or better grabbing-opportunity skills. If you repeat the experiment and the "doubling" of the marshmallow turns into "a teen barging into the room and stealing the marshmallow", who'd be the wiser kid?
Later you decide to eat your marshmallow, but the other kid sees this and demands half. He goes to mom and she makes you share.
Lesson learned: either hide what you have or don't delay gratification.
I feel like this scenario is becoming more common in (US) politics these days (eg student loan forgiveness, housing bubble in 2008). Or it could've anyways been happening and I just didn't notice.
Things that look like failures in long term planning (to people with resource surpluses) can actually be optimal decisions (to people without resource surpluses).
In that case, it was the observation that maximizing currency profit from farming in a society that experiences arbitrary taxation and repeated famine is useless -- if no one has food then no one will sell you any, assuming your saved currency hasn't already been seized.
In contrast, optimizing for familial and social ties were much more reliable ways to see yourself through then-common perils.
If you're poor and don't have a stable living situation, delaying gratification presents risks to you. (ones that people with money and stability don't have to consider)
Sometimes people are dumb, but sometimes they're optimizing for factors others are oblivious to.
What "take risk" means is that you should try to be entrepreneur in situation where you can fall back and be well paid programmer again if it does not work out. Or that you should risk someone elses money.
EDIT: I guess good rephrase would be that "take risk" usually means "overcome irrational fear when you are in perfectly safe situation". That is what actually people mean.
"Sell everything and fund my startup" is fine when you've got a 12 month emergency fund, living in a paid-off home, , and you parents are able to bail you out. It's not fine when failure means you're penniless and homeless.
Further: it's much less of a risk when you have a metaphorical rolodex of wealthy friends from university or business school. You're not cold pitching - not even slightly. Doors open for you, instead of being slammed in your face.
Yet they'll tell you shit like "Try hard enough and you will succeed! I worked long and hard, people saw that, and were willing to invest. Good hard honest work is rewarded."
The people working on their startup 12 hours a day who don't have connections have no idea that the bit left out is that "people were willing to invest in my idea because we chugged beers together in the basement of Sigma Chi."
That's not so much about being a billionaire, but about diversification.
Fortunately, even people of very modest means have access to diversified index funds these days.
If you have a few thousand stocks in your index fund (eg like VWRA or VT), then in doesn't matter how risky any individual stock is (like the startup in your example), as long as holding them has positive expected value.
> But because these households wobble on the edge of disaster continually, that changes the calculus. These small subsistence farmers generally seek to minimize risk, rather than maximize profits.
> [...] Consequently, for the family, money is likely to become useless the moment it is needed most. So while keeping some cash around against an emergency (or simply for market transactions – more on that later) might be a good idea, keeping nearly a year’s worth of expenses to make it through a bad harvest was not practical.
> In contrast, optimizing for familial and social ties were much more reliable ways to see yourself through then-common perils.
Social ties are no more helpful in a famine than currency is. People who can't sell you food can't give you food either. They are insurance against the case that your crop fails, not that everybody's crop fails.
Currency is fine in that scenario. The tendency not to grow the most profitable set of crops is a method of avoiding crop failure, not a method of mitigating it when it happens.
See "Risk Control", "Banking the Yields", "Banqueting the Yields" for why currency was a terrible idea and relationships were superior.
> Avoiding risk for these farmers comes in two main forms: there are strategies to reduce the risk of failure within the annual cycle and then strategies to prepare for failure by ‘banking’ the gains of a good cycle against the losses of a bad cycle.
> If you only farm one crop (the ‘best’ one) and you get too little rain or too much, or the temperature is wrong – that crop fails and the family starves. But if you farm several different crops, that mitigates the risk of any particular crop failing due to climate conditions, or blight (for the Romans, the standard combination seems to have been a mix of wheat, barley and beans, often with grapes or olives besides; there might also be a small garden space. Orchards might double as grazing-space for a small herd of animals, like pigs). By switching up crops like this and farming a bit of everything, the family is less profitable (and less engaged with markets, more on that in a bit), but much safer because the climate conditions that cause one crop to fail may not impact the others.
Under "Banqueting the Yields":
> The most immediate of these are the horizontal relationships: friends, family, marriage ties and neighbors. While some high-risk disasters are likely to strike an entire village at once (like a large raid or a general drought), most of the disasters that might befall one farming family (an essential worker being conscripted, harvest failure, robbery and so on) would just strike that one household. So farmers tended to build these reciprocal relationships with each other: I help you when things are bad for you, so you help me when things are bad for me.
You might notice that this is exactly what I said above. What did you want me to see?
Social ties are more helpful than currency, even in a famine, because at that point resources are shared based on relationship rather than value. Triage, not optimizing future gain.
See also all the bits about why currency at that point was a terrible store of value.
> Ok, so why not sell the grain and store something less perishable, like money? Sure, you can’t put it in a bank, but you can just keep it. And indeed, our ancients do this
The problems with currency are listed as:
1. Someone can come into your house and take it.
2. Ordinary farmers cannot afford enough currency to replace the value of a failed harvest. (An entire year's revenue.)
3. In the event of a famine, the price of food rises, making currency a poor hedge against famine.
Only #3 applies to how valuable currency is in a famine, and it remains superior to local social ties when the famine strikes.
But because of its unaffordability and undesirable correlation with famine, it is not the favored solution to famine. It's just a much better solution than local friendships.
You read the wrong essay; the standard defense against famine is discussed in the following one:
> So we’ve established what the big landlord gets out of working with the smaller subsistence farmers around them – they get labor to put more of their large holdings under cultivation and even a degree of labor flexibility with wage laborers and sharecroppers drawn from the existing rural population. In this sense – and I want to stress this – the large estates need the rural small farmers to survive. This is why, even in periods of rapid growth among large landholding estates (like the steady expansion of latifundia in the Roman late Republic and early Empire), there remained lots of these smaller farmers. But what do the small farmers get?
> Just like the smallholders could establish horizontal ties with fellow small farmers, they could also try to establish those ties with the big fellow in the big house. Of course the mechanisms for establishing the ties were different: few peasants could banquet an aristocrat and most aristocrats would be insulted by a suggestion of an alliance through marriage. Instead the ties were strictly vertical – that is they were unequal. They often began with the farmer working at least a bit as a tenant on the big farm, but also typically included political support, sometimes military support (that is, coming out to fight when the large landholder did, often as common troops in his retinue) and no small amount of social deference.
> In exchange, in theory, the large landholder could provide the ultimate backstop against catastrophe – even a catastrophe that might ruin an entire village or rural area all at once.
In the event of a famine, the farmer has two options:
1. Leave the stricken area, in which case he's dependent on his stock of currency.
2. Hope for relief to be delivered by his social superiors, which depends on their stock of currency.
I once watched a movie about this called The Wolf of Wall Street
Likely this is related to the marshmallow. I need to eat. I will eat it now. I cannot guarantee the marginal return on more marshmallows. I mean maybe if real life was like "wait one minute and double your money" people would do it, but typically it's like, lock up your cash for weeks, months, years at a time for margins, not for doubling your marshmallow count.
In real life, realized savings or gains of 1 or 2 or 4 percent for a 6 month wait is not worth the RISK of locking up that marshmallow (or T-bond) when having that marshmallow locked up may result in say, no housing.
There's an opposing wise saying too: https://kottke.org/10/10/andy-warhol-on-coca-cola
Sam's Cola is $8.54 for a 24 pack while Coca-Cola is $13.48. (Both prices taken from Walmart).
Cheap work boots are $30 at Walmart while Red Wing Super Soles are $250 while Iron Rangers are $350.
In that kind of scenario, everyone's savings are constantly wiped out; there's no difference between "wait one minute and double your money" and "wait one minute and all your money disappears".
The authors in a book “The Poor Economics” make a similar assertion. It did make a lot of sense to me.
I would dispute that line of thinking. Wealthier people who are used to getting what they want when they want it would have worse impulse control. Poorer people are used to having to wait already.
Past a certain level of desperation, there can be a hard-to-escape level of nihilism - "why bother saving, something's going to take it and I'm going to be fucked tomorrow no matter how much I do". Whether this is an accurate description of the situation or not is going to depend, but I have met a number of people who think like this even when they've not been that desperate in decades, and it bites them as soon as they stop making so much that it masks the problem.
And in some cases, it can be practically true - there's various systems that are designed with nasty edges where if you have enough resources accrued, you stop being given support, but the thresholds, by design or incident, are far below the point where you might be able to escape the pit, so you can't save your way out of it - you'll suffer a catastrophic penalty for accumulating wealth, and then be worse off.
Once you get past a certain level of instability, you start seeing gains again from saving if you do it, but not necessarily immediately - after all, if you're earning $9 an hour, at perhaps 160hr/month, and you're spending $800/mo on rent, that's $640 ignoring taxes to spend on anything else, so even if you somehow spent _none_ of that on taxes or food or w/e, it'd take more than a month to save one month's rent. So the benefits of saving are slow to accrue, when your income is not much past your expenses, and it can be hard to convince someone who's never had that level of safety and stability that it's worth it when it's going to take a long time to be worth it.
If your income is outsized enough to your expenses, then it can be more obvious much faster, _but only if you've ever had to think about it_ - if you've been externalizing your life expenses to your parents or a trust fund, it's even more foreign to you than the people described above who have concluded saving isn't useful, because you've never had to think about money as a resource in your life, it's just a thing you spend unendingly.
Consistently, those in poverty (living on < $1 per day) do not simply 'try harder' to save and make better financial decisions by being restricting their impulses. Instead they find clever ways to outwit themselves.
One mother in India, intent on accruing $2000 (?) for her daughter's dowry, knew she didn't have the willpower to "just save $200 per year over 10 years", though her annual income was greater than $200.
But she had the foresight to take out a $2000 loan from a bank, immediately move it to a saving account, and pay back the bank. The interest on her loan was almost like an extrinsic-motivation fee.
The $2000 in the saving account was earmarked for the dowry, and she would not touch it. So, she had to save every month to pay back the loan to the bank. The longer she took to do this, the more interest she paid.
This is a kind of non-rational trick that some people use to "trick themselves into doing the right thing". This is like paying some random stranger $100 if you do not accomplish some task.
1. Immediate use of the home 2. Collateral that can be taken back of the loan isn't repaid 3. Often the collateral gains in value over the duration of the loan 4. The interest rate on the loan is way lower than a personal loan or a credit card.
However, (3) is a bug that's just commonly encountered (hopefully temporarily) in some countries that restrict construction way too much at the moment. One can hope.
I was really taken by this example because my initial reaction was "just try harder". My first-world perspective has always been "if you failed, its a personal short-coming. You need to become better".
This mother's solution is based off a fundamentally different philosophy; "I am not capable of that kind of self-control. I'll modify the environment".
Most people on this website live in cultures where the value system places prestige upon accruing money, so it's easy for us to do so because the incentives line up. In parts of India that's not so. To simplify a little, their value systems places prestige upon spending money on social events/life cycle rituals, so it's easy for them to spend money on e.g. a funeral but significantly harder to hold onto the money.
This, in Gregory's view (which I symphathise with) has nothing to do with being rich or poor. The rich in Bastar also spend a lot on life cycle rituals, but they outearn their spending.
For the interested, I plan on publishing a review on that book later this month: https://two-wrongs.com/book-review-savage-money.html
It may sound silly when everything is framed in terms of marshmallows, but it's probably a safe bet that lessons learned in life will carry over to an experiment unless they carefully consider what the experiment is asking of them.
Another way I've seen people reason over things like this is in terms of an MMORPG/ARPG. 'You need to invest in your character to get stronger to beat the next boss. That will pay back in X amount of time, but if the value of the loot drops too much in that time then it's not worth it.'
I’m sure that overworked wealthy people have plenty of vices, i.e. “poor impulse control”. But they have successful careers so those things are coping mechanisms, really. It’s compartmentalized.
In any case my cynicism would just be vindicated if a study just turned out to rationalize (as an emergent property because, duh, there is a population overlap between researchers and this group) the position of the upper-middle class.