The true secret might just be to realize that building wealth is not just a function of effort, knowledge, or luck, but also time

- Vikas Arora

The best investment advice usually doesn’t come from mathematics but from psychology. Sometimes, though rarely, even a subject as seemingly disconnected as geography can give us great lessons on building our corpus. This is not to say that spreadsheets and formulae are irrelevant to investing; they are relevant, however, just the first chapter, rather than being the entire textbook.

In his book, ‘The Psychology of Money, Morgan Housel explains how the earth came to be covered by ice several times in its lifespan. Confounded scientists worldwide wondered, ‘what kind of power must it have taken to freeze the entire planet, melt it, and freeze it all over again? It must have been the most powerful force on earth’ and it was.

Amid several theories, a fascinating nuance emerged: moderately cool summers, not extremely cold winters, were the secret to the planet freezing over. It all begins when summer isn’t warm enough to melt the ice that froze the previous winter. The leftover base of ice makes it easier for snow to accumulate the following winter. If this cycle repeats for decades, even regular snowfall can turn into a continental ice sheet.

The lesson we can take from here is not just one on science, but about how seemingly small quantities collected over time can build up to unimaginably big things. A succinct example of this phenomenon is a Wikipedia entry that reads: "Ronald James Read (October 23, 1921 – June 2, 2014) was an American philanthropist, investor, janitor and gas station attendant."

Ronald Read didn’t have a secret. He didn’t win a lottery, invent an app, or even buy Bitcoin in 2010. He simply saved everything he could and invested it in blue-chip stocks. These small savings compounded for decades to create a fortune. The Wikipedia entry on him goes on to read:

"Read died in 2014. He received media coverage in numerous newspapers and magazines after bequeathing US$1.2 million to Brooks Memorial Library and $4.8 million to Brattleboro Memorial Hospital. Read amassed a fortune by investing in dividend-producing stocks, avoiding the stocks of companies he did not understand such as technology companies, living frugally, and being a buy and hold investor in a diversified portfolio of stocks with a heavy concentration in blue-chip companies."

The magic of compounding applies to everyone: from a janitor, to arguably the greatest investor of all time: Warren Buffet. Several people attribute his success in investing to his acumen. However, where would Warren Buffet be had he started investing in his 30s, like most people do, and retired in his 60s?

Instead of $84.5 billion, he would surely be worth $30 billion, or maybe $15 billion?

Wrong. Had Warren Buffet not begun investing since his literal childhood, today, his net worth would be ~$11.9 million. Roughly 99% less than what it is today. According to Morgan House, his skill is investing, but his secret is time.

Successful investing does not mean getting the highest returns time after time. The rise of crypto currency, Unicorns and IPO’s >100% listing gains, are usually one-offs. For every risky decision that pays of phenomenally, there might be 3 that end up disappointing you. The true secret might just be to realize that building wealth is not just a function of effort, knowledge, or luck, but also time.

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