Shawshank Redemption is one of the greatest movies of all time. Personally, it’s probably my second favorite movie ever. While it deals with some dark themes and can be heavy at times, the movie is primarily a story about hope, perseverance, and friendship.
As my friends and I were talking about Shawshank the other day, which we often do, it occurred to me that there’s a great investing lesson hidden in the story.
I’m going to be giving away the entire plot, so if you haven’t seen the movie, go watch it and then come back and read this. Even if you don’t come back, you should just watch it anyway. You won’t regret it.
The hero of the movie is Andy Dufresne. He’s a banker who’s accused and convicted of murdering his wife and her lover and is sentenced to two consecutive life sentences at Shawshank State Prison. The story follows Andy as he leaves his old life behind and has to adjust to life in prison.
Then, after spending almost two decades locked away, Andy suddenly escapes.
How does he do it?
Within the first few weeks of arriving at Shawshank, Andy is befriended by Red, a fellow inmate who “knows how to get things.” In Red’s words:
“He had a quiet way about him, a walk and a talk that just wasn’t normal around here. He strolled, like a man in a park without a care or a worry in the world, like he had on an invisible coat that would shield him from this place. Yeah, I think it would be fair to say… I liked Andy from the start.”
What quietly amazes everyone in the prison — and us, too — about watching Andy is the way he accepts the good and the bad as all part of some larger plan that only he can fully see.
When they first become acquainted, Andy asks Red to procure for him a tiny rock hammer and a poster of Rita Hayworth. The reasoning for the poster seemed obvious and Red assumed the rock hammer was for Andy’s hobby of crafting chess pieces from rocks.
Unbeknownst to everyone in Shawshank State Prison, behind the Rita Hayworth poster in his prison cell wall, Andy was using the hammer to slowly dig his way to freedom. Every night for 19 years he chipped away at the wall until he finally had a tunnel big enough to crawl through and escape.
“All they found of him was a muddy set of prison clothes, a bar of soap, and an old rock hammer, damn near worn down to the nub. I remember thinking it would take a man six hundred years to tunnel through the wall with it. Old Andy did it in less than twenty.
Oh, Andy loved geology. I imagine it appealed to his meticulous nature. Geology is the study of pressure and time. That’s all it takes really, pressure, and time. That, and a big goddamn poster.”
Have an investment philosophy similar to Andy’s escape plan.
In order to execute his escape, Andy had to be extremely diligent, consistent, and above all, patient. There must’ve been plenty of nights during those 19 years where he thought he would never make it. How could a tiny rock hammer create such a massive tunnel? I’m sure he was occasionally plagued with thoughts that he was progressing too slowly or wasn’t seeing results fast enough. But he stuck to it, he saw his plan through.
The same principles apply to successful long-term investing. The counterintuitive nature of compounding makes it easy to overlook the power of small, continuous investment efforts. Average returns sustained for an above-average period of time can lead to extraordinary results. All it requires is consistency, diligence, and patience.
Eventually, after decades of consistent investing, you’ll look at your portfolio balance with this same, amazed expression:
Almost all investing mistakes are rooted in people looking at long-term market returns and saying, “That’s nice, but can I have it all faster?”
Warren Buffett and Charlie Munger are two of the most famous investors of all time. But about 40 years ago there was a third member of their investment group, Rick Guerin. They were all equally talented, but Rick became over-leveraged trying to accelerate his investment returns and lost his money. Buffett said:
“Charlie and I always knew that we would become incredibly wealthy. We were not in a hurry to get wealthy; we knew it would happen. Rick was just as smart as us, but he was in a hurry.”
“Be more patient” is the investing equivalent of “Get 8 hours of sleep” in health. It sounds too simple to take seriously but will probably make a bigger difference than almost anything else you do.
After Andy escapes he heads to Zihuatanejo, Mexico. A warm place on the Pacific with no memory. I can’t think of any other way to end this post than with the ending of the movie. It’s an incredible two minutes:
Thanks for reading!