Baby Steps and Windfalls

Supported by Greenhaven Road Capital, finding value off the beaten path.

There are two types of change, gradual and sudden. Kids are one example. Before kids a person is mostly responsible for themselves. Then a baby shows up. One human being is entirely dependent on another. That’s sudden.

Then those kids grow up. They become less, but not fully, dependent. One day a parent looks at them and somehow they grew from a baby to a teenager then to an adult. Daily gradual change is hard to notice, but a lifetime of gradual change is hard to ignore.

The delightful Chenmark email addressed this idea with, People Like Us Do Things Like This.

“Second, we must understand that change is a steady, incremental process. Good things happen gradually so that great things can happen all at once. To be successful, we must have the discipline to make the small, daily, but sometimes hard decisions that will add up to massive success over time.”

A lot of successful change is baby steps. The physical world shows this everyday; beards go grey, grass becomes hay, pounds are added (or lost) from what we weigh. Gradual change is easy to get used to, we hardly notice it.

The hard part of gradual change is sustaining it. This is why making it to Mars is so hard. It takes a long time. High school students can figure out the variables for fuel, direction, orientation and so on but keeping people alive, sane, and healthy during a nearly a year in space is a challenge. The same is true for financial, personal, or experiential wealth.

But windfalls happen too. Something good, or bad, occurs in our lives that change the existing conditions. Babies begin one type of family and divorces end one. Financial rewards from a lifetime of effort are some too. On the Invest Like the Best podcast, Joe McLean talked about this.

“Blindly buying houses and giving money is not the direction you want to go in. That’s part of our spirit of empowering people to get education rather than given money.”

McLean wants to serve his clients and influence their actions after a windfall.

Lottery winners keep their money, but sometimes lose it. Bariatric surgery participants keep their weight off, but sometimes gain it back. The leverage point for windfalls and baby steps is the same — it’s actions. Gradual change is actions in pursuit, sudden change is actions to sustain.

Sometimes the actions are unclear. Sometimes it takes a little creativity. For starters, think about what not to do. McLean notes that athletes buy the right watch, not the bright watch. Invert the question, says Charlie Munger, and avoid doing dumb things before you mess around with doing the right things.

Then good ideas can come from anywhere.

“I’m often asked, ‘Where do you get your ideas?’ This happens to anyone who is willing to stand in front of an audience and talk about his or her work. The short answer is: everywhere. It’s like asking, ‘Where do you find the air you breathe?’ Ideas are all around you.”

Twyla Tharp

In the book, Anatomy of a Song, Marc Myers interviews and edits decades of musicians interviews. What’s common about each is the sudden and gradual change. There’s always a flash; lyrics, riffs, intros. That’s the sudden change. Jim Weatherly called a college friend only to have Farah Fawcett answer the phone. She couldn’t talk, she had to catch a plane. Jim recalled.

“After I got off the phone, I grabbed my guitar and wrote ‘Midnight Plane to Houston’ in about forty-five minutes—the music and lyrics. The line ‘I’d rather live in her world than live without her in mine’ locked the whole song.”

That’s sudden.

Then that song took a lot of work. Weatherly sold it to Crissy Houston who changed it from planes to Houston to trains to Georgia. Then Gladys Knight changed it to have more soul and spirit. That’s gradual.

There are two ways to go bankrupt said Hemingway’s character Mike Campbell, gradually and suddenly. Those are the two ways that everything happens.

Thanks for reading. Want more? Check out this email series.

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