Long-Term Thinking: 1800-2013

Long-Term Thinking died on Tuesday. His last true friend, Vanguard founder Jack Bogle, was at his side. He was 213 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 Monday, 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 hospitalized 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 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 media. Louis Rukeyser's Wall Street Week went off the air the same year Mad Money, Jim Cramer's daily investment show, debuted. The number of important financial events hasn't changed since Rukeyser could cover a whole week's news in an hour -- 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 incentivized to do what's right. Your pension fund, your 401(k), and your kids' college funds probably have 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 turn off CNBC and stop checking your brokerage account. 

No Pitch


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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 03, 2014, at 11:36 AM, Mathman6577 wrote:

    Wall Street Week was one of my favorite TV shows of all-time.

  • Report this Comment On January 03, 2014, at 11:38 AM, jordanwi wrote:

    LTM's outer score card may look dead but his/her/its inner score card is alive and well.

  • Report this Comment On January 03, 2014, at 11:39 AM, jordanwi wrote:

    *LTT's.

  • Report this Comment On January 03, 2014, at 12:23 PM, MartyTheCanuck wrote:

    "In lieu of flowers..." - Great, great line !

  • Report this Comment On January 03, 2014, at 1:02 PM, mtprx wrote:

    Beautiful, elegant, and well said. Like an old tree with its roots firmly in the ground standing against all storms. Thank you "Jack"

  • Report this Comment On January 03, 2014, at 1:19 PM, SkepikI wrote:

    Well, Morgan, this is a new experience. For the very first time a MF article was good for one full belly laugh. I won't even try to critique... (**)

  • Report this Comment On January 03, 2014, at 1:47 PM, ChrisWalczakSD wrote:

    Just saw an article on Seeking Alpha titled, "Seasonality Suggests Owning Railroads in Q1."

    Does that mean Berkshire will be selling BNSF this April? :)

  • Report this Comment On January 03, 2014, at 4:31 PM, astuber9 wrote:

    Motley Fool HR should be ready for Morgan to leave the company. I think he is practicing for a career in fiction.

  • Report this Comment On January 03, 2014, at 6:59 PM, wildeweasel wrote:

    Are you sure he dead and not just hiding?

  • Report this Comment On January 03, 2014, at 7:38 PM, daveandrae wrote:

    I "give up" any and everything to do with the stock market each year for lent. (ash wednesday to easter sunday.)

    I'm looking forward to it more than usual this year.

  • Report this Comment On January 03, 2014, at 9:07 PM, colleran wrote:

    I am happy to hear that people are looking more to the short term. That means that I am going to do even better in the future.

  • Report this Comment On January 03, 2014, at 10:29 PM, boogerface02211 wrote:

    A lone voice crying out in the wilderness. Thank you Morgan.

  • Report this Comment On January 04, 2014, at 9:27 AM, MartyTheCanuck wrote:

    @colleran

    My thinking exactly. All this short-term thinking leads to mispricing that we long-term thinkers can take advantage of. My 10-year return is above 11%, mostly because of that.

  • Report this Comment On January 04, 2014, at 10:37 AM, gkirkmf wrote:

    Wonderful Morgan... you made my day.... it is very seldom that I get such a nice chuckle on a cold snowy Sat. morning.

  • Report this Comment On January 04, 2014, at 3:06 PM, ibuildthings wrote:

    The managers who fear they will lose customers based on one bad quarter are taking the heat that is due to other managers who pretend to be smart, then lose bunches of clients' money through churning or gambling masked as investing. "Where are the customers Yachts"? is a good question. The customers are getting wary. They should be demanding to see 10-year track records, not last quarters' track record.

  • Report this Comment On January 04, 2014, at 3:33 PM, june61944 wrote:

    Another terrific reason why financial salespeople are the most overpaid people in the history of the planet. Telling people to sit tight wont generate commissions I guess. Thanks so much for putting things in perspective in an entertaining way.

  • Report this Comment On January 05, 2014, at 9:07 AM, kmcva wrote:

    I love it. Makes me think of all the pundits who moaned 5 years ago that the 401(k) and it's like were dead because of the crash and that govt had to step up and create a new retirement system. Where are they now that (over the long-er term) the accounts have rebounded strongly? Thanks!

  • Report this Comment On January 05, 2014, at 4:15 PM, LibArtsTrader wrote:

    Nice Tribute.

    Hyperbolic Discounting – the tendency for people to have a stronger preference for more immediate payoffs relative to later payoffs, where the tendency increases the closer to the present both payoffs are.[42] Also known as current moment bias, present-bias, and related to Dynamic inconsistency. - Wikipedia. Psychologists classify this behavior as a cognitive bias, which is defined as "systematic deviations from a standard of rationality or good judgment".

    Electronic efficiency is an exercise in probing limits.

    A race to an uncertain future at the speed of light.

  • Report this Comment On January 05, 2014, at 6:09 PM, thunderboltnova wrote:

    When do we sell?? Interest rates are gonna go up!

  • Report this Comment On January 06, 2014, at 2:06 PM, MaxTheTerrible wrote:

    Long live the Long Term Thinking!!!..?

  • Report this Comment On January 06, 2014, at 6:47 PM, anash91 wrote:

    RIP LTT. I will consider to use long term and mid term thinking rather than a current evaluation of the market. 2 days could lose 2k, but in 2 years I could gain 10k. It's all about patience, but since we have the mine now attitude with the internet, LTT has all but become a thing of the past

  • Report this Comment On January 06, 2014, at 8:13 PM, Stockllama10 wrote:

    Give Morgan Housel a medal.

    Great stats (average stock: 5 days) in seriousness, though.

  • Report this Comment On January 06, 2014, at 9:10 PM, XMFDivine wrote:

    Awesome piece, Morgan. Please keep coming with the satire!

  • Report this Comment On January 06, 2014, at 10:02 PM, RichAA wrote:

    Ha! Well done. I had just checked by brokerage account before I read it.

  • Report this Comment On January 07, 2014, at 12:02 AM, tchams wrote:

    Another great article.

  • Report this Comment On January 07, 2014, at 1:17 AM, douglee8 wrote:

    I think "Wall Street Week" was a half-hour show.

  • Report this Comment On January 07, 2014, at 10:53 AM, JULPAC wrote:

    I'm not a big fan of yours Morgan, but this was a great "tongue n cheek" piece.

  • Report this Comment On January 07, 2014, at 12:10 PM, larchmont1 wrote:

    Great writing.

    Morgan has personified Long Term Thinking in a way that makes me picture a young, incredulous Woody Allen.

    Of course, the article makes an excellent point.

  • Report this Comment On January 07, 2014, at 7:44 PM, AnsgarJohn wrote:

    The Dutch have a saying: De een zijn dood is een ander zijn brood.

  • Report this Comment On January 10, 2014, at 12:53 PM, ffbj wrote:

    As Mark Twain quipped: "News of my death has been greatly exaggerated."

  • Report this Comment On January 11, 2014, at 2:22 AM, BlueBoomerHD wrote:

    Long term buy and hold, index funds and couch potato investing still live here.

    The King is dead! Long live the King!

  • Report this Comment On January 11, 2014, at 6:45 PM, awarenessrus wrote:

    YOU Morgan, are amazing!!

  • Report this Comment On January 11, 2014, at 8:00 PM, mj2boogie wrote:

    Great and funny article!!

    How true, how true! I am so glad I am (almost always) long-term buy and hold!!

  • Report this Comment On January 12, 2014, at 8:12 AM, yogahelps2 wrote:

    << 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.>>

    Why should companies invest when there is no demand/purchasing power among the middle class? Greed is the driver behind the short-term focus of the past decade. We need to increase the minimum wage and reduce the wealth gap.

  • Report this Comment On January 15, 2014, at 5:47 PM, bernbern0 wrote:

    I'm late to this one Morgan, but happy I just discovered it. Wonderful!!! Thank you. Once again,

    I hope young people are reading your stuff and learning from your wisdom.

  • Report this Comment On January 20, 2014, at 9:09 AM, lexander50 wrote:

    Very fun Article. Thank you Morgan Housel.

    I disagree with only a minor thing. I think checking your brokerage account daily is a good thing, if you make sure you tell yourself ahead of doing so that the companies you are watching are REAL companies and have REAL employees, REAL products and REAL clients. I think that there is a "virtuality" that assails everything we do on a computer. This is difficult to explain, but in our minds Email is not the same as an official letter, A facebook comment is not the same as the comment we make in person, sexting is not the same as a love connection and consequently decisions we make about selling online, is another one of those meaningless decisions.

    I think we should have a voice message to say" Your decision to sell this stock is affecting x number of employees, X number of clients and x number of investors. You are a partner in a REAL business, do you really want to sell you share of the business? " I think once people start realizing that they are not just playing a stock market gambling game in virtual reality, the attitudes may change.

    And to the guys and gals who want to get rich in 5 days I say "Get REAL, People!"

  • Report this Comment On February 25, 2014, at 9:41 PM, stockdissector wrote:

    Great piece.

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