- Clarity Drops
- Posts
- Time Preference
Reading time: 4 min
Today’s high-signal drops:
• Makes-You-Think Tweet: On politicians
• Mind-Expanding Concept: Time preference
• Cool Quote: Communication is performance
• High-Signal Content: Where did language come from?
Makes-You-Think Tweet
Be wary of politicians who promise to give you exactly what you want.
— Walker⚡️ (@WalkerAmerica)
2:09 AM • Jul 19, 2023
Mind-Expanding Concept
Time Preference
Generated by midjourney | 59 year old fisherman with morning catch
Put simply, time preference is the extent to which humans value the present over the future.
It is always positive - we do indeed value the present over the future. Why? Because our time on earth is finite. As we don’t know when it ends, we’d rather enjoy our time and consume what we have today than take the chances of doing it tomorrow, which might never come.
A hunter-gatherer who hunts every morning to find the food for the day has a high time preference. A fisherman who makes a net to catch fish for the entire village one day does not have to go fishing for a few days as he will be fed by the other fishermen. He has a lower time preference. He lowered it by investing time to build the net to be more productive - time he could’ve used fishing with his old rod. In general terms, he delayed gratification to have better outcomes in the future. But who’s to say that the net would work? He couldn’t know. So besides delaying gratification, he took some risk. He naturally only did that because he saw a potential benefit. You run this story over and over in ever more sophisticated ways and you see how civilization advanced. The accumulation of capital goods unlocked human flourishing.
Let’s bring it to our reality. If you have a low-time preference, say you live from paycheck to paycheck, you’re making decisions for the short term. You’re consuming all that you have. Any surprises (life like those) can put you in debt or in trouble. Saving and creating an emergency fund increases your time preference. Buying revenue-generating assets, even further. Suddenly, if you get fired, you don’t need to get whatever job that pops up. You can take a couple of months to find a better one. You can think beyond today.
There’s this story of a horse tamer who was sentenced to death by a tyrannical king. He promised the king that if he was let to live, he would teach the king’s favorite horse to talk in a year. The king agreed and he was sent back to prison. His cellmate immediately asked him if he was crazy to make such a proposal. He replied that a lot could happen in a year - the horse might die, the king might die, he might die, or…the horse might talk!
The higher the time preference, the less space we have for being rational and the more prone we are to succumbing to our instincts. If your 4-year-old daughter is hungry and you have no food and no money, I don’t expect you to be polite. The lower the time preference, the more cooperative and positive-sum we are as we’re thinking for the long term. If you’re rich enough not to worry about money in your life, you’ll very likely develop a particular taste for bittersweet beverages and a type of art, and you’ll start talking about your legacy.
The game is figuring out ways of lowering our time preference. You’re always negotiating with your future self.
Play long-term games with long-term people. All returns in life, whether in wealth, relationships, or knowledge, come from compound interest.
Cool Quote
“A lack of communication is a lack of performance.”
“…I don’t care how well you think you did on this task, if you failed to communicate it while it was being done and you failed to close the loop to let the people know that it was done, who you’re accountable to that is a failure of performance, not a failure of communication as a separate category.”
High-Signal Content
“…the fact that the unconscious prefers avoiding verbal instructions pretty much altogether—even where they would appear to be quite useful—suggests rather strongly that it doesn’t much like language and even that it doesn’t trust it. And why is that? How about for the good and sufficient reason that it has been getting along quite well without it for a couple of million years?”
See you next week,
Filipe