In 1818 William Cubitt invented a machine called a “discipline mill”. The machine was a wooden wheel with treads that was used to punish British prisoners. The wheel was later adapted to crush grains and took the name “treadmill”. If you’ve ever gone for a run on a modern version of one of these machines you might be all too familiar with that feeling of being tortured.
Now, I try to avoid treadmills, but I do torture myself by running outside quite a bit. And since I run like an overweight hippo that feeling of torture is something I am very familiar with. But a funny thing happens as you run more and more. Yes, it is a truly awful form of exercise, but as you build up endurance your pain threshold also rises. When you get fairly good at running you reach a point where you achieve what I would describe as a “peaceful pain”. This is the point where you can run at a pace that is building resiliency while completely at peace with the fact that the stress you’re enduring is sustainable. In short, it is where you’re optimizing your performance.
Interestingly, I find that these peaceful pain periods are often the times when my mind is most active. There’s something almost meditative about reaching that point of peaceful pain. And the other day, as I was in the middle of a long and horrific run, I realized that this was exactly like good investing. In other words, the optimal portfolio is the point where you find a peaceful pain point. This is that point where you are optimizing your returns in perpetuity, but not stressing them so much that you are tempted to quit.
Finding your peaceful pain point takes time and practice. It might even take a number of mistakes. But it is the only true holy grail in investing because it is the portfolio that optimizes your return on investment not only by making your portfolio work for you, but by optimizing your psychological performance so that you can focus on other more important things in your life.