In my previous four posts I introduced my guiding principles of wealth management, along with the first four principles (links to one, two, three and four). Today I will discuss the fifth and last guiding principle:
Be specific and proactive by identifying and implementing the actions that will result in the best permanent changes
Over the years, I have had the privilege of observing how clients meet challenges and tackle opportunities. Some have a knack for succeeding in any task they take on, while others seem to struggle more than they need to. Eventually, I saw a key distinction between these two groups: Successful people are usually very specific and proactive, while those who struggle tend to be vague and reactive. They set goals, but they do not follow through with a plan of specific actions aimed at meeting those goals. Consequently, instead of controlling events, they wind up responding to events. Getting stuck in reactive mode is another example of the 85% Trap.
By contrast, when successful people see a need or set a goal for themselves, they develop a specific plan of action. In keeping with the concept of the Essential 15%, they strive to find a permanent solution to every challenge, as opposed to a solution that requires ongoing effort.
What can you learn about systematic investment management from Henry Ford?
Henry Ford is recognized as the father of the auto industry, largely on the strength of one innovation: the automotive assembly line. Looking back at the process he pioneered, Ford recalled the inefficiencies it replaced:
A Ford car contains about five thousand parts. … In our first assembling, we simply started to put a car together at a spot on the floor, and workmen brought to it the parts as they were needed in exactly the same way one builds a house. … The rapid press of production made it necessary to devise plans of production that would avoid having workers falling over one another. The undirected worker spends more of his time walking about for materials and tools than he does in working; he gets small pay because pedestrianism is not a highly paid line.†
Ford knew that in his new system, the assembly line, there were high-value tasks, such as welding the parts of a car together, and there were tasks with little or no value, such as fetching tools and parts. The more workers were occupied by the former tasks and not the latter ones, the more efficient the overall system became.