Patience is a virtue, especially when it comes to building capital. But as with most virtues, it’s not always easy to muster, since it usually requires resisting temptations for gratification on the sooner side. Should you put the extra $1,000 earned this month in your retirement savings or use it to buy a new suit? Should you approve money from the firm’s “rainy-day” fund to cover travel for senior executives (yourself included) to a lavish conference this summer or let it continue to accrue as a buffer for future challenges? Such decisions – a type referred to by economists as intertemporal choices – are characterized by options that offer different rewards as time unfolds. That is, they contrast smaller pleasures or gains now with larger pleasures or gains later.
Almost everyone – from individual investors to CFOs of large corporations – would probably agree that the best way to choose between such options would be to objectively weigh the potential costs and benefits offered by each. But, as the past two decades of psychological research has revealed time and again, the human mind isn’t entirely objective. It’s a well-established fact that we discount the value of future rewards. For example, if given the choice between receiving $75 dollars today or $100 in a year, most people would opt for the former even though a 30% annual return on an investment is difficult to beat. Of course, discounting as a function of time isn’t inherently illogical. Some level of it makes good sense; you never can be absolutely sure you’re going to be around in the future to reap the reward. But our minds tend to discount future value quite excessively – a phenomenon that significantly contributes to problems ranging from credit-card debt to substance abuse.
The usual advice for combatting the desire to spend money for short-term gratification has centered on using willpower to tamp down emotional responses. Squelch that craving for a shopping spree! Although this strategy certainly can work at times – especially since emotions like sadness have been shown to exacerbate financial impatience – it’s not optimal. The big mistake comes from assuming that all emotions pose a problem for financial decisions and need to be controlled. If you stop to think about it, not every emotion we feel is tied to present desires. Some, like gratitude, are associated with situations that involve accepting a short-term cost to further future gains. Feeling grateful reminds most people that they should expend capital – time, effort, or money – to repay another, thereby solidifying a relationship that might be beneficial in the future.
My colleagues Ye Li, Jennifer Lerner, Leah Dickens, and I decided to test how the experience of gratitude effects discounting and financial impatience. We designed an experiment (now in press at the journal Psychological Science) that presented participants with a set of 27 questions, which pit a desire for immediate cash against a willingness to wait for larger rewards at various times in the future. For example, one question required study subjects to choose between receiving $54 now or $80 in 30 days. To increase the stakes, participants knew they had a chance to obtain one of the financial rewards they had selected; it wasn’t purely hypothetical. If they chose the immediate cash, they’d be paid then and there; if they chose the delayed amount, we’d send them a check. However, before they made these decisions, we randomly assigned each one of them to recall and briefly write about an event from their past that made them feel (a) grateful, (b) happy, or (c) neutral.
As we expected, individuals who wrote about neutral or happy times had a strong preference for immediate payouts. But those who’d described feeling grateful showed significantly more patience. They required an immediate $63, on average, to forgo receiving $85 in three months, whereas the neutral and happy groups required only $55, on average, to forgo the same future gain. Even more telling was the fact that any given participant’s degree of patience was directly related to the amount of gratitude he or she reported feeling. It’s important to note that positive feelings alone were not enough to enhance patience: Happy participants were just as impatient as those in the neutral condition. The influence of gratitude was quite specific.
We see broad implications for these findings, since they suggest that gratitude can foster long-term thinking. We all recognize the fact that willpower can and does fail at times. Having an alternative source of patience – one that can come from something as simple as reflecting on an emotional memory – offers an important new tool for long-term success. And that itself is something to be grateful for.
source: Gratitude Is the New Willpower April 09, 2014 at 03:00PM