U PSTREAM E FFECTS #7: T RAJECTORY

23 DECEMBER 1776

His long years of horsemanship and powerfully built thighs usually made riding no trouble.
 
But as he re-mounted his horse for the seventh jaunt of the day, his thighs creaked, his back creaked, everything creaked. His teeth were bothering him, there was the sharpness as he inhaled the wet and cold air.
 
But then, his back straightened perfectly and head arched upwards just so; his legs did not fail him in presenting a stately visage as he dismounted, placing his riding boots and spurs into the snow.
 
The boys — they really were just boys, many of them — gathered around the fire to hear the General speak.
 
He unbuttoned the top buttons of his long coat, took his spectacles slowly out from a pocket underneath its layers, placed them on his nose slowly — not in a hurry, externally, despite internally feeling blown in so many directions by the winds of fate.
 
“Paine published a new pamphlet, boys, about what is it to be a Continental. Shall I read some from it?”
 
Ascents all around. These men, so wet and cold and miserable, many barefoot and wearing little more than rags, so dispirited before the appearance of the General, now themselves more invigorated than any pint of lager and Christmas cake could have made them.
 
Washington unfolds his little copy of The Crisis , and reads:
 
“These are the times that try men’s souls. The summer soldier and the sunshine patriot will, in this crisis, shrink from the service of their country…”
 
***
 
Those last weeks of the year are feeling very different to the commanding officers of the Redcoats.
 
Ensconced comfortably in friendly well-provisioned taverns and inns in their conquered headquarters of Manhattan, it was now a waiting game.
 
The revolution was dying stillborn — no gunpowder, no money, no allies, no more credit, not even enough shoes … 1776 had seen more lofty rhetoric than real armed might from the colonials — Paine’s Common Sense  and the newly published The Crisis , along with The Declaration of Independence  kept stirring and inspiring the revolutionary spirit, but the record on the battlefield was another matter entirely.
 
Washington’s volunteer army signed up each year for a one year term. With minimal money, minimal provisions, not enough clothing or ammunition, and shattered morale from the repeated defeats with no progress — there would be minimal reenlistment.
 
With no army, it would be a matter of arresting the radicals and hanging them.
 
This whole Independence foolishness would be over.
 
The set about making the preparations for their Christmas feast.
 
***
 
Benajmain Rush had come to say hello and congratulate Washington on the speech and presentation of Paine’s work. “These are the times that try men’s souls…” — what a mix of the lofty poetic, but grounded in a farmer’s simple virtue.
 
Washington was cordial with his old friend, as always, but he was obviously consumed with something, carefully writing on small slips of paper.
 
These would be the codewords that were changed periodically, and Dr. Rush, though entirely in Washington’s trust, found it would be rude to peer over his desk.
 
As he went to leave the headquarters, a wind rustled the paper up, and a slip landed at his shoes. Picking it up to place on Washington’s desk reflexively, he saw the pass-phrase.
 
Written on the little slip were three words:
 
Victory or Death
 
***
 
On Christmas morning, Johann Gottleib Rall awoke in Trenton to the sound of muskets going off.
 
“Achtung, what are those fools doing?”
 
He gets up, takes off his night-gown, begins putting on his uniform, Colonel of Hesse.
 
Once the canon fire started exploding in the main streets of the city, Rall realized this was no Christmas celebration.
 
Hastily dressing, he runs to the stable for his horse while shouting orders to form up for a counterattack.
 
Waving his saber in the air and shouting in Hessian-accented German, he sees too late the Americans emerging from the tree line — the highest and most glorious target around, musket fire tears into Rall. His blood begins staining the snow before some of his soldiers drag him into a nearby church.
 
Pursuit isn’t far behind — Rall tells his young attendant to surrender the church.
 
Washington is by his side in a moment, holding his hand as the Hessian Colonel is bleeding to death.
 
They discuss the surrender and Washington promises to treat the German prisoners fairly and honorably.
 
“And — how?” Rall asks.
 
“We crossed the river by night. We’d hidden boats. Converged on Trenton from two directions.”
 
Rall nodded. “Ach ja, boats. We... didn’t think you’d march or shoot so well."
 
Colonel Rall died as the American soldiers outside were celebrating their Christmas victory — half-starved and under-equipped, the men took from the storehouses new boots, muskets, tore into the Hessian Christmas feast, and imbibed deeply on rum and victory.
 
Re-enlistments were high. 
 
***
 
COMPOUNDING GAINS OR COMPOUDING LOSSES?

I seriously and sincerely doubt that Einstein ever said, "The most powerful force in the universe is compound interest”… it just sounds too much like the sort of fake-quote nonsense people make up and parrot around to sound profound.
 
Yet, there’s something there.
 
Things that grow faster as a result of growing larger are, indeed, very powerful.
 
***
 
SMALL DEFICIT, REPEATED GOES TO...
 
"Annual income twenty pounds, annual expenditure nineteen pounds nineteen shillings and six pence — result happiness. ... Annual income twenty pounds, annual expenditure twenty pounds ought and six pence — result misery.” — Charles Dickens
 
Let’s do some math.
 
Not hard math.
 
Easy math. Math you ain’t allowed to whine or cry that you don’t like math about.
 
We begin –

 
You spend one more dollar than you bring in every single day.
 
How many dollars are you down in a year?
 
365?
 
Wait, you tapping savings or going into debt?
 
Debt? Then there’s probably interest, right?
 
Let’s say 10% interest. Let’s just compound it once per year to keep the math easy.
 
So that’s… $36.50 in interest.
 
So… at the end of a year, you’re down $365 + $36.50 = $401.50
 
***
 
YOU STILL AWAKE?
 
Sorry, just checking. When I wrote  Roguelike  (mathematical and behavior models from difficult video games), around half of the feedback about was that the math part was too easy and obvious, and half of it was that it was too difficult and frustrating.
 
You can’t win. Well, we’re making our lives better. Bear with me.
 
(We’ll join General Washington ambushing and destroying some Hessian mercenaries in a second — Victory or Death, Cry Havoc and let slip the dogs of war stuff — just with the math for a moment, regardless of if it’s easy or hard or both.)
 
After one year of spending $1 more per day than you bring in, and taking a 10% interest hit from the debt, you’re in the hole $401.50
 
Still awake?
 
Let’s say, next year, you’re again spending that single buck more per day than you bring in.
 
Another $365.
 
How much you in the hole?
 
$365 + $401.50 = $766.50
 
Right?
 
Wait, we forgot the interest again.
 
10% is… $76.65 this time.
 
$766.50 + $76.65 = (drum roll please) = $843.15
 
***
 
HUH, THAT'S HIGHER THAN EXPECTED
 
For most people, that’s a bit higher than expected.
 
Seriously, ask people to just guess — “hey, you’re spending a dollar more per day than you’re bringing in, you do that for two years, how much money do you owe?”
 
I’m going to guess most of them say — $365.
 
Yeah, no joke, people think, “uhh, that’s like a year, so maybe 365 dollars.”
 
(I know it makes no sense, but most of the time people don’t like to think about painful stuff. We talked about the Matahachi Problem last chapter; this is that.)
 
But ok, hey buddy, it’s been TWO years. 365 x2 = $730.
 
So why are we at $843.15 in the hole? Only spending a buck more a day than you bring in, two years later, 843 dollars and 15 cents in the hole.
 
Interest? Yeah, interest.
 
***
 
YEAR THREE
 
$365 more (just a buck a day!)
 
$365 + $843.15 = $1,208.15
 
Wait, we forgot the interest.
 
That’s another $120.81
 
So… $1,328.96 in the hole. Three years.
 
Just a frigging lousy dollar per day spent more than brought in, and now you’re over a grand in the hole after 3 years.
 
What did that dollar buy? A Pepsi? Hmm.
 
***
 
SMALL DEFICIT, REPEATED, GOES TO… INFINITY
 
Here’s the odd thing about the math of everyday life.
 
If you take a small loss, repeat it forever… the number actually goes to infinity.
 
This is two things: first, it’s perfectly logical. Second, it’s counterintuitive and doesn’t occur to most people.
 
Again, say you’ve got a $10 loss regularly, and then you get hit with 10% interest on top of it. How’s it go?
 
-$10 (expense), -$11 (interest), -$21, -$23.10, -$33.10, -$36.41 … 
 
It keeps getting bigger and bigger. Of course, it goes to infinity if nothing stops or changes.
 
That doesn’t occur to most people. If they’re currently having more money go out than come in, they don’t realize that, barring reversal of that pattern, the number is heading to infinity; it’s getting worse and harder to fix all the time.
 
Modernizing Charles Dickens a bit,
 
“Annual income of $20,000 and expenses of $19,900 — result happiness. Annual income of $20,000 and expenses of $20,100 — result misery.”  
 
Of course that’s true — because that tiny shortfall is going to become a huge problem in not-very-long.
 
***
 
OF COURSE, THE SAME IS TRUE OF POSITIVE GAINS
 
A small surplus, grown regularly, also heads towards infinity.
 
This isn’t just money: this is people in your life, this is opportunities for really cool and fantastic projects, this is new customers/clients for your business, and so on.
 
In reality, nothing ever gets to infinity — you either hit what’s called the “carrying capacity” of what you’re doing, or diminishing returns kicks in and you stop growing that particular impact area.
 
But never mind the infinity piece — here’s the basic idea.
 
In the context of any resource that grows more easily when you have more of it, and less easily when you have less of it, even small changes can lead to things getting much better or much worse for you.
 
***
 
TRAJECTORY
 
The first and most important thing is knowing whether you’re winning or losing.
 
In other words, knowing your trajectory.
 
This might seem incredibly obvious of a statement, but in the real world, very often people have no idea.
 
Is their money going up or down on a long-term basis? They don’t know.
 
Are they effectively developing the relationships that are going to be key to the upcoming phases of their life, and indeed, the very purpose of their life?
 
They don’t know.
 
In career development, how often are people surprised by an annual review? Do they know the next steps they need to do to get promoted rapidly and get the type of authority, duties, and portfolio that they want from their work? They don’t know.
 
Most surprisingly, are entrepreneurs running companies aware of their burn rate in cash, the trajectory of their sales and development, the rate of improvement of their core products/services for their users? … too often, they don’t know!
 
You need to know.
 
***
 
STAGE ONE — REALIZE THAT INTENTIONALITY ABOUT TRAJECTORY IS REALLY IMPORTANT
 
A piece of inspiration:

" News Flash, Your Debt Is An Emergency "

Read it regardless if you're in debt; the author is a master and the mental model is very powerful.
 
I’m not for motivation of making big mighty vows or whatever. Anyone can do that. The cold hard determination is more important.
 
But sooner or later, it’s imperative to realize that these things can’t be left to chance.
 
The more good people in your life, the more good people come into your life.
 
The more savings you have, the more opportunities you have to grow your income and make good long-term decisions.
 
The more credible you are, the more opportunities you get to extend your work and become even more credible.
 
The more happy customers you have, the easier it is to spread word of mouth and get more happy customers.
 
The more you put up all-star performance repeatedly, the easier it is to get promotions, resources, special projects, and authority to allow you to make even greater contributions.
 
This is a really big deal. It’s shocking how many people don’t know and aren’t intentional. That’s Stage One — realizing it’s important.
 
***
 
STAGE TWO — GETTING A BROAD INVENTORY AND BASIC TRACKING OF WHAT’S GOING ON
 
Once you’ve resolved to start improving an area of your life, it can be tricky to know where to start. Let's use money again as our example.

Where do you start?

I typically recommend starting by mere observation.
 
If you don’t know what to do, start observing and keeping logs and journals of where your money is going.
 
Track your spending, inflows, outflows. 
 
If you wanted to change your body composition and lose fat, simply note down in a journal everything you eat and how often you move.
 
For people, a simple note on a weekly basis of who you spent the most time with that week.
 
Insist on getting clear project scopes with target completion dates, and relentlessly pay attention on a weekly basis to how much progress is happening towards getting those projects complete before those deadlines.
 
You don’t even need to do anything far differently to start. If nothing else, start tracking.
 
Do broad strokes of tracking — don’t let the little details stop you from starting.
 
If you want to do simple spending tracking of cash, just round everything from 50 cents to 99 cents up to the next dollar, and 0 cents to 49 cents down to the lower dollar. It works out close enough to get a broad idea of what’s going on.

So if an expense was "$2.43", just record it as $2. If it was "$13.70", just record "$14." The precision isn't as important early on as just starting, and using whole dollars makes it easier.
 
A simple question on a weekly review of, “Who did I spend time with this week?” might be a good start to figuring out where your relationships are at.

Keep it simple and start doing a simple tracking of what's going on.
 
***
 
STAGE THREE — SHORT-TERM DRAMATIC INTERVENTION IF NECESSARY
 
General Washington’s assessment in December 1776 was that the war was almost over.
 
At that stage, on the brink of disaster, he planned a series of aggressive maneuvers to capture supplies, deliver critically needed morale-building victories, and increase enlistments.
 
Daring raids can’t carry a war alone — the professionalization of the American forces under French and German support, and the diplomatic breakthroughs that had France enter on the American side with land and sea reinforcements were critical to winning.
 
But Washington knew he needed a victory desperately. As such, he did a massive cycle of daring raids and dramatic action.
 
The rest of the war wasn’t like that. It was often a waiting game. But he needed dramatic action to keep the American forces on trajectory.
 
Likewise, if you’re over your target weight, you need a sustainable plan you can live with. If you’re underwater with debt, eventually you need to get to spend/earn cycle that’s sustainable and fits in with all your life goals.
 
But if it’s an emergency with disaster on the brink, or if you’ve been badly stagnating, it might be time for dramatic action.
 
If you’re starting from scratch, you might need to meet 500 to 1000 decent people and have good conversations and followup with them to find 5-10 really steadfastly excellent, elite, high-character friends.
 
A “chip away at it” philosophy of meeting one new person per week might not get you escape velocity from where you’re currently at. So you might aggressively start going to meet ups, conferences, events. You might block out 20 hours per week for getting-to-know-you Skype calls and coffee meetings.
 
Carlos Miceli , an Argentinian entrepreneur, did just that to break out of his local environment. His English at the time was serviceable but not great, so for around a year, he aggressively sent invitations to people who he liked their work or blogging online to get on a call. Not famous people (yet), just anyone who he saw doing something cool. People are reasonably friendly, and in this way, Carlos quickly built a base of people he met who would go on to become acquaintances, friends, colleagues, partners, employers, and clients all throughout Latin America and the Western world.
 
In the long run, you probably don’t want to spend 20 hours per week meeting and talking with strangers. But if you need to break out, that’s a way to do it.
 
What if there’s no reason why someone would want to meet you and take your calls? Then maybe it’s time to set a series of short-term learning and short projects, very intensely. It might be time to dive into a particular craft or trade skill, a particular hobby that’s good at connecting with people through, a professional skill, a foreign language or culture. Again, the amount of mastery you can build in an intense focused sprint of a few months is immense.
 
Likewise, you can kickstart weight loss by setting an aggressive diet for a short period of time (perhaps, one month) and then be very careful to not max relapse and binge at the end of it. A single month of no processed food, or only cooking your own meals, or running a 30% caloric deficit per day, followed by a return to relative normalcy at a slightly improved baseline can make for permanent lessons and gains.
 
Stripping spending down to bare essentials is a fantastic way to eliminate debt. Most people are odd about trying to keep up appearances while being barely underwater. Can you slum it for a month or two, spend nothing, while aggressively eliminating debt? Next time your apartment is up, can you move in with your parents (or spouse’s parents), or live in your car, or take some on-site project where there’s corporate housing, to eliminate that rent expense and deploy all that to eliminating debt? Not forever, just for a couple months. If you have kids, is there someone in your family who would take them for the summer while you and the spouse make it a max-frugal suffer-for-a-short-term-to-break-free cycle?
 
If you’re on Western wages or salary, you can rapidly eliminate reasonably small amounts of consumer debt if you make it an overwhelming priority.
 
It’s true, you probably can’t do all  of these at the same time — strip down to bare bones on expenses, do new projects rapidly to build credibility, meet tons of people, and get started in regulating your health and weight — but you can do whichever one is most important right now, lock down permanent gains in that area, and then move on to the next one.
 
Sprints of massive focus are magical. There’s no United States without Washington leading those daring winter raids. What’s your key area to make massive improvement in?
 
***
 
STAGE FOUR — SUSTAINABLE BORING CONSISTENT OPERATIONALIZATION
 
"Years ago when I first started out as a consultant, I had to learn how to tell a well-managed industrial plant from a poorly managed one—without any pretense to production knowledge. A well-managed plant, I soon learned, is a quiet place. A factory that is “dramatic,” a factory in which the “epic of industry” is unfolded before the visitor’s eyes, is poorly managed. A well-managed factory is boring. Nothing exciting happens in it because the crises have been anticipated and have been converted into routine.” — Peter Drucker,  The Effective Executive
 
Our first stage, Stage One, is where emotion and epiphany and getting fired up matters. “Yes, I will take initiative and take control of my life.” Good.
 
Stage Two is boring again. If you don’t know what to do and don’t know where you’re at, just start tracking. This usually results in some automatic changes as you realize how your life is actually going and come to higher awareness. But it’s a good, easy, basically-can’t-fail-if-you-do-it step.
 
If you’re stuck, Stage Three is dramatic — you put a massive amount of attention into kickstarting massive progress. This is good for getting momentum for clearing a crisis, dramatically altering trajectory, shedding stagnation and getting moving.
 
But you don’t want to live crisis-to-crisis; the goal is to architect a life where your trajectory just goes up in a boring, peaceful, pleasant, sustainable way.
 
This Stage varies mightily depending on what you’re working on, and takes a while to fine-tune. It’s not to be rushed; the drama is passing and we’re looking to settle into pleasant routines that make us happy, healthy, wealthy, thriving, surrounded by good people, all the time, without the need for dramatic action.
 
To use the example of spending and earning, there’s a variety of little tiny skills, mental models, and technology you want to learn.
 
Here’s a few examples:
 
*Per-Use cost: You can calculate the real cost of an item by dividing its number of times used by the cost of the item. Boots are a great example — better-made boots from a good company will last you 10 years if you take care of them, and cost you around $300. From 2008 to 2012, I had a single pair of high-quality leather boots that I wore basically every day, that originally cost around $400. That’s around 1,200 days worn on those boots for $300, or about 25 cents per day. In 2013, 2014, and 2015 I went through many  periods of cheap boots and shoes in the $50 to $120 range. I don’t even want to think about how much money I wasted wearing lower-quality stuff that kept wearing out, and wasn’t constructed well enough to be re-soled or maintained. I bought a pair of  Frye Engineer's Boots  in mid-2015 for around $300 after doing careful research that should, if I take good care of them, last me 5 to 10 more years. Thus, even though Frye boots have a greater outlay for cost, they’re much more efficient on a per-use cost than, say, the Zara leather boots I bought for $120 that didn’t last me a whole year (maybe 250 wears total, or double the per-use cost of nicer boots — and remember, they were wearing out and miserable to wear for the back half of that time).
 
[Note that if you’re trying to eliminate debt, it makes sense to manage cashflow and go with cheaper stuff for a while — if you’re paying interest on new purchases, you’re eliminating the value of per-use costing… this comes after getting out of debt.]
 
*Buying the Depreciation: New Ikea furniture has to be about the worst purchase ever — why? Because you can almost always buy someone else’s used furniture when they move for 90% off. Ever re-sold cheap furniture? Yeah, it sucks, you get maybe 10% of what you paid for it. It hurts. Once you’re well-established in a place you won’t move for a long time, you can buy nice furniture that will gradually appreciate in value. Until then, buy it used — let some other sucker sit at the new chair that goes from being worth $60 down to being worth $6 in re-sale value a year later. New cars / used cars is the same thing.
 
*Calculate the substituting cost and do it: Coffee and tea used to be, strangely, my largest discretionary expense. Making coffee at home, of better quality, should cost you around 10 to 20 cents a drink instead of a couple dollars. Caffeine pills, in cheaper countries, cost 2 cents to 5 cents per 100mg of caffeine (about the same as in a cup of coffee). This requires some thinking and planning of your day and how your spending usually happens, but gradually you can swap out what you want (either the tactile feel of coffee you made yourself, or merely the caffeine which is what I aim for) at much lower cost. Alcohol is similar: I don’t drink, but the drinkers in the  MMM  and  Early Retirement Extreme  communities often carry a flask with them when they go, going from 4 drinks at the bar down to maybe 1 plus their flask-sips. Apparently this has a fun clandestine feel to it, too.
 
*Various problem-solving instead of excuse-making mindsets: Pre-cooking a week of chicken on Sunday is trivially easy to do. Put them in Tupperware or Ziplock bags. This is trivial to do. No matter how busy you are, it’s really very possible to operationalize eating at least two meals a day that you made, at about one-tenth the cost of what you’d pay out.
 
Do you need to do all of this? No, of course no. But as you gradually implement it, you can either bank and invest the gains, redeploy the spending to accomplishing other key priorities you’ve got, or reduce your working accordingly and have more time to spend on creative projects, civic/community/nonprofit projects, education, training, or whatever else. It’s nice to have your fingers on the levers of spending.
 
The exact particulars vary by domain, but the same applies for eating healthy, meeting and staying in touch with people, doing better project planning to ensure your projects get done promptly, harvesting the various intangible gains from projects in terms of credibility and future opportunities, getting referrals and repeat purchases from happy customers/clients — all of this can be operationalized, so it happens automatically without you putting much effort into it going forwards.
 
***
 
FIRST, JUST START UNDERSTANDING YOUR TRAJECTORY
 
Dramatic action can come later, and you don't need anything fancy to start.

The simple question of, "Is my money going up or down? How much?"
 
Are the people you’re spending more time with higher caliber than you spent with last year (either because the same people are growing and evolving, or because you’re associating with higher caliber people)? 
 
Are you getting better at your core work?
 
Are you becoming more credible and trusted?
 
Is your health improving or declining?
 
Take these things seriously. If you’re not sure where you’re at, just start making observations and writing them down for a while to track. Take dramatic action if you’re in a bad place or just stagnant. Then operationalize it, so your trajectory is upwards without needing conscious action on your part.
 
***

ACTION

What area would make the biggest improvement for you?

1. Realize it's important. If you don't know if you're improving or not, it's probably not going well. Wake up and pay attention, it's your life after all.

2. Start doing simple, very-easy-to-sustain tracking of that area. A few minutes a day or a single review on the weekend might be enough. Don't make it complicated!

3. Take short-term dramatic action if necessary. Dramatic action doesn't necessarily work over the long term, but almost all of us can sustain 1-3 months of intensity if we know that it ends and we get back to regular life.

4. Operationalize success: make it consistent and boring, so you're just succeeding without getting at it.

What areas are you tackling?