A delightful video recreates the famous " marshmallow experiment ," a study on delayed gratification originally conducted in 1972 by psychologist Walter Mischel of Stanford University (now Columbia).
As the video shows, an adult offers a young child a marshmallow and tells the child that s/he may eat it; but if s/he waits until the adult gets back, s/he will get another marshmallow. The study then analyzed how long each child resisted the temptation and later whether or not doing so was correlated with future success.
The kids' struggles to hold out for the extra marshmallow are poignant and hit home with all of us.
As in the video, Mischel observed that some children would "cover their eyes with their hands or turn around so that they can't see the tray, others start kicking the desk, or tug on their pigtails, or stroke the marshmallow as if it were a tiny stuffed animal," while others simply ate the marshmallow as soon as the adult left the room.
Of the over 600 children who took part in the experiment, only a small minority of them ate the marshmallow right away. Of those who attempted to delay, one-third deferred gratification long enough to get the second marshmallow, with older children being more likely to hold out. Since Mischel's daughters knew and grew up with many of the original test subjects, Mischel later came to suspect (and later establish ) that there was a correlation between the results of the marshmallow test and the success of the children many years later.
Despite the myriad of books and papers written about retirement planning, the bottom line is that we are all pretty much just like the kids in the marshmallow experiment. If we are able to delay gratification — save more/spend less — we will be far more successful later. But doing so consistently is really hard. Good retirement planning requires us to keep putting money aside for decades instead of spending it for (seemingly?) important or fun stuff now in order to fund an unknown, uncertain and often far-off future. Not surprisingly, we aren't very good at this hyperbolic discounting .
This isn't news of the man bites dog variety, of course. We're well aware of what we should do. Unfortunately, our behavioral biases conspire to convince us that indulging now ("just this once") is okay. Indeed, our brains are such incredible rationalization machines that we readily believe not only that "it's okay," we can even convince ourselves that we are somehow doing the right thing by saving less and spending more right now . After all, I (or my kids) really need this marshmallow or the researcher may not be coming back or we may be dead by the time s/he comes back with the second marshmallow. The possibilities are endless.
Marketers are well aware of our weaknesses, of course (see below).
They can make eating the marshmallow right now seem like the only plausible option. It is certainly the option that's the most fun.
Retirement planning deals with many complicated issues. But its essential element — the key to retirement planning — is remarkably and deceptively simple. Will we eat the marshmallow right away — or not?
