I ran 1500 miles, and this is what I discovered about Investing
The counterintuitive truth all runners and investors must know
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Over the past few years, I’ve spent hundreds of hours running the open roads. This is my exercise, but also my meditation.
I use this time to verbalize my ideas, in an attempt to unwind patterns I’ve noticed, and develop a more unified worldview. 1500 miles later, I find myself drawing similarities between disparate interests of mine. Today, it was running and finance.
In this case, I converged on two parallel themes, Endurance and Intensity.
The interesting thing, when training for a Marathon, is that you’re really two layers deep into endurance. The first is the immediate goal, complete a single long race. The second is the method, training uninterrupted and consistently over the course of several months.
There is one final layer though. One that is talked about quite a bit less, but is probably the most important. That is, to maintain the ability to run for the rest of your life.
When running, an important thing I try to keep top of mind is that I’m not only training for long distance races, but I’m training for a long running career. I want to be one of those old guys, shuffling along, putting one foot in front of the other, crossing the finish line after a 5 hours.
I want to be able to run Marathons when I’m 80. I’m playing a long game, within a long game.
Endurance in Investing
I’ve begun to treat my investments the same way. I’m not trying to do little flips, or have one big pay day. I’m trying to engage in behaviors that will keep me in the game as long as possible.
True financial endurance means two things:
The first is that, you never have to stop buying.
This means you have some form of income. Some money coming in, no matter how little, that you can use to incrementally increase your exposure to the market.
The second is that you never have to sell.
In order to achieve this, you need a safety net. Some padding, so that if you experience a medical emergency, or you lose your job, you’re not forced to sell your investment to pay for these expenses.
How to Lose at Endurance
The only way for me to truly lose as a runner, is if I have to stop running. The only way for me to lose as an investor is if I have to sell my investments.
Nick Maggiulli in his article “Just Keep Buying”, tells a story of the unluckiest investor of all time. Someone who consistently invested right before every market crash in the past 50 years.
"He made a total of 4 large stock purchases between 1973 and 2007.
He bought in 1973 before a 48% decline in stocks, bought in 1987 before a 34% decline, bought in 2000 before the dot com crash, and bought in 2007 before the Great Recession…
Despite these 4 individual purchases that totaled a little less than $200,000, how did he do?
He ended up with a $980,000 profit for a 9% annualized return. What was his secret? He never sold."
In short, no matter how bad of an investor you are, you only really lose if you stop playing the game.
Instead of maximizing returns, the goal is, never be forced to sell. This reframing fundamentally changes how we should think about investing over a lifetime, and brings me to the second parallel to running.
“There is more to life than increasing its speed.” – Mahatma Gandhi
When running, it’s tempting to look at metrics like pace. Pace is sexy. Going faster and faster with each workout makes us feel like we’re achieving something meaningful. It’s thrilling.
The unfortunate reality is, by seeking faster paces we’re not only experiencing diminishing returns, but we’re putting ourselves at risk of injury.
An article written by Coach Jeff Gaudette, after preparing dozens of athletes for elite level marathons, touches on this idea.
“Aerobic development is roughly the same whether you’re running at 30 seconds or 2 minutes slower than marathon pace. For a 3:30 marathoner, this means that 8:30 pace provides basically the same aerobic benefits as miles at 9:30 or 10:00 pace.
However, running faster than 8:30 pace only increases the time it takes for you to recover while providing little additional benefit aerobically. So, running faster is actually detrimental.”
This means that greater effort, and greater intensity beyond a certain point, actually hurts us.
The chart below is a clear example of this. In fitness circles this is referred to as the “Goldilocks Principal”.
The interesting part here is that training too little, while not optimal, is not harmful, unlike training too hard.
The effect displayed above may seem benign considering that, after enough time, all methods lead back to your “Fitness Baseline”. What we must keep in mind is that, this is only a single workout.
When we begin to look at a series of workouts within a training regimen, the pernicious effects of too much intensity become clear.
Depending on our level of intensity we can find ourselves spiraling upward toward longevity, or downward toward ruin.
Intensity in Investing
When running, we increase our pace in an attempt to hit new personal records, while putting ourselves at risk of overtraining and significant injury.
When investing, we increase our exposure to risk in an attempt to hit quick returns, while putting ourselves at risk of loss and going completely broke.
Morgan Housel, writer and partner at The Collaborative Fund, touches on a non-intuitive element of ratcheting back intensity.
“Those who fight it – the rare company or employee or economy willing to sacrifice short-term gain for long-term survival – are the oddballs, rarely understood, easily belittled, who underperform most of the time but survive long enough to get the last laugh, and the highest returns.”
The thing about dialing back intensity is, it hurts our ego.
It feels like we could be doing more, or that we’re leaving potential on the table. No one who consistently hits market returns year over year gets media recognition. No one making 8% on their money is the talk of the dinner party.
You must be willing to toil in obscurity for decades.
How to Lose at Intensity
When you select a metric like weekly, monthly or even annual returns, you’re making the same mistake as someone using pace to measure progress in long distance running. You’re choosing an intensity metric in a longevity sport.
Warren Buffet is, without a doubt, one of the greatest investors of all time. Below is a graph of his net worth in relation to his age. This is a graphical representation of low intensity, high endurance.
What’s his secret?
In 80 years of investing, he never went broke…
At any point in the last 80 years, he could have bet the farm on a risky asset, or some new technology that promised to 100X in value by next year. He could have gotten greedy.
Instead he was searching for modest and consistent returns, with the absolute minimum risk necessary. The magic of his exponential wealth didn’t lie in one time high risk payouts, but in the power of compounding.
Remember the goal. Never get injured, never go broke. We’re the 80 year old finishing marathons. In Finance, you’re Warren Buffet. The guy who never went bust and made little by little for his entire life.
A Critical Reframing
“Be impatient for actions, and patient for outcomes” —Dan Heath
In essence, both Endurance and Intensity are measures of Patience. In an attempt to circumvent either, you are fundamentally trading a healthy and prosperous future, for a potential short-term upside.
It’s not sexy to be patient. No one is going to praise your equanimity. You won’t set world records, or 10X your investments this year.
It’s so easy to focus only on crossing the next finish line, that we forget the actual goal is crossing a finish line that’s 50 years away.
To be able to reap the rewards of compound interest, you need to stay in the game. To stay in the game, you need patience.
(Fun Fact: In 2021, Carol Wright, became the oldest Boston Marathon finisher at 79 years old. Her time was 5 hours, 27 minutes, 18 seconds)