Small Sustainable Adjustments

“Stubborn Attachments” by Tyler Cowen talks about some of the problems of financial decision-making across time. How do we balance actions and long-term consequences in guiding our choices? 

Discounting cashflows is one way to take into account the “Time Value” of money. A Dollar today is worth more than a Dollar in 5 years' time. Making decisions based on discounted cash flows ends up almost ignoring 15–20-year time frames. The underlying assumption is you can reinvest at the end of the period. 

I take the essence of his argument as a focus on Maximum Sustainable Return. Sustainability is key. You need endurance to make sure you are in it for the long run. To extend what you are doing to the next generation, and the generation after that. To adapt your thinking from 5-year plans to 1,000-year plans. Consequences beyond "you". Where BIG interventions fizzle, but small sustainable actions have big long-term effects. 

Epiphanies, vanity projects, and conspicuous victories are much less impactful than small sustainable adjustments. “Most people overestimate what they can achieve in a year and underestimate what they can achieve in ten years.” (Amara’s Law). 

Time is the most powerful investment force.

Le Temps

In Between

Actions have consequences. Both intended and unintended. The desire to count and maximise has the unintended consequence of undervaluing the future. If you make your decisions by simplifying complexity down to two simple numbers (Return and Risk), the result is a just-watching-your-feet time horizon. The underlying assumption is you will have the opportunity to make a different decision for the next time frame that does consider the future when its turn comes. Aiming for returns of 15-20% would mean anything beyond a 5 to 10-year time horizon almost does not enter your consideration. The most powerful investment forces are space and time. Space between production and consumption. Time between contribution and extraction. Rather than short sprints, thinking with a long timeframe in mind allows you to focus on sustainability and consistency. A long timeframe forces you to think of things that cannot be simplified into numbers.

Observable Universe Logarithmic Map

Home for Bees

Two concepts I am progressively incorporating into my investment philosophy are Rewilding and Biodiversity. My Father-in-Law is a Natural Beekeeper and I like the idea of Natural Stockkeeping. Recognising that it is the bee that does the work. Where the goal is to do as little as possible, but not less. You have a roll, but it is more custodial. As we are grappling with a world that consumes too much already, yet is still struggling with mass poverty and hand-to-mouth living, we have to come up with new stories. In “Stubborn Attachments”, Tyler Cowen talks about twisting the maths of finance to not excessively discount (ignore) the future, and to focus on Maximum Sustainable Growth. David Attenborough reminds us of the seemingly obvious observation that something is only sustainable if you can do it forever. One measure of growth that is dangerous is activity. Doing more is not always doing better. Controlling more is not always doing better. Sometimes we can do better, without doing, and releasing the potential outcomes.