The Kaizen Way of Wealth Creation

By Alpha Research

The Kaizen Way of Wealth Creation

Dec 27, 2019

As we approach towards the end of decade 2010-2020, it’s a good time to reflect on the changes which have happened in our life and to introspect the goals which we had set for ourselves 10 years back.

Time flies very fast. If you will look back and try to recollect the moments of last 10 years, you will realise that there are very few special moments that you are able to recollect. But overall, we are sure that wonderful and good things have happened in your life in this decade.

For India, the decade of 2010-2020 has been fantastic. The e-commerce, startups, smart phone, electric vehicle and other disruptions are all part of this decade. Sensex gave a return of 136% in this decade.

It’s also a good time to plan for the next decade and set some goals around health, family, wealth, career, etc. Setting the goals is good and important as it gives life a direction and some meaning.

For some people, achievement of goals is easy as they are very focused and disciplined. But for most of the people, it’s not easy and its like moving a huge block.

‘The Kaizen Way’ is a popular book written by Dr. Robert Maurer. The book talks about the secret behind Japanese innovation and quality. The book is a good read and can indeed help us in moving the huge block.

As per book, most intentions for change seek a transformative move—something significant to be achieved once and for all, in a short period. “Big and bold steps” is the mantra of many professionals and companies.

Real change, however, takes time and is difficult. We become overwhelmed with the magnitude of the effort and persistence required to lose twenty kilograms, save up for retirement or stabilize a sinking relationship. As with most New Year resolutions, we’ll meet with success temporarily, only to find ourselves slipping back into our old ways as soon as the initial burst of enthusiasm fades out.

Dr. Maurer conceives transformative change as an endless, continuous process of gradual improvements. By breaking daunting tasks into absurdly little steps, we feel little resistance to change.

One small step leads to the next, which leads to one more, and so on—finally leading us to our goal of transformative change.

Dr. Maurer relates this approach to Kaizen, the famed Japanese system of obsessive tinkering and continuous, incremental improvement. Kaizen involves making continual, small adjustments to lifestyle to not only improve speed and quality, but also save resources. That is to say, it is a relentless pursuit of perfection by breaking it down into incremental improvements.

People who have embraced Kaizen approach, start their everyday determined to become a little better at whatever it is they are doing than they were the day before.

Implication of Kaizen on Wealth Creation

Wealth creation is like a water wheel and investment is like a water which is the resource to move the wheel. The key for moving the water wheel faster is to pour water on the wheel regularly and steadily and gradually increase the flow of water. The continuous flow of water creates the momentum in wheel and the speed increases exponentially as the quantum of water is gradually increased.

Similarly, for wealth creation, its good if we can begin with small regular investment to make the wheel move and gradually increase the investment for momentum to be created. For making the start, quantum of money is not relevant. What’s important is to take the plunge and then gradually increase the saving and investment amount to create the magic.

The kaizen theory when applied to Systematic Investment plan (SIP) can lead to magical results. The same is evident as under:

If a monthly SIP investment of Rs. 1 Lac is done in equity fund for 20 years, then with a return expectation of 15% per annum, the future value of investment will be ~15 Crores.