Lindy effect in investing. Stability VS Growth
Stability vs. growth
The choice between old and new companies comes down to a balance between stability and growth potential. The assets of old companies are "Name", loyal customers and clear market positions. Their shares are more predictable and less exposed to risk. New companies are based on innovative business models and technologies. Their aim is to conquer the market quickly. This approach increases shareholder value and investor returns. However, newness is still a risk and such companies may be less stable in the long term.
The choice between old and new companies comes down to a balance between stability and growth potential. The assets of old companies are "Name", loyal customers and clear market positions. Their shares are more predictable and less exposed to risk. New companies are based on innovative business models and technologies. Their aim is to conquer the market quickly. This approach increases shareholder value and investor returns. However, newness is still a risk and such companies may be less stable in the long term.
A balance of old and new
When evaluating investee companies, you should consider not only their history and past performance, but also current trends, the competitive environment, financial position and management potential. A successful investment portfolio is a balance between investing in old and new companies. A balance between stability and growth potential. By diversifying and investing in different types of assets, an investor reduces overall risk.
When evaluating investee companies, you should consider not only their history and past performance, but also current trends, the competitive environment, financial position and management potential. A successful investment portfolio is a balance between investing in old and new companies. A balance between stability and growth potential. By diversifying and investing in different types of assets, an investor reduces overall risk.
Investing is an art that requires not only in-depth knowledge and financial expertise, but also an understanding of the long-term trends and principles of the investment market. Investors are frightened by uncertainty and the risk of losing what they have invested. The search for the "investment grail" continues.
One popular investment strategy is based on the Lindy Effect, which states that the longer an asset (investment product, company or technology) exists and shows stable results, the higher the probability of its long-term survival. Investors often use this principle when making investment decisions, favouring assets that have a long history.
Which company to invest in? Old or new. According to the Lindy Effect, Coca-Cola has a better chance of surviving into the next century than Google. Is this true?
The Lindy Effect
I'm often asked, "What will change in the next 10 years? And almost never: 'What will NOT change in those 10 years? Yet the second question is more important than the first. You can only build a successful business strategy based on what is stable over time. Jeff Bezos
A company's long history of success is an indicator of its stability and reliability. This principle was first articulated by American author and financier Nassim Taleb. If something has existed for a long time, there is a high probability that it will continue to exist. What is valuable is what has stood the test of time. That's the essence of the Lindy Effect.
Can we believe in the Lindy Effect?
We can assume that "old" established companies, such as Coca-Cola or Johnson & Johnson, have a better chance of surviving into the next century because of their long and successful history. Based on the Lindy effect, Google (founded in 1998) should be considered a new company and not a promising one to invest in. But we know that Google's innovative potential and unique market position have long made it a successful investment target. "Newcomers" Apple, Amazon and Microsoft are profitable investments. So new companies and technological innovation should not be ignored when considering where to invest.
One popular investment strategy is based on the Lindy Effect, which states that the longer an asset (investment product, company or technology) exists and shows stable results, the higher the probability of its long-term survival. Investors often use this principle when making investment decisions, favouring assets that have a long history.
Which company to invest in? Old or new. According to the Lindy Effect, Coca-Cola has a better chance of surviving into the next century than Google. Is this true?
The Lindy Effect
I'm often asked, "What will change in the next 10 years? And almost never: 'What will NOT change in those 10 years? Yet the second question is more important than the first. You can only build a successful business strategy based on what is stable over time. Jeff Bezos
A company's long history of success is an indicator of its stability and reliability. This principle was first articulated by American author and financier Nassim Taleb. If something has existed for a long time, there is a high probability that it will continue to exist. What is valuable is what has stood the test of time. That's the essence of the Lindy Effect.
Can we believe in the Lindy Effect?
We can assume that "old" established companies, such as Coca-Cola or Johnson & Johnson, have a better chance of surviving into the next century because of their long and successful history. Based on the Lindy effect, Google (founded in 1998) should be considered a new company and not a promising one to invest in. But we know that Google's innovative potential and unique market position have long made it a successful investment target. "Newcomers" Apple, Amazon and Microsoft are profitable investments. So new companies and technological innovation should not be ignored when considering where to invest.
Which company to choose?
When evaluating and investing in companies, it is important to consider the factors and risks that may affect their sustainability and profitability in the future.
Єyfos Hub manages financial, technical and corporate assets. When reviewing a potential investment, we analyse
Investors can apply the Lindy Effect by favouring assets that demonstrate stability and success. However, we would like to reiterate that the past success of a company does not guarantee its future growth, and relying solely on the long history of an asset can be dangerous. Therefore, Eyfos Hub recommends taking into account both the historical volatility and the investment potential of the asset.
When evaluating and investing in companies, it is important to consider the factors and risks that may affect their sustainability and profitability in the future.
Єyfos Hub manages financial, technical and corporate assets. When reviewing a potential investment, we analyse
- History, market stability
- Diversity of the portfolio
- Innovation and future growth
- Development strategies and market conditions
- Adaptability to changing market conditions
- Potential risks that may affect sustainability and change dynamics (economic, technological, market or competitive risks)
- Industry-specific factors and uncertainty risks
Investors can apply the Lindy Effect by favouring assets that demonstrate stability and success. However, we would like to reiterate that the past success of a company does not guarantee its future growth, and relying solely on the long history of an asset can be dangerous. Therefore, Eyfos Hub recommends taking into account both the historical volatility and the investment potential of the asset.
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