Time Preference, the Basics

I’m back with an updated perspective on a few ideas. It might be the keystone that holds all my meaningful ideas together, and it’s taken me on a such a valuable path already that I am itching to see how the rest of this unfolds.

Join me for this adventure.

Like any epic story, I am not sure how it ends. But I know its gonna hit home. Give the rest of this short mail a read to catch a glimpse of some of the terrain we will traverse. If it excites you, just keep an eye out for the next mail. Otherwise, if you’re not interested, hit unsubscribe.

Now… where to begin?

What separates the mediocre from the magnificent?

How do some people achieve things which are universes greater than what seems possible with the day-to-day actions of a human being?

What is the difference between people who are slaves to their immediate addictions and reactions, and people who are masters of their future ambitions and dreams?

Is there a link between health, wealth and happiness?

All of these questions are addressed by the concept of time preference, which might be the most important principle connecting human action to achievement.

What is time preference?

It is an economics term describing the value placed on receiving a good or cash at an earlier or a later time.

If we save money to use later and receive interest then we have earned extra for our low time preference. If we borrow money to use now we will pay extra interest for our high time preference.

Also, I'm thinking about the term time preference even more broadly, using it to decribe the value placed on receiving the benefit of ANY ACTION, either earlier or later.

So what?

Understanding the differences between immediate and delayed benefits has helped me make better decisions.

Benefits received now have the benefit of being, well, immediate. But, a short-term gain can mean a long-term loss.

Whereas, delayed benefits do come with an immediate sacrifice, or cost, but can mean long-term gains. However, and perhaps most importantly, long-term gains can be compounded.

By compounding benefits, we can achieve benefits which are orders of magnitudes more profound than benefits extracted immediately.

This is where we want to play, in the realm of greatness.

But, which low time preference actions should we prioritise? And how do we prioritise them?

Welcome to the The Time Preference Mail, the place where I am going to share what I find while looking for answers to these questions.