The difference between speed and velocity might seem trivial but it is actually pretty important.
Let's start with defining the terms.
Speed is the rate at which something is able to move and velocity is speed coupled with direction.
So velocity is the rate at which something is able to move in a given direction.
Why Does This Matter?
A lot of times, we can be focused on speed. How do we get to the next step in our careers? How do we get as much done in one day as possible? How can I best use my time?
But it's wasteful if those questions are asked without concern for direction.
In other words, without the right direction, speed is useless. In fact, speed is detrimental because you are going the wrong way faster.
You might've already caught on, but this is the same concept as growth with a purpose from last week.
You can think of it like this: growth = speed and purpose = direction.
I think it's such an important concept that it deserves some more attention.
We know that speed without direction is not very helpful, even detrimental. But this begs the question: which direction should we go?
The direction you should go is situational. It's based on your priorities and what is important to you.
Let's take a career example. A lot of people try to climb the corporate ladder as quickly as possible. That is speed. But to drill down on direction, an important question must be asked.
What do you want out of life?
If your life-long goal is to be a CEO, then climbing the corporate ladder might be appropriate. However, if your life-goal is to be the greatest parent in the world, your speed in this example might be inappropriate.
I'm not saying it is impossible to do both, climb corporately and be a great parent, but you need to be aware of your direction. If your true goal is to be an incredible parent, working 90 hour weeks might not be congruent with your vision.
The things that are most important in your life should set your direction.
After figuring out your direction, then you can focus on increasing your speed. Similar to how builders say, "Measure twice, cut once" we should say "Direction twice, speed once."
It is so easy to get caught up in life and lose direction because everyone around you is focused on speed. Here's the thing though: they might have different directions than you.
Our environments shape us even though we don't all come from the same contexts. In other words, if we allow our workaholic-neighbor, who brags about his Ferrari, to shape our worldview of work, we are allowing his direction to dictate ours.
What's the Solution?
The only way to make sure we are headed in the right direction is to be very intentional and aware of the things that are most important in our lives.
Try this out: Each morning when you wake up, write down the two-three things that are most important to you. Then focus on speed to improve at those things.
But beware: sometimes our directions can fight each other.
Like in the work example, if we seek to be the best CEO/parent ever, those can contradict, or pull against each other. It's a harsh reality. In these cases, you need to be even more clear which takes priority because you will undoubtedly face the decision to spend more time at work or home.
Another point on this topic is that if you are upset with the results of your direction, you should pay attention to that. Let's say you start falling behind in work because you've decided to be the world's greatest parent. If you start getting depressed about your results at work, maybe you need to be brutally honest with yourself and either, disassociate your identity from work or give up your dream of world's greatest parent. The latter seems like heresy so I suggest the former but this just puts direction in perspective.
[*Important tangent: The dangerous thing here is that our directions may become our identity. The most important things in our life become who we are at a fundamental level. This creates some problems.
For one, it is possible to be wrong. We may think becoming a CEO will solve our issues. It may not. So be sure to take some breaks along this journey of life to stop and assess your current direction. Like I was saying, "Direction twice, speed once."
Two, we may become disillusioned if we don't reach the goal at the end of our direction-tunnel. If we want to become CEO and it is part of our identity, not getting the job may crush us since we are left reeling with no sense who we are. This is not to say that we shouldn't dream big, we should! But we also need to be aware of our direction becoming our identity. *end tangent]
If we are headed in the right direction for ourselves then we should be fine with the results. If not, our direction is probably still being externally dictated.
What About Speed?
As stated, speed without direction is useless. But speed can be a multiplier. The more speed you have in the right direction, the more time you have for other, complementary, or even contradictory directions.
Let's go back to the same work-parent example. If you get your work done efficiently, you will give yourself the opportunity to be the world's greatest parent as well. So speed is definitely not useless. It is just secondary, dependent on the correct direction.
So the most important things in your life can act as motivation agents to increase your speed. If you can't find any motivation at work, the fact that you can spend more time with your family can be necessary motivation to get your stuff done.
So it can be a virtuous cycle. Your direction helps motivate your speed and then your speed opens up more time for improvement or other directions and then that motivates even more speed. That is the eventual goal. This virtuous cycle of speed and direction.
What Does This Have to Do With Investing?
There are a couple ways this concept applies to investing.
For one, we talked about how our direction can be externally dictated. This bleeds into comparison. If we are constantly comparing our investment results against other people, we may become frustrated. But their direction might be to become the world's best investor. If you don't care much about that, why should you get frustrated if your investment results are a little lower?
Two, investors love speed but have a hard time nailing down direction. They love arguing over the minutiae and forgetting the bigger picture. I couldn't tell you what the price of gold is. I don't know much about global politics. I don't know who is in President Trump's cabinet. I don't know the 15 year Treasury yield. Some may call that uninformed. I call it a keen sense of velocity over speed. I try to double-down on the things that have the biggest impact on performance rather than the things that people "should know."
I like to examine business models, market dynamics, investor psychology and sentiment, competitive advantages, financial strength, and company leadership. I think these are a good place to start.
But then again, other people may have different priorities. They may like learning about macroeconomics and think that it has a big impact on markets. Time will tell whose velocity takes them the furthest. I've placed my bet.
Speed without direction is useless. But with the right direction, speed is a multiplier. Explore what is most important to you, without making it your entire identity, and then double-down to see where your velocity takes you.
I am looking forward to hearing about the results.
Actionable item: Tomorrow morning write down two things that are most important to you and focus on how you can increase the speed relating to them.