Recently my girlfriend told me, "I ate the marshmallow," seemingly off-subject during a discussion of self-discipline, before explaining that it was a popular reference to a 1960s psychological experiment. She was surprised that I had not heard of it. After I did a little research on the subject, I was quite surprised as well. It was right down my alley!
The experiment was hosted by Walter Mischel who set out to gauge will power and self-control by sequestering several children under the age of six (one at a time), and then providing him or her with one marshmallow and a challenge that he would be back in 15 minutes, and if the child had not eaten the marshmallow, then the child would receive an additional marshmallow.
The results were that most children (70%) ate the marshmallow before the 15 minutes expired; most caved within the first three minutes. Years later, though, Mischel noted a correlation between school performance and the individual results from the preschool experiment. Those children who displayed self-control were getting higher grades and performing better on the SAT by upward of 210 points. Inspired by the oblique benefits from this old experiment, Mischel and company resumed tracking many of the participants into their late-30s.
"What we're really measuring with the marshmallows isn't will power or self-control," Mischel said. "It's much more important than that. This task forces kids to find a way to make the situation work for them. They want the second marshmallow, but how can they get it? We can't control the world, but we can control how we think about it."
For most of us, especially for those who are notably impatient, saving and investing would be a lot like these children eating marshmallows. As soon as I read through the experiment, I immediately compared it to investing myself because of its focus on delayed gratification through increased self-control. In reality, each of the children equally wanted as many marshmallows as he/she could get, but not all of them were willing to pay the same price.
In this case, the cost was valued in time and many people overlook time as a currency. Truly, calling time a currency would be a misnomer, but it certainly is a fair way of viewing it. Re-envision the experiment to run several hours, and every 15 minutes, the number of marshmallows present would double. Each child would still start with one marshmallow, and after 15 minutes, the more patient children would have two. If those children waited another 15 minutes without eating one or both marshmallows, then they would get two more. If they ate one, then they would still have the remainder doubled every 15 minutes.
In theory, the most patient (and arguably, greedy) children would eventually have enough marshmallows that he/she could begin to eat comfortably without it affecting their accumulation. This comparison is a lot like the time value of money. I think one turn-off to investing is the presentation. It is too honesty and too money-hungry. It uses graphs based on past performance usually, so telling a new graduate that he/she should wait another 40 years to have a cushy nest-egg on which to retire is counter-intuitive. Sure, everyone wants a nice retirement, but sacrificing over the next 40 years will make a rather dull 60-year-old without very many fun life experiences.
In reality, there is a point where enough should be enough (this excludes the greedy). Not necessarily enough for a lifetime, but enough for that current point in life. If a tightwad feverishly sacrificed to accumulate vast amounts of wealth by his/her mid-30s, then it would be hard to imagine having a happy life up until that point. But if those could-be "tightwads" loosened their purse strings along the way, then they would enjoy the best of both worlds. They would have both enough in the bank and plenty to spend, like a child with a dozen marshmallows would have plenty to eat.
At that point, there is a paradigm shift in the term "self-control." With little, "self-control" automatically means controlling yourself by refraining from various actions to result in a better life down the line. With enough, "self-control" starts to mean that you have control over more things yourself. You don't have to work a horrible job, because you have enough financial stability to take greater risks and to find a better job. You don't have to miss big events because your latest paycheck has not posted. You have a better sense of choice because you have more power to choose.
At work, my youngest co-worker told me to "feed the pig," referencing American Institute of Certified Public Accountants (AICPA) mascot Benjamin Bankes. In 2006, there was a recognized push to encourage people to start saving more. A website was created (www.feedthepig.org) and commercials started airing, and I guess it was moderately successful, especially if my 20-year-old colleague is now open-minded to saving enough to discuss it intelligently.
Unfortunately, I see a glaring error between their message and their goal, which is that people who don't save have a different interpretation of money than those who save. At a certain point, it is like they are speaking two different languages. When people who don't save hear about how to building up a lot of money, I'm not sure they understand what the indirect benefits of having a lot of money are. In fact, I'm fairly certain "having a lot of money" to people who don't save simply means "being able to purchase a lot." If that's the case, then I understand the lull in savers.
I wonder what would happen if their message went from "save to build up a lot of money" to "save to seize more control over your life." Would that increase the desired savings lacking among our population? Or would the lure of that self-sustained freedom still be overpowered by instant gratification?
Personally, I think life's too short for instant gratification.
Read more about Walter Mischel and the results of his marshmallow experiment at http://www.newyorker.com/reporting/2009/05/18/090518fa_fact_lehrer#ixzz248Bs2pkh
