Snowballs, Bicycles, Spaceships, and Flywheels: Successful Investing Takes Patience and Perseverance

Adopt the pace of nature; her secret is patience.  –Ralph Waldo Emerson, American author, poet, and philosopher

Last year I lost my cell phone on an out of state trip.  I prepare taxes out of my home as a side job and we were just entering the tax season.  I knew my customers would be trying to reach me so I didn’t waste any time ordering a replacement.  I ordered my new phone at 5:00 Monday evening and it was delivered to my front door at 9:30 Tuesday morning. 

This is the kind of “instant gratification” the modern world has programed us to expect.  We not only expect to get what we want, we expect to get it practically immediately. 

Investing doesn’t conform to this compressed, information-age, instant gratification timetable.  The compounding of money still operates on the same timetable it always has.  Investing is the ultimate “delayed gratification” activity. 

This tension between the “instant” culture of the modern world and the “delayed” culture of investing has created a generation of investors sorely lacking in one of the key attributes needed for success: patience.

Four Authors, Four Analogies

Investing is a process that starts out slowly and builds momentum over time.  At first progress is slow and difficult.  Later your investments grow faster than you could have imagined.  The key is patience and perseverance during the difficult times early on.

Four of my favorite authors have written memorable analogies describing processes that, like investing, start slowly and build momentum.  These analogies give me the strength to persevere when it feels like I am not making much progress.  I hope they are helpful to you:

Warren Buffett – The Snowball

Warren Buffett is perhaps the most successful investor of all time.  Alice Schroeder’s biography of Buffett is titled The Snowball.  The title comes from one of Buffet’s quotes: “Life is like a snowball.  The important thing is finding wet snow and a really long hill.” 

Anyone who has built a snowman knows that you start out with just a small snowball that you shape in your hand.  As you roll the snowball over the wet snow it starts to grow.  The growth of the snowball is slow at first but increases as you continue to push.  Before long you have a snowball so big you can hardly roll it any more. 

This is where Buffett’s really long hill comes in to play.  While we probably can’t find a hill nearly as steep or long as the one Buffett has been rolling his snowball down for the last 50 years the same principle of building momentum over time applies to all of us.    

Dave Ramsey – The Bicycle

Dave Ramsey, in his book The Total Money Makeover, compares getting out of debt and building up wealth to riding a bike up a very steep hill.  He describes how at times it takes all the strength you can muster just to keep moving forward.  Sometimes you don’t have the strength to ride straight up the hill, so you traverse back and forth across the hill, inching upwards ever so slowly. 

Through concerted effort you eventually approach the top of the hill and things start getting a little easier.  Then you crest the hill and start down the other side.  You keep pedaling and gain speed and momentum.  After awhile you hardly need to pedal at all, and yet you still travel faster.  You feel the wind blowing through your hair, the speed is exhilarating, and you realize that all your hard work was worth it.

Stephen R. Covey – The Spaceship

Stephen R. Covey, in his landmark book The Seven Habits of Highly Effective People, reminds us that the hardest part of space travel is breaking free of the earth’s gravity.  Speaking of the Apollo 11 mission, men’s first trip to the moon, Covey says, “More energy was spent in the first few minutes after lift-off, in the first few miles of travel, than was used over the next several days to travel half a million miles.” 

Over time your investments can break free of gravity and earn more than you are contributing, and eventually even more than you are making at your job.  The difficult part is getting started and then maintaining the effort long enough to reach the point where you can break free.             

Jim Collins – The Flywheel

Jim Collins, in his book Good to Great, invites you to imagine a huge flywheel weighing 5,000 pounds.  Your job is to get the flywheel turning.  At first you can hardly budge the flywheel but you eventually get it to inch forward.  It takes hours of hard work to get the flywheel to complete one turn.  Then, as described by Collins:

“You keep pushing, and the flywheel begins to move a bit faster, and with continued great effort, you move it around a second rotation.  You keep pushing in a consistent direction.  Three turns…four…five…six…the flywheel builds up speed…seven…eight…you keep pushing…nine…ten…it builds momentum…eleven…twelve…moving faster with each turn…twenty…thirty…fifty…a hundred.

Then, at some point – breakthrough!  The momentum of the thing kicks in your favor, hurling the flywheel forward, turn after turn…whoosh!…its own heavy weight working for you.  You’re pushing no harder than during the first rotation, but the flywheel goes faster and faster.  Each turn of the flywheel builds upon work done earlier, compounding your investment of effort.  A thousand times faster, then ten thousand, then a hundred thousand.  The huge heavy disk flies forward, with almost unstoppable momentum.”

The goal of investing is to reach the point of “breakthrough.”  After this point, although your effort remains consistent, the results are multiplied.  The work you did early on, that felt like it wasn’t being rewarded, is “compounded” and your investments grow exponentially.     

What is Your Favorite Analogy?

So there you have it.  Four fantastic analogies from four awesome authors.  Pick your favorite one and turn to it when you get discouraged about the progress you are making towards your financial goals.  With patience and perseverance the speed of your progress will increase and eventually you will get the snowball rolling, reach the top of the hill, escape gravity, and push the flywheel to the point of “breakthrough.”  To borrow a phrase from Vanguard founder John Bogle, be patient and stay the course.        

I love all the analogies but the one I keep coming back to is the flywheel.  The visual image of the flywheel gaining momentum as I continue to push gives me a lot of strength and courage when things get difficult. 

Which analogy works best for you, or do you have a different one you would like to add to the list?  I would love to hear everyone’s thoughts.