Marshmallows and Millions – The Benefits of Delayed Gratification

Great investing requires a lot of delayed gratification.

 – Charlie Munger

In 1972, Stanford Psychologist Walter Mischel did a study on Delayed Gratification.

In the study, children were offered a choice between:

• One small but immediate reward,
• Two small rewards if they delayed gratification

They were left alone for 15 minutes in a variety of scenarios.

When they followed up in future studies, years later, the researchers found a correlation between the length of time a child could delay gratification and:

• BMI
• SAT scores
• Life outcomes
• Level of education
• Stress management
• Anxiety management

While this study has been talked about for decades, later studies support a common criticism of the marshmallow test, which was that it’s largely a middle or upper class behavior. If you come from a place of shortages and broken promises, eating the treat in front of you now might be the better bet than trusting there will be more later.

This was backed up on Twitter.

I asked people if they would take $1 billion today or if they’d take $2.1 billion in 31 days and a number of people responded they wouldn’t wait for $2.1 billion because they couldn’t trust I’d pay them.

Whether the results could be replicated, or not, the benefits of delayed gratification are high:

• Increased creativity
• Improved finances
• Increased health
• Goal attainment

Increased creativity

When we delay gratification, we’re more willing to stay focused on the task at hand. We’re focused on the process, not the results, which promotes:

• Exploration
• Deep thinking
• Experimentation
• Reduced distractions

These can all lead to deeper insights and creativity.

Improved finances

Growing your wealth requires long-term thinking. It’s not about getting rich quickly, it’s about growing sustainable wealth over a long time horizon.

When you delay gratification with your finances, it:

• Reduces debt
• Improves investments
• Promotes financial planning

Reduce Debt

Americans carry a balance on 53% on all active credit cards:

• 30% between $1,001 and $5,000
• 15% between $5,001 and $10,000
• 6% have more than $10,000 in credit card debt

While 6% is a small number, it means that 14 million Americans carry more than $10,000 in credit card debt.

The greatest drivers of credit card debt are:

• Inflation
• Emergencies
• Consumer spending

Once you’re in credit card debt, it can be difficult to get out of it.

The easiest way to resolve credit card debt is to never get into it in the first place, which is where delayed gratification comes in. The goal is to reduce consumer spending, increase your earnings and increase saving and investing and these all require delayed gratification.

Financial Planning and Improved Investments

When you are mindful of your spending, you spend less.

The formula for long-term wealth is simple:

1. Earn more
2. Spend less
3. Invest the rest

If you’re able to increase your earnings and reduce your spending by delaying gratification, you’ll have more money available to invest.

I often say If you show me someone’s investing horizon, it will have a high correlation with their future wealth.

The longer the horizon you choose, the more likely you’re going to succeed. Whether you invest in stocks or real estate, as an example, you should be focused on the returns you’ll generate over the coming decades. For example, a $1 million rental property with a 20-year mortgage will provide you with $1 million in net worth in 20 years with zero capital appreciation or cash flow.

That $1 million property could require a $200,000 investment today, which means you’ll increase your net worth 5x in 20 years.

Increase your horizon to increase your wealth and let the compounding do the work.

Increased health

We all know exercise and improved diet are good for our health.

The problem is the results from exercise and diet aren’t immediate, which means the average person won’t exercise or maintain a proper diet long enough to see the results.

For most people who do the exercise program 75 Hard they see results. BIG RESULTS.

75 Hard is simple. It isn’t easy, but it’s simple

People who go through this program not only achieve great health outcomes, they also learn they can Do Hard Sh!t, which means they will have higher self-confidence and succeed in other areas of their lives.

Goal attainment

If you want to achieve big goals, here’s what you need to do:

• Begin with the end in mind
• Break it down into years
• Reduce it to quarters
• Cut it to months
• Down to weeks
• Now to days
• Habits

This type of process requires delayed gratification.

These goals can have a time horizon of 5+ years or more and you need to stay focused on the daily habits that will work up through the waterfall to get to the end goal.

You’ll start with the smallest step and build on it until you make it to the end.