What’s the largest chunk of time you’ve invested to achieve a single goal? An American Bachelor of Arts diploma for example, might take you four years. A PhD, takes the average student 8.2 years to complete. My grandparents, now 92, just celebrated their 69th wedding anniversary, meaning they’ve been working on their relationship for more than 70 years.
Even thinking about the vast quantities of time we invest in achieving our life’s grandest goals can feel daunting. Which is why, when it comes to time-economic decisions, many of us must, and do, make tradeoffs. For instance, we might calculate that instead of investing the necessary eight years to earn that PhD, we could start working and earning now, for less pay, but use the saved time instead to “work our way up” to a similar career, had we allocated the time to school.
Higher education is a wonderful example to use here, because there's plenty of quantitative data. An increasing number of students in America are opting for higher degrees, rather than jumping straight into the workforce. At the time of publication, the U.S. national student debt is a staggering $1.4 trillion dollars, meaning there are a whole lot of well-educated people out there hoping and banking on those degrees to eventually pay back their debt and turn a profit.
If you're into this sort of stuff, you've probably read about or at least heard of the famous Stanford Marshmallow Experiment where they promised kids double marshmallows if they could withstand eating one marshmallow over a certain amount of time. The study then concluded that those children who were able to hold out for the bigger reward in the future, would go on to achieve more financial success than those who opted instead for the immediate reward.
My point with all these examples is really to highlight two contrasting paths to economic return. The first: fat margins over short periods of time. The second: small margins over a very long time. Most business models fall under one or the other. Specialized goods, such as art, surgery, and software typically earn higher margins. Commoditized goods: groceries, rice, coffee, on the other hand operate on very thin margins, with price usually determining the eventual winner.
Amazon's recent acquisition of Whole Foods, is a perfect example of leveraging low margins over a very long time horizon. Amazon as a company defends its core business by operating on seemingly razor-thin margins, meanwhile consistently growing their market share inch by inch. This is, in my opinion, the genius of Jeff Bezos, Amazon’s CEO.
While fat margins look nice on paper, they also attract plenty of competition, who are now vying for a piece of the pie. Sustaining a business on small margins can work too, but often the time investment required to scale is often a competition deterrent.
A lot of life’s big decisions fall under one of these categories. It has been my observation that as a society, we’ve become increasingly conditioned to expect greater returns in smaller amounts of time, thus trending away from the difficult task of building something truly great over a very long timeline. So, whether you decide to tough it out, or throw in the towel and start new, depends entirely on what lies at the end of that decision.
Relationships, family, our life’s purpose, these all take tremendous amounts of time, and would not fare well using the more instant, fat-margin model. Understanding the time-costs involved in making marshmallow decisions can significantly improve your decision making when it comes to these difficult situations.
Patience is indeed a virtue, and so if you can stand it, you might find yourself achieving more than you can imagine, simply because you opted for the smaller return but dared to look a little further down the road. And who knows, you might also end up with a few extra marshmallows along the way.