One Approach To Investing During a Recession?

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(Edited)



Have you heard of the Lindy Effect? Chart at front of post courtesy of atlasgeographica.com. In properties economic times people who are investing have a tenancy to invest in the next hot thing.

Whether it was SPACs, Web3, tech stocks, or next popular trend people have not fared well in terms of investment returns. In difficult economic times these type of investments not only give poor returns they tend to fall in value significantly. The boom and bust phenomenon. Yet not all investments are the same.

Nassim Taleb has one approach to investing and he calls it The Lindy Effect.

The Lindy effect (also known as Lindy's Law) is a theorized phenomenon by which the future life expectancy of some non-perishable things, like a technology or an idea, is proportional to their current age.

Quote from Wikipedia

Another way of thinking it is longevity of the asset increases in value. In terms of opportunities/examples would be businesses that have operated for a very long time- skill labor services and other services that are necessities such as laundromats.

(Courtesy of zoomexpresslaundry.com)

Bottom line in difficult times we should not try to invest in the next big thing as risk aversion is on most of our minds. Instead invest in things that have been established for a long time and proven it has went through challenging economic times. The longer a business has been established the more likelihood it can survive longer.

None of what I write is financial advice. It is for entertainment purposes only. Thanks for reading!



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5 comments
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Hmmm. I support what you have said here. Investing in things that have been in existence for a long time, there will be more confidence in it

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Yep sort of old fashion thinking here. Invest on something that is not popular but consistently profitable versus the hyper gains in high growth companies.

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Well said if that is taken as a point of view for most people

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It makes sense but there are good and bad companies to choose. There are a lot of companies that use to be big blue chip stocks but have dropped down because they aren't as relevant such as GE or oil stocks.

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