The Road Less Travelled

Jeff Bezos, founder, chairman, CEO, and president of Amazon is one of the richest men in the world. In a meeting with Warren Buffett, he asked America’s most prolific investor, “Your investment thesis is so simple. You’re one of the richest guys in the world, and it’s so simple. Why doesn’t everyone just copy you?”

Warren Buffett responded to Jeff by saying, “Because nobody wants to get rich slowly.”

Nobody wants to push the flywheel. A flywheel is a mechanical device designed to efficiently store rotational energy. Well, that’s how an engineer would describe a flywheel. To me, a flywheel is a wheel that’s really hard to get started.

Once it gets going, however, it’s really hard to stop. Imagine trying to stop the pedals on a spinning bike with your feet – that’s how stubborn a moving flywheel can be about staying in motion.

Many young business owners know what it’s like to push against a stationary flywheel. The newbie real estate agent finds it hard to close her first sale, and the next few sales don’t come easy either. She sees more experienced agents landing clients without breaking a sweat.

The guy who just launched a website faces a similar struggle. He posts excellent content but gets frustrated as older, sometimes less impressive sites, attract way more visitors.

“The secret of getting ahead is getting started.” – Mark Twain

I remember the first time I posted an article on my website. I was terrified. The moment I hit publish, anyone in the world could see my thoughts. What would they think? After publishing, I waited… and nothing happened.

Looking back, I laugh at my fear because almost no one, except maybe a few friends out of sympathy, read that article. My website was a flywheel that wouldn’t budge despite my efforts. But I didn’t stop; I kept pushing at it day and night, even when a voice inside me said it was useless and I should just quit.

Fast forward eight years, and what began as a blog no one read is now a thriving business. The flywheel is spinning so fast now I couldn’t stop it if I tried.

What made the difference? I didn’t give up. I kept learning and improving my online publishing skills. Writing not only helped me share my thoughts but also taught me how to think and give advice. It helped me be of service to my clients.

The Flywheel and Financial Freedom

Now, how does this concept apply to building wealth? Long-term investing is the same as trying to move a flywheel. It starts off slow, but once it gets going, it’s really hard to stop.

Many people see saving money as:

  • A huge sacrifice,
  • Having no short-term benefit, and
  • A long-term benefit they may never get to enjoy.

My daily job is to challenge these beliefs. Here’s the thing. Most people can’t see past the seemingly immovable flywheel of investing.

“It’s always too soon to quit!” – Norman Vincent Peale

Let’s imagine you read my blog and I’ve convinced you to start saving and investing today. Excellent! So, you give up DStv to save more money. You take the R1 000 monthly fee and invest it in a low-cost index fund. You feel good about your decision, although you miss some of the shows you use to watch on TV.

Now let’s fast forward one month. You’ve suffered through withdrawals from the lack of DStv. You’ve yelled at your kids a bit more than usual. Surly would best describe your “I gave up DStv to invest” mood.

To ease your pain, you decide to check your investments. You log into your account, and if we assume the month was an average month for the stock and bond market, you earned about one-twelfth of 10% — or 0.83%. (Over the long term, the global stock market returns about 10% per year.)

Your R1 000 investment has turned into the princely sum of R1 008.30. The flywheel didn’t turn much! At this point several things happen.

  1. First you curse me and the day you ever read my stupid blog.
  2. Second, you kick yourself for giving up a month of Come Dine With Me for a lousy R8.30.
  3. And you’re at a loss on how to respond to your significant other who went through their own Dstv withdrawals and wants to know how the investment is performing.

Welcome to the world of investing. The art of getting rich really, really slowly. And that brings me to what is called “Compounding Magic”.

“The strongest force in the universe is Compound Interest.” – Albert Einstein

Let’s use our example of investing R1, 000 a month. If we again assume an 10% return, after ten years we’ll have R212 967.75. If on an average month we earn about 0.83%. (which is 10% divided by twelve), our R212 967.75 will be generating an average monthly return of R1, 767.63.


Now our investments are generating more than our monthly contributions. And if we continue to invest our R1 000 a month plus the income generated by our investments, our wealth continues to compound. The flywheel picks up speed.

Now let’s take it to the next level.

What income will this portfolio generate after 20 years? Using an Excel spreadsheet, we can quickly calculate that the portfolio will be worth R762 757.49 and thus be generating R6 330.89 per month. That’s more than 3 times what it was generating 10 years ago.

Magic again! Imagine if we had chosen to increase our monthly contribution annually?

Now, I’ll be the first to admit that the above illustration is idealistic and simplistic. It has to be in order to illustrate the point. In real life, investments don’t grow in a linear fashion. Crashes happen, we get our asset allocation wrong and suffer a substantial loss, or we face financial hardships and can no longer contribute, or worse must withdraw from our accounts.

Or the market simply underperforms for a prolonged period thus poorly affecting our returns through no fault of our own. These are all things that can slow down or even halt the momentum of our flywheel.

Bad things can happen, that’s life…but we investors are optimists. Why else would you save for over 20 years? Why save for the future if you don’t believe tomorrow will be better than today?

“When I let go of what I am, I become what I might be. When I let go of what I have, I receive what I need.” – Lao Tzu

We invest with the expectation of growth whilst fully accepting that the outcome is not within our control. What is within our control is our process and actions. So, we keep going, we keep investing, month after month. And for that we are rewarded with magic.

Here’s the key point. The first R1 000 of monthly income is the hardest. It took us almost ten years.

As the power of compounding grows, it gets easier and easier. Why is this important? It’s important because we need to set realistic expectations. M. Scott Peck in his bestseller, The Road Less Travelled, makes this point in a different context. He says that life is tough. And as soon as we realise that life is tough, life gets a little easier.

Building wealth is slow at first. It can even be discouraging at times. But once we realise this, once we set realistic expectations, it gets a little easier.

Keep pushing on that flywheel!

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