The Long Arithmetic: Issue 3

In 1669, Louis XIV’s finance minister, Jean-Baptiste Colbert, signed an ordinance reorganizing the royal forests of France. One of them, the Forêt de Tronçais in the country’s center, was given a specific job. Oaks were planted in dense rows so they would grow tall and straight, interplanted with beech to keep the trunks knot-free. The intended use was naval timber: the masts of French warships the Crown expected to build two centuries later.

The oaks did what they were planted to do. By the 1860s, when most of them had reached maturity, France was building ships of iron. The wooden masts they had been planted for were already obsolete.

The forest is still standing. Today the Tronçais oaks supply the staves for cognac casks and the great Bordeaux wines.

Colbert had been wrong about the use. He had been right about something else.

This is what I see in that forest. Patience in capital is three different disciplines that have been crowded into one word, and most people who call themselves patient hold only one of the three.

If you’re working on wealth you’re building over the next twenty or thirty years, it’s probably worth asking which of the three you actually have.

This is the form most people mean when they say patience.

The position is open. The thesis was good when it was bought. Months pass. The market trades sideways. Quarterly statements arrive without much to show. There is nothing wrong with the holding, and there is also nothing to point at when someone asks how the year is going.

This is uncomfortable in a particular way, and the discomfort produces a specific reaction: the reach for activity. People rebalance things that don’t need rebalancing. They trim winners “to lock in gains.” They add to losers “to dollar-cost in.” They take a meeting with a sponsor they would have ignored in a louder year. The activity is doing real work, but the work it’s doing is mostly relieving the discomfort of the holder, not improving the holdings.

I’ve caught myself doing this. A quiet quarter, a position I haven’t touched in six months, and I’d find myself opening the spreadsheet and looking for a reason to do something. The reason was usually that I was uncomfortable, not that the spreadsheet was.

The most useful question to ask in this state is whether the same action would be taken on a stranger’s book, given only the holdings and not the holder. Usually, the answer is no. Which is information about the state of the holder, more than the state of the holdings.

This one is harder, and probably the most expensive of the three.

The portfolio is fine. Nothing material has changed since last week. But this week, the advisor is calling about a private credit fund that closes Monday. A peer mentions a six-cap industrial deal his syndicator is finalizing. A finance writer is predicting a market move in the next quarter. None of these have anything to do with what you already hold. All of them carry the same emotional pressure: other people are doing something, and you are not.

What’s being communicated is mostly information about other people’s urgency. Mistaking it for information about your own position is one of the more common ways that careful portfolios get unbuilt.

The hard part is that the social pressure doesn’t feel like social pressure when it arrives. It feels like an opportunity that has unfortunately appeared on a tight deadline. The thirty-minute window inside which an LP decision feels urgent is almost always a function of someone else’s calendar, not yours. The question worth sitting with before you wire is whether you would have called the sponsor on your own initiative this week, unprompted. If not, the urgency was theirs, and you’ve probably just adopted it.

This is the form almost nobody has.

When you put a position on, you wrote a thesis. The thesis had a horizon: five years, ten, twenty. Most people’s mental scoreboards don’t refresh at those intervals. They refresh quarterly, or at year-end, or at eighteen months, because that’s the cadence at which something has to be reported, taxed, or compared against a benchmark.

What happens is that the reporting cadence quietly becomes the decision cadence. A position with a ten-year thesis gets reviewed at eighteen months. At eighteen months, almost any thesis still looks unfinished, because almost any thesis still is unfinished. The investor takes the unfinished reading as a verdict and sells, or rotates, or mentally writes off.

I invested in a syndication in 2017 with a projected exit around a 2x equity multiple. By 2022 the sponsor sold and the actual multiple was 1.13. Somewhere in the middle of those five years, the reading on the deal shifted from “this will probably hit thesis” to “we may only get principal back.” In a syndication I can’t exit on my own initiative. What I can do, and what I almost did somewhere around year four, is write the deal off in my head before the sponsor closes it, and let the assumed-loser status shape how I underwrite the next position. Pre-writing the verdict before the deal closes is the move I have to watch in myself.

The Colbert version of this is letting the oaks grow long enough that the original use disappeared and a different one found them. The investor’s version is letting a position run long enough that the thesis you wrote down may turn out to be wrong, while the asset turns out to be right anyway, for reasons you couldn’t have priced in. The cost of being early is rarely catastrophic. The cost of being on time and not seeing it, because the scoreboard updated before the thesis did, is harder to measure, because it doesn’t appear on any statement.

Most of the people I know who call themselves long-term investors have the first form. They can sit through stillness. They take the call, or they pull the trigger at the scoreboard refresh.

A smaller group has the first two but not the third. They sit through stillness, they let the call go, and then they cut a long thesis short because the eighteen-month reading looked off.

A very small group has all three. They tend to be people whose thinking horizon is something a generation longer than their own working career. They don’t need the position to be verified inside the window of their own bonus cycle.

Patient capital, in the end, comes down to which of the three disciplines you have available, and which the situation is currently asking for. The painful situation is the one that requires the discipline you haven’t yet built.

The question “am I patient” usually gives you the answer you want to hear. A more useful one is which of the three forms you currently have, and which the situation in front of you is asking for.

The naming is most of the work. Once you can say which form is being asked, the next move is usually clearer than it was a minute ago, which is often that there is no move.

Colbert’s forest made it because the system protecting it had all three. Most portfolios make it on one and a half.

Disclaimer: This is not financial advice. Consult your CPA or licensed advisor before acting on anything specific to your situation.

Until Monday.

Alina