Keep It Going
A quick story about athletes and investors.
A big difference between professional and amateur athletes is the intensity of training. The intuition of amateur athletes is to push as hard as they can, testing the limits of their potential, maximizing what they’re capable of, grind until you’re broken, no pain no gain.
The training schedules of professional athletes – once a good coach enters the picture – tends to be calmer.
A group of researchers recently looked at the training schedule of a dozen Olympic-level cross-country skiers, who are some of the most insane athletes you’ll ever witness.
Over a year the athletes trained an average of 861 hours – a couple hours a day. Each hour was broken up into three buckets: High intensity (>87% of max heart rate, huffing and puffing), medium intensity (82%-87% max heart rate, heavy breathing), and low intensity (60%-82% max heart rate, you can probably carry on a conversation).
After a year, the training schedule broke out like this:
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88.7% of training hours were light intensity.
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6.4% were medium intensity.
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4.8% were high intensity.
The huge majority of the time was spent barely pushing themselves, almost cruising along at a leisurely pace.
You’ll find nearly the same percentage breakdown when studying professional runners.
And rowers.
And swimmers.
It’s astounding, isn’t it? Some of the best athletes in the world spend almost all their time working way below potential, purposefully not pushing themselves to the limits.
They don’t race at that leisurely pace, of course – they might be at the highest levels of intensity for an hour or more during a competition.
But in training, you tend to build the best athletic machine when longevity is favored over intensity, when your body gets a signal to adapt vs. thinking it’s been temporarily tortured, and when you’re less subject to in jury and mental burnout.
Stephen Seiler, an exercise physiologist, explained:
[Professional endurance athletes] go for a long time at a low intensity where they can recover, and repeat it day after day. And that’s what really brings success. For the highest levels to be attainable over time, the training process has to be sustainable. At higher levels of intensity, chronic levels of stress leads to burnout and stagnation.
For the highest levels to be attainable over time, the process has to be sustainable.
Which is exactly how good investing works too, isn’t it?
The most important investing question is not, “What are the highest returns I can earn?”
It’s, “What are the best returns I can sustain for the longest period of time?”
Compounding is just returns to the power of time. Time is the exponent that does the heavy lifting, and the common denominator of almost all big fortunes isn’t returns; it’s endurance and longevity. “Excellent returns for a few years” is not nearly as powerful as “pretty good returns for a long time.” And few things can beat, “average returns sustained for a very long time.”
That’s the biggest but most obvious secret in investing: Average returns for an above-average period of time leads to magic.
I think we’re seeing the flip side of that recently.
So many investors over the last five years have gone out of their way to maximize annual returns, squeezing every potential penny out of every opportunity they could find. The highest-risk investments, often fueled with leverage.
They did that because the opportunities were everywhere – everything seemed to go up, every asset, month after month.
It felt great. Always does.
But now I think we’ll see that a lot of even the best investors were the equivalent of an athlete who pushed to 110% in every training session, and now they’re burnt out.
For a period of time they felt like champions. But over time they’ll be lapped by the guy who casually jogs each day way below his potential, who can sustain his training and build a body that can adapt and recover for the next day.
There are two kinds of investing burnout: financial and psychological. The first is when you’re leveraged, investing on margin, and your bid to maximize potential forces you out when the market turns. The second is psychological. It’s hard to predict how you might feel when a big chunk of your net worth evaporates in two weeks until it’s occurred. A lot of those investors will end up like a professional athlete who burns out, their mind giving up before their body.
It’s counterintuitive, but you will likely maximize investment gains over your lifetime if you go out of your way to not maximize annual returns, instead focusing on merely good returns that you can sustain for as long as possible.
Carl Richards once made the point that a house might be the best investment most people ever make. It’s not that housing provides great returns – it does not. It’s not even the leverage. It’s that people are more likely to buy a house and sit on it without interruption for years or decades than any other asset. It’s the one asset people give compounding a fighting chance to work.
This kid has it all figured out:
