Rory, my business partner, shared something recently that struck me. He thinks doing something moderately difficult for a long period of time is far more difficult than doing something extremely difficult for a short period of time.
I think he’s right.
Doing something very difficult for a short amount of time isn’t particularly hard. My senior year of college I decided to run a half marathon. Not sure why, but I signed up in January for the half in Nashville in the spring. Four months to train, plenty of time. April rolled around. No training completed. I stayed in decent shape, but I certainly wasn’t training. There are more fun ways to spend one’s senior year than pounding the pavement. But I told myself I would do it, so I rolled out of bed and showed up at the starting line. First five miles were great. Turns out the last 8.1 miles are a lot harder… You runners reading this probably think that’s pathetic. Cut me some slack, I’m not exactly built like a runner. More of a linebacker than a cornerback. Suffice to say, it was tough. There were plenty of spectators cheering the runners on. One guy was holding a sign that said, “Shut up, legs.” Mine wouldn’t shut up. Especially the last 8.1 miles.
But after a grueling two hours and ten minutes it was over.
High difficulty, short duration. Challenging, but not very remarkable. I know a lot of people who have run half-marathons. Many of them quite a bit faster than I managed to. I’m glad I did it, but it’s very low on the list of things I’m proud of.
My half-marathon days are behind me. I’m a one-hit wonder. Two years later in 2017 I tried something different. That year I decided to work out every day of the year. No days off was the only rule. No specific workout plan, but I wanted to see if I could manage 365 workouts that year. None of those workouts were as difficult as the half marathon. Not even close. Each workout typically lasted only 30-60 minutes. But 365 days is a long time. I got married in July of that year and we honeymooned at the beach in Florida. July in Florida is hot. And I was on my honeymoon. No gym access. So I was pounding the pavement every day of my honeymoon. Laura thought I was crazy. Later that year in November we celebrated Thanksgiving with her family in South Carolina. I remember getting up at 5am to help my father-in-law get the turkey started. He went back to bed, I laced up the running shoes and took off.
There weren’t many exceedingly difficult workouts in 2017. Certainly nothing on par with running a half-marathon. But there were 365 of them. And I’m far more proud of making it a year straight without missing a workout than I am of dragging myself across the finish line of the Music City Half Marathon. I’ve met a lot of people that have run half-marathons. I haven’t met many who worked out every day for a year.
This is the Difficulty – Duration Paradigm. Doing something of moderate difficulty for a long period of time is far more difficult than doing something of extreme difficulty for a short period of time. I think it helps explain why the divorce rate is so high. It’s easy to be a great husband for a week. Being a good husband for forty years is a whole different ballgame. It probably helps explain why recovering from an addiction is so difficult. A lot of alcoholics can stay sober for 48 hours. Not many make it 48 years.
The Difficulty-Duration Paradigm also helps explain the challenge of building wealth. We often say becoming wealthy is simple, it just isn't easy. You don’t need to build a business that goes public or to invest in the next big company pre-IPO. You just need to suffer the moderate difficulty of spending less than you make, allocate the difference to a well-diversified equity portfolio, and not make any big mistakes in the stock market… for decades.
I remember when I first learned of the power of compound interest. How much do you need to invest monthly beginning at age 25 to have an account worth $1,000,000 by age 65 assuming an 8% rate of return? I thought the answer would be in the thousands. $1,000,000 is a lot of money. Turns out the answer is only $285/month. $285/month?? If that’s true, why isn’t everyone a millionaire?
I formerly thought the answer was a lack of education. People need to know it only takes $285/month for 40 years. If people were just more educated, they would become wealthy. I hear that prescription often.
It’s dead wrong.
The reason many people aren’t wealthy isn’t because they lack the knowledge of how to become wealthy. It’s because saving a small amount of money for a long period of time is extremely difficult. When I heard it only takes $285/month for 40 years, I focused on that $285 number. That doesn’t sound too challenging. Butthat’s the easy part, the hard part is doing it month after month for 40 years. I’ll be 30 in October, so I’m five years into the example of the individual starting to invest at age 25 to be a millionaire by 65. Five years is a long time. During the last five years I’ve gotten married, started three businesses between my wife and I, bought a house, experienced two presidential elections, navigated a pandemic…It’s felt like a lifetime. But I’m only 12.5% of the way from age 25 to 65. That’s the equivalent of getting to my work out on Valentine’s Day in 2017 the year I went 365 days without missing a workout.
It's easy to invest 20% of your income into a diversified portfolio and avoid chasing the new investment fad or panicking during a market downturn for one year. It’s not so easy to do that for five years. It’s really, really difficult to do it for four decades. It’s the duration side of the Difficulty-Duration Paradigm that presents the real challenge.
It’s important to understand that on the front end. We spend a lot of time talking with people about building wealth. Sometimes I fear it sounds too easy when we talk about. We talk about compound interest until we’re blue in the face. We help folks step back and think in terms of decades rather than days. We have models and fancy software programs. If you continue investing this amount of money from now until retirement you have x% probability of success. It’s easy to be a bit detached. I just have to invest that amount each month – that’s not too bad. You start focusing on the difficulty side of the paradigm when you’re thinking big picture.
Then the real world shows up and the duration side of the paradigm punches you in the mouth. Doing anything consistently for decades is difficult.
Advisors like flaunting the catchy stuff. Look how our portfolio outperformed the S&P last year, etc. etc. We focus on what actually works. Like helping people execute on the moderately difficult things for a long period of time. We help people conquer the Difficulty – Duration Paradigm. Because that’s how wealth is built.
If you don’t believe me, then where are all the millionaires?
Sean Cawley, CFP®
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