The Long Finance Initiative: A Clock Ticking in Dog Years

The Long Finance initiative is a fascinating and somewhat audacious endeavor that challenges conventional thinking about time horizons in finance. Launched in 2007 by Michael Mainelli and Ian Harris, it operates under the umbrella of the Z/Yen Group, a commercial think-tank. Its core objective is to promote long-term thinking and investment, encouraging a shift away from the short-term pressures that often dominate financial markets and corporate decision-making.

The initiative’s central analogy is the “Clock of the Long Now” (also known as the 10,000-year clock), a mechanical clock designed to keep accurate time for ten millennia. Long Finance seeks to build institutions and practices that similarly focus on durations far beyond the typical quarterly earnings report or annual shareholder meeting. The idea is that responsible stewardship requires a timescale that aligns with the long-term consequences of our actions, particularly in areas like infrastructure, climate change, and intergenerational equity.

Long Finance isn’t advocating for reckless, speculative bets on distant futures. Instead, it champions strategies that consider the enduring impact of investments and policies. This involves developing metrics and frameworks that properly account for long-term risks and rewards. For example, traditional discounted cash flow analysis can undervalue projects with payoffs far in the future because of the inherent discounting of future returns. Long Finance seeks alternative valuation methods that give greater weight to these later benefits.

One of the key activities of Long Finance is the development of “Meta-currenices.” These are currencies designed with built-in mechanisms to encourage long-term holding. Examples include demurrage (a holding fee that erodes value over time, incentivizing spending or investment) or interest-bearing structures that reward patience. The aim is to create monetary systems that counteract the tendency towards short-term speculation and hoarding.

Another important aspect is its focus on “Perpetual Motion Portfolios.” These are investment strategies designed to generate sustainable returns over extended periods, adapting to changing market conditions and societal needs. The concept emphasizes diversification, resilience, and a commitment to long-term capital preservation.

The initiative publishes research, hosts events, and engages with policymakers and financial professionals to raise awareness about the importance of long-termism. It promotes ethical considerations and social responsibility in financial decision-making, arguing that a longer perspective fosters a more sustainable and equitable economic system.

While the specific proposals of Long Finance may be debated and refined, its overarching message is clear: the financial system needs to better account for the long-term consequences of its actions. By challenging conventional wisdom and exploring innovative approaches, Long Finance aims to contribute to a more responsible and future-oriented financial landscape, one where the “dog years” of rapid change are balanced with a commitment to enduring value.