Do not take yearly results too seriously. Instead, focus on four or five-year averages. — Warren Buffett

Do not take yearly results too seriously. Instead, focus on four or five-year averages.

Author: Warren Buffett

Insight: We're wired to care intensely about what happened last quarter, last month, or last week. A stock drops 10 percent and we panic. We have one bad work quarter and feel like failures. One great year and we think we've figured it all out. But this obsession with the immediate creates constant emotional whiplash and usually leads to terrible decisions—selling low in fear, or taking wild risks after a lucky win. Buffett's point cuts deeper than just investing. Any worthwhile endeavor—a career, a relationship, a fitness goal, a creative project—has natural rhythms and noise. What looks like progress one year might flatten the next. What looks like failure might be the foundation for breakthrough. When you zoom out to four or five years, the noise fades and you actually see the trend. You stop reacting to every tremor and start noticing if you're moving in the right direction overall. The tricky part is that our brains hate this prescription. We want instant feedback. We want to know how we're doing right now. But the moment you accept that real results reveal themselves slowly, you gain something valuable: permission to stick with your actual strategy long enough for it to work. That might be the most practical advantage of thinking in longer averages—it makes patience feel rational instead of agonizing.

Source: Berkshire Hathaway Annual Letter to Shareholders, 2024