOU WILL BE MISUNDERSTOOD.
BUT…
A Healthy Mind and an Active Body can do wonders for the life to come. Most importantly, it allows you to survive one onslaught after another. It allows you to get back up. It allows you to wipe your wounds, lick your sweat and move once again.
When asked about his silence during meetings, J.D. Rockefeller (once the richest man in the world) often recited a poem:
A wise old owl lived in an oak,
The more he saw the less he spoke,
The less he spoke,
the more he heard,
Why aren’t we all like that wise old bird?
Ageing Beautifully is a Gift you must give yourself. Irrespective of your age, this subject deserves as much attention as does buying your next BMW or your next villa in Arabian Ranches or your next holiday to Maldives.
Enjoy the talk by Rodney Dangerfield for the future you are heading towards 😄
Loads of Love.
Manish