The most important lesson I’ve learned this year is that velocity is the giver of life.
Velocity gives life to startups that grow into big businesses. It gives life to bull runs and manias in financial markets. It gives life to personal growth and achievement.
Velocity is the rate of change of something relative to some reference point, meaning velocity is speed plus direction. Speed for the sake of speed is better than sloth, but far worse than velocity. Velocity matters to humans because our time is finite. Speed in the right direction is life because it is time well spent.
For businesses and individuals, velocity can be roughly measured by the rate of learning times the application of new learnings. If you aren’t learning new things, you can’t apply them. If you are learning new things, but not applying them, you aren’t moving. If you aren’t moving, you have no velocity.
When you have good velocity, you know it, and you should do everything you can to keep it or move it faster. When you don’t, you know it too, and you should do everything you can to capture it.
Acceleration and deceleration are natural components of velocity. Something stationary must accelerate to begin movement in some direction. Acceleration comes with effort that increases as velocity increases. Deceleration comes from the resistance of gravity, which also increases as velocity increases. Gravity manifests itself in different ways and attempts to throttle velocity across all time.
The concept of velocity offers two investment approaches. Invest when velocity is on your side and accelerating or invest when velocity is working against you but decelerating. These ideas broadly define growth vs value. You either want to be in a growth business that is picking up momentum in some way, or you want to be involved as a business reverses its fortunes. In either case, you only want to invest when the price doesn’t reflect velocity, which ultimately yields better than expected performance over the long term.
When velocity is on your side but decelerating, you’re in a dangerous period where gravity is winning. Sometimes this can be temporary, but if gravity creates a permanently lower trajectory, it can cause a reversal. Similarly, when velocity is working against you and accelerating, you’re catching a falling knife where volatility is often at its maximum. Calming volatility is an indicator of reversing negative velocity in all things.
Speed must eventually decelerate as energy wanes without direction, but velocity not necessarily. Escape velocity is where something transcends the influence of gravity and glides into a self-sustaining progression. Escape is the goal of all pursuit of velocity. The total victory of gravity means death. Even if escape is futile, the pursuit of velocity is not because it is life.