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Time Preference
Mr. GoBrr
February 25, 2024 • Reading Time:3 minutes
It’s Sunday.
Today I want to share with you the idea of:
Time Preference
Yesterday, I discussed concept of Scarcity.
Understanding scarcity can enhance our decision-making process.
I told the story about you with a bottle of water in the desert.
The intense thirst you're currently experiencing is more agonizing than any potential future thirst.
By rationing water to last longer, you are effectively delaying the gratification of quenching your thirst, all to give yourself more time.
This indicates that you possess a certain level of low time preference.
Time preference revolves around the concept that people generally prefer immediate rewards over future ones.
Consider another example.
Suppose you have the choice of receiving $1000 today or $1100 euros in a year's time.
If your time preference is high, you would opt for the $1000 today.
However, if your time preference is low, you would choose the $1100 in the future.
People commonly prefer to receive a sum of money right away rather than wait for a larger amount in the future.
This tendency is primarily due to the risks and uncertainties linked with the future and the desire to satiate current needs.
Our time preference reflects our willingness to sacrifice a larger future reward for a smaller one in the present.
With a high time preference:
You prioritize immediate comfort over physical exercises;
Recklessly spending money over future prosperity;
Entertainment over diligent studying for an exam;
etc..
In contrast, a low time preference means:
You're willing to forgo immediate comfort for physical exercise
Abandon sweets and fast food for better health
Save money to ensure a prosperous future.
etc..
Bitcoin incentivizes you to develop a low time preference.
You are encouraged to consume less and save more, as Bitcoin's scarcity properties enhance its future value.
A low time preference lead to a satisfying life.
A low time preference is the sure path to prosperity.
“Capitalism is what happens when people drop their time preference, defer immediate gratification, and invest in the future.
Debt‐fueled mass consumption is as much a normal part of capitalism as asphyxiation is a normal part of respiration.”
I hope this lesson was helpful.
Below, I have provided some videos for you to learn more about time preference:
Mr Go Brr
What'd you think of today's edition? |