In a hyperconnected world that constantly demands our attention through messages, notifications and alerts, it’s hard to resist the allure of instant gratification. However, the expression “Patience is the mother of all virtues” still applies for those who want to consolidate their assets and forge their path to financial freedom. It’s time we rediscovered the value of delayed gratification!
What to remember
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Every day, our hyperconnected lives expose us to thousands of messages and requests that stimulate one of our most primal instincts: the need for instant gratification and short-term satisfaction. Regardless of the future, instant gratification is a survival instinct deeply ingrained in our brains and inherited from our ancestors whose main concern was where their next meal would come from.
This instinct, while very useful in a hostile environment where our immediate survival is the main concern, constitutes a real obstacle to achieving our long-term objectives. And for good reason: he who eats all his seeds today will have nothing left to plant tomorrow and nothing to harvest the next day.
It is now understood that instant gratification often triggers the release of dopamine in the brain, a neurotransmitter associated with pleasure and reward. Technologies and other applications exploit this false need for instant gratification to generate a behaviour. However, it is useful to learn to resist short-termism. This is especially true when it comes to making decisions to promote your long-term financial well-being. It’s time we gave more importance to delayed gratification!
Delayed gratification is the ability to resist the allure of an instant reward in favour of a potentially greater future reward.
Delayed gratification is your ability to resist the allure of an instant reward in favour of a potentially greater future reward.
This concept was studied as early as the 1970s at Stanford University through the famous marshmallow test. It is an experiment carried out with children by psychologist Walter Mischel and his team. Mischel tested the ability of young children to exercise self-control and not eat a marshmallow placed in front of them when they were left alone in a room for about 10 minutes. Each child was told that if they managed it, they would be rewarded with two marshmallows when the researcher returned.
This experiment gained global popularity and left many amused spectators feeling moved by the efforts of certain children to resist temptation, whether successfully or not. In reality, the main purpose of the study was to illustrate and analyse the benefits of patience for cognitive development, particularly for stress management and appreciation of hard work. This experiment also allows us to better understand the impact of patience in life in general.
When it comes to finances and investment, patience and delayed gratification are the keys to financial well-being. Like a child with a marshmallow, it is not easy for adults to temper their desires in the moment and focus on building long-term assets. We all have our marshmallows that entice us every day. Practising delayed gratification does not prevent us from succumbing to it from time to time. However, it allows us to strike a balance between enjoying the present and giving ourselves the means to maintain this well-being in the future.
If instant gratification is so appealing, how can we stop ourselves from giving in to it? Rather than focusing on curbing our desires, it is helpful to understand and focus on what we lose by being impatient. Let’s take investing and the constant race for performance as an example.
Investors who are persistently impulsive focus on the immediate benefits and costs. In doing so, they favour short-termism and succumb to present bias. Impatient people are under the illusion that they can time the market and take short-term actions to increase returns or avoid losses. These investors seek instant gratification by chasing performance and jumping from one stock or fund to another. They succumb to the illusion of market timing which can be very costly. While it is still possible to achieve some wins, it is not a strong long-term positioning. To put it in the words of Warren Buffett: “If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes.”
“If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes” (Warren Buffett)
Impulsivity can also be fuelled by loss aversion. Investors who can’t stand the idea of losing money tend to flee the market at the slightest sign of turbulence, turning what usually ends up being a temporary drop in portfolio value into a permanent loss of capital. This inevitably harms the performance of their investments in the long run. Having the patience to wait and break the cycle are fundamental qualities for successful investing.
Investors who are in a hurry and afraid of missing opportunities tend to take the lead from others when it comes to knowing how to react, and spend countless hours taking pseudo-advice from social media. They therefore forget that herd mentality in the field of investing can trigger stock market crashes: everyone follows the herd to the edge of the cliff. Not to mention the numerous scams touted by pseudo experts.
Making wise long-term decisions requires adopting a deliberate thought process that goes against our instincts. Fortunately, learning patience and self-discipline to practise delayed gratification can happen at any age. The marshmallow test is also proof of this.
Many follow-up studies and attempts to replicate the experiment have shown that this test only shows part of the reality. We now know that this test does not predict future success in a child’s life and that many variables such as cultural differences were not properly taken into account in the initial experiment. The creators of the test themselves are now convinced: self-control – and the ability to regulate one’s own emotions – involves a set of skills that can be learned.
Self-control – and the ability to regulate one’s own emotions – involves a set of skills that can be taught and learned.
Getting to grips with your personal finances is not just about money management; it is also about time management.
Delayed gratification is a fundamental pillar of financial planning. It is important to think carefully about our decisions now and how they will affect our future and that of our family. It is not a question of stopping ourselves from living in the present, but of also being able to take the steps that will allow us to continue to live well tomorrow. It’s all a question of balance.
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