One thing that is highly underrated when it comes to life, personal finance, or almost anything else is that a simple process can create a sophisticated outcome.
Take natural selection and evolution. Over hundreds of millions of years, life has evolved from simple, single-cell organisms to complex, multi-trillion cell organisms with large brains and the capacity for higher level thinking. We can see, hear, touch, taste, and feel, all because of life’s ability to evolve and adapt.
And underlying this journey of evolution and increasing complexity is a very simple and straightforward process:
And that’s it! A simple process can form the bedrock for some amazing outcomes.
Another area you see this is in computers and technology. Here’s an interesting quote:
[A computer] takes these very simple-minded instructions—‘Go fetch a number, add it to this number, put the result there, perceive if it’s greater than this other number’––but executes them at a rate of, let’s say, 1,000,000 per second. At 1,000,000 per second, the results appear to be magic.
Steve Jobs
Areas such as artificial intelligence and machine learning are also based on simple processes repeated over and over and refined to the point where wondrous and interesting things start to happen.
Personal finance
Many people get caught up in the complexity and details of the financial system. I’ve been asked by clients before is there is some “secret” product or tax loophole that will make them rich(er). And they are always disappointed when I tell them something like this:
Ronald Read offers a powerful example. Read worked as a gas station attendant and janitor. He was also extremely frugal and diligent in his investing. He died in 2014 at the age of 92 with an estate valued at $8 million.
Read never earned a very large paycheck, but in the end he had a net worth that eclipsed about 99% of his peers merely by abiding the simple “save, invest, avoid huge mistakes” framework.
He saved lots of money and invested well. But he also made his fair share of mistakes (i.e. Lehman Brothers). However, he never put himself in the position of making a mistake so large that he would imperil his financial future.
Unfortunately, just because something is simple, does not mean it is easy. Natural selection is no picnic. It’s brutal and callous to the extreme. And personal finance can be the same way.
Not many people would want to live the life of Ronald Read. That would involve secondhand clothing, a small house, and a cheap car. And doing all of that in the face of the temptation to spend your growing wealth.
Fortunately, there are often ways to find a balance between enjoying your life and setting the table for great financial future. But it all starts with the basics… saving, investing, and avoiding huge mistakes. A simple process with a sophisticated result.
