What's your time horizon?

Professor Kay of the London School of Economics last week published his report, "The Kay Review of UK Equity Markets and Long-Term Decision Making".  The 'probe' into the financial sector was intended to consider the extent to which the UK equity market is excessively focused on short-term outcomes, to the detriment of its 'core role' in facilitating investment and enabling long-term profitability and growth.

What relevance to you in your quest for greater life satisfaction, other than the obvious hits that your savings are likely to have taken?

Think of your life satisfaction as the primary asset of Life Satisfaction Ltd of which you are the boss, the Chief Executive Officer (CEO).  Following one of our earlier concepts, 'CEO of You', you are also the major shareholder hoping to maximise your return from Life Satisfaction Ltd's success. 

So, let's play in today's equity market.

Kay's critique of the UK equity markets is that in an increasingly unstable and complex market, the trust and confidence in delivering a long term financial benefit has been replaced with the desire for short term gain.  Added to this is the fact that the value of the company is increasingly affected by what other's think of it, driving further short term impulsive action.

In essence, all those involved in the company are taking quicker decisions on how to maximise their asset value today based on insufficient consideration of a long term trends, combined with a concern as to what others are thinking,  at the expense of delivering a long term benefit.

Maybe we can understand after all how the equity fund managers and the country's best CEO's have got us to where we are.

At Professor Kay's report presentation, he stated: "This isn’t – let’s emphasise – because people are not trying to do the right thing, as they see it. It is because they are responding to the incentives created by the environment in which they operate."

So, how to assess the value of your life satisfaction asset, and how to incentivise yourself to a longer term view?

There are two bases for asset valuation:
1. The value of cash and earnings that it will generate over its life - if you were to invest in it
2. What someone else is willing to pay for that asset - if you were to trade it

Both bases play a part when looking to maximise your life satisfaction. Certainly it is worth focusing on the value of life satisfaction over as long a term as feasible. Giving up work to spend time with your children may not be the best strategy in optimising life satisfaction when considering a 15 year time horizon. Pursuing that promotion at the expense of your health will not be the best strategy over the same period. The aim here is sustainability.

How can you sustainably deliver a high value of life satisfaction over your lifetime?  If you are eco minded, you may even consider extending to consideration of your future generations. Incentivise yourself to meet the targets that you set for yourself across your Life Scorecard over time, not just one component today.

It's also worth considering what you would trade your life satisfaction for. Get to the point that you wouldn't want to trade your life for anyone's and you know you are on to a winner.