Your Personal Time Machine
Discover more from Implied Volatility Of My Thoughts
Hello Dear Reader,
Today I want to talk to you about Your Personal Time Machine.
Before we begin, first lets take a hypothetical scenario and live through it. Assuming you are in your early 40s, let us assume you find a Time Machine in an alley walking down the road one day. You get on it and turn the date dial back to when you were 18 years old. You assume that nothing is going to happen but surprisingly, you see that the environment around you changes and you are now 20 years into the past. You get off the machine and find your way to your old house where through the window you can see your 18 year old self. Now, my question to you is, What would you tell this 18 year old you are seeing through the window?
I would tell my 18 year old self to buy low cost ETFs and learn as much as possible about concentrated active investing in the next 5-7 years. I would also tell my 18 year old self to not take up smoking and eat healthy. I have a whole list of things that I would lecture my 18 year old self on.
Now, assuming you also have a ready list with you and tell your 18 year old self these things, and then further assuming your 18 year old self follows through on 60% of what you told him to, you would really be in a good spot today.
But the above is a hypothetical situation. We cannot go back and lecture our 18 year old self. We can though lecture our 40 year old self today. This brings us to the wonders of Kaizen & the magic of the Compounding Effect.
So what is Kaizen?
Kaizen is a Japanese practice of taking small steps to continuously improve a process or a product.
"Attempts to reach goals through radical or revolutionary means often fail because they heighten fear. But the small steps of kaizen disarm the brain’s fear response, stimulating rational thought and creative play."
- Robert Maurer Ph.D., One Small Step Can Change Your Life1
When we often set a big goal for ourselves, it sounds exciting, but it is also scary. The larger the change we want to make, the more fear we experience (fear of the unknown and fear of failure). When a region of the brain called the amygdala detects fear, it triggers our fight-or-flight response in the body. When our fight-or-flight response is active, we instinctively seek out comfort and find it hard to concentrate on our long-term goals.
When we use kaizen and take embarrassingly small steps towards a goal, we tiptoe past the amygdala's fear detection system and avoid activating the flight-or-fight response. These small steps eliminate a fear of failure and remove our inherent urge to distract ourselves. The smaller the steps we take, the quicker we lay new neural networks in the brain and develop positive habits.
With Kaizen, “Your resistance to change begins to weaken. Where once you might have been daunted by change, your new mental software will have you moving toward your ultimate goal at a pace that may well exceed your expectations.”
- Robert Maurer Ph.D., One Small Step Can Change Your Life
“Your brain loves questions and won’t reject them . . . unless the question is so big it triggers fear. Questions such as ‘How am I going to get thin (or rich, or married) by the end of the year?’ or ‘What new product will bring in a million more dollars for the company?’ are awfully big and frightening.’”
"If you are trying to reach a specific goal, ask yourself every day: What is one small step I could take toward reaching my goal? Consider writing your question on a Post-it note and then sticking it onto your nightstand (or dashboard, or coffeepot)."
"Small rewards are the perfect encouragement. Not only are they inexpensive and convenient, but they also stimulate the internal motivation required for lasting change."
- Robert Maurer Ph.D., One Small Step Can Change Your Life
This brings us to the magic of the compounding effect.
“The Compound Effect is the principle of reaping huge rewards from a series of small, smart choices. What’s most interesting about this process to me is that, even though the results are massive, the steps, in the moment, don’t feel significant. Whether you’re using this strategy for improving your health, relationships, finances, or anything else for that matter, the changes are so subtle, they’re almost imperceptible. These small changes offer little or no immediate result, no big win, no obvious I-told-you-so payoff. So why bother?”
- Darren Hardy, The Compounding Effect2
Darren Hardy in his book the Compound Effect calls it the Compound Curve and tells us three ways we can stay on it.
Choice Awareness
Why Awareness
Power of Routines
Choice Awareness - Most of us sleepwalk through our daily choices. We make choices that align with the demands of others without realizing that those choices don’t align with our ultimate goal. Lets take an example. You were in college and you saw a bunch of people from the cool gang of your college smoking. You tried it out. You didn’t like it and threw the first cigarette away. Heck, you even coughed a little. Its been 20 years and now you smoke 1 pack a day. ITC shares though are still at below 250. But we will talk about the compounding effect of ITC in a different newsletter.
We as people have to learn to be conscious of our choices by keeping a pad of paper and pen nearby to write down every choice we make in a particular area of life that we want to improve upon. We can even write it down on a Notes app on our smartphones.
At the end of the day/week, we then need to look at the list and ask ourselves: Are these choices consistent with my core values? Are they in alignment with who I want to become?
We then need to cross out any choice that didn’t move us closer to where we ultimately want to be. Over time, we’ll gain awareness of our moment-to-moment choices and consistently make choices that move us towards our ultimate goal.
Why Awareness - Let me ask you this before we talk about the Why Awareness. Would you play the Russian Roulette with me if I gave you Rs. 5 crore? A sane answer would be No. Now, let me ask you this, would you play the Russian Roulette with me if I had kidnapped your parents and threatened to harm them unless otherwise? A sane answer would be Yes. Our ‘WHY Power’ is the internal drive we need to get started and take massive actions. Our WHY can take two forms: what we love and what we hate. Our why doesn't have to be noble, it just has to move us.
"America had the British. Luke had Darth Vader. Rocky had Apollo Creed. Twenty-something’s have ‘The Man.’"
- Darren Hardy
Power of Routines - The moments after we wake up and the moments before we go to bed are within our control – we must use these moments to direct our lives.
Morning Routine: Review our vision/mission, set the top priority for the day, read something positive and instructional, and do work to advance our most important project.
Nighttime Routine: Reflect on the choices we’ve made throughout the day, be grateful for the wins we’ve experienced, and get curious about how we can improve tomorrow by asking ourselves: How could I have made today even better?
This might seem like Overrated Gyaan. I was to tell you about Your Personal Time Machine today.
Look at it this way. Everyone of us has some or the other regrets in their life. We feel we had our own personal time machine to go back and turn things in our favor.
If you resist the urge to see immediate results and go for short term profits and instead, construct a daily/weekly habit of constant improvements to generate the compound effect in your lives following the Kaizen way, you will have no need for a time machine 20 years from today.
Picture License Details3
We will here talk about Mr. Sandeep Engineer. A chemical engineer from Lalbhai Dalpatbhai College of Engineering, Ahmedabad, Engineer started his career with a job at Cadila Pharma in 1981. He sold Isabgol (psyllium husks) and also manufactured bulk drugs in the late 1980s. He recalls that shopkeepers always wanted him to give them products on credit and even decorate their counters and tell him that only if the products sell the invoicing would be done. Mr. Sandeep one day went to see Mr. Pankaj Patel, (now Chairman at Cadila) his mentor who told him to try his luck with active pharmaceuticals ingredients and assured him saying he should make in bulk as Cadila would buy. Everything seemed perfect. But Cadila rejected over half of his products, since quality was not as per required standards. Eventually, manufacturing had to be stopped as the products he was manufacturing became obsolete. Mr. Sandeep did not give up. One day, Mr. Sandeep’s uncle introduced him to CPVC. He was head of R&D at BF Goodrich Performance Materials (today’s Lubrizol) in the US, the world’s largest manufacturer of CPVC pipes. Mr. Sandeep took a huge bet on chlorinated polyvinyl chloride (CPVC)—an expensive, but high-quality alternative to galvanized iron (GI) pipes. But he only brought the industrial CPVC pipe to India, not the plumbing one. He failed miserably. In the first couple of years, he was operating at only 5% of his total capacity. Huge losses started to mount up. He had nothing but his experience from his failures and a desire to succeed. His fortunes turned when he moved into plumbing and brought plumbing CVPC pipes to India. He regularly had plumber meets, trained them on how to use the pipes correctly. The CPVC pipes were more expensive than the GI pipes. Mr. Sandeep brought down prices by 20-25 percent so that he could sell larger volumes. His belief was that if a cement company can create a brand for itself, why can’t a pipe company. At a time when none of his competitors were thinking of branding, he started pumping 1.5-2 percent of his top line into marketing.
‘We came to a point where our day-to-day business was to just survive.’
‘We had to build scale. We made the market for CPVC in India and if we didn’t increase capacities aggressively, someone else would have borne the fruit of our hard work.’
- Sandeep Engineer (The Unusual Billionaires, Saurabh Mukherjea)4
As you might have guessed already, this is the man who has built Astral Poly Technik, which is now India’s largest manufacturer of CPVC with a share of 25-plus percent in the plumbing and drainage sectors and has a market cap of over 41000 crores.
The company has given a lifetime return of 364x to its shareholders since its IPO. The company has recently ventured into adhesives segment. These numbers don’t surprise me.
“If you have challenges, hang in there because there is always a way out. The bad times eventually pass and there is a future. The more the challenges, the better you shape up.”
“Everything is like [a game of] snakes and ladders, you reach the top and then you are at zero.”
- Sandeep Engineer (Quote From Forbes India5)
Not everyone of us can show resilience in life. Not everyone of us can constantly set big goals, and without panicking take action on them even as we constantly fail and get setbacks like Mr. Sandeep Engineer, not give up and eventually succeed and build a Rs. 41000 crore business.
But I am confident most of us can start taking small steps on a daily/weekly basis to improve our lives and see the positive effects of it compound in our lives over the next 20 years. Eventually, using this technique, we would not be needing a time machine 20 years in the future to come back and lecture ourselves today.
Rgds,
Ayush Agrawal
For any queries or feedback, do get in touch with me on valueinvestorayush@gmail.com
Disclaimer: The author of this publication is not a SEBI Registered Advisor or Analyst. The information on the company and its promotor mentioned in this newsletter is provided for information purposes only. It does not constitute an offer, recommendation, or any investment advice to any person nor does it constitute any prediction of likely future movements in the company’s stock prices or business performance. It should not be used as a basis for any investment decisions or as a proposition to buy or sell any securities. Please seek advice from a registered financial advisor and do your own due diligence before making any investment decisions.
https://www.goodreads.com/book/show/266621.One_Small_Step_Can_Change_Your_Life
https://www.goodreads.com/book/show/9420697-the-compound-effect?from_search=true&from_srp=true&qid=Z46Vv9yAWq&rank=1
AstralAniket, CC BY-SA 4.0 <https://creativecommons.org/licenses/by-sa/4.0>, via Wikimedia Commons
https://www.goodreads.com/book/show/31442327-the-unusual-billionaires?ac=1&from_search=true&qid=f50s0hjIwG&rank=1
https://www.forbesindia.com/article/real-issue/how-astral-pipes-sandeep-engineer-became-a-mintnew-billionaire/52953/1