Delayed Gratification
I’ve got a complicated relationship with delayed gratification. I grew up in a first-generation household where the mindset was extreme frugality, particularly around material possessions. (Clearly exempt from the frugality mindset were Education and Family Experiences, travel in particular). Delayed gratification meant that sacrifices today meant greater things in the future.
I feel extremely grateful to have been raised wit this mindset. Because of it, I’ve been a disciplined and patient investor (of the buy-and-hold kind), I’ve made huge sacrifices in my career (which brought me success, by “traditional” markers), I’ve lived a very healthy lifestyle (affirmatively by not smoking and preventatively by consistently working out) and as a family we’ve always lived well within our means, which has afforded us tremendous flexibility in our lives.
But I think that blindly living a Delayed Gratification mindset requires a bit more scrutiny. Like anything, the “answer” lies is not Black and White, lying somewhere in the Gray.
Continuum 1: The “Deferred Life Plan”
Let’s take two obvious continuums: first, you delay for too long and you leave this world with a huge pot of money, but having never been able to really enjoy it.
The first supporting argument is “yes, but it all goes to my kids — so it was worth it.” I don’t believe there’s a right or wrong answer, but I would ask two questions — First, by leaving your kids gobs of money, are you truly doing what’s best for them? Second, what lessons are you showing them about the joy of experiencing life? And would you want them to make the same sacrifices to their kids? (You can see the slipperiness of the argument here.)
Continuum 2: YOLO!
On the other end of the continuum we have the “well we’re all going to die any way — so live only for the present.” While at times, an enviable position, there is a pragmatism required to provide shelter and opportunity for one’s self and their family. That being said, with age #YOLO does start to resonate more.
The Algorithmic Answer
The quant in me actually believes that one could try to quantify the “optimal amount” of delayed gratification, particularly when it comes to money. Here’s how I envision it:
- Each year, you map out the following amounts (for the rest of your life): projected income, projected spending, life expectancy, and amount you want to pass to your kids
- You take the present value of these cash flows and then your “excess spend” would be the difference between the cash in your bank account and the PV of these cash flows
This is a completely unrealistic exercise. There are too many variables, many are hard to measure and the situation (called Life) consistently changes. There’s also a decent likelihood that the Present Value will be significantly more than the Amount in the Bank, which in theory means you should incur debt to spend it. This is a scary proposition, but there are many kernels of truth in that line of thinking.
The Number
This is a very “Wall Street” concept that once your bank account hits “X” you’ll go “pursue your passions.” It usually is a number where you assume some safe rate of investment (~3–5ish percent) and can live off of the income. This is a flawed framework for a few reasons:
- It constantly changes due to the aforementioned variables
- It values your earnings potential at close to zero (as you would no longer work)
- It doesn’t capture building equity in yourself
But let’s return to delayed gratification more generally…
All hours and all dollars are not created equally
This is where the delayed gratification framework breaks down for me. Let’s look at dollars first:
Would you rather take a $5,000 vacation when you’re 30 or 60? Again, there’s no right or wrong answer, but a few things to consider about that vacation in your 30s:
- You’re probably pretty healthy, thus expanding the breadth of experiences you can have (🏄!)
- Your kids are probably young, fun, and still living at home. They might even still be at that wonderful age where you are their Most Favorite Person in the World.
- And not to get morbid — but shit can happen by the time you turn 60
If you think of time as well, the same framework can apply. Put more bluntly, an hour in your 30s may produce more utility than an hour in your 60s.
The Elephant in the Room — FEAR
I wrote a long post yesterday about the hierarchy of fears and many of the points are relevant here as well. Most people don’t trust the “Algorithmic Answer,” detailed above because of Fear. I’ve found that many of my peers (especially those of Immigrant descent) have a Fear of Extinction. In the post, I made the argument that most readers of my blog come from privileged backgrounds and that fear is off the table.
But most of my peers (and myself included) can’t seem to shake this fear of Extinction, which impacts the perception of risk taking and propagates the delayed gratification myth.
I’ve recently started reading Ernest Becker’s “The Denial of Death” where he makes the argument that humans are terrified of their own deaths. From this fear, they seek a “heroic journey” to give themselves the closest thing to immortality, in the form of building great companies, philanthropic efforts, writing books, etc. I’m early in the book but I see the kernels of similarity, in the role fear may be playing in my own journey to “build something that outlives me.”
So yes, continue to delay that gratification — but with pragmatism and an awareness around the underlying fears which may driving it.
🤔🏄🖋⏲5
Reflect, flow, write, with a timer, Day 5
I’m experimenting with a daily writing process, focusing on just ideas and nothing else.
