Updated: Feb 14, 2019
We've talked about this idea before, but I wanted to drill down into more detail because it's an important concept.
From childhood, we're told that setting goals is important. If we want to be successful we must set goals. If we want to accomplish anything in life, we need goals. FAST goals, ambitious goals, big goals. It's all about goals.
Well not so fast…here's another, more effective, way to look at it.
Goals are useful in that they help us set a general direction for where we want to go and what we want to accomplish. But, they aren't a solution to all of our problems. That's where systems come into play. Systems are the means by which we accomplish our goals. Put another way, the stuff we do everyday, or our habits.
I first came across the idea of systems from Scott Adams, creator of the cartoon Dilbert, in his book, How To Fail at Almost Everything and Still Win Big. He talks about how he set up systems in his life and ultimately accomplished more than his original goals.
Here's how it works.
It's pretty obvious that we won't accomplish our goals if we don't work towards them. Just because we create a goal doesn't mean we'll succeed.
We need to put systems in place to achieve those goals.
Here's some examples.
Goal: Read 50 books per year. System: Spend one hour reading each night before bed.
Goal: Lose weight. System: Run for 30 minutes a day, buy smaller plates, and drink 64 oz of water each day.
Goal: Learn the piano. System: Spend an hour each evening watching YouTube videos and playing along.
It's nothing revolutionary. A system consists of how we spend our time and energy on a daily basis. Eventually, as time ticks along, if we have effectively set up our systems, we'll breeze past our goals.
Further, systems are superior to goals for a number of reasons, as outlined in the book, Atomic Habits, by James Clear.
1. Winners and losers have the same goals.
In the Olympics, everyone has the same goal to win a gold medal. But the systems those athletes put in place were the difference between winning and losing.
2. Goals restrict happiness.
When you make a goal, you subconsciously think you can only be happy once you reach that goal. With systems, you are focusing on what you can control, thereby eliminating the "one-day I'll be happy" syndrome.
3. Goals provide a momentary change
Once you achieve a goal, the motivation stops. Progress comes to a screeching halt. If, on the other hand, you set up a system, you'll keep going because it's a never-ending journey.
Here's a personal example.
Last year, I made a promise to myself that I would run the LA Marathon. I bought new running shoes, paid the entry fee and was on my way. To train, I'd run five days per week.
After months of training, race day came. I woke up, laced my shoes, and was shuttled to Dodger Stadium, where thousands of people were waiting, expectantly, in the freezing cold to run 26.2 miles. A bunch of crazy people if you ask me…
After 4 hours and 15 minutes, I barely finished. My legs felt like lead balloons. I nearly collapsed when I crossed the finish line by the Santa Monica pier.
But here's the thing. After the marathon, I didn't run for nearly five months. And that's not an exaggeration. I had completed my goal and thus my fitness progress came to a screeching halt.
If I had set up a system to simply run for an hour each day, I would likely have continued shortly after the Marathon.
Goals are limiting.
If we set goals too high, they seem impossible and we don't even get started. But we can also set them too low and limit ourselves. If we simply set up great systems, we get the best of both worlds.
What Does This Have To Do With Investing
Let's say our goal is to have $1 million in the bank by age 50. Let's run it through the 'three downsides of goals' test.
1. Losers and winners will set a goal of saving $1 million. 2. You might fall prey to "one-day" syndrome. 3. You might stop saving after hitting $1 million.
On the other hand, you can set up a system. Maybe your system is to save 20% of each paycheck, subscribe to Investing City :) and read for 30 minutes per day about investing.
Again, it's all about focusing on what you can control. Sometimes reaching our goals is out of our control. But we needn't worry about that because as long as we construct great systems and stick to them, we did the best we could.
Goals are good for direction setting. Systems are good for progress.
Spend more time building systems than fantasizing about achieving your goals. It'll make a world of difference.
To give you some ideas, here are some of my daily systems.
- Run for 30 minutes. - Write at least 500 words. - Read a book for 30 minutes. - Read 2 chapters in my Bible. - Learn something new.
As James Clear would say, "Habits are the compound interest of self-improvement."