Do you want to be rich?
Imagine we get a “brand-spanking-new puppy from the pet shop,” Peter D. Kaufman suggests.
What is our goal bringing this puppy into our home?
“It’s to have an engaged, contributing, all-in new member of our household,” states Peter, CEO of Glenair, Inc. and editor of Poor Charlie’s Almanack, the Wit and Wisdom of Charlie Munger. Charlie is the Vice Chairman of Berkshire Hathaway and has been called “one of the great minds of the twentieth century.”
“And night number one, how are we doing?” he asks.
“It’s a disaster,” Peter observes. It’s “over in the corner shaking like a leaf. It’s anything but engaged It’s anything but contributing and it’s anything but all in.”
The good news?
“Human beings are really good at solving this problem. We know we need to create a calm, reassuring, secure, and safe environment,” Peter says. “We know that even though this puppy can’t understand what we’re saying, we need to communicate in soothing tones. And we also know that we need to provide food and water for this puppy.
“But underlying all these things, stitching them all together, we really know we have to be constant, don’t we? You can’t not feed the puppy one day, or what happens? Well, the puppy freaks out. The puppy becomes a neurotic puppy. It doesn’t know whether it can trust you or not. The trust that this puppy needs to go all in is dependent upon your being constant in these behaviors.
“So, if we are constant, usually in about seven days more or less, this little puppy will trot over to our side and it will attach itself to us. And for the rest of its life, it will be willing to die for us,” Peter discerns. “That puppy just went all in, didn’t it?
“Now, did it go all in because it’s our idea that we want an engaged, contributing, all-in new member of our household?” he asks.
No! “It doesn’t even know what our idea is, does it? Why did it just go all in? It was the puppy’s idea!”
Yesterday, we looked at Peter’s question: What’s the most powerful force that we as human beings, both as individuals and groups, can potentially harness towards achieving our ends in life?
“The most powerful force in the universe is compound interest, which Peter defines as: the “dogged incremental constant progress over a very long time frame.”
Our problem is that we don’t like to be constant.
“Nobody wants to be constant. We’re the functional equivalent of Sisyphus pushing his boulder up the mountain,” Peter observes. We push it halfway up and say, “Aw, I’ll come back and do this another time.” The boulder goes back down.
“I’ve got this great idea, I’m going to really work hard on it,” we say. Then, we push it up halfway and, “Aw, you know, I’ll get back to this next month.”
“This is the human condition. In geometric terms this is called variance drain,” Peter states. Whenever we interrupt the constant increase, we lose compounding. We’re no longer on the “log curve.” We fall back onto a “linear curve or, God forbid, a step curve down,” says Peter.
“You have to be constant.
“How many people do you know that are constant in what they do?” Peter asks. “I know a couple. Warren Buffett and Charlie Munger. Everybody wants to be rich like Warren Buffett and Charlie Munger. I’m telling you how they got rich. They were constant. They were not intermittent.”
Reflection: What is my #1 goal right now?
Action: To achieve my goal, commit to dogged incremental constant progress over a very long time frame.