88 ATaleofTwoMarkets
Milton Friedman’s rejoinder to Keynes was that the long run is
just a series of short runs linked in succession. Thus the long run
is simultaneously with us (it was the long run four years ago) and
ahead of us (four years from now). Market price today reflects the
value of a business as long ago as four years, and the price today is
a guess about business productivity and returns some four years from
now. If your guess is better than the market’s, then while four years
from now the market may be getting today’s value of that business
right, you will be that much ahead.
That is the sense in which the market may get it right in the
long term: Four years from now the market will get correct what
Starbucks is doing today; if you are able to assess that performance
better than today’s market crowd is doing, you will reap outsized
returns. The hard question, of course, is how to make that deter-
mination with high success rates.
Warren Buffett takes Keynes seriously, adopting the “till death
do us part” standard. He invests only in businesses he would be
happy to hold forever. It is a commitment not unlike the one you
make to your spouse. The consequence is the same: be patient and
picky in your search.