The Lindy Effect for Business Buying
The longer a business has survived, the longer it's likely to last.
- Difficulty
- Easy
- Time to result
- ~ongoing to results
- Steps
- 2
- Confidence
- 85%
The Lindy effect states that the longer something non-perishable has already existed, the longer its remaining life expectancy. Sanchez applies it to business buying: a company that has survived 5 to 7 years has a higher probability of continuing than a brand-new startup. Because roughly 50-60% of businesses fail in that early window, buying an established one effectively cuts your failure risk in half. She frames it as the opposite of the intuition that 'old means outdated' — old actually means proven.
Origin
Sanchez borrows the Lindy effect concept and applies it as a core screening rule in Main Street Millionaire to justify buying established boring businesses over startups.
Core principles
- 01Age is a proxy for durability, not obsolescence
- 02Historical survival predicts future survival
- 03Buying an established business removes most of the startup failure rate
How to run it
- 1
Measure the age
Determine how many years the business has been operating; use 5 to 7 years as a threshold for meaningful survival.
- 2
Translate age into de-risked odds
Recognize that surviving past 5-7 years removes the bulk of the 50-60% failure rate, leaving a far more resilient business.
Pro tip Frame it to yourself as a startup with half the failure risk already removed.
In the wild
Sanchez asks the listener to imagine being offered a startup with 50% lower failure risk, then points out that a boring business surviving 5-7 years is exactly that.
→ Buyers reframe established businesses as lower-risk startups rather than stale relics.
Common mistakes
Dismissing old businesses as outdated
Assuming a 30-year-old business must be broken ignores that its longevity is evidence of durability.
Is it for you?
Best for
Risk-averse buyers wanting to de-risk their first acquisition.
Not ideal for
Investors specifically seeking early-stage, high-growth upside.
From the transcript
“the Lindy effect says the longer a business has been in existence the higher likelihood it will have to continue to be in business”
“if you look at businesses that have have survived for over 5 to 7 years you have taken away anywhere from 50 to 60% failure…”
From the episode
Codie Sanchez: How to Make Extraordinary Wealth Buying Boring Businesses
Codie Sanchez