Upon reviewing hundreds of hours of observations from these types of experiments, Mischel drew some important conclusions. His initial conclusion was that the children who resisted temptation were experts at what he called ‘strategic allocation of attention’. Rather than focusing all their attention on the delectable treat, the children that resisted the treats were more often the ones who covered their eyes, played games, sang songs, or otherwise occupied themselves while they waited. “If you’re thinking about the marshmallow and how delicious it is, then you’re going to eat it,” says Mischel. “The key is to avoid thinking about it in the first place”. Mischel was convinced that children with a better understanding of how to focus on something else displayed much better self control behaviour.
How important is this quality of self control? Scientists including Mischel have conducted several longitudinal studies based on the results of the early childhood studies. In reviewing the data from follow-ups, researchers have shown that adults who demonstrated poor self control as children were more prone to higher levels of obesity, and were more likely to have problems with drugs. As high-school students, they are more likely to have behavioural problems at home and in school, and they found it harder to form and maintain friendships. Perhaps most interestingly, the children who waited the 15 minutes for the extra treat scored, on average, more the 200 points higher on their SATs in high-school.
Self Control Can Be Taught
Now for the good news. Though some children naturally exhibit self control more than others, it turns out that the behaviours that support a child’s ability to succeed in school and life can be taught. According to Mischel, “What’s interesting about 4-year-olds is that they are just figuring out the rules of thinking. The kids who couldn’t delay would often have the rules backwards. They would think that the best way to resist the marshmallow is to stare at it, to keep a close eye on the goal. But that’s a terrible idea. If you do that, you’re going to ring the bell before I leave the room.” However, when Mischel and his team taught the kids some simple ‘mental transformations’, such as pretending that the treat was just a picture surrounded by an imaginary frame, imagining it as a small pet that must be stroked and cared for, or picturing a marshmallow as a cloud, self control improved dramatically. “All I’ve done is given them some tips from their mental user manual,” says Michel. ” Once you realize that will power is just a matter of learning how to control your attention and thoughts, you can really begin to increase it.”
Parents teach these skills naturally, but it pays to be mindful and actively provide opportunities for children to learn these skills. Mischel provides some helpful advice for parents: “This is where your parents are important. Have they established rituals that force you to delay on a daily basis? Do they encourage you to wait? And do they make waiting worthwhile?” Even simple lessons like not snacking before dinner, waiting until everyone is finished before leaving the dinner table, taking turns with toys, saving allowances, or holding out for Christmas morning can reinforce important qualities of self control. Modeling is important too, especially for young children, so parents should make a show of waiting in line, or passing on snacks or dessert.
Patience and Self Control Are Also Important For Investment Success
This is primarily an investment blog, so I would be remiss if I did not include a lesson for investors. One obvious lesson relates to saving techniques. Clearly it is much easier to save money every month if the savings come out of your account, or off your paycheck, automatically so that there is never an opportunity to spend in to an immediate ‘treat’. We strongly advocate this ‘pay yourself first approach’ to clients who are saving for a specific goal, such as retirement or a child’s education, and it has proven its efficacy many times over.
Another less obvious take-away relates to how often a person checks his or her investment portfolio. A portfolio with an allocation to stocks is necessarily constructed to meet a longer term goal, as the performance of stocks is erratic in the short term. However, clients insist on checking their portfolio values on a weekly, daily, or even intra-day basis. This is a very bad idea, as the ups and downs in the portfolio balance out over time, and are meaningless on short time scales. In fact, investors that check portfolios every day will see about 4.5 times as much portfolio variability as investors who check every month. The chart below shows how an investor’s anxiety, as a function of the swings he observes in his portfolio, increases exponentially with the frequency of his observations.
Source: Butler|Philbrick & Associates
Note: Graph represents the theoretical increase in observed volatility due to more frequent observations of portfolio value according to the equation: perceived vol (time horizon 2) = perceived vol (time horizon 1) * square root (number of periods in time horizon 2 / number of periods in time horizon 1). The y-axis shows the magnitude of the increase in observed portfolio variability, with annual observations given a factor of 1.
Chart is for illustrative purposes only.
Investors would be well served by performing a great deal of due diligence as early as possible in their investment horizon in order to find an investment strategy that they are confident in, and can commit to over a very long period of time. (Click here, here, and here for evidence that Buy and Hold is NOT a smart strategy to stick with, and click here, here and here for a compelling alternative). Once that commitment is made, investors should follow the strategy with discipline, and ignore the day-to-day media circus and market gyrations, as they will lead to higher anxiety at best, and poor investment performance at worst.