Progress, Volatility and The Snowball

MrT kittensA few weeks back, I was struggling with my cycling training.

I don’t know why. Maybe I was tired, maybe I was over-training, maybe the dog had eaten my homework. Whatever the excuse reason, I was struggling to keep up with the group.

The thought that popped into my head was….I don’t feel I’m making progress. What if the training does not make me fitter?  Maybe I should just stop now and have a good cry?

Fortunately The Escape Artist recognises these thoughts as the random babblings of my Inner Toddler.  The advantage of being older than I was is that I have had these thoughts many times before and I know they are bullshit.

I’ve experienced them in many different situations…but particularly in relation to 1) fitness and 2) financial independence.

Let’s start with fitness.  Here’s how I knew that those thoughts were wrong.  If you do the work, you always get fitter.  This is not my opinion, it is bio-chemistry.  Bio-chemistry follows the Laws of the Universe…with equations and shit. You do not get to invent your own Laws of the Universe. Not even if you are one of those people that say they have a “slow metabolism” and “big bones”.

Now The Escape Artist loves you…whatever size you may be. But the laws of the universe really do not give a fuck about excuses. You may say that your weight is nothing to do with the Krispy Krap doughnuts and the Alabama Fried Kitten Nuggets that fell into your stomach by accident while you weren’t watching. But if you have been eating that shit, the universe is gonna find out about it and there will be consequences.  On the positive side, if you eat right and exercise you will get as fit, slim and buff…that’s just the way it is.

We all know that but theoretical knowledge is never enough on its own. We humans aren’t wired that way. We need to see it and/ or live through it ourselves to really understand and internalise something.  I have got fit before so I know what is involved. When I was at college there was nothing to do most of the time so I took up rowing.  The training was a shock to the system, like an Army boot camp.  For most of my first term, I walked around like a new born foal…with my wobbly legs threatening to give way at any point.

But inevitably, I found that when you start exercising a lot, some funny things happen.  Your bones shrink and your metabolism speeds up…a lot.  This was not just specific to me. After a year of training, all the other people in my crew had small bones and fast metabolisms as well.  It turns out that the laws of the universe applied to them too.

Its the same with financial independence. Getting to FI takes less time than many people think: about 19 years with a 50% savings rate and only about 8 years with a 75% savings rate.  But still long enough that there will be times when it feels like you are stuck and not making any progress.

The one thing I promise you is that if you actually do the stuff I talk about on this blog, you’re going to make progress.  You start by making baby steps and you end up making enormous leaps and bounds of progress. But it won’t feel like that much of the time.  This is partly because we often forget where we started and how much we have achieved.  Its partly because progress is rarely smooth and linear: its more like 2 steps forward and one step back. Finally, it also feels like that because we often confuse inputs and outputs when measuring progress.

Here’s how to distinguish between the inputs and the outputs.  The inputs are things like cutting spending, putting in effort at work, investing rather than hoarding cash, cutting investment fees etc.  These inputs are the building blocks of progress.

The outputs are things like your net worth or income.  These outputs are the visible signs of progress.  You can’t directly control the outputs – they are affected by lots of things…like market movements and your bosses’ subjective opinion of you. The outputs exhibit volatility – they vary. Often for reasons we don’t really understand. The trick is to keep focusing on optimising your inputs when the outputs don’t seem to be going your way.

For example, in a bear market you will feel like you are getting further from your goal of FI. But this is just your emotions screwing with you.  In fact, at lower prices you are getting more shares / units for your new savings every month. Behind the scenes, value is building in your portfolio. Its even more important at times like that not to get discouraged but rather to focus on holding down your spending and putting as much money as you can to work.

Effort is the key input.  We are all told at school / by parents to keep working hard consistently and that’s not bad advice.  The problem is that we come to believe that we can take a safe little path of exam success, desk job, 40 years being looked after by a benevolent employer and then a gold watch and cruises in our incontinent golden years.  Unfortunately, the reward for effort alone is slavery.  But effort combined with some ability, independent thought and the principles of lifehacking will help you rise up the ladder towards the top of any pretty much any field.

We come into the world with all sorts of preconceptions about what is fair. We think its fair that if we work hard on one day, we will get rewarded at the end of that day or at least over a period that makes the link obvious. But it doesn’t always work that way.  The lags between good inputs (effort, intelligence) and good outputs (net worth, income) can be long, variable and uncertain.

We tend to gauge progress by the outputs and not by the inputs.  As Taleb explains in Fooled By Randomness, we are regularly fooled by the volatility and randomness inherent in all walks of life…but particularly finance and business.  It is better to acknowledge volatility than try to assume it away or suppress it. There will be plenty of times when we suffer temporary setbacks but where the underlying trend remains upward and we just need to keep playing the hand we are dealt as best we can.

One of the (many) mistakes I made was too much focus on net worth and short term market movements (over which I had no control) and too little focus on our spending (over which I had direct control).  I wasted hours every week screenwatching…following every portfolio price tick up and down when I should have been getting a grip on our spending and stemming the bleeding from my bank account.

Cutting spending is the key to realising that there is no direct relationship between spending and happiness. Once you have internalised that truth, everything falls into place and your progress will start to accelerate.  Cutting spending has an effect 25x as powerful as making money investing (at a 4% assumed SWR). Every £1 you cut from your spending reduces the target for enough by £25. Again, this is not my opinion, its arithmetic.

The growth in your net worth will always be back-end loaded due to the maths of compounding. This produces an exponential growth J curve effect. If you look at the illustrative numbers in Dignity, the year one investment income is a puny £189. Twenty years later this has risen by a factor of 80x and our hero is free and FI.  Most of the money for my Freedom Fund materialised in the last few years, when the snowball had gathered scale and was careering downhill with awesome power and momentum.

Putting it all together, here’s what this looks like:

Having quit work, I’ve found new challenges that make life fun and interesting.  But you have to start again at the bottom and work up. I’ve gone from being one of the organ grinders at work to the monkey in my cycling group.  You have to embrace this and suspend your ego.  As MMM puts it: to achieve greatness, you must first acknowledge that you suck.

Having persisted through my performance lag a few weeks ago, I had what felt like a huge day of progress last week. The sun was out, spring was in the air, and I was out in beautiful countryside riding with a group of friendly people.  Not only was I was able to keep up but instead of grimly hanging on at the back, I was able to relax, chat and my pedals seemed to turn almost effortlessly.

But here’s the thing. The progress was not achieved last week when the sun was out. It was achieved beforehand, during the grim winter months when I pushed on, even when I felt knackered. Last week was only when the benefits became obvious and I realised the snowball had gotten big.

If you are currently on the path to FI and loving it, that’s fantastic. But if you sometimes feel like you are a bit stuck and not making progress, then this article was written for you. Don’t worry, its normal to feel like that sometimes. Just keep focusing on what you can control.

1. No kittens were harmed in the writing of this article

2. You can follow The Escape Artist on Twitter here


  1. Great post TEA. After two years on the path to FI, I’ve hit 50% of my FI goal. Its been relentless saving and investing. Focusing solely on this and business I have found my own fitness floundering. I guess what I’ve learnt and what I take from this is you need balance in all aspects of your life. This will get you through the rough and smooth times.

  2. Timely article TEA. A persistent cold, long hours at work and revision for an exam this week on top of that has left me battered and bruised. Boo hoo.

    But, it is at times like this that I look at my savings and think “Hmmmm I could take a year off work and relax, and just live off my savings”. And I suspect this temptation will only get more as the nugget grows.

    Of course, I slapped myself about the face. A few months off now is nothing compared to what the reward will be if I stick to it.

    If you had one piece of advice for those of us starting out, what would it be? Sort out our expenses? Sort out what makes us happy?

    Mr Z

    1. If I was only allowed to give one piece of advice then this blog would be a lot shorter. No bad thing, some might say. Cutting expenses and focusing on what makes you happy are both excellent suggestions. Another one might be: ride a bike. Another one would be: experiment more…I’m definitely over-running now…

      1. True, and that would be a shame as the blog is excellent.

        By the way, I forgot to mention. Always remember rule #5 –

  3. Nicely put EA. Savings and investing mirrors endurance sport in many ways, it’s a long term path not an overnight journey. This ERG spent his teens to early thirties chasing sporting ambitions, spending what he earned (very little) but learning to live very modestly but above all have time to train. From early thirties work began mostly in business but some salaried work. Take home / pay or profits were never huge but within 17 years enough was amassed not to have to work and live the life I love. (I’ve always valued free time above endless material goods). The lessons in endurance sport certainly helped. As a teenage athlete finishing 5th or 6th in the school cross country I remember a school teacher who ran the athletics telling me, if you stick at it and keep training you’ll be amazed at how far you can go. Wise words and ones that I’ll forever be grateful that he shared with me.

    1. Thanks for the comment. Yes, sounds like learning to live cheaply in your 20s plus the lessons learnt from endurance sport provided a foundation for your subsequent ER.

  4. Great post. I have noticed the same tendency when learning all different kinds of skills. I have actually drawn out charts very similar to the one you have in the post, to demonstrate to myself that even though I am most of the time not performing at my best, I am actually still in a long term trend towards improvement. I think the chart may be even more severe in certain skills, like the game of chess for example, where you have brief breakthroughs when you perform well for short periods and then drop down to a higher low, which is frustrating because we are psychologically wired to be loss averse.

    What I am trying to learn is to focus on moving to the right on that graph, and not focus on moving upwards. In other words, focus on your objective progress towards your goal, which will include volatility in your outputs, and not on your relative performance at that moment.

  5. An excellent article, TEA!

    Currently I can say that I am during the happy, bubbly stage of the FI process. I am going to be fascinated to see how I react to a bear market like that post-financial crisis.

    I think you’re right there is a tendency to focus on the outputs rather than the inputs in a process like FI (and exercise). It is easy to forget that it is the savings aspect of investing which is more important than the actual investing bit per se.

    That is why I have started to use Dividend Life’s Work Freedom Day. It links the input and output elements together for checking progress. It encourages you to reduce your expenses (and save more) and make wise decisions. Hopefully that will speed my progress up!

    Keeping motivation up in good times and bad is critical. You have clearly succeeded. I hope I do too!

    Thanks again for writing this up. Very interesting.

  6. nice articel as usual TEA. Wondering if you’ll be sharing your overall cycling route for us curious minds. i just looked up Mt Ventoux on Ride With GPS to see what the ascent looks like & came across this nutcase of a route that appears to to the climb 3 times!

    Only a 5,000ft climb to do it once though. What’s the problem? I did 2,000ft of climbing around London a couple of weeks ago on “The London Classic” & that was on a Brompton 😉

    Joking aside, a single 5,000ft climb looks gruelling!! I’m going to have to do this at some point, once the kids no longer want me around so much, & most likely on a Brompton just to make it even more of challenge!

    1. LCIL – Thanks. I’m going to start from Bedoin and go up to Ventoux from there…which is the classic Tour approach. Then maybe descend into Malaucene. From there I will just keep my compass facing N / NW until I hit Caen and the ferry home. That is pretty much the extent of my route planning. What could possibly go wrong?

  7. Thanks TEA for this great piece and timely reminder. It is tough in the beginning and middle but gets better as you get closer to FI and then it is cruise control as you hit your goal. The key really is to grind it out and stay the course, the result will be worth it. Anyone remembers 2008 and 2009? It felt like the world was ending but as you said it was a great opportunity to invest in great companies at give away valuations.

  8. Chandon · · Reply

    This was a very well written and interesting article. Whilst I agree with your thesis that life is about putting in some serious effort (think Gladwell’s 10,000 hours etc), whether you’re talking about FI, dieting, sports or doing anything really, what happens if you put in the hard yards and still come up short? I’m interested in this from a personal perspective, as I am now fifty, unemployed and unlikely to ever find a remunerative job ever again in my old field. Throughout my high-earning 40s, I cut my expenses massively and saved hard, and I was well on the way to FI, but ran out of earnings before I made it. I’m interested to learn how to deal with a derailed FI plan/life. Regardless of that, keep up the good work, as I really enjoy reading your articles.

    1. Chandon – you raise an important point which is that even if we do the right things, success is often not guaranteed. That’s because of volatility or randomness: we can all get hit by lightning. The thing is to accept that truth and move forward whilst keeping focused on what we can control.

      Think about what success means: you have been successful in cutting your expenses, saving more and generally improving your position / skills / attitude. This put you in a much better position than you would have been if you hadn’t done those things. How to deal with a derailed plan? First accept the new reality and remember that’s normal…we all have to adjust as we go along. Then start the process of thinking about what next. The great advantage of a crisis is that it forces us to re-examine habits and make changes. I can be more specific with more info…so email me if you want to chat further. All the best, TEA

  9. Steve R · · Reply

    Some great stuff here. My inputs are pretty damn good and I’m keeping a close eye on them to make sure they stay that way, so I just need to keep going and ignore the volatility in the output. Just using the word “volatility” in connection with “life results” is brilliant; it allows me to carry my “volatility is normal and OK and nothing to worry about” understanding across from financial markets to the rest of my life. This is probably one of those articles I’ll refer back to when things start to seem a bit hopeless. Cheers!

  10. Hi TEA

    Great post, I hadn’t thought of the importance of the past actions on the present, but the way you highlighted it by saying that you didn’t just get fitter yesterday, but several weeks back made it sink in.

    When are you going to Mont Ventoux? I have driven up it and would love to ride up in the future, will have to maybe try next year as I am concentrating on training for the Ride London 100 this year.

    Have a great time

    1. Thanks FIUK, if all goes well Saturday 9 May will be V-day!

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: