In short
The Lindy effect is the idea that, for things that don’t wear out with age, such as ideas, books, technologies and many businesses, the longer something has already survived, the longer it is likely to keep surviving. A book that has been in print for fifty years is likely to be in print for another fifty.
What is the Lindy effect?
Most things we meet in daily life are perishable. People, cars and fruit all age, and each extra year brings them closer to the end. The Lindy effect describes the opposite pattern among things that don’t perish. For an idea, a technology or an institution, survival is information: each year it lasts is evidence that it can withstand whatever the world has thrown at it, so its expected remaining life grows rather than shrinks.
Statisticians describe this as a lifetime that follows a power-law, or Pareto, distribution. Mortality falls with age, so the survivors become ever more likely to keep surviving.
Where the name comes from
- 1964Albert Goldman writes “Lindy’s Law” for The New Republic, describing a belief among comedians at Lindy’s delicatessen in New York: a show that had already run a long time was likely to keep running for about as long again.
- 1982Mathematician Benoit Mandelbrot borrows the name in The Fractal Geometry of Nature, applying it to things such as a writer’s body of work.
- 2007Nassim Nicholas Taleb develops the underlying idea in The Black Swan.
- 2012Taleb names it “the Lindy effect” in Antifragile, extending it to anything without a natural upper limit on its life.
What it applies to, and what it doesn’t
Tends to apply
- Ideas, books and principles
- Technologies such as the wheel, the knife and double-entry bookkeeping
- Institutions and customs
- Many businesses and brands
- Well-located land
Doesn’t apply
- People and other living things
- Machines and buildings, which wear out (though the land under them doesn’t)
- Fads with a natural expiry
- Anything kept alive by temporary conditions, such as cheap debt or a single patent
The Lindy effect in investing
For investors, the Lindy effect is a useful filter, not a forecast. It suggests three habits.
Prefer the proven
A business that has compounded through several recessions, rate cycles and technological shifts has shown a resilience that no business plan can demonstrate.
Respect old ideas
Principles that have served investors for generations, such as buying good businesses, not overpaying and avoiding ruinous debt, deserve more weight than this year’s theory.
Treat newness with caution
New technologies can be enormously valuable, but most new things fail. Where we own businesses exposed to change, we want them to be the ones driving it.
Limits and criticisms
- It’s a tendency, not a law. Long-lived companies do fail, sometimes quickly when technology shifts beneath them.
- Survivorship bias. We see the survivors, not the many that failed at the same age. Age alone doesn’t prove quality.
- Price still matters. A durable business bought at an excessive price can still be a poor investment.
- The maths is narrower than the slogan. The neat “expect it to last as long again” version holds only under particular statistical assumptions.
How Lindy Capital uses it
The Lindy test is the second step in our process. Before we consider price, we ask how long a business, product or type of asset has existed and what it has already survived. It sits alongside our other tests (durable economics, a downside stress test and a sensible price) and never replaces them.
See our full investment approach →
Questions
Who came up with the Lindy effect?
The idea first appeared in Albert Goldman’s 1964 article “Lindy’s Law” in The New Republic. Benoit Mandelbrot formalised a version in 1982, and Nassim Nicholas Taleb coined the term “Lindy effect” in Antifragile (2012).
Is the Lindy effect real?
It is a recognised statistical tendency for non-perishable things whose lifetimes follow a power-law distribution. It works well as a rule of thumb, but it guarantees nothing about any single case.
Does the Lindy effect apply to companies?
Partly. Businesses don’t age biologically, so a long record of survival is meaningful evidence of resilience. But companies can be disrupted, so the Lindy test works best alongside analysis of the business and its price.
What is the opposite of the Lindy effect?
Ageing. For living things and machines, each extra year shortens the remaining life expectancy rather than lengthening it.
Sources
- Goldman, A. “Lindy’s Law.” The New Republic, 13 June 1964.
- Mandelbrot, B. The Fractal Geometry of Nature. 1982.
- Taleb, N. N. Antifragile: Things That Gain from Disorder. 2012.
- Lindy effect, Wikipedia.