I used to be in the moving business. Eighteen years ago, after working for seven years in the risk arbitrage business, one of the many ‘moving’ businesses of Wall Street, I left New York to come to San Francisco in order to get into the ‘storage’ business. America’s strong economic foundations are rooted in multi-year business building and long-term risk taking. We are now bearing witness to the sour fruits of moving securities around like meaningless scraps of paper for short-term profit and the securitization of risk into a daisy chain of the unknown and the unmanageable.
Over the past 20 years, the average holding period for stocks has declined from 2+years to just 3 months as of earlier this year. A root cause of the relentless volatility in the equity, commodity, and debt indexes is the steady erosion of long term thinking in investing, not only in this country, but all over the world. How many public company CEOs have lamented the wholly inconsistent demands of managing quarterly earnings expectations for fickle institutional investors while maintaining a consistent long term operating strategy to maximize shareholder value?
It’s time for a global re-boot of the investor mindset so that people can start investing responsibly– there are many reasons why Warren Buffett is such a successful investor, and long-term thinking is one of them.
I can thank Brett Haire, my boss at First Boston during the 1980′s, for inspiring me to leave Wall Street and risk arbitrage behind. I remember once asking Brett for permission to accumulate a long-term, unhedged position in the spin-out of a company that we were researching for investment. Brett looked at me, incredulous, and said, “Pascal, we’re in the moving business here, not in the storage business.” At that moment I realized that I did not want to be in the moving business and initiated the career path that led me to become a venture capitalist.
America needs to get back in the storage business at many levels and actively promote the entrepreneurial spirit that built this country one brick at a time at the same time that we re-build our securities markets. Let’s learn from our mistakes.
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