The power of long term thinking – is it really powerful? If it’s really powerful, do we feel it? When was the last time you invested somewhere, built a relationship or built a habit thinking of long term impact?
Most of us don’t think long term. We prefer to win today and lose for a month or year or even for a lifetime! But long term thinking is something that can make our life purposeful.
Last year I read one book named – The almanac of Naval Rabikant. Rabikant said that normally in most of the cases we have two options to choose when we are in a confusion to take any decision. The first option is something which will give you short term gain but long term pain. In the short term the option is really peaceful but in the long term you have to suffer for sure. On the other hand, the other option is the opposite. The second option is short term pain and long term gain. So this option will ensure your sufferings in the short term with a guarantee of long term gain or peace. Rabikant suggested, at any time – we should choose option two. Take a pain today for a better or best year. One of the examples of this short term pain, long term gain is doing physical exercise. When I run, I do push ups or abs workout – it’s really painful for me. It’s really burning my body and muscles during workout time. But this short term pain relaxes me for the rest of the day. In the long term I am healthy and not getting attacked by any disease. Feeling energized! For sure this is a bigger benefit than relaxing today and spending my morning in bed.
Even without long term thinking you won’t be able to feel the power of many things like Compound Effect. Einstein once said that compound effect is the 8th wonder of the world. To feel the power of compound impact, you have to plan for a long period. Let’s take an example of an investment portfolio. Say an investor designed his investment portfolio with 50% in simple interest and 50% in compound interest. Simple interest investment giving him a yearly 20% return, where the compound interest investment giving him a 15% annual return. If in both cases the initial investment is 100 USD, below is the chart for first 4 years:
| Interest type | Initial Investment | Y1 | Y2 | Y3 | Y4 |
| Simple | 100 | 120 | 140 | 160 | 180 |
| Compound | 100 | 115 | 132 | 152 | 175 |
In the 5th year the compound part will touch and start surpassing the simple part. Below will be the return till Y10.
| Interest type | Initial Investment | Y5 | Y6 | Y7 | Y8 | Y9 | Y10 |
| Simple | 100 | 200 | 220 | 240 | 260 | 280 | 300 |
| Compound | 100 | 201 | 231 | 266 | 306 | 352 | 405 |
In next 10 years check the impact, which is even stronger for Compound part:
| Interest type | Initial Investment | Y11 | Y12 | Y13 | Y14 | Y15 | Y16 | Y17 | Y18 | Y19 | Y20 |
| Simple | 100 | 320 | 340 | 360 | 380 | 400 | 420 | 440 | 460 | 480 | 500 |
| Compound | 100 | 465 | 535 | 615 | 708 | 814 | 936 | 1076 | 1238 | 1423 | 1637 |
So, this period of 20 years will be closed with a 3 times return in compound investment than simple investment with a 5% less annual return! Feel the power of long term thinking!
The long term impact is the same for our relationships with others as well. Our relationships also give compound returns if we invest for the long term. One of the mistakes parents do, is that when their kids choose something that they don’t like – parents discourage or stop them by using their force. Because parents are for sure more powerful than their 5 years old kids. But in the short term you are winning the battle. In the long term – you are losing the war! Your childs won’t share anything they know you won’t like later with you. The mistake you made with him when he was 5 years old, was the investment you made for your childs not to share anything for the rest of their lives. So, it’s better not to stop your kids with your force if you know they are doing something wrong. Instead give them time, make them understand the negative impact of their choice with an hour discussion. Understand their thinking as well. If it’s really something wrong with the discussion you will have, you kids should stop by themselves. Also, later they won’t hesitate to share with you the same types of choice he want to make.
Another example of thinking short term is arguing against a person, not against an idea or system. Say, you have a colleague you don’t like. Whatever he proposes you try to say against it. It’s not the idea, it’s your colleague. Even in the middle of your argument if you realize what he is saying is right, you still prefer to oppose. As a result, maybe you are winning in the short term (the battle), but you are suffering in the long term (the war) because his idea was right and you have won with a wrong idea.
So, it is better to think long term. Better to take decision thinking long term. The best case is for sure to win in the battle and win in the war as well. But it’s not always possible for sure. In cases this is not possible, choose losing in the battle and winning in the war.