Imagine we have two people: John and Jane.
Both John and Jane live in a village by the sea.
To survive, they catch fish by hand in the nearby lagoon.
To catch enough fish to feed themselves and their families, both of them need to spend their entire day fishing.
This means they wake up at sunrise and by sunset, they have caught enough fish for the day, which their families then cook and eat.
However, John and Jane have a key difference between them.
John has a day-to-day mindset.
Jane has a long-term mindset.
Jane realises that there is a way to catch fish more easily, and while it may require sacrifice, it will pay off in the long run.
She estimates if she invests two hours per day making a fishing net, it will be ready in one week.
So, for the following week, Jane spends two fewer hours fishing each day, and spends it on net-making instead.
During that week, she catches 20% less fish.
She doesn’t want her family to go hungry, so she tells them she will just eat a small amount of fish for the week, and spends most of the week hungry.
However, after one week, she has a fishing net.
Now, instead of spending eight hours per day fishing, she can catch just as many fish as before in only four hours.
Of course, John, who has not invested any time in improving his craft, still spends a full eight hours per day fishing.
Since Jane now has four extra hours per day, she is in a position to even further improve her position.
She spends the extra time making another three nets.
After a month, she now has four nets, and can catch all the fish she needs in just one hour per day.
She now has an extra seven hours per day.
Not wanting to rest of her laurels, Jane strives to invest this extra time in even more improvements.
She wakes up each morning, spends one hour fishing, then spends the rest of her day building a fishing boat.
The fishing boat takes her three months to finish.
When it’s ready, she is able to take her nets and boat out of the lagoon to fish.
Now, each day she is catching ten times as many fish as before, and is catching bigger and more exotic fish that John doesn’t even have access to and has never seen before.
Since fishing with a boat allows her to catch exponentially more, she doesn’t even need to fish every day anymore.
Just one fishing trip per week is enough for her to catch enough to feed her entire family.
She now has six days free per week to enjoy at her leisure. She can use this time to invest in even more improvements, such as starting a vegetable garden, a store, or even a business renting out her boat and nets for the days she does not use them.
Meanwhile, John, who has not understood the concept of investing, is still spending eight hours per day catching fish by hand.
Here is the reality:
99% of people today are John.
Going to work each day, bringing home a paycheck, and investing none of it, is the equivalent of spending all eight hours of your day catching fish by hand.
If you continue to do this, week after week, month after month, logic should tell you that even after forty years, you will still be catching fish by hand.
But, if you take the foresight to just sacrifice one or two hours a week and a few dollars to start building a fishing net, your situation will inevitably improve.
Building your first fishing net might look something like:
- Cancelling Netflix and using that $10 each month to buy an investing book.
- Giving up alcohol and investing that money saved into an index fund.
- Instead of taking a vacation, use that money to take an investing course or attend a conference.
- Waking up an hour earlier each day to work on a side hustle.
As we saw with Jane, just taking this small step in the right direction (making a fishing net) will eventually snowball into larger opportunities down the road, like building a fishing boat.
As happened with Jane, a fishing boat will give you access to bigger and better fish (opportunities) that most other people can’t even comprehend or have even heard of.
A fishing boat might look like:
- A $100k portfolio that brings in thousands in dividends per year.
- A side hustle that grows to the point of replacing your monthly salary.
- A rental property that will bring in passive income every week.
Once you have a fishing boat in your life, this will provide you even more disposable time and income.
You will now have the opportunity to spend your time making even more fishing nets and fishing boats (more stocks and rental properties), venturing into other endeavours that might interest you, like making fishing rods and hooks (crypto, startups, side hustles), or simply enjoying your newfound leisure time.
Most people believe that to go from catching fish by hand to having a fleet of fishing boats requires you to win the lottery, get a multi-million dollar inheritance, or be a genius and get a $500k salary.
The reality is the difference is simply sacrificing one hour each day to make a fishing net, and through consistent effort this can turn into two fishing nets, which will turn into four, which will turn into a fishing boat, which will turn into two boats, which will turn into four, which over a long enough time period will turn into literally as much money as you desire to continue accumulating.
This is the effect of compounding, the eighth wonder of the world that Einstein spoke of, and is available to every single one of us.
Next time you buy a new purse, or a new pair of shoes, or an expensive lunch or dinner, or spend a night getting drunk, or playing video games, or binging Netflix, understand you are giving up more than just a few dollars or a few hours of your time.
You are giving up your opportunity to start making your first fishing net, which is the first step towards everything.