I. Timescale
In the long run, good things happen to good people.
“Things gravitate toward what they were intended for.”
— Marcus Aurelius
If it’s bad now, you just need to wait longer.
Extend your time scale (backwards-looking) and be more patient (forwards-looking).
Do these, and it will be clear.
I. Boring Beauty
When something profound (good or bad) happens, we finally realize the beauty of our mundane lives.
“I wish there was a way to know you were in the good old days before you actually left them.”
— Andy Bernard (Ed Helms)
Life is like a good record.
Fleeting with unlimited meaning.
However you want to listen, the choice is yours.
I. The Hidden
Reality is also what we don’t see.
“Just because you haven’t seen a black swan, doesn’t mean one doesn’t exist. Just because you’ve only seen white swans, doesn’t mean that’s all that exists.”
— Nassim Taleb
Our realities are mostly shaped by our experiences. Yet, different (unseen) outcomes are possible, even typical, for other people.
It would sometimes serve us better to see what we cannot see.
I. Rivers of Time
Every moment is unique.
“No man ever steps in the same river twice, for it’s not the same river and he’s not the same man.”
— Heraclitus
Whether it be your view of the world, your circumstances, or the people around you, each second that passes is accompanied by change.
You cannot live the same moment twice.
I. Fighting Types
The best skills come from within.
“The student as boxer, not fencer.
The fencer’s weapon is picked up and put down again.
The boxer’s is part of him.
All he has to do is clench his fist.”
— Marcus Aurelius
We spend time trying to control the wrong things. With limited attention, what are the weapons you care about most?
Be a boxer, not a fencer.
Warren Buffet has an interesting principal he follows.
At the end of each year, a company gets to decide what to do with their earnings. Some companies issue a portion of the money to their shareholders; this is called a dividend. Most investors love it, in fact some design their portfolios to exclusively invest in companies that provide annual dividends. Warren on the other hand? He HATES investing in these companies.
Why? When you receive a dividend, you realize gains, which means you have to pay taxes each year.
Warren would rather the money was reinvested into the business to help it grow.
First off, this allows him to avoid taxes for as long as he can. But if we remember the rules of compounding, it allows his money to stay in the system and work even harder. Warren wants to be taxed only once, at the very end when the journey is over, not throughout.
Buffett principal #2: Never take your money out
The first rule of compounding is to start as early as you can.
But once your money is in, we want to optimize towards growth – this means paying as little as possible.
“The objective is to buy a non-dividend-paying stock that compounds for 30 years at 15% a year and pay only a single tax at the end of the period. After taxes this works out to a 13.4% annual rate of return.
Charlie Munger, 1998
If you invested $10,000 with Warren Buffett, at his annual rate of return of 23%, the following chart shows you the amount you’d have in 30 years, based off if you paid taxes each year versus allowed the money to keep compounding.
Breaks vs BRAKES
Breaks are healthy – they allow us to recover and admire our results.
Trouble comes when we allow a short break to turn into hitting the brakes (that is, stopping completely).
Here’s what what I mean:
Warren’s principal reminds us of the power of pausing too often or for too long.
Once you stop showing up, you stop gaining.
You’ve decided to start (that’s great!), but don’t underestimate the importance of continued hustle. The laws of compounding don’t care if you’ve had a bad day, or it’s a busy week.
When we decide to follow through, we continue to gain, period.
So wherever you are, keep it up, and just like Warren you too will enjoy the aggregation, not of a single year, but an exponential 30 years.
Getting up when others won’t is what makes all the difference.
And who knows, that determination might be worth an extra $2.8M dollars, in whichever domain you’re compounding.
Post inspired by:
Buffettology: Unexplained Techniques That Have Made Warren Buffett by Mary Buffett
Last week Jack Bogle passed away. A true financial great, Jack made some of the most pivotal contributions to finance and investing throughout his career. Don’t just take my word for it, even other legends agree:
“If a statue is ever erected to honor the person who has done the most for American investors, the hands down choice should be Jack Bogle.
In his early years, Jack was frequently mocked by the investment-management industry.
Today, however, he has the satisfaction of knowing that he helped millions of investors realize far better returns on their savings than they otherwise would have earned. He is a hero to them and to me.”
Warren Buffet, Berkshire Annual Letter 2016
In this writeup, I outline my favorite Jack Bogle lessons, all of them have applications outside of money management and may be applied in wider ways across your life. The quotes within are taken from, “The Bogleheads’ Guide to Investing“
The best gains in life grow in a compounding fashion; returns continue to grow on top of prior returns. The amounts your money can earn in Year 1 will be far smaller than year 2, year 3 or year 5.
“It may not seem like a big deal, until you realize that every time the money doubles, it becomes 4, then 8, then 16 times your original investment.
Start with one penny and double it every day, on the thirtieth day it compounds to $5,338,709.12.”
LESSON: Most people search for linear gains. Instead, set your pursuits on investments that can yield compounding results.
Related: The Impact of a Starbucks Latte
If your young, your greatest advantage is starting earlier than your competition. “The best time to plant a tree is twenty years ago. The second best time is now.” The old proverb goes. At face-value, a few years doesn’t sound like much, until you account for compounding interest.
“Let’s assume a child is born today. For the next 65 years, she or her parents will deposit a certain amount into a stock mutual fund that pays an average annual return of 10 percent.
How much do you think they need to deposit each day in order for her to have $1 million at age 65? Five dollars? Ten Dollars?
In fact, a daily deposit of only 54 cents compounds to more than $1 million in 65 years.
It really helps to start early.“
LESSON: The most important thing you can do is start today. Forget about the marginal progress you’ll make on Day 1, it’s the fact that you got off the couch and began that matters most.
Related: Ninety-Percent of life is about showing up on time
The common-person thinks the only path to wealth is to generate more income. While making more money can help, there’s a second part to the equation, one which is often times ignored: minimizing costs.
“Reducing your spending [costs] is financially more efficient than earning more money.
For every additional dollar of earnings you plan to save, you will likely have to earn $1.40 because you have to pay income taxes.
However, every dollar unspent can be invested [immediately for compounding gains].”
LESSON: While most people focus on gains, you should also consider the power of subtractions. You don’t need to add another book to your reading list, you need to remove one not servicing your needs.
Choosing a single winner is far harder than it may appear. While markets are meant to show the “real value” of an asset, it’s nearly impossible to predict their future value. You’ll fare much better by holding the entire market; when the economy wins, you win too.
The fastest way to get rich in the stock market is to own the next Microsoft. The fastest way to lose all your money is to own the next Enron. Identifying them in advance is impossible.
However, you don’t have to identify them in advance to make a healthy return on your investment. If you buy an S&P 500 index fund, your investment is highly diversified and its performance will match that of 500 leading U.S. corporations’ stocks.
Over 10 years, the average expert-picked stocks were up an annualized 8% compared to the market index return of 9.5%.
A 1.5% difference may not seem like much, but compounded over a lifetime it makes a tremendous difference.
LESSON: Don’t waste your time trying to find a needle in a haystack. Sure you may get lucky sometimes, but odds are you’ll fare better by holding a small piece of everything. Worry about getting the market (macro) right, not the stock (micro).
RIP Jack, you will be missed.
Written on April 5th, 2018 10 minute read
Everyone has trouble delaying gratification, but some people have it worse than others.
Let’s explore why it’s so hard, and how it connects to your success.
Our brains are wired to favor immediate reward.
Two Million years ago, our only priority was to stay alive. Cavemen didn’t have time to sit around and contemplate life (sorry Aristotle!), instead they needed to hunt and gather. Our human brains encouraged this behavior through a short-term feedback loop, which worked really well. This simple system was at the root of our survival; don’t be eaten, successfully procreate, and improve living conditions.
While humans have evolved and developed the ability to rationalize, our brains continue to use the same decision-making system.
It’s as if we have the newest iPhone, but it’s running on the original Mac software.
Using fMRI machines, scientists can observe what is going on in our brains while we make decisions. Ultimately, it’s a fight between two parts of your brain; emotional vs. rational.
When we choose immediate gratification, our emotional parts are in control; when we choose future rewards, our rational parts are running the show. (Brain Battles, 2004).
This explains why, when we’re under stress, we tend to break goals and indulge in bad habits. Stress basically numbs our prefrontal cortex and gives complete control to the amygdala.
That’s our fight or flight mechanism, and, when that’s in control, the fighters take new shape. (The amygdala and decision making, 2010).
It’s like emotional morphs into Muhammed Ali, while rational downgrades into a nostalgic childhood geek.
Place your bets.
Today’s world is significantly different than that of our ancestors; our goals are at odds with our brains.
Want to get in better shape?
Want to start a business?
Want to be more financially independent?
We’re in a constant fight against immediate reward, and our ability to overcome it is extremely predictive of future success.
This is especially true in the 21st century, but, before we apply it to our lives today, let’s take a quick look back on history.
Time dilation is a scientific concept discovered in 1897 by Joseph Larmor (source). Time dilation occurs when two people are looking at the same event but observe a different amount of elapsed time.
When this gets discussed in the scientific community, it’s focused around velocity and gravitational fields. For example, when we are on Earth we look out into the universe and view things in “Earth-time,” which is based on our gravitational field. If we were on Mars, we would see the exact same events, but happening slightly slower. This is because the gravitational field on Mars is different, and, therefore, time moves at a different speed.
Have you seen the movie Interstellar?
The scene below is touted by some astrophysicists as one of the best visual representations of time dilation ever. In this scene, part of the team spends less than 15 minutes on a high-gravitational planet. When they return back to their ship, 23 years has passed for the crew members who remained on board.
Instead of velocity and gravity, it’s based on our experiences and use of technology.
Here’s what I mean:
The technology we use has subtly established new baselines for our expectations and our patience.
This change began a few centuries ago, but it is progressing. Quickly.
Months: In the 1600s, when settlers first arrived in America, they set up a monthly horseback post between New York and Boston [1]. Back in that time, that was the speed of communication and exploration; it was their reality. Think about it, not only did they wait months to receive messages by post, but it took them months to sail across the ocean and arrive in America. Their reference point for time was in months, basically the currency or units of exchange.
Days: Once the United States Postal Service was established in 1775, improvements in infrastructure allowed mail to be delivered on a more regular basis. By the 1800s, Americans were becoming used to receiving new mail each day, a vast improvement from the century before. With this improvement, the new baseline shifted from monthly to daily.
Hours: In the late 1800s, Alexander Graham Bell figured out a way to transmit sounds over wires, creating the landline telephone [2]. While the invention occurred in the 1800s, consumer adoption didn’t start taking hold until the 1960s [3]. With a telephone in every home and office, it was expected that you’d be able to answer or return a call within a few hours of receiving one. What was also widely popular around this time? The color television and the evening news. These technologies helped create a new world, one understood by the hour.
Minutes: Ray Tomlinson is credited with inventing email in 1972 [4], but it wasn’t until the 1990’s when email became more adopted by everyday people. Likewise, microwaves become common in every home, which meant one great leap; foods that were meant to take an hour to cook, would now be ready in minutes. Children born in the 90’s are also referred to as the “Microwave generation” for this reason. Kids growing up at this time naturally saw the world through minutes, and would now be able to have another basic need even faster than their parents.
Seconds: Steve Jobs. Just by saying his name, you likely pictured two things; iPhones and black turtlenecks. We can credit him with the proliferation of smartphones, and along with those, improvements in mobile apps, sites and tools. A few seconds, can feel like an eternity. And if you need proof of this point, 53% of mobile users abandon sites that take longer than 3 seconds to load [5]. Today, for better or worse, the baseline is seconds.
The boxes are getting smaller and the clocks are halvening. Improvements are taking less time to develop and, when they go into production, their addition is exponential.
Consider how often you may check social media after you’ve added a post, or how often you refresh your inbox after an important email has been sent. Do you think of it in months, days, hours, minutes, or seconds? The sheer speed we now have has changed our definition of delayed gratification; time has recalibrated.
Which takes us back to our kid and grandparent graphic; same reality, different baselines.
Your baseline is highly predicated on the way you choose to use the technology available. If you allow it to control your expectations and understanding of speed, you will continue to have difficulty delaying gratification.
And, gratification, is where this all comes together.
Our greatest pursuits are set on long time horizons.
The more ambitious the goal, the longer you must persist without immediate results.
Perhaps this is one reason why we look at wildly successful individuals as if they are cut from a different cloth. It’s as if they possess some sort of magical power to accomplish remarkable things, meanwhile, we are merely “average.” Yet, fundamentally, they are more masterful at delaying gratification. A small part may be in their genes, but I’d posit it’s mostly hard-work, focus and comfort when waiting to reap reward.
The Reward Delayed Timeline
They are achieving goals that have longer reward delays. As their ambition and impact increase so do the stakes and risk. Are they immune to reality and natural stress? Certainly not. They stay grounded and honest to the necessary waiting period needed to get the job done. By surrounding themselves with others who are similar, it makes goals feel more possible and recalibrates their natural baseline to a new timeframe.
“The first order thought of instant gratification is a crowded path, ensuring mediocre results at best. Delayed gratification, which requires second order thinking, is less crowded and more likely to get results.”
A simple example would be writing this article. Believe it or not, this article took two months to complete. That meant opening a Google Doc hundreds of times, only to see incomplete or partial work. The writing too underdeveloped so I couldn’t share my work for feedback. I was forced to wait.
Here’s the thing, if I had to plot it on the Reward Delayed Timeline, it’s not that high; it falls somewhere around “Skilled.” It’s measly compared to a founder starting a business (Industry Leader) or a personal favorite of mine, Elon Musk (World Changer). Getting humanity to Mars is at least a 30 year project, which has minimal feedback loops along the way. That’s some serious second order thinking.
You can do it.
Repeat, repeat, repeat.
As our baseline shifts, it becomes harder to stay on task, delay results, and produce deep meaningful impact.
I believe that if you can put your phone down and detach more often, you’ll be better at setting time-delayed goals and sticking to them. By focusing your efforts on a reward-delayed timeline strategy, you can correctly plot the ambition, skills and patience needed to get the job done.
Because once you become a master of yourself, you can master anything.
And that’s Delayed…
..
Gratification
…
..
at its finest.
Written on March 8th, 2018 8 minute read
If you’re reading this article, I need to thank you.
Thank you for becoming a fan, sharing with friends, and for all of the encouragement along the way.
Building a subscriber base is a lot like weight lifting.
The first time you hit the gym, your muscles aren’t very strong. Something as light as 25 pounds, really feels like 100.
Well, that’s the same thing that happens when you start anything new. I’ll use this blog as an example, but odds are, you’re also working on something you’re excited about too. Take this framework and fit it into whatever constitutes as your blog.
If you plot difficulty over your most ambitious goals, they get more achievable over time. It takes a while to establish a base, but once you do, the next goalpost becomes easier. Much like when you hit the gym, the first set of weights feel way heavier, but if you stick with it, your muscles build and those once heavier weights become your warm-up exercise.
It has this funny compounding effect; where your progress keeps doubling, yet, it continues to get easier. Your ability to impact keeps growing too. Suddenly lifting 100 pounds feels less than your original 50 pound rep on day one.
This blog is still in its earliest infancy. We’re deciding which exercises make sense and when to fit the gym into the busyness of life. We have to zoom in really close to see the location.
Life is about the journey, not the destination.
This past month, you’ve seen me lace up my sneakers and hit the gym. After a month of checking out the equipment, I’ve decided to put a new workout plan in place. That’s right, channeling my inner Kanye =)
Monday Tidbits are staying, but I’m switching around the article content.
I want to go deeper on these topics and add more visuals (similar to this week). Who knows, maybe there will be video content too or a podcast for the train ride or drive. But basically, the articles won’t come every Thursday.
If you’ve enjoyed anything so far, or thought this week was cool, I think you’ll love what’s coming next.
The destination may change but who cares?
Changing the workout routine keeps life interesting.
It’s all about the journey,
Alex
In the 1950’s after rigorous mathematical computations of the physics of our anatomy, experts concluded that it was impossible for a human to run a mile in less than 4 minutes.
A physical impossibility, scientists said. Then along came Roger Bannister, who in 1954 broke the barrier with an official time of 3:59.4
Suddenly, the floodgates opened. Within a month, Roger’s record was beat. Within the next four years, runners would continue to oust each other. Today the record stands at 3:43.13
We tend to look at averages to determine what is attainable. Truth is, we do not know the limits of human potential. Our brains change in response to our actions and circumstances.
When we bring talented people together our baseline for achievement rises and suddenly we’re all breaking records once deemed “impossible.”
