After posting 838% revenue growth in 1997, Jeff Bezos reminded his team in his first letter to shareholders:

This is Day 1 for the Internet and, if we execute well, for Amazon.com.

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Nearly twenty years later, in his 2016 letter to shareholders, Bezos pondered what day two might look like.

Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.

Stasis. Followed by excruciating, painful decline.  Pleasant.  But powerful.  Yet, for me, Day 2 has a somewhat different meaning.

In Search Inside Yourself, Chade-Meng Tan, one of Google’s earliest engineers, provides us with timeless wisdom for enhancing mindfulness and emotional intelligence.  Meng shares a short parable, inspired by the poem Autobiography in Five Short Chapters, that captures the importance of Day 2 (emphasis added):

Day 1: I walk down the street. There is a deep hole in the sidewalk. I do not see the hole. I walk right in.

Day 2: I walk down the same street. I see the deep hole in the sidewalk. I walk right in.

Day 3: I walk down the same street. I see the deep hole in the sidewalk. I walk around it.

The hardest day is Day 2. On Day 2, you can clearly see the hole in the sidewalk, and you can clearly see yourself walking right into it, and still, you are unable to stop yourself.

But Day 2 is a prerequisite for Day 3. Only when you can clearly see how you fail will you be able to overcome the causes of those failures. So when you find yourself in Day 2, know that this is a natural progression toward Day 3 and if you keep practicing, you will soon develop the ability to walk around the hole.

At every step of your growth, expect failure. Lots of failure. When you are learning to juggle three balls, you expect to drop balls all the time until you can keep three balls in the air. Once you can juggle three balls and you want to learn to juggle four, what happens? Failure, failure, failure. You will keep dropping balls as you practice until you gain the new ability. Eventually, you have no problem juggling four balls. If you decide to go for five, what then? Yes, failure, failure, failure, until you acquire the new skill.

When you are growing, it often feels like you are failing all the time, but I encourage you to look back at your journey every now and then to see how far you have come. For example, while you are dropping balls all over the place in your practice to juggle five, think back on your progress from two to three to four. At every step, you told yourself how great it would be to juggle one more ball, and at every step, you eventually succeeded.

Understand that failure is an integral part of the growth process. Do not just see the failure – also see the growth. When you do, you will experience the joy of growing.

I was reminded of this inspiring story when re-reading Ray Dalio’s Principles this weekend. Below are just a few related excerpts (slightly paraphrased and rearranged):

  • Look to nature to learn how reality works. Man’s most distinctive quality is our singular ability to look down on reality from a higher perspective and synthesize an understanding of it.
  • Evolution is the single greatest force in the universe; it is the only thing that is permanent and it drives everything.  Evolution is good because it is the process of adaptation that generally moves things toward improvement. From this perspective, we can see that perfection doesn’t exist; it is a goal that fuels a never-ending process of adaptation.
  • Evolving is life’s greatest accomplishment and its greatest reward. The key is to fail, learn, and improve quickly. Adaptation through rapid trial and error is invaluable.
  • Maximize your evolution. This constant drive toward learnings and improvement makes getting better innately enjoyable and getting better fast exhilarating.
  • Remember “no pain, no gain.”  While we don’t like pain, everything that nature made has a purpose, so nature gave us pain for a purpose.
  • In order to gain strength, one has to push limits, which is painful. Man needs difficulties. They are necessary for health.

The bottom line, according to Dalio is:

Pain + Reflection = Progress

I’ve had those words written up on my whiteboard since the first time I read them several years back. Simply put: Day 2 is a prerequisite for Day 3.

Back to Dalio to elaborate (emphasis added):

There is no avoiding pain, especially if you’re going after ambitious goals. Believe it or not, you are lucky to feel that kind of pain if you approach it correctly, because it is a signal that you need to find solutions so you can progress. If you can develop a reflexive reaction to psychic pain that causes you to reflect on it rather than avoid it, it will lead to your rapid learning/evolving.

Most people have a tough time reflecting when they are in pain and they pay attention to other things when the pain passes, so they miss out on the reflections that provide the lessons. If you can reflect well while you’re in pain, great. But if you can remember to reflect after it passes, that’s valuable too.

The challenges you face will test and strengthen you. If you’re not failing, you’re not pushing your limits, and if you’re not pushing your limits, you’re not maximizing your potential.

At some point in your life you will crash in a big way.  Your ultimate success will depend on you realizing that fact, even though it might not seem that way at the moment.

The quality of your life will depend on the choices you make at those painful moments.

See also The Obstacle Is the Way.  See also King of Pain.

We will be back to our regularly scheduled investment musings later this week.

Article by Christopher Pavese, Broyhill Asset Management