Joel Greenblatt: In Investing The Last Man Standing Is Patience

In his presentation to the folks at Google, Joel Greenblatt emphasized the importance of patience in successful investing saying:

“The last man standing is patience. We call it time arbitrage. Other people call it time arbitrage– just being patient. That’s in really short supply, and it’s not getting better. Things are moving to faster and less patience. So that’s really the secret.”

An excerpt from the presentation:

Your job is to be cold and calculating and unemotional. Unfortunately, people are human. It’s good news for us, but people– the stats are against you. That’s why I think the indexers get it right for the wrong reasons. They mostly are saying the market’s efficient and have other explanations of why you can’t beat it. I think the market often gives you opportunities, but it’s very difficult to take advantage of them for behavioral and agency problems.

And those are much more powerful than you would think by just saying, oh, behavioral and agency problems. The people are people, and it’s been happening forever. I don’t think it’s getting better. I think time horizons are shortening. There’s so much– all that data, all that– look, when I started my first firm in 1985, I used to write quarterly letters. And they read something like this– we were up 3% last quarter, thanks a lot. That’s what it sort of said. Now we have $10 and $20 billion endowments that need to get our results weekly. I don’t know what they do with them.

But we now have to do that, and most of them do a good job with it. But that’s just the way of the world. So if you keep measuring things in shorter periods, and you can measure them, and there’s more data, it doesn’t make it better. It makes you more susceptible to emotional influence. So that world’s getting better. The last man standing is patience. We call it time arbitrage. Other people call it time arbitrage– just being patient. That’s in really short supply, and it’s not getting better. Things are moving to faster and less patience.

So that’s really the secret.

You can watch the entire presentation here: