[ahtihn]

> Why take a 3x in 5 years when you can get a 25x in 15 years?

3x in 5 years is equivalent to 27x in 15 years.

Obviously it's not that simple in practice but it's not like it's easy to predict growth over a 15 year period.

[eftychis]

The issue here is the lack of opportunities. You have a finite number of bins to place your money in. If you find a "winner," there is no necessarily refresh to get new winners.

After some amount invested that likely most people will never see one has a hard time finding suitable places to reinvest -- that is experienced by eg the renessaince fund, Warren buffet etc. Or of course you can inflate the public or private market

[danielmarkbruce]

"roughly" is in the next sentence...and if we are being so pedantic "equivalent" is the wrong phrasing for everyone except like 10 people.

[danuker]

> "equivalent" is the wrong phrasing

A 15-year period is 3 times longer than a 5-year period.

5x3 = 15

Compounding the 3x return, for 3 times:

3^3 = 27

They are exactly, mathematically equivalent.

But of course there's no way to predict that the growth rate will stay the same. Logistic functions look like exponentials, until they suddenly don't (market saturation).

[danielmarkbruce]

The IRR is equivalent. You can't eat(spend) IRR.

The NPV is not equivalent (unless you happen to have a cost of capital = 25%... like about 10 people). The cash on cash is not equivalent. Every person on planet earth will take the 15 year compounding (again except the 10 or so..).... hence they are not equivalent. When returns are high, investors are not indifferent to time horizon. Longer is better. To make it extremely clear - would you prefer IRR of 50% for 1 minute or 10 years?

The only statement which is precise enough is "the IRR is equivalent". Anyone can be pedantic, it rarely helps.

[danuker]

You are right. Only in a zero-interest-rate environment are they "equivalent" WRT NPV. If you can safely get high returns, then you have to discount them.

[danielmarkbruce]

They are equivalent NPV wise only when the cost of capital is 25%. Cost of capital is a fuzzy concept and different folks have different numbers based on all kinds of things (despite the precise numbers put in spreadsheets). From a practical perspective they will almost never be NPV equivalent.

[TrackerFF]

I'd imagine that every acquisition comes with a non-negligible acquisition cost, which should be baked into the calculation.

Less companies held over a longer time would mean less acquisition costs, while more companies held over a shorter time would mean more acquisition costs.