“Grit is living life like it’s a marathon, not a sprint.”
—Angela Duckworth, Grit

What determines success? Is it intelligence, talent, or something else?

Angela Duckworth’s book, Grit: The Power of Passion and Perseverance, answers this question and explores the “something else” that is essential for success. Grit is the ability to sustain effort in order to reach long-term goals. Duckworth defines grit as part passion (something you know you want and/or love doing) and part perseverance (hard work and resilience).

Let’s dive into some of the highlights from this excellent book. As we do, we’ll look at how grit can be applied, specifically—to your finances!

Why Grit Matters

As Angela details, a wide variety of research proves that talent and intelligence alone can’t predict success. IQ or aptitude tests are poor measures of real potential, and many people with great talent fail to succeed. However, effort (sustained by grit) is twice as important as talent. Effort hones talents into tangible skills through practice and improvement. Then, effort helps you apply those skills to attain achievement.

“Everybody knows that effort matters. What was revelatory to me was how much it matters,” says Duckworth.

There is another way that grit matters. You don’t have much control over talent or intelligence. But effort? How long and hard you work is absolutely in your control. Unlike innate talent or intelligence, Duckworth says we’re not born with grit. It’s developed over time—consciously and purposefully, and often with great effort.

The 4 Components of Grit

Duckworth found there were 4 characteristics of grit. These are psychological assets which generally develop in the order listed below.

1.  Interest.

“You cannot will yourself to be interested in something you’re not interested in,” says Angela in Grit. “But you can actively discover and deepen your interest.”

Whether it’s mastery of a sport, an art, or a career, or some other goal, you’re not likely to pursue something with the effort it requires unless you are genuinely passionate about it.

This applies to investments as well. While some investments will work exactly the same for anyone, those who become extraordinary investors are those with passion for a particular investment.

Warren Buffet is passionate about investing in companies and has grown Berkshire Hathaway into a large fortune.

We have partners and colleagues who are passionate about investing in apartment buildings and they do it very well. (I have learned I am not passionate about real estate and I only invest with partners who handle the “tenants, termites and toilets!”)

My friends Dan Sullivan and Babs Smith are passionate about helping entrepreneurs grow themselves and their businesses. They have invested in and grown an extraordinary business called Strategic Coach.

2.   Practice.

Whatever your big goal, you must be able to pursue it consistently, day in and day out. You must develop endurance even in the face of adversity. And you must be willing to do hard work even when it is uncomfortable. “Nobody gets to be good at something without effort, no matter what your aptitude is,” says Angela.

Consistent practice applies to saving money as well. Saving consistently—no matter what—is the foundation of wealth. That means saving when it’s easy and saving when it’s hard. Saving for rainy days, sunny days, and every other kind of day.

While too many investors try to time the market or pick the next “hot stock,” the truth about building wealth is much more boring. Those who chase luck in the market rarely do as well in the long run as those who apply the fundamentals of earning, saving, and investing—again and again and again.

3.  Purpose.

Those with grit believe that their work matters—to them and to the world. Those who are motivated by a mission that helps others tend to have more perseverance than those seeking pleasure or recognition.

This reminds me of a favorite Mary Baker Eddy quote: “One must fulfill one’s mission without timidity or dissimulation, for to be well done, the work must be done unselfishly.”

Your money can have a purpose as well. We save a lot of cash through our family’s whole life policies. The first purpose for that money is providing us with a robust emergency fund. Its second purpose (over and above our emergency fund) is that it provides liquidity for opportunities. Sometimes an investment provides an opportunity. Sometimes having the liquidity allows us to invest in our own businesses or non-profit, the Prosperity Economics Movement.

4.  Hope.

Hope is important in every stage of grit as it allows people to push beyond obstacles and “rise to the occasion.” Duckworth defines this kind of hope as much more than mere optimism:

There’s an old Japanese saying: Fall seven, rise eight. If I were ever to get a tattoo, I’d get these four simple words indelibly inked.

What is hope? One kind of hope is the expectation that tomorrow will be better than today. It’s the kind of hope that has us yearning for sunnier weather, or a smoother path ahead. It comes without the burden of responsibility. The onus is on the universe to make things better.

Grit depends on a different kind of hope. It rests on the expectation that our own efforts can improve our future. I have a feeling tomorrow will be better is different from I resolve to make tomorrow better. The hope that gritty people have has nothing to do with luck and everything to do with getting up again.

Grit Requires a Growth Mindset

Some people seem like they are born to do what they do—whether that means acing mathematics in school, mastering an instrument, or succeeding in sports. A growth mindset is the self-fulfilling belief that you can get better at anything. You are not limited by your current capabilities—but you are limited indeed if you believe you are!

The concept of a growth mindset comes from the research of Carol Dweck, an acknowledged hero of Duckworth’s. Dweck has shown that extraordinary results can be achieved by those who don’t see their potential as “fixed,” but are always working to learn and improve themselves. Explains Dweck, “In a growth mindset, people believe that their most basic abilities can be developed through dedication and hard work—brains and talent are just the starting point. This view creates a love of learning and a resilience that is essential for great accomplishment.”

In some ways, grit is almost the opposite of being born with extraordinary talent or intelligence. While exemplary test scores or natural talent might be seen as a head start in the race of life—grit is about training to run an ultra-marathon in the rain.

Developing Financial Grit

“Easy money” is an oxymoron. Investors as well as investments can benefit from some grit. As with the rest of life, those wanting painless results with minimal efforts are bound to be disappointed.

One of the worst investments out there—unfortunately a popular one—is target-date funds. They are designed especially for people who don’t want to be bothered about their investments, promising a set-it-and-forget it strategy that will reallocate itself.

The pitch might as well be, “Spend five minutes choosing a target-date fund for your retirement account—and never have to think about money again!” But the fees are high and the results returns of target-date funds are underwhelming at best and tragic at worst. And yet, as MarketWatch columnist Brian Livingston wrote, trying to convince investors to avoid them is “like trying to persuade true believers that the Easter Bunny doesn’t really bring those candy eggs.”

Investing doesn’t need to be hard or complicated. (We prefer that it is not!) Yet that doesn’t mean it won’t take grit to build wealth—it will. Jimmy Vreeland, my co-author of Busting the Real Estate Investing Lies, resists the language of “passive income.” Instead, he prefers the term “leveraged income” to indicate that it still takes WORK!

Of course, that is especially true sometimes with real estate—sometimes it takes plenty of work. But the principle applies in different ways regardless of what you’re invested in. We see so many people not wanting to do the work… not wanting to learn, self educate, put in the time to study, practice etc. Yet there is such value in that because our clients (and advisors) who take the time to do so get such great results!

Many of our clients do great work—reading and watching videos or listening to podcasts ahead of our meetings. When they come to me, they have a few questions about how a certain strategy or product should be personalized for their situation, but they have given themselves a head start. I don’t need to start from square one and they don’t need hand-holding.  They are ready to go and get results… I love that!

To get the best results, you must apply yourself, keep learning, push through discomfort and take consistent actions even in the face of challenges. This is true in virtually every area of life. Grit is an excellent guidebook for anyone who wants to succeed at anything—including investing.

“To be gritty is to keep putting one foot in front of the other… to hold fast to an interesting and purposeful goal… to invest, day after week after year, in challenging practice. To be gritty is to fall down seven times, and rise eight.”—Angela Duckworth

—Kim Butler with Kate Phillips