The Illusion of the Irrelevance of the Long Term

In the early 80′s a riddle did the rounds which had everyone stumped for a few days until the solution followed shortly afterwards. Considering this was before you could forward something to a group in Outlook, ideas used to propagate themselves very quickly in those days. The riddle went like this:

3 MEN GO INTO A MOTEL. THE MAN BEHIND THE DESK SAID THE ROOM IS $30,
SO EACH MAN PAID $10 AND WENT TO THE ROOM. A WHILE LATER THE MAN BEHIND THE DESK REALIZED THE ROOM WAS ONLY $25, SO HE SENT THE BELLBOY TO THE 3 GUYS’ ROOM WITH $5. ON THE WAY, THE BELLBOY COULDN’T FIGURE OUT HOW TO SPLIT $5 EVENLY BETWEEN 3 MEN, SO HE GAVE EACH MAN A $1 AND KEPT THE OTHER $2 FOR HIMSELF. THIS MEANT THAT THE 3 MEN EACH PAID $9 FOR THE ROOM, WHICH IS A TOTAL OF $ 27. ADD THE $2 THAT THE BELLBOY KEPT = $29. WHERE IS THE OTHER DOLLAR?

The answer – which I must confess eluded me for ages – is that there is no $30. Each man pays $9 for the room which equals $27, plus the $2 equals $29. Simple. But the illusion is a powerful one.

In the same way, the powerful illusion is that every decision we make is important and that we never get the chance – like a share trader who makes dozens of trades a day, or the poker player who plays dozens of hands an evening – to get to the medium term. But we do.

No poker player gets to play any exact hand more than once. But you still make the decision that is right according to the Long Term every time, and that way you make a profit. No trader gets to invest in the exact same share with the exact same future prospects for the exact same price twice. But by investing with the best long term expectation in a series of inherently independent situations you give yourself the best chance of making the best Long Term return.

I understand that some decisions feel so big that we’ll never ever reach any kind of long term and so the best policy seems to be to play it safe. Putting your children through school; setting up your own business; buying your own home; getting married; going back into training; getting divorced; being completely honest with your team… the list is endless. And that’s the point.

While we look at the present and the future from one position at the point of making a decision… it all looks very different in the rear view mirror. Eventually the numinous truth of the illusion catches up with us and we realise that each monumental mountain was really only a molehill – only one of many problems that we had to overcome; just part of a continuum which eventually became a Long Run.

And those of us who explored the opportunities and took the risks in a calculated way will, eventually, have received what we expected (or Expected) and deserved. And those of us who eschewed them and feigned satisfaction with the safer option experience a pain much greater than the pain of setback or Short Term failure… in the Long Run they experience the agony of regret.

And the most amazing thing about it all? The most amazing thing is that we know this. That’s why when we have to make a difficult decision we feel torn… we feel torn between the person we are now and the person we know deep down that we’ll become in time. And that is the struggle that takes place inside us all whenever we make a decision. Long Term vs Short Term: the us we are tonight and the us we’ll be tomorrow.

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