In a legendary moment during the 1932 World Series, Babe Ruth pointed to the stands to show exactly where he was going to hit a homerun — and then did it.
In 2006, Elon Musk enacted his own version of pointing to the stands, publishing a seemingly impossible 10-year plan:
- Create a low-volume car that, by necessity, would be expensive.
- Use that money to develop a medium-volume car at a lower price.
- Use that money to create an affordable, high-volume car.
- Provide solar power.
Like Ruth, Musk proved himself a prophet: On July 20, 2016, he announced all four goals had been achieved.
This is amazing in its own right. But it’s also fascinating because it flies in the face of much of the current dogma in Silicon Valley. Telling founders to “fail fast” and keep their businesses “lean” encourages ultra short-term thinking. (“Business plan? No, it will be outdated as soon as it hits the real world! 10-year plan? How can you even think that far ahead?!”)
Ten years ago when I was a 25-year-old founder, I felt this intense pressure to focus on what was right in front of me. Instead, I made a decision that has made all of my subsequent success possible: I chose to play the long game, rather than the short. I chose to look 10 years ahead, rather than three months. When getting my company IWT off the ground, instead of focusing on launching products to make money fast, I focused on building a tribe of true fans and students for life. I call this approach the 10-Year Principle.
Sounds simple, right? Wrong. The reality was brutal. That one resolution led to many difficult, counterintuitive decisions I would’ve never made otherwise. Because of the decision:
- IWT didn’t launch its first product for three years
- I read and responded to 1,000+ emails every day for years
- We spent years and hundreds of thousands of dollars to develop courses
- We discontinued highly profitable courses that weren’t delivering the results we wanted for our clients.
- Banned people with credit card debt from taking our flagship courses
These decisions cost us millions of dollars in potential revenue. For example, this meant we couldn’t hire as fast as a venture-backed startup. It also meant we could only launch a small number of products, increasing the pressure on us to make each one count. Imagine someone offering you millions of dollars in cash and then turning that down. That’s essentially what we did.
But day by day, the strategy started to pay off. It helped us build students for life: customers who buy every new course we create. Today, we have dozens of employees and are growing rapidly.
Put simply, the time frame in which you make your decisions determines your logic. Things that make sense in the long term might seem crazy to people who only think of the short term.
But here’s the thing: while long-term thinking seems crazy when you don’t understand it, short-term thinking often really is crazy. Let me give you an example…
The hidden costs of short-term thinking
I once left a big watermelon sitting on my kitchen counter. Every day as I walked by it, I thought to myself, “I’ll eat this later.” Eventually, I started thinking, “Okay. I’ll just throw this away later.”
I did this religiously for weeks until one day, I walked into my kitchen and saw a pool of liquid on the floor. Apparently, watermelons liquefy and turn into some kind of alcohol-smelling ooze after you let them sit for five months.
I’m not lazy. I’m not stupid. So why couldn’t I get around to picking that watermelon up and throwing it in the garbage? I was thinking ultra short-term. The watermelon was big and heavy and I had better things to do, so it made sense not to deal with it in the moment. I was being completely logical. But over time all these rational short-term decisions led to a disgusting mess.
The same thing can happen at a startup. Go too long without thinking about the company’s long-term future, and you could easily end up with a mess on your hands.
So how do you escape the short-term thinking trap?
The first step is realizing that while short-term sacrifices feel bad at the time, they can also lead to disproportionate rewards in the future.
Take the famous Marshmallow Test, a series of experiments in the late 1960s and early 1970s in which children were offered a choice between receiving one marshmallow immediately, or two if they waited 15 minutes. Follow-ups over the next 40 years showed the kids who waited were healthier and more successful in school years later.
Most entrepreneurs behave like the kids who gobbled that single marshmallow. Successful entrepreneurs know better. Along with Musk, many of the country’s top entrepreneurs like Jeff Bezos, Mark Zuckerberg, and Sam Altman are thinking more long-term than ever, not less. In fact, they look at it as their competitive advantage.
Jeff Bezos, for example, measures the success of new initiatives over seven-year time frames, while most of his competitors are focused on quarterly earnings.
Mark Zuckerberg – who recently released his own 10-year plan – reflected, “If I were starting now, I would have stayed in Boston. [Silicon Valley] is a little short-term focused and that bothers me.”
Sam Altman, the president of Y Combinator, the largest accelerator in the world, refers to long-term thinking as “one of the few arbitrage opportunities left in the market.” He adds, “When you’re thinking about a startup, it’s really worthwhile to think about something you’re willing to make a very long-term commitment to because that is where the current void in the market is.”
I’m not saying it’s easy. If it was, everyone would do it. But if Musk, Zuckerberg, Bezos, and Altman’s careers are any indication, patience pays off.
So give yourself the space and time to think about your company’s long-term future. At IWT, I have a no-meeting Wednesday strategy day: no meetings, no calls, just time to think about strategy and where the company is going. Long-term thinking takes perspective, and even a designated hour per week can have a huge impact.
If you aren’t taking the time to get this long-term perspective, you’re leaving marshmallows (read: money) on the table.
– Ramit Sethi is the founder of Growth Lab and IWT
This story originally appeared on Fortune.