So, you want to find great quality businesses to invest in?

There’s a shortcut I find myself using again and again.

It’s called the Lindy effect. The longer an idea, technology, or enterprise has survived — the longer it may continue to do so. With, of course, some caveats.

You see, longevity means a resistance to change. After all, a business that has survived obsolescence, competition, and a myriad of other odds should be positioned to last at least as long again.

The Lindy effect is named after Lindy’s deli in New York, where comedians came up with the theory. They proselytised that a comedy show running only two weeks would be expected to last another two weeks. While a show that had lasted two years could expect to run a further two years.

 


Postcard photo of Lindy’s in New York City. Source: Wikimedia Commons

 

These days, with the world changing fast, the Lindy effect depends on adaptability.

Nassim Nicholas Taleb referenced Lindy’s law in his 2012 book Antifragile: Things That Gain From Disorder.

Well, the ultimate company or investment is one that must be ‘antifragile’.

Antifragility is where something may ‘increase in capability to thrive as a result of stressors, shocks, volatility, noise, mistakes, faults, attacks, or failures.’

Being antifragile means locking in the Lindy effect and potentially prevailing forever.

For example, take international air travel. When it began in the 1950s, there was no guarantee that it would grow to fly some 6 million people a day!

Air travel is safer than ever before due to accidents that have occurred over the years. Aviation accidents and recovered black boxes from crashes are studied in depth. Airlines and the industry learn from these events to prevent them happening again.

Now, there’s a new technological revolution underway where systems can think and adapt. Businesses that adopt it could become more antifragile…

 

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