One moment I love in The Simpsons is a casual quip by Homer. Marge is confronting Homer about not spending enough time with the kids, “one day Lisa and Bart will be out of the house and you’ll regret not spending more time with them”, to which Homer replies, “That’s a problem for future Homer… Man, I don’t envy that guy!”, pours an entire bottle of vodka into a jar of mayonnaise, and downs the concoction before promptly passing out on the floor. A comical commentary on short-term decisions.
We might not take it to Homer’s level, but we’re all guilty of not prioritizing our future self. A lot of success is simply showing up, which can be inspiring as we don’t have to be exceptional to achieve amazing results, you can get fit without a perfect workout if you can stack hundreds of good workouts. But there’s something equally disheartening about this, showing up day after day is hard.
Luckily there’s a way we can overcome this, through forming habits.
Say we set a goal for running five days a week. We don’t really care whether it’s five, four, or six days a week, James Clear says in Atomic Habits, what we want is to become a runner, and to do this our actions must prove we are a runner. So we follow a routine, we train rain or shine, we put in the miles, and in the process, something magical happens. Every step we take rewires our brain, imprinting our actions into our mind, and telling us a new story about who we are. Each step confirms our behaviors to us, ingraining what we’re doing as who we are. And before we know it, we’re not someone who runs five days a week, we’re a runner. We identify as a different person, and now running five days a week comes easy, it’s what runners do.
Many successful pursuits result in this same language, we don’t describe ourselves as reading twelve books a year, we’re a bookworm. We don’t wake up early, we’re a morning person. The same with unsuccessful pursuits, we call ourselves lazy instead of saying we haven’t taken action towards our goals. Habit formation can be hard, but once an identity has formed, dropping that identity can be just as hard as building it in the first place, it’s not all upside.
Once you understand this mechanism, achievements suddenly look less magical. You no longer put someone on a pedestal for running a 50k, you realize that if you dedicated the time to running five times a week and steadily increasing your mileage week over week, you’d be able to run a 50k six months from now. Achievements become less about “is it possible?”, and more about “is the price of entry worth it?”, which is incredibly exciting. You realize you could achieve anything if you set your mind to it. But this is where the harsh realities of time come in, you can achieve anything if you set your mind to it and you dedicate enough time to it, yet there’s only 24 hours in a day. You can stack habits, form routines, and build identities all you like, but there’s not enough hours in the day to maintain twelve identities at the same time, you can’t be a CEO, parent, athlete, musician, volunteer, friend, sibling, author, race car driver, gardener, chef, and a part-time vigilante all at once (okay maybe that last one’s just me).
Imagine your life as a stove. You have four burners to work with and each burner can power one aspect of your life. You might have a fixed sense of self, determine the four identities that are most important to you and keep these on the stove at all times. Or you might decide there’s a season for everything, where career and friends are placed on the big burners in your 20’s, and then in the 30’s they’re placed on the backburner with family coming to the front, and sports getting kicked to the sidelines. Yet no matter what tactic you employ, you can’t overcome the harsh reality that there are only four burners, life has very real constraints.
But that’s not true. There’s one exception to this; investing.
While your career, relationships, and almost anything else in your life need you to invest time or effort to improve them, investing is the opposite. It’s counter-intuitive, people often delay sorting out their finances and investments because they believe it’s an arduous process that requires understanding how the stock market behaves, following stock prices, and possessing a high-risk appetite. But investing is very simple, invest in a low-cost index fund and keep buying, and you’ll be outperforming the majority of professional investors without even identifying as an investor yourself. Making a timeless investment will improve your finances without needing any effort from you in future.
But if you’re going to get great financial results by doing nothing, couldn’t you just put extra effort into investing to improve your results? Surely you can pick out the winning stocks and buy more of those? Or even just identify the bad stocks and not buy those ones? Unfortunately, it isn’t that simple, index funds outperform most professional investors for good reason, the stock market is incredibly complex, most information is already priced in, and there’s either a human or an algorithm that got to it ahead of you.
But even if you’re not actively trading stocks and you’re an investor in index funds, that doesn’t mean you’re in the clear. Even passive investors’ money-weighted returns lag the returns of index funds due to investing more when times are good (buying more stock when it’s overpriced), and pausing their automatic investments when the markets take a dip to increase their emergency fund in a time of uncertainty (and not buy stocks when they’re at their lowest prices). It’s human nature, it’s hard to leave our investments on autopilot when putting energy into every other area of our life results in better outcomes and provides reassurance that we’re on top of things.
How do we overcome this human tendency? Understanding the situation will get you halfway. One of the wisest pieces of advice from the late Jack Bogle, Vanguard’s founder goes something like this:
Buy an index fund and leave it alone, don’t touch it, don’t even check your balance until you retire. Then when you retire, make sure you have a doctor on hand, because you’ll likely have a heart attack when you check the balance.
Knowing you’ll do best by setting and forgetting your investments can help settle you and bring mental peace of mind. One fun but slightly morbid fact is the category of investors with the best investment returns are investors that have passed away, because they haven’t changed their investments. Investors who have forgotten their account exists come a close second.
The other half of overcoming our desire to take action is reframing, appreciating that investing allows us to free our mind, and choosing to use our limited time and energy on whatever is more important in our life at any given time.
We face one of the most fundamental questions of life every morning when we wake up wondering “what will I do today?”, how freeing we don’t have to manage investments. The fact our time and energy aren’t required for great investing performance might be the most counter-intuitive phenomena I know.
One of my favorite short stories, The Last Question by Isaac Asimov, examines that everything requires energy – that the universal truth of life is we must overcome disorder. Counter surfaces become dirty if we don’t dust them, our bodies atrophy if we don’t exercise them, the earth will become incapable of sustaining life when our sun eventually burns out. The story goes on to present the infamous Last Question: “How can the net amount of entropy of the universe be massively decreased?”
“How can the net amount of entropy of the universe be massively decreased?”
Which is to say, can we prevent disorder? Is it the fate of humanity to watch our sun burn out, and for all energy from the Big Bang to be dispersed so sparsely that the universe comes to a cold and infinite end? It’s an iconic question to which we don’t have the answer.
Fortunately, we don’t need to answer The Last Question yet, we’ve got five billion years left of life on our sun. We have enough energy in our lifetimes to wake up every day and decide how to spend it. And we can seek comfort in our investments flourishing without requiring our attention. Here’s to investing our energy wisely and keeping our stoves stoked.
