What Investors Can Take Learn From Roger Bannister's Miracle Mile
Fewer people have run a four-minute mile than have scaled Mount Everest. The first runner to do it was Roger Bannister.
Bannister was a strong runner, but not the most physically gifted athlete. His edge was his strategy. “It is the brain, not the heart or lungs, that is the critical organ,” he once said.
A New Yorker article describes Bannister’s approach to the race.
Bannister took a cerebral approach to the four-minute barrier. He studied running’s physiological demands, measured his own oxygen-consumption levels, and produced papers with titles like “The Carbon Dioxide Stimulus to Breathing in Severe Exercise.” Bannister discovered that running consistent lap times demanded less oxygen than varying the pace. So he focused on his quarter-mile splits. During lunch breaks, he would run ten of them, stopwatch in hand, punctuated by two-minute breaks. In five months, he brought down the average time he could run these intervals from sixty-three seconds to fifty-nine.
59 seconds is fast, but not crazy fast. It’s about 15 miles-per-hour. Many people could run that fast for a short distance. Bannister’s goal was more ambitious in that he sought to do it over four consecutive laps.
Halfway through lap four is when the race became historic. As the other runners tired and slowed, Bannister began his finishing kick—the “Bannister Burst.” He pulled away from the pack, completing the final lap in just under 59 seconds.
Bannister’s finishing time for the race: 3 minutes, 59.4 seconds.
0.6 seconds made him a legend.
We’re all running our own races in life. We have goals we want to attain. Lifestyles we desire. Legacies we want to leave.
We don’t run on circular tracks, like Roger Bannister did. Rather, our aim is to ascend.
In contemplating how to fund our aspirations, we can take several cues from Roger Bannister, who died earlier this year at the age of 88. Bannister’s method to conquer the four-minute mile involved two concepts that are relatable to creating a successful investment plan: chunking and compounding.
In Bannister’s time, numerous runners were close to piercing the 4-minute mile. It wasn’t out of reach physically. There seemed to be a mental barrier. After Bannister eclipsed the mark, four others followed within a year.
Hard tasks or puzzles tend to linger. People procrastinate and justify it with mental softeners. “It’s not the right time,” we tell ourselves. “I’ll get to it later,” which often means never.
It’s easy to do this with investing, because it’s a long-term challenge many perceive as complicated.
Bannister was a medical student, which meant he didn’t have as much time to train as his competitors. Often, all he had was 30 minutes at his lunch hour. Thus, he had to be productive with his time.
We can simplify the investment process by focusing on straight-forward mini-goals. Here are a few ideas.
Monitor and manage investment fees. Personal Capital found 61% of Americans do not know how much they pay in investment fees. Page 9 of their Advisor Fee Report nicely summarizes the average fees across major institutions. If you’re paying over 1.5%, then you’re probably paying too much.
Don’t ignore taxes. Tax drag is a genuine cost to a client, and one which many don’t pay close attention to. Long-term capital gains on investments held at least a year are taxed at 20%, or less in some cases. However, short-term gains are taxed as ordinary income. The difference adds up over time! Also, if your assets are managed in a separate account, you can nicely improve tax efficiency through a strategic tax loss selling program.
Embrace equities as the growth engine for your portfolio. With investing, it’s pretty clear who the fastest horse on track is. In the past 90 years, the S&P 500 has 66 calendar-year gains and 24 losses. So stocks advance about three out of every four years. Over that span, the annualized return was 9.6 percent. Simply overweighting stocks in your asset allocation goes a long way.
Compounding is the key to wealth creation. It really is.
We often fall prey to an illusion which says extraordinary actions are a prerequisite for achieving extraordinary results. Not true.
Bannister ran at a brisk pace, but his weapon for conquering the four-minute mark was consistency. He didn’t lead for much of the race in which his magnificent feat occurred. He only pulled away from the pack on lap four. That was because he ran a consistent time versus earlier laps, while others slowed.
Similarly, with investing the real differentiation comes in the later years. Great long-term investors and business leaders don’t distinguish themselves in single years or even cycles. Instead, they play the long game well. That is where the compounding magic happens.
Most people see the world and manage their life using a linear lens. Shrewd investors and business leaders look beyond the short-term and see exponential opportunities down the road. They plan accordingly, and that is their edge.
"We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next 10. Don't let yourself be lulled into inaction."
- Bill Gates
Here is a video of Bannister’s historic race in which he recounts his thoughts and feelings during the race.