I mentioned the concept of delayed gratification in passing back in Episode 010 while talking about certain elements alongside the phenomenon of trade. Let’s not delay any more!
We haven’t met our fictional friends in a while, so let’s go back to the setting in Episode 012 where Steve, Bryan, Brenda and Irene are sat in the garden looking around as Bruno the dog and Iris the cat are doing doggy and catty things around. Specifically, Bruno brings in a bone and buries it next to his kennel, which leads them to digress from their task at hand to philosophize. It’s a sunny afternoon after all and the beer won’t drink itself!
Brenda is like, isn’t that clever of little Bruno? Irene going, yeah, he’s saving up for the future, very prudent. Bryan reacts by saying, pah, what’s the big deal, he’s just burying a bone, with Steve adding, well, I mean humans don’t do such silly things, if I have a good sandwich in my hand, I’d eat it right away, why let it rot.
Brenda snaps back, no Steve, that’s not it, Bruno is showing restraint now for enjoyment later. Bryan starting to see, oh wait, that’s right, Steve, we do such things all the time as well, with Irene adding, that’s true. Steve, I mean after every harvest don’t you store up some of the produce for the next season’s planting, surely you don’t eat it all right away?
When the Waiting’s Worth It
Yes, that’s it, it’s that simple. Delayed Gratification is simply about sacrificing the prospect of immediate reward in favor of something likely more valuable at a future point in time. While this is mainly treated under the discipline of psychology, this, like many other concepts in that domain, has significant economic bearings as well. So let’s explore it from that angle.
This can be compared in many ways to the notion of the time value of money we discussed in Episode 007, along with capital we saw in Episode 005 - money, or using money and capital can be put to good use right now rather than later, allowing it to produce a return, a sort of a mirror image of delayed gratification.
It could even be human capital, like even though you want to stay in bed, it’s Monday morning after all, you resolve to and do get up early to write, as scheduled, that new piece about, let’s say, forgoing immediate enjoyment for long-term gain!
In making such choices, we are also applying the idea of opportunity cost. The cost of the lost opportunity of doing something productive and thus more rewarding longer-term is what you pay by snoozing and staying in bed (although there are times it may be justified!)
The most famous experiment around this is the 1970s Stanford University ‘marshmallow experiment’, where 4-year-olds were offered either one marshmallow they could eat right now or had to wait, in a closed room unsupervised, to get two later. (It’s almost as if one cannot ever write a piece on this topic without mentioning this particular experiment - it’s the marshmallow tax!) Kids who turned out to show restraint in that experiment were generally seen to be more competent and successful later in life. But let’s look at more specifically economic ramifications.
As you Slow So Shall You Reap
Back in TecC 10 in my other series here on the story of human innovation and progress, I spoke about the advent of farming - human existence in sedentary agricultural lifestyle is like the last 5 minutes of a 24-hour day, compared to the hunter-gatherer living over the rest of that 24-hour analogy.
And the central dilemma there was just that - how did the early farmers develop, first the idea, and then the ability, both individual and institutional, to store up the seed for future productive use rather than consume it right away - it may be obvious to us but we must be mindful it was a completely new idea to them representing an intellectual breakthrough!
There’s another classic example: education. The human species is said to have the longest childhood in the animal kingdom, and given childhood is that phase for any individual creature to learn the realities of life as relevant, humans expend the greatest effort in providing for it, unlike any other species.
And this - delayed gratification, scales from the individual to societies, institutions and nations - it’s at the very foundation of what we generally call civilization. Those of these bodies that are constitutionally built for long-term thinking and action may be expected to show better outcomes, economic and otherwise. (The question of how much short-term restraint many of our institutions from corporations to governments show compared to the 4-year-olds is left as an exercise to the reader.)
So, yes, this is a lot more than a dog and a bone, we’ve seen how this seemingly unrelated idea is intimately linked with concepts we’ve touched on in previous pieces, from capital to interest (time value of money), debt to opportunity cost to trade itself.
But there’s one other key concept vital in crystallizing the concept of delayed gratification in more specifically economic terms, one key concept needed to put flesh on the bone, and that’s what’s coming next. So between now and a week to come: it’s delayed gratification!
Article written by Ash Stuart
Images, video, voice narration and some footnotes generated by AI
Nothing in this presentation constitutes as advice - financial, investment or other
Further Reading & Reference
* TecC 10 - Seeds of Civilization: The First Great Bargain
