Headwinds, Tailwinds, Crosswinds and Spaghetti Strands
One of the events that I love to watch each year is the Tour de France.
As I write this, they are currently racing across the scenic (from my couch) and torturous (from their bikes) route for 20211. One theme that comes up every year is cyclists benefitting from tailwinds or fighting headwinds/crosswinds. This same concept applies to each of us, as well as the companies we invest in, over time.
Imagine three people…let’s call them Peter, Paul and Mary. Peter grew up in a middle-class home with both parents. They spent time with him and encouraged him to do well in school, be polite, work hard, etc. He was from a smaller town in the Midwest, where there weren’t a wide variety of professional careers. Paul grew up in a bigger city on the west coast, but his dad passed away when Paul was just a baby. Paul’s mom worked hard to support the family, but that meant she was rarely home and often tired. She didn’t have time to take him to play soccer or work with him on his homework. They also couldn’t afford to live in a great neighborhood. Mary grew up with both parents in a big east coast city. Her dad was an executive at a larger company, while her mom volunteered with two community organizations. Their family had lived in the area for multiple generations, so both parents knew a large number of people with a wide variety of careers and influence.
I’m sure you can see where this story is going. Which of these three people are most likely to benefit from advantages in their life and which are more likely to need to overcome additional challenges? I haven’t told you anything about Peter, Paul or Mary, merely a VERY small piece of the environment that they grew up in. The purpose is to illustrate the headwinds that each might have had to fight through (poverty, questionable influences, lack of exposure to career opportunities, etc.) and the tailwinds that were aiding them along the way (family support, strong work ethic modeling, large network of career connections, etc.). Note that I did not address which one ended up happier or more successful. We don’t know anything about their personality, physical traits, goals, etc., despite each of these being linked to career success and happiness. The environment and influences can help model and encourage behaviors. However, as I’m sure anyone with kids can attest from personal experience, we can not control the behaviors of others.
Take a moment here to think about your own headwinds that you’ve had to push through or tailwinds that might have given you a boost in life. Probably the biggest tailwind for everyone reading this is simply the era that you were born into. Things like electricity and plumbing have only been common in homes for about 100 years. In 1921, the life expectancy for a man born in the US was 60 years (a figure that interestingly enough was the high-water mark until 1932). Today, it is 79 years — an increase of 19 years! Go ahead and think of a few headwinds and tailwinds…it’s probably pretty easy to come up with multiple in each category. Really.
Did you do it? C’mon, it’ll only take a minute or two.
Also, don’t think of the tailwinds as things that diminish your accomplishments…virtually everyone has had a few beneficial opportunities come their way. It was still up to you to take advantage of the situation. Plus, give yourself a pat on the back for overcoming the headwinds that challenged you along the way.
Headwinds and tailwinds are not really that groundbreaking of concepts. However, it is important to remember that we all also deal with plenty of crosswinds. Things that change our life direction dramatically…and often times we are not even aware of it. Here’s a personal example. I’ve been married to my high school sweetheart for 31 years now (aw shucks).
We’d been going to the same schools for almost six years before we started dating. While I’m sure each of us could have picked the other out of a lineup, we hardly knew the other existed for most of the first five years. However, one of my friends (shout out to Nate Smith who I haven’t seen in over 30 years) got an invite to work on the school newspaper and I tagged along. We both ended up joining, and there I met the girl who was going to be the editor-in-chief. The rest is history.
My job of 26 years teaching college came about because
The MBA program I was thinking about attending didn’t look like a good match which led to me going to the University of Kansas for their PhD program
When I was getting done, I turned down two smaller schools because I didn’t think they would be good fits
A person at the school that hired me resigned unexpectedly at the beginning of the summer, which created the need for an expedited search. Fortunately, I was close enough for a quick interview.
If any of those things (along with a bunch of others) didn’t happen, my life likely would have turned out a lot different. This brings to mind an image that I’ve seen a few times over the past year (aka the spaghetti strands from the title).2
Where we are in life now is more likely a product of random (or seemingly random) outcomes.3 If that is true up to this point, guess what? It’s going to be true going forward. As we “bike” our way through life, we have tailwinds that push us forward, headwinds working against us, and crosswinds pushing us into different lanes. How we respond to all of these outside forces is based on our fundamental core (and even some of that may be genetic).
While I find this interesting to ponder, your mileage may vary. However, let me now tie this back into an investing/business framework. Just like individuals have tailwinds, headwinds, and crosswinds that cause their lives to unfold in an unpredictable pattern, businesses experience the same forces. One of the largest companies in the world at this moment is Microsoft (which checks in as the second biggest company in terms of market capitalization as of July 13th, 2021). I’m sure everyone is familiar with Bill Gates who was one of the original founders and ran the company for a long time.
You might also be familiar with Malcolm Gladwell and the 10,000 hour rule.4 Bill Gates is incredibly bright, works hard, and has many other positive traits and likely would have been hugely successful even without Microsoft. However, if he would have been born 5 years earlier, to a different family, or 5 years later, we may not be familiar with him. That is because his specific situation put him in position to have exposure to computer time at the right moment to convert his potential into success. Did he still need to take advantage of that opportunity? Sure, but it is the unique combination of the opportunity and his personal traits that created the Bill Gates we know today.
When you look at companies that are successful now, it is essential to remember that what makes them successful is a specific combination of opportunity and the key people making decisions to capture that opportunity. If (or, more appropriately, when) things change, will the company still be successful? What can change? The regulatory environment, technology, departure of key personnel, corporate culture, etc. Can the company maintain its competitive edge when it moves from $10 million in sales to $10 billion in sales? How much is the result of a visionary CEO and what happens when that person is no longer there? Is the problem the company is currently facing a short-term blip that will create a buying opportunity or a longer-term problem that will cause the stock to underperform for years going forward? If you are going to invest in individual stocks, it is critical that you know the story and are regularly updating your understanding of the story. You have to understand what resulted in the company getting to where it is now AND keep an eye on the path it is taking going forward. In other words, what are the tailwinds, headwinds, and crosswinds that create its specific spaghetti strand?
Congrats to Sepp Kuss for being the first US-rider to win a Tour Stage in 10 years!
Not sure where this image originated, but kudos to the creator!
I say seemingly random because there are many people who would argue that it is not random, but part of God’s plan. While this is a perfectly reasonably view and it is very possible that God knows exactly the headwinds, tailwinds, and crosswinds that will wind up in our paths, it is hubris to believe that we KNOW what these will be or how we will respond (which opens up a debate on free will). From our point of view, it is random.
While the 10,000 hour rule (essentially that success in a field is the result of hard work over around 10,000 cumulative hours devoted to deliberate practice, which is the key to gain mastery in a discipline) gained a lot of attention and is compelling. However, there is growing consensus that there is a lot more to success than practice. Also, while the 10,000 hour rule is commonly associated with Gladwell in his book Outliers, it originated in a 1993 study on violin players.