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What Buffett and the Terminator Can Teach You about Investing

Posted by Ryan Holt October 3, 2018 • 5 min read

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  • Why building wealth is a lot like building strength
  • What Warren Buffett and Arnold Schwarzenegger have in common
  • How applying Buffett's and Schwarzenegger’s principles can potentially make you a better investor

You’d never mistake Warren Buffett and Arnold Schwarzenegger for twins, but for what they lack in physical similarities they make up with a powerful commonality—both Warren and Arnold redefined their industries.

Buffett is arguably the most successful investor in history, while Schwarzenegger popularized bodybuilding as a sport. One focused on growing money, the other on growing muscle. Still, building wealth is a lot like building muscle. And if you squint, the roads Buffett and Arnold took to greatness are remarkably similar. Both followed a set of shared principles that you too can apply to the way you invest and live your life.

Building wealth is like building muscle

In 1955, with a personal fortune of $127,000, Mr. Buffett told his wife Susie, “Compound interest guarantees I’m going to get rich.” Sixty years and 70 billion dollars later, and there’s no better case study of this powerful investing concept.

To define compound interest with a tongue twister, compounding is “earnings earning earnings.” When you invest your savings, your investments expectantly earn income or increase in price, and when these earnings are reinvested the cycle continues, growing your portfolio larger and larger over time—earnings earning earnings. This concept isn’t limited to wealth creation, as it also applies to strength training.

Schwarzenegger wasn’t born 260 pounds with a 520-pound bench press, like Warren, he built his power with patience. After all, the process of building strength really comes down to two things: lifting progressively heavier things and time. Think of strength as earnings, when you lift weights your body builds muscle, and when these muscles are stressed by even heavier weights you build more muscle to compensate, and the cycle continues. Soon enough you’re lifting personal bests—strength strengthening strength.

The takeaway: over time modest amounts of improvement—one more rep, one more invested dollar—can compound into great things—$70 billion, 7 Mr. Olympia titles, or whatever your great feat.

Warren’s and Arnold’s Principles

The principles that helped Buffett and Schwarzenegger reach the pinnacle of their industries can also help you in your financial journey.

Principle 1: Amass knowledge

Money and muscles aren’t the only things that compound. When a journalist asked Buffett how he became so smart, Warren quipped, “Read 500 pages every week. That's how knowledge builds up, like compound interest.” The belief that knowledge is power also transcends to the bodybuilding world where Schwarzenegger believes, “The way to success, in and out of bodybuilding, is having as much knowledge as possible.” Amassing knowledge was a central part of how Arnold and Warren approached their work and it should also be for you.

There are thousands of personal finance blogs, classic investment books, and interviews with financial giants, not to mention forums where you can openly discuss ideas with peer investors. You don’t know what you don’t know and we live in a world with unparalleled access to information, so amass knowledge and let your wisdom compound. Do it. Do it now!

    Some of our favourites:

  • Seeking Alpha (a community of investors and industry experts)
  • The Intelligent Investor or Security Analysis (classic investment books by Benjamin Graham)
  • Chat with Traders podcast (interviews with talented traders)

Principle 2: Find a mentor

While you and I had posters of Back to the Future in our dorm rooms, Arnold had prints of Joe Weider doing a rear double biceps pose. Joe Weider is one of the original bodybuilding gurus, founding the Mr. Olympia competition in 1965—the same competition Schwarzenegger would go on to win a record seven times. Joe was also the one who saw potential in a young man from Austria, inviting Arnold to America in 1968 and serving as his trainer at the famous Gold’s Gym.

And apparently, even oracles need mentors. Warren Buffett was a young man when Benjamin Graham wrote one of the best-selling investment books of all time and Buffett’s favourite read, The Intelligent Investor. It was with this book that Warren Buffett became obsessed with the idea of studying under Graham. Warren enrolled at Columbia, where Graham was a professor, and at graduation offered to work for Graham pro-bono. Warren Buffett has since become the world’s richest investor by finding undervalued securities and it’s no coincidence that his mentor was the “father of value investing.”

A mentor has made mistakes so you don’t have to. They offer advice that only comes with experience and can serve as sounding boards or cheerleaders. So find someone who invests the way you’d like to or lives a lifestyle you admire, and reach out. Don’t forget, you have access to thousands of successful mentors in the form of interviews, biographies, even Reddit Ask Me Anythings. For instance, Warren Buffett has written a number of shareholder letters outlining Berkshire Hathaway’s successes, mistakes, and learnings over the past 40 years. He also holds an annual shareholder meeting at which you can submit questions.

Principle 3: Know yourself

Buffett is famous for investing only in what he knows, it’s what he calls his “circle of competence.” The fast-paced and mercurial nature of technology companies is foreign to Warren, which is why, even in 2017, he mostly avoids investing in them. Instead, opting for the likes of Coca-Cola, Dairy Queen, and GEICO. Unlike ice cream and insurance, tech trends aren’t within his circle of competence.

In the gym, Arnold customized his workout regimen to how his body worked and not the latest fitness trend. At 6’2”, Arnold’s legs were often considered his biggest weakness and the reason he lost his first Mr. Olympia to the shorter Sergio Oliva. Schwarzenegger knew his body better than anyone else and that gave him the confidence to sway from the conventional training wisdom that low volume—less than 10 sets per body part—is the best way to add size. Arnold took a different approach, doing as many as 60 sets on leg day. Seven Mr. Olympia titles later, he was asked if in hindsight high volume was really the best routine—his response, "It's what I used and what worked for me."

Self-awareness is the ability to perceive yourself separate from others and your environment. It allows you to identify your strengths and weaknesses, which can be a huge edge in the investing world. For one, self-awareness can help you recognize when you are following the herd, such as buying into the latest bubble or selling when fear is rampant. Second, knowing the extent of your abilities helps you avoid potential investment mistakes that are common with overconfidence.

The most important principle of them all

Amassing knowledge, finding a mentor, and knowing yourself are three practices that can potentially help make you a better investor. But still, there remains a final principle that plays a role in every success story—perseverance.

When it comes to budgeting, saving, investing, or applying these three principles, to succeed is to persevere. And similar to compound interest, as you persist in becoming a better investor, the savvier you become, the more empowered you feel, and the more you want to learn.

Investing, like strength training, is a rewarding endeavour. It requires planning and much discipline, but the pursuit to be the best can also be passionate fun—just ask Warren or Arnold.

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The information in this blog is for information purposes only and should not be used or construed as financial or investment advice by any individual. Information obtained from third parties is believed to be reliable, but no representations or warranty, expressed or implied is made by Questrade, Inc., its affiliates or any other person to its accuracy.