1. What is the Lindy Effect?
The Lindy Effect, a theory pioneered by financial analyst Albert Goldman, suggests that the expected lifespan of a phenomenon is directly proportional to its existing lifespan. Initially observed on Broadway, where shows lasting 100 days were more likely to last another 100, the Lindy Effect gained popularity in finance. Mathematician Benoit Mandelbrot and author Nassim Taleb later explored its applications.
Taleb explains, "Things that have endured for a long time, like humans, tend not to 'age'; they 'anti-age.' Each year a thing survives, its life expectancy doubles."
2. How do Investors Utilize the Lindy Effect?
In investment, the Lindy Effect serves as a quality indicator, signaling "time-tested" reliability. Companies with a longer history are perceived as more likely to endure, translating to higher chances of future success.
Market Sentiment's retrospective analysis reveals that investing in companies over 100 years old outperformed the S&P 500 index from 2000 to 2023.
Applying the Lindy Effect helps predict not only a company's longevity but also technological and trend forecasts. For instance, if Web3 social networks struggle in the next five years, their continued existence in the next decade becomes less likely.
3. Applying the Lindy Effect to Bitcoin
Considering the Lindy Law, Bitcoin, having survived 15 years, is seen as a stable asset. Approvals of Bitcoin spot ETFs could signal its acceptance globally. The Lindy Effect for BTC suggests its sustained development over the past 15 years may continue for the next 15.
4. Applying the Lindy Effect to Altcoins
While Bitcoin appears resilient, the same cannot be said for the altcoin market. Analysts note cyclicality in cryptocurrency prices, correlating with Bitcoin halving cycles. CoinGecko statistics reveal over 50% of listed cryptocurrencies ceased to exist, emphasizing the importance of considering the Lindy Effect for altcoins with a history of enduring at least two Bitcoin halving cycles, approximately eight years.
In conclusion, the Lindy Effect provides investors with a timeless framework, guiding them to favor assets, ideas, and products that have withstood the test of time. By leveraging this principle, investors can make informed decisions that stand the best chance of success in the long run.
https://www.zugtimes.com/understanding-the-lindy-effect-in-investments-a-time-tested-approach/
