Sunday, June 19, 2005
Long Term Planning
To open, here is a quote from an article in today's New York Times: "In other words, most investors tend to ignore events that are scheduled to happen more than five years into the future. They are like drivers who ignore warning signs about slippery pavement just around the bend, and instead wait until nearly the last second to apply the brakes." Looking Long Term? Get Your Glasses! by MARK HULBERT Published: June 19, 2005.
Well, by gum, don't that explain a few things though? Apparently some economists have conducted some research and found out for certain what seems pretty obvious to a casual observer: people plan about as far as the tips of their noses. This is not a new phenomenon. I remember in High School I was talking with a bunch of friends when one of our bunch posited that someday rock and roll would be the "Muzak" of elevators, department stores, etc. Only he and I agreed with that prediction; several others expressed the opinion that such a thing would never happen. Millions of us, comprising the dominant social force in the country for most of our lifetimes (including now, and I do apologize for that) and they didn't think that our taste in music would take over. What is, was and ever more shall be, I suppose, is what they believed. I see the same thing with the Social Security issue today, where an even bigger bulge of babies, not to mention immigrants, will swell taxpayer ranks considerably more than is needed. And as for long term thinking on environmental issues, international politics, or for that matter planning where to put a subdivision, you might as well forget you ever heard of the idea.
For example, consider the arctic refuge oil drilling dispute. First, consider that the United States consumes about 18 million barrels of oil per day, or 18,000,000 barrels expressed numerically. The arctic refuge area is estimated by the most optimistic estimators to contain about 32 billion barrels of recoverable petroleum, or 32,000,000,000 numerically. All you have to do is divide 32,000,000,000 by 18,000,000 to see the most optimistic estimate of how many extra days' oil we would receive if the most optimistic estimates are true.
Okay, I'll do it for you here on my calculator. The product of that division is 1227.78 days (actually is 1227.7777777777 forever days, but I can't count that many 7s.) In years, 1228 days (I'm going to fudge up for optimistic purposes) is 3.64 years. So we will extend the agony of slowly running out of petroleum by a little under 4 years if the most optimistic estimates of oil in the arctic refuge are true. Rather than worry about caribou per se, a better question is to ask if 3.64 years worth of oil is worth the risk to the area? Maybe it is, maybe it isn't, but we may never know until it's over because that debate requires thinking ahead by decades, or centuries, and not many in this country are prone to do such a thing.
It's a shame, because long-term thinking yields long-term results. There's a great deal to be said for maximizing value for stockholders, but why not do it long-term? Well, because they'll dump your stock and buy elsewhere. According to the research cited in the article, though, looking out 7 to 10 years and investing today in companies favored by demographic trends over that time period, then selling at the 7 to 10 year mark, is a great way to make a fortune. And the research on demographic trends is, amazingly enough, freely available, often from the federal government.
Well, I warned you. If you don't get rich now it's your own fault, you know? Now, go forth and be demographical . . .
Well, by gum, don't that explain a few things though? Apparently some economists have conducted some research and found out for certain what seems pretty obvious to a casual observer: people plan about as far as the tips of their noses. This is not a new phenomenon. I remember in High School I was talking with a bunch of friends when one of our bunch posited that someday rock and roll would be the "Muzak" of elevators, department stores, etc. Only he and I agreed with that prediction; several others expressed the opinion that such a thing would never happen. Millions of us, comprising the dominant social force in the country for most of our lifetimes (including now, and I do apologize for that) and they didn't think that our taste in music would take over. What is, was and ever more shall be, I suppose, is what they believed. I see the same thing with the Social Security issue today, where an even bigger bulge of babies, not to mention immigrants, will swell taxpayer ranks considerably more than is needed. And as for long term thinking on environmental issues, international politics, or for that matter planning where to put a subdivision, you might as well forget you ever heard of the idea.
For example, consider the arctic refuge oil drilling dispute. First, consider that the United States consumes about 18 million barrels of oil per day, or 18,000,000 barrels expressed numerically. The arctic refuge area is estimated by the most optimistic estimators to contain about 32 billion barrels of recoverable petroleum, or 32,000,000,000 numerically. All you have to do is divide 32,000,000,000 by 18,000,000 to see the most optimistic estimate of how many extra days' oil we would receive if the most optimistic estimates are true.
Okay, I'll do it for you here on my calculator. The product of that division is 1227.78 days (actually is 1227.7777777777 forever days, but I can't count that many 7s.) In years, 1228 days (I'm going to fudge up for optimistic purposes) is 3.64 years. So we will extend the agony of slowly running out of petroleum by a little under 4 years if the most optimistic estimates of oil in the arctic refuge are true. Rather than worry about caribou per se, a better question is to ask if 3.64 years worth of oil is worth the risk to the area? Maybe it is, maybe it isn't, but we may never know until it's over because that debate requires thinking ahead by decades, or centuries, and not many in this country are prone to do such a thing.
It's a shame, because long-term thinking yields long-term results. There's a great deal to be said for maximizing value for stockholders, but why not do it long-term? Well, because they'll dump your stock and buy elsewhere. According to the research cited in the article, though, looking out 7 to 10 years and investing today in companies favored by demographic trends over that time period, then selling at the 7 to 10 year mark, is a great way to make a fortune. And the research on demographic trends is, amazingly enough, freely available, often from the federal government.
Well, I warned you. If you don't get rich now it's your own fault, you know? Now, go forth and be demographical . . .
