markets
Lindy Effect
The rule
For ideas, firms and methods, the older it is, the longer it will likely last. A recipe cooked for 100 years will probably still be cooked next year.
Where it flips
This misleads when the world truly changes. Old machines, old business ways, even big-name firms do die when the ground shifts under them. The fix is to ask whether the thing survived because it is strong, or only because nothing has tested it yet.
Things like ideas and businesses do not age like people; they age backwards. Every extra year a business survives is fresh proof it can handle shocks, so its likely remaining life grows with age. A company that has traded through fifty years of ups and downs has shown more than a three-year-old favourite with a shiny story. Trust the time-tested over the merely new.
A worked example
Aarvi must choose between a 60-year-old consumer firm that lived through many downturns and a two-year-old app stock with a slick pitch. This idea tilts her toward the survivor, whose long life is itself the proof of strength. [illustrative]
How to spot it
- ·Decades of surviving real downturns
- ·An old firm still useful today, not just old
- ·A new story with no record through a crisis
Nassim Nicholas Taleb · Skin in the Game