Why investors should forget about delayed gratification

Distant profits are worth less and less these days

THE marshmallow test is a classic of standardised psychology. A young child is given a marshmallow, and told they can eat it whenever they like. Wait for 15 minutes, though, and they can have 2. Then they are left alone. When the test was first performed, at Stanford University in the 1960s, the average child succumbed in 3 minutes. But those who did not were rewarded with more than just a sugar rush. A follow-up study in 1990 showed that success on the test was associated with a whole range of goodies in later life, from academic achievement to coping better with stress.

By now, the associated investment lesson is eye-rollingly familiar. Jam tomorrow should be prized over jam today. Valuing a...


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