Long-Term Investing Success Is About Grit

Grit: The Power of Passion and Perseverance - Angela Duckworth

Blustery media pundits will never tell you: Investing success isn't about genius, it's about discipline. Without discipline, no great investing idea is worth much.

Angela Duckworth's book on the "science" of grit tells you something you probably didn't need science to tell you: Hard work and persistence aren't just virtues, they're cold hard facts of success. That here we have empirical backing to such wisdom is so much the better.

We're all born with different circumstances, but on the whole anyone can become wealthy. My great grandmother, Hosanna, an Armenian immigrant who came here with nothing, ended up with a pretty tidy sum just by putting a little away each month into stocks and never touching them. She died when I was 10, but my grandfather told me that story shortly after her funeral, and it stuck with me forever. We all have stories like this among friends and family; too few of us heed the lesson.

Duckworth's very readable book is condensed in this: "Grit is about having the same top level goal for a very long time and sticking to it". That means matching your actions with your stated purposes, understanding how what you're doing here and now connects to your larger goals. Every rote management and self-help book admonishes readers to dothat, but how many of us do it?

To really get grit, you have to make a couple cognitive leaps. First, think in terms of individual personhood-the idea that you are solely responsible for yourself. Second, do away with the notion of luck.

Both can be tough to accept. Does luck and randomness play a role in life? Of course. And, are you truly always responsible only for yourself and no other factors matter? Probably not-there are a lot of forces in life beyond our control. But you have to act in the world as if those are indubitably true, no excuses. This is a general trait of success in all walks of life.

Talent is an advantage, not destiny. And talent isn't just about aptitude; talent can be emotional disposition, too. Those with kids or grandkids know too well that some are naturally precocious, and some not. People can become ambitious of course, but there is something innate we must acknowledge. But it doesn't amount to as much as people believe-what Duckworth's research shows is that yes, talent matters, but far less than basic stick-to-itiveness.

What wonderful investing lessons these are: The market bounces up and down and all around in the short term, but over the longer run it's no mistake that those who persisted in saving and sticking to the markets' long-term return are the ones with the most wealth. Study after study shows investors fail to hit their goals not because they had a bad strategy, or even necessarily picked bad stocks or funds. It's mostly because they didn't stick to their plan-no discipline, no grit.

What makes grit all the more difficult, though, is the investing world will bombard you-relentlessly-with gurus, stock tips and schemes. This assault to your grit is a key reason we frequently advise not paying too much attention to the financial press in general and instead thinking about your long-term reasons for being invested the way you are.

The hard way to get grit is doing it by yourself. Duckworth's research shows those who go it alone fail frequently. The easier way to get grit is to join a culture where grit's the norm-hard work, accountability, persistence. Then they become habitual for you, too. I'd advise precisely that for your money management: Find an adviser who displays those qualities of grit with candor and transparency, in their relationship building and communication, and who's dedicated to setting a customized plan for your long-term goals (and even shows a little tough love when you show signs of abandoning the plan).

It's no accident Duckworth is a disciple of Martin Seligman, founder of the "positive psychology" movement. This is really a book about the science of human meaning and purpose. People who persevere have meaning in their lives. They interpret the world through an optimistic lens. They don't let the thrum and bombardment of negative media set their mood. Positive psychology, now a fairly mature discipline, has as its foundation those who have clear purpose in their lives, and who show the grit to avoid things against or contrary to those purposes. Again, what better investing lesson is there?

This book should probably be an essay. There's a lot of that these days, a great idea elongated into a tome where an article would suffice. We live in an era of self-help book as science book. And yet, what this work lacks is the counterfactual: "I finish what I start" is a wonderful ethos, but sometimes ideas are truly bad, or life goals change. Blindly sticking to things that don't work is no great plan. Investing philosophies, like the world itself, must evolve sometimes. Flexible asset allocation can indeed be a virtue for those with discipline.

Duckworth's research indicates a distinct advantage for people who dealt with rejection in life, particularly at a young age. I now see how lucky I was to have a bit of strife in my youth. For me, and though I waver frequently, my truest professional manifestation of grit has been authorship. I'm an ok writer, but the difference was always that I followed through and just wrote those darn books where others mused about it. From that, opportunities followed, including the privilege of writing to you now.