Systematic Relative Strength

Stanford University psychology researcher Walter Mischel famously demonstrated the importance of self-discipline (the ability to delay immediate gratifiction in exchange for long-term goal achievement) in achieving lifelong success in his well-known “Marshmallow Study.” In the study which began in the 1960s, he offered hungry 4-year-olds a marshmallow, but told them that if they could wait for the experimenter to return after running an errand, they could have two marshmallows. Those who could wait the fifteen or twenty minutes for the experimenter to return would be demonstrating the ability to delay gratification and control impulse.

About one-third of of the children grabbed the single marshmallow right away while some waited a little longer, and about one-third were able to wait 15 or 20 minutes for the researcher to return.

Years later when the children graduated from high school, the differences between the two groups were dramatic: the resisters were more positive, self-motivating, persistent in the face of difficulties, and able to delay gratification in pursuit of their goals. They had the habits of successful people which resulted in more successful marriages, higher incomes, greater career satisfaction, better health, and more fulfilling lives than most of the population.

Those having grabbed the marshmallow were more troubled, stubborn and indecisive, mistrustful, less self-confident, and still could not put off gratification. They had trouble subordinating immediate impulses to achieve long-range goals. When it was time to study for the big test, they tended to get distracted into doing activities that brought instant gratifciation This impulse followed them throughout their lives and resulted in unsucessful marriages, low job satisfaction and income, bad health, and frustrating lives.

I recently came across an in-depth article about Walter Mischel in The New Yorker, which discusses the Marshmallow Study in the context of his long career. It gives a fascinating look into the events and studies that led Mischel to the Marshmallow Study and his subsequent research on the subject of delayed gratification. He is a big believer that people can actually develop the ability to delay gratification through hard work and training.

One particularly relevant passage of the article is as follow:

At the time, psychologists assumed that children’s ability to wait depended on how badly they wanted the marshmallow. But it soon became obvious that every child craved the extra treat. What, then, determined self-control? Mischel’s conclusion, based on hundreds of hours of observation, was that the crucial skill was the “strategic allocation of attention.” Instead of getting obsessed with the marshmallow—the “hot stimulus”—the patient children distracted themselves by covering their eyes, pretending to play hide-and-seek underneath the desk, or singing songs from “Sesame Street.” Their desire wasn’t defeated—it was merely forgotten. “If you’re thinking about the marshmallow and how delicious it is, then you’re going to eat it,” Mischel says. “The key is to avoid thinking about it in the first place.

In adults, this skill is often referred to as metacognition, or thinking about thinking, and it’s what allows people to outsmart their shortcomings. (When Odysseus had himself tied to the ship’s mast, he was using some of the skills of metacognition: knowing he wouldn’t be able to resist the Sirens’ song, he made it impossible to give in.) Mischel’s large data set from various studies allowed him to see that children with a more accurate understanding of the workings of self-control were better able to delay gratification. “What’s interesting about four-year-olds is that they’re just figuring out the rules of thinking,” Mischel says. “The kids who couldn’t delay would often have the rules backwards. They would think that the best way to resist the marshmallow is to stare right at it, to keep a close eye on the goal. But that’s a terrible idea. If you do that, you’re going to ring the bell before I leave the room.”

As discussed in the article, researchers have concluded that although intelligence is very important to long-term individual performance, self-control is even more important. Furthermore, self-control can be developed over time, even if it may come more easily to some than to others.

Delayed gratification is, of course, the rationale for investing. It is what motivates people to save for tomorrow what they could spend today. Delayed gratification is what allows people to accept short-term volatility in exchange for the expectation of more plentiful long-term rewards. I would strongly suggest that investors are best served by doing very thorough research about about investing early on in their lives so that they can adhere to an overriding investment philosophy for a long period of time. Such research might lead a person to determine a disciplined long-term savings plan. It might also lead a person to a deep commitment to a given number of investment strategies like relative strength, value, and/or indexing. Finally, the key to long-term success is to focus on other things while adhering to those saving and investment principles for the long run.

This entry was posted on Monday, April 5th, 2010 at 6:24 am and is filed under Investor Behavior, Retirement/Saving, Thought Process. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.