Recently I came across an interesting article from the early 20th century about a new management system employed at Pullman (the company responsible for manufacturing most of the country’s railroad cars in the 20th century).
Apparently, the folks at Pullman had a problem at their factory. As they tried to grow bigger and bigger, instead of efficiently building more railroad cars, the managers found that greater and greater time was spent dealing with communication overload.
One “big, bright room” had been filled with “desks, counters, wall racks and filing devices” where “back and forth along the rows of files quick-eyed clerks” were passing cards in some kid of elaborate accounting system.
This scene is probably familiar to many investors that spend their days busily responding to emails and moving documents and processes forward through careful attention to the inbox and some unseen steadying hand.
In fact, we can spend all day knocking down email requests and attending conference calls, only to get to that magical time of day evening when the chatter dies down and we can actually get some real work done.
You can think of your financial life in similar terms. There’s the convenience of having everything at your finger tips … and then there’s actually getting the work done.
For example, there are plenty of the cool Fintech tools that can automate your finances and be completely convenient. Some may even trick you into saving more by rounding up your purchases and squirreling away the extra money into a hidden bank account.
Even if you’re not using those tools, you may have all your accounts linked up in a clever way where you’re monitoring the latest stock market news and can execute a trade from the power of your iPhone.
But are those tools really providing value? Or are they just convenient?
You see, the Pullman problem is a century-old problem of information overload. Just like the modern knowledge worker, the Pullman engineers had inboxes and notifications filled with ad hoc messages. The problem has only been magnified over the years thanks to digital delivery of these messages.
The solution, of course, isn’t that you need your phone to ping you reminding you to invest some cash once a week. The solution is to take the approach followed by Pullman: they made it harder to communicate and less convenient.
The company hired managers who’s sole purpose was to handle the logistical issues that used to distract the factory workers. They also closed the management doors to the factory workers. If you had a request, you had to fill out a form and drop it off in a slot for one specific manager to process.
While certainly not convenient, the process worked and Pullman’s profit per train car jumped.
So when someone asks me why I deposit all of my excess paycheck into Vanguard and then make it extremely inconvenient to withdraw the money, I’ll just tell them now that I’m following the advice of the Pullman company. Making things harder isn’t necessarily bad. Come up with a simple plan, set it up on auto-pilot and then make it hard for you to interfere. You’ll get rich in the process.
Joshua Holt is a former private equity M&A lawyer and the creator of Biglaw Investor. Josh couldn’t find a place where lawyers were talking about money, so he created it himself. He spends 10 minutes a month on Empower keeping track of his money. He’s also maxing out tax-advantaged accounts like 529 Plans to minimize his taxable income.
