The Power Principle

In time’s embrace, a secret lies, A choice to soar or compromise, Let’s unveil the law that shapes our fate, To channel power, as we navigate.

“The key to growth is the introduction of higher dimensions of consciousness into our awareness.” — Lao Tzu

A powerful, universal principle holds the key to determining our fate — whether we ascend to greatness or remain mired in mediocrity, whether we become the architects of our future or fall prey to our addictions and reactions. It is the key to all success and achievement, whether in health, wealth or happiness.

Allow me to unveil the law of time preference.

What is Time Preference?

Originally an economics concept, time preference refers to the value placed on receiving a good or cash at an early or later time. A low-time preference indicates a preference for delayed gratification, prioritising long-term returns over immediate rewards.

Conversely, a high-time preference reveals a preference for immediate gratification, placing short-term gains above long-term success.

This simple concept has far-reaching consequences and implications for every aspect of our lives. By understanding human behaviour through the lens of time preference, we can improve our perspective and make better choices, spontaneously. Awareness is the seed of change.

However, why would we choose to extract any value later, rather than now?

“The best time to plant a tree was 20 years ago. The second best time is now.” — Chinese Proverb

Imagine this: you’ve just received a bonus at work, and you’re faced with a choice. Should you splurge on that shiny new gadget you’ve been eyeing or stash the money away in your savings account?

If you choose to save the money in a bank or loan it to someone, you’ll earn interest on it over time. By doing so, you’re sacrificing the ability to spend or use that money immediately, opting instead for the rewards that come with delaying your gratification. In this scenario, you’re prioritising long-term gains, because your money will grow through the power of compound interest. You can receive more later than you have now — if you wait.

On the flip side, if you decide to borrow money from a lender to access immediate value, you’ll end up paying a greater price for immediate access to that value. This is because you’ll need to pay interest on the borrowed amount, ultimately costing you much more over time. Often, the interest on our debt also compounds, either by failing to pay instalments or because we stack our debts.

“The most powerful force in the universe is compound interest.” — Warren Buffett

Sustainability & Compounding

Many immediately gratifying actions and short-term gains turn out to be unsustainable and cause unexpected long-term costs. In contrast, delaying gratification leads to long-term gains and inherently sustainable choices designed for the long haul. Let me explain.

High-time preference choices, or, choices which come with a long-term cost, are not sustainable choices. If we persist in repeating these choices, their long-term costs will stack, filling our future with debt. This is also true if we stack many different unsustainable choices — we compound the debt for our future self.

We can thus clearly say, by law of nature, the principle of time preference deems high-time preference actions to be unsustainable.

“Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.”, a quote often attributed to Albert Einstein.

Inversely, low-time preference actions, which do not carry a long-term cost, are inherently sustainable and repeatable. In fact, delaying our gratification produces long-term gains. Therefore, if we repeat low-time preference actions, or combine them, then we stack our long-term returns — we compound them.

If we tap into the compounding returns of sustainable actions, we can turn our seemingly-insignificant day-to-day actions into profound outcomes, over time. It is through persistence and patience that we can tap into greatness.

As time passes, we either earn or pay interest on the choices we make, compounding the impact of our habits.

“The greatest shortcoming of the human race is our inability to understand exponential growth.” — Albert Bartlett

Acknowledging these forces at play in our lives should pierce us like a double-edged sword. Yes, we have the opportunity to access great heights through low-time preference action. But, we must heed this warning regarding our unsustainable habits — they will almost certainly produce unpayable debts if left unchecked.

Combine these facts with our inability to appreciate exponential growth and we find ourselves in a precarious predicament. We are destined for exponential returns, or debt — and there is very little room in between. All the while, we are convinced that everything in our lives changes steadily, incrementally, linearly.

Our salvation lies in comprehending the power of our actions, over time. And, using that knowledge to say no to the seductive pull of the things we desire in the short term and to keep our focus fixed on the greater goals we have for our future selves — simple, but not an easy feat.

Our task is thus to lower our time preference, to access and make the law of compounding returns work in our favour.

From Awareness to Action

Awareness of the power of our actions, through the inescapable law of time preference and the unavoidable compounded consequences, is a powerful first step. But it remains a first step.

For us to change our future, we must change our actions. To change our actions for the better, we must first understand them. To understand our actions, we must first become aware of their consequences. To become aware of the consequences of our actions, we must first pay attention — we must apply our awareness with intention.

Yet again, our awareness is the seed of our change.

“Knowing yourself is the beginning of all wisdom.” — Aristotle

By extending our awareness of this law, to our behaviour as it relates to this law, we can start to identify which low-time preference actions to prioritise, and which high-time preference actions to avoid.

Changing our behaviour is difficult, but by using our knowledge of time preference to understand our behaviour and guide our choices, we can align ourselves with a path towards sustainable and profound success in our health, wealth, and happiness.

As you go about your day, evaluate your decisions and actions through the lens of time preference. Observe your behaviour and its consequences to learn which choices are beneficial and sustainable. Contemplate the high- and low-time preference choices you are not making and consider how to introduce them into your life.

“The ability to discipline yourself to delay gratification in the short term in order to enjoy greater rewards in the long term is the indispensable prerequisite for success.” — Brian Tracy

Master the law of time preference to unlock the greatest power you can.