Gaining Super Powers: Low Time Preference

6 steps to improving your health, wealth, relationships, and overall life satisfaction

There is a super power that you can develop which leads to all good things in life.

It can help you get and stay healthy to a ripe old age, build wealth, improve relationships, and generally find greater long term life satisfaction.

TIME PREFERENCE

To explain what time preference is, consider this: if I asked you whether you would prefer I give you a gift now or a year from now, all else being equal, I’m sure you would prefer to have it now, right?

Time preference is an economic term that refers to how strongly people tend to prefer the present moment to the future (or in other words how strongly they discount the future for the present).

Time preference is measured from the point of view of the present moment, so a high time preference means that the present is valued more highly than the future which is correspondingly discounted, while a low time preference means less value is assigned to the present moment and more is assigned to the future.

Thinking of it as a ratio, present preference : future preference, or a fraction present / future, time preference will always be greater than 1 because everyone always prefers the present over the future to some extent.

The basic reason is that the present is certain and the future is not - some few of us will not even be alive tomorrow let alone a year from now.

It’s also because we need things in the present to survive and make it to the future. We need food, water, air, shelter, money, etc, and we need these things now.

If you always preferred the future over the present you would not make it to the future.

And even if it’s not a necessity, if there is something to be enjoyed we would prefer to enjoy it now rather than wait.

But some people prefer the present too much, they use up all their resources and money right now and leave nothing for the future.

They are very short sighted.

Maybe they are hunter gatherers living in a bountiful environment and they trust the land to provide moment to moment with no need for planning ahead.

That might work for them, but it wouldn’t work too well in a civilized society where some degree of planning ahead is a requirement for leading a successful life (according to most standards).

There was a famous marshmallow experiment carried out in children to measure time preference in such a society (i.e. ours) and what it takes to lower it: to induce someone to wait longer than they otherwise might to enjoy something.

Ooh … that tasty marshmallow is so hard to resist!

The experiment was simple: the children who can manage to avoid eating the 1 marshmallow sitting on the table in front of them for 15 minutes got 2 marshmallows as a reward.

Sounds easy?

Not so much for the little kiddos who struggled mightily with the temptation, biting their nails, sitting on their hands, humming and bouncing around trying to tear their little hearts and minds and eyes away from that fluffy white confection.

The children who could sit on their hands or bite their nails and somehow make it through the 15 minutes of short term temptation showed a lower time preference for the present than their counterparts who caved in to their immediate desire for just one delicious mouthful.

What's most interesting about the experiment is that lower time preference turned out to predict better future outcomes of some importance in those very same children, e.g. marriage, advanced educational attainment and a higher income bracket.

A lower time preference corresponds to the ability to plan for the future, to delay gratification for something better.

to avoid junk food and inactivity and instead invest in your health.

To spend time now studying in exchange for a better job years later.

To save up capital and invest it for a better tomorrow.

To treat others well so they will one day return the favor.

To follow the law and so avoid jail time.

To value intimacy and cultivate friendships.

To marry and expend the effort to raise good children who are a comfort in old age.

To not only prefer 2 marshmallows later to 1 marshmallow now, but to perhaps eventually come around to considering your immortal soul and its destination in the next world - the ultimate indicator of truly low time preference.

So is there a way to turn the dial on time preference one way or the other?

Unfortunately what seems to work best and require no individual effort at all, is rather difficult to implement yourself: hard money as the basis of your entire countries financial system (our financial system is built on the easiest of easy money).

Converting savings from easy money into hard money is a way around this, but it requires a degree of certainty to weather medium term fluctuations in value that doesn’t come easily to everyone.

Still it’s one of the most important parts of the science of adjusting time preference, so it deserves discussion, before we get to other ways of lowering time preference below.

The reason money can have an effect on time preference is that it is more than a bill in your pocket or a number in your bank account. It is an operating system for value that resides in your brain.

The technical term is the “unit of account” aspect of money.

You can price anything in terms of money whether it be a good or service, your time or someone elses.

You could even assign a monetary value to the 15 minutes of discomfort a kid has to go through in order to delay eating 1 marshmallow in exchange for 2 marshmallows.

The kids that can wait it out value that 15 minutes of their lives at least as much as 1 marshmallow (which has a corresponding value in the unit of account, i.e. money).

The kids who can’t wait it out might be enticed to do so if the reward was higher. Maybe if you promised them 3 marshmallows at the end instead of 2.

Imagine I offered you $100 today or $101 in 10 years. You would probably take the $100 today - I might not even be around in 10 years and anyway it’s just an extra dollar, not quite worth the wait.

But what if I offered you $100 today or a million dollars in 10 years?

I wager many, if not most people who aren’t downright impoverished, would pass on the $100 if they trusted the offer, just for the chance they could get a cool million in 10 years.

And if not, what if the offer was $10 million, $100 million, a billion dollars? At some point you would likely play the game.

What is it worth to you to pass on some icecream? How much would I have to pay you to exercise today?

Since everything can be assigned value in terms of the unit of account in a society, what happens when the unit of account itself becomes corrupted? When it fluctuates wildly due to inflation and deflation?

How do you make the day to day economic calculations that you need to to make in order figure out whether you should do something now or later, if you should save up or not, if you should invest time and money into education or just start working in the factory today, if you should invest into your business or just cash out before the currency crashes?

Even simple subconcious calculations become corrupted in this environment: like what’s it worth to skip that second plate of lasagna, or put down the remote and go to bed early, or exercise a bit more?

Just how important is the future vs the present?

To really understand the effect of money on time preference we need to know what hard money is and why it tends to shift time preference lower.

Hard money maintains or gains value over time which encourages economic savings and investments in the future as well as tends to shift short term thinking towards long term thinking in other areas of our lives, i.e. it lowers time preference in general.

But getting to the actual definition, hard money is just that which is hard to make - e.g. gold cannot be made in a lab or by a printer, it has to be searched out and dug up, usually involving significant time and expense.

For thousands of years the hardest to “create” money was gold since no matter what degree of human ingenuity was applied, in the way of better tools or newly invented machinery, to increase the extraction of the yellow metal, the rate of production of new gold compared to above ground gold always hovered around 2%, because as the easier to reach deposits dried up new technologies only made the harder to reach less concentrated ones more accessible.

Since population growth also hovered around the same rate or higher the increase in society-wide gold reserves generally kept up with or slightly lagged population growth over very long spans of time.

This meant that as population outgrew existing and newly minted gold reserves and technology brought down the price of goods (preindustrial era clothing used to be stolen off peoples backs because it was so expensive to make), the value of gold - what you could buy with it - actually increased slowly year over year, meaning instead of having an inflationary money, which could buy less and less every year, humanity had a deflationary money, which could buy more and more as time passed.

People obviously preferred this over the alternative because money represents some amount of effort or work they have expended to get their hands on it.

If money loses purchasing power over time then it does not act as a good store of the value (personal effort) it is meant to represent.

On the other hand easy to make money is inflationary, because what is easy to make tends to get made, especially when it’s money (have money printer, will print).

Inflation means easy money loses value over time, it takes more and more of it to buy the same amount of stuff.

inflationary money requires an interest rate to entice people to give up value in the present in exchange for more in the future. The higher the inflation rate the more interest is required to prevent people spending it all now before it becomes worth less in the future.

In the case of hard money like gold that is deflationary, again meaning it gains value over time, even if only slightly: if you assume there is a carrying cost to store it, which might be around 1% a year in order to keep it secure (imagine paying to guard gold in a vault), then even a zero percent interest rate could make sense, because it relieves the lender from paying the carrying costs and even though the same amount is returned at a future date, because of deflation it is actually worth more, so the “real” yearly interest rate in terms of value could be described to be around 2% - 3% (1% - 2% rise in value due to deflation + 1% in carrying costs) even though the nominal rate is zero.

So since we had deflationary money on the gold standard throughout much of the civilized world over the last 5000 years people were incentivized to save their money and psychologically habituated to plan for the future in all areas of their lives.

When money very slowly gains in value there is an incentive to save up for the future, and only buy what’s necessary now and only invest in sound ventures which are very likely to pay back with profit.

At the same time you learn to value the future more because your economic position in the future has become more certain. What you have set aside will grow in value and provide for you, so you can then rest easy and begin to consider what else you need to do in order to make it to a future you want to live in - investments in your health, education, personal relationships, etc.

WHAT ELSE CAN YOU DO?

So beyond saving in a hard currency what else can you do to shift your time preference?

One way to think about this is: you need to make what you want to do cheaper and what you don’t want to do more expensive.

For example say you want to encourage yourself to do hard things now in order that you will be healthier in a month, and even healthier than that in 6 months, and hopefully in optimal health beginning at some point in the near future and extending into your ripe old age.

In order to begin you need to make it cheaper to start. For instance you need to lower the value your brain assigns to time spent exercising today.

There are a few ways to do this.

1. Habituating yourself to exercise: the more you do the easier it becomes to do it, and the better you will feel from it and at some point in the first few months you will likely start to miss it if you skip it.

2. Another way is to educate yourself on the harms of not exercising.

   The bigger and more scary and more immediate the harms become in your mind, the cheaper exercise will begin to seem to you in order to avoid them - ie it will begin to seem like a small price to pay in order to avoid the terrible harm that comes of not doing it.

   Reading, listening to experts, visiting hospitals/nursing homes are all excellent for this.

3. Visualize the benefits and harms. As you visualize the positive things that you will get from exercise feel deep gratitude.

   As you visualize the negative things not exercising would do to you feel fear. Visualize in as much detail as possible.

4. Use Carrots and Sticks: reward yourself for doing what you want, and punish yourself if you slip.

   It doesn’t have to be a big punishment, just keeping track in a simple journal when you slip up can give you ego a little ding that helps you avoid slipping again.

   We tend to minimize and brush off mistakes, but writing it down forces you to confront them and stop making them in the future.

   You can take this further though and set up an accountability partner, or commit to giving a small some of money away each time you skip your planned exercise without a valid excuse.

5. And one of the best ways is to ease into it with baby steps. Do a tiny bit to start and very gradually increase the amount over time to benefit from the snowball effect.

   Find an amount that is so small your brain doesn’t even consider it.

   But the key here is to commit to it on a regular basis for a long time.

   So for example, could you commit to a daily 1 minute walk for the next year? Or to do just 1 pushup daily for 6 months?

   I’m not saying you can never decide to change to something else, the point is that you commit to something easy, and then once you realize how incredibly easy it is to keep it up you sligtly increase it with the same time commitment.

   Maybe you decide, hey this is nothing, I can do a 5 minute walk a day no problem, or 10 minutes, etc.

   Eventually you’re walking 30, 60 100 minutes a day and enjoying yourself more than you ever imagined.

The 6 methods combined (saving in hard money, habituation, education, visualization, carrots/sticks and baby steps) can be generalized to making any change seem much cheaper to make psychologically speaking.

These are the secrets of making a low time preference your own personal super power.