MFA investment May 2024

Investing in the Lindy effect

(I know: it’s June already. But it’ll drive me nuts if the list of titles has a month missing. The end of the school year is always crazy, so I’m cheating a little and sending the May investment now, with the June investment to follow mid-month. Sincere apologies. Happily, the share price of the May investment has only continued to stink since mid-May—stinks worse, actually—which means we can make an intelligent investment at a discount, and we haven’t lost out.)

We currently have just seven holdings in the Money for Artists portfolio. Some are just a single share, which is relatively meaningless in the long run. So there’s a good case to be made for saying that we should invest our little bit of monthly savings in the positions we already hold that are down the most, and continue to build them out.

This is even more true given that the S&P 500 is at all-time highs, and the market is “frothy,” as the investing maniacs like to say — things are overpriced and speculative, in other words, so it’s hard to find new things that are cheap.

Fair. But damnit, when good things are cheap, we are hard-pressed not to take advantage. And there are a couple of companies trading near 52-week lows that I’m going to put money towards this month, bringing the MFA portfolio to nine discrete holdings. They make deeply unsexy and unhyped stuff that is honestly just a net good for people, and which I am happy to invest a few bucks in now and sit on forever so that my family has a reliable nest egg when I am old.

First, though, the Lindy effect.

Lindy’s delicatessen by Bertil Carlson

In brief, the Lindy effect (read about it here and here) says that the longer something has been around, the longer it will be around.

Nassim Nicholas Taleb has incorporated this idea into his antifragile framework, writing

If a book has been in print for forty years, I can expect it to be in print for another forty years. But, and that is the main difference, if it survives another decade, then it will be expected to be in print another fifty years. This, simply, as a rule, tells you why things that have been around for a long time are not “aging” like persons, but “aging” in reverse. Every year that passes without extinction doubles the additional life expectancy. This is an indicator of some robustness. The robustness of an item is proportional to its life!

You can see the application of this to investing: a business that has been around for a hundred years is likely to be around for another hundred.

In a little quirk of history, both companies I am buying this month were founded 147 years ago, which is highly predictive of their continuing to exist long after I’m dead.

I like that a lot more than buying shares of Lululemon or whatever trend is hot now.

Old stuff is hot stuff. Photo by Dawid Zawiła on Unsplash

This month, then, we’ll invest our little hard-earned pile of retirement dollars in things that check all the boxes:

1. Inexpensive

2. Not disgusting (and even beneficial)

3. Old and super-durable and likely to be around for a long, long time

Let’s go.