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The Truth About Overnight Success
Is overnight success a real thing? Consider how you become the kind of person who's most likely to experience that tipping point.
Daniel Lancaster
January 27, 2025
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“Failure is only the opportunity to begin again, only this time more wisely.”
-Henry Ford
NEWS
What Happened Last Week
The Composite Purchasing Managers Index (PMI), which measures how many companies are seeing growth vs decline in various aspects of their business, fell slightly to the lowest point it’s seen in nine months. It remains expansionary, however, at 52.4 (above 50 is a positive signal).
The PMI is made up of manufacturing and service industries. Manufacturing improved and services fell, but encouragingly both are now above 50. This indicates health in both sectors.
Despite the slowdown of recent days, the optimism of small US businesses soared to 105.1 in December. This is its highest point since October 2018.
The Department of Government Efficiency (DOGE) could be one of many reasons investors and business owners are optimistic, but one risk to meeting expectations here is its limited powers (more like an advisory board). Congress and the President still hold the final authority to do what ends up being proposed.
Uncertainty is high following the regulatory freeze and hiring freeze in the government while President Trump begins enacting reforms.
Investor sentiment swung positive again after President Trump’s first days in office, according to the AAII Investor Sentiment Survey and Fear and Greed Index.
How I See It
Recession and bear markets are not a big subject of conversation these days.
Investors, by and large, have accepted the idea that we are in a bull market which is likely to continue through 2025.
This is fine, so long as it doesn’t get out of hand.
Markets are historically high compared with earnings, but it’s quite likely there’s good reason for that optimism:
The Fed maintains room to implement meaningful monetary policy.
AI infrastructure is a major focus this year and offers huge potential for productivity.
President Trump has set a goal to eliminate ten regulations for every one new regulation put in place.
President Trump is pushing for a reduction of the corporate tax rate from 21% to 15%, among the lowest in the world.
These are just a few of the myriad possible conditions that America may be headed for in the years ahead.
The stock market’s job is to account for the likelihood of all of these changes taking place, attempting to price companies as efficiently as possible with limited information about the future.
But the problem right now is that there is so much interrelated change that it’s near impossible to adequately produce an idea of what even next year will look like in terms of US economics. That’s called uncertainty.
The good thing about uncertainty is that it fades over time. There’s particularly a lot of uncertainty right now, because we’re still trying to measure exactly what will and won’t change. What can and can’t be done.
And when uncertainty is high, markets tend to be modest in their estimations of what’s likely. They usually don’t get too far ahead of themselves in times like this.
Historically, with Republican Presidents taking office, there is often a surge in the election year due to optimism over better business conditions, and then a moderation which happens in the inaugural year when reality reveals that positive change is not as easy or fast as we might like. The President’s powers still remain limited, and the effect of all of these changes combined is near impossible to reasonably predict.
So I’m glad that investors have remained somewhat skeptical these past couple of months, only now returning to some degree of cautious optimism.
If we were seeing extreme optimism, sometimes described as extreme greed or euphoria, then that would be a potential red flag.
This could be a year of higher volatility due to the uncertainty, but overall, I still believe it will end solidly positive.
PARADIGM SHIFT
The Truth About Overnight Success
Ryan Holiday, author of The Daily Stoic, reminds listeners in this podcast that overnight success, while it does happen, is rarely as instantaneous as it appears to be.
There are three general pathways to success:
Slow, steady and incremental growth of income and assets.
Instant windfalls of winning the lottery, picking the winning investment, or inheriting a fortune.
Slow, disciplined dedication to a craft which eventually hits a sudden tipping point and changes everything.
The first way is the most common way, even though wealth accumulation is not common in general.
The second way is extremely uncommon, and even when it happens, it often only provides a short burst of benefit before it’s run dry and essentially wasted.
The third way is how the greatest wealth often comes into being.
You personally have a unique blend of talents and passions which tailor you to a very specific and valuable niche. No one has the same mix of personality, experience, education, interest and talent that you have.
And because of that, you have something valuable to offer the world.
Not everyone takes the initiative to expend the energy necessary for exploring avenues with trial and error. But trial and error is the only way you raise chances of whittling away the chaff, and narrowing your focus in discovering your personal superpower.
It takes time to recognize and share this with the world. And that’s why those who chase quick riches will often fail, whereas those who navigate their lives around calculated risk-taking toward their interests and passions are far more likely to hit that tipping point of so-called “overnight success.”
But it’s not overnight. Intentional movement toward short- and medium-term goals keeps you from what Napoleon Hill calls “drifting.” And as long as you’re not drifting, you are learning valuable lessons from your successes and failures.
That journey of lessons accumulates interest, so to speak, and eventually hits that tipping point where wealth exponentially begins to increase.
The more experience you accumulate, the more niche becomes your expertise. Identifying that intersection of skill, passion and experience within yourself, and channeling it into focused effort, can pay greater dividends than any lottery win could hope to accomplish.
And only you, and those closest to you, will know how much preparation, discipline and intentionality came in advance of that sudden success.
FINANCIAL TOOL
Passive Investing
Passive investing means choosing a benchmark and simply trying to match its performance.
No bets are taken based on market forecasts. And usually an ETF is used to allow a manager to set this up and maintain it over time. But little trading is actually done unless necessary to stick as close to the benchmark as reasonably possible.
Active investing is the opposite of passive investing.
Active investing includes moments of market bets that stray from the benchmark in order to potentially capture higher returns. But because of the additional need to forecast and strategize, active investing generally costs more than passive investing.
Here’s the problem.
There are varying theories about how efficient the market truly is. Efficiency means that markets properly price assets based on all publicly known information. And the evidence points to the likelihood that this is the normal state of the stock market.
But if markets are efficient, then any attempt to outperform is actually guesswork, just as likely to fail as to succeed.
Combined with a higher fee, that means active investing usually underperforms its passive counterparts!
There are exceptions, but most cases show that passive investing outperforms active investing over the long-run.
But there is a problem with passive investing.
It’s a very rare person indeed that has the nerve to do it!
Even though buying a passively managed ETF is simple in theory, leaving it alone for ten or twenty years is almost unheard of. According to DALBAR’s studies, the average US investor changes their strategy about every 3.5 years. And because the investors themselves are making those active decisions, they still underperform the markets by a significant margin.
So passive investing is simple, but by no means easy!
Almost no one does it, even if they claim to believe in it.
So here’s the thing many people don’t think about. Or if they do think about it, they don’t believe.
Having some relationship to a financial advisor, coach or counselor can actually be one of the most valuable things you can do, above and beyond making the actual investments. Because while the tools are available, it’s rare that an investor can save themselves from their own emotional biases, overconfidence and misunderstandings that lead to significant underperformance over the years.
While passive investing is an easy thing to imagine, it’s not something that almost anyone successfully achieves in the long-run.
HERE’S HOW I CAN HELP
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I’d love to hear from you. Let me know what you’d like to see in upcoming newsletters, articles, or a digital course at Contact Us - The Wealth Expedition.