Over the years I have come to believe, and read studies on, the fact that most people are short-sighted and that their lack of foresight hurts them in various aspects of their life. There are some scientific articles (including from Christopher K. Hsee and Yan Zhang) that indicate the ability have foresight is critical to financial as well as career success as it will help people prepare for the future. Books, including Brain Bugs: How the Brain’s Flaws Shape Our Lives, also support this conclusion.
Many people make short-term decisions as they want immediate gratification. Psychology Today ran a study that asked people would they rather have $100 now or $120 one month from now. The vast majority of people selected the $100 today…even though if they just waited 30 days they could receive an extra $20, which is a 20% return on the money in just one month. People can’t stand accepting short term sacrifice for long term gain.
There are studies around employment as well. Harvard ran a study in 2014 that asked would you rather have a promotion today and your income increased from 50K to 52.5K. Or would you rather be promoted in 6 months and have your income go from 50K to 60K. Most people selected the immediate 5% increase to 52.5K. But if they waited 6 months they could have received a 20% increase, which then of course would be their new base salary to get a raise (and compound off) going forward.
Gratification vs foresight
I think Americans tend to seek immediate gratification. Look at some of the other data that supports this, such as most people do not save for their future and would rather shop, people trading in cars before they start to gain the financial benefit of ownership vs. depreciation, and countless other examples. I think that short sightedness also applies to other aspects of life as well, such as Americans eat unhealthy and do not think about long term health issues and things like that.
I think the ability to prepare for the future has generally benefited me over the years. As when I was working as a kid, I always invested some to ensure long term benefits. and financial stability/freedom. Where I could have made a short sighted decision to say buy a car to get that instant gratification. Or spend money on some silly material item. I attribute some of this to my mom, pounding it into my head about thinking long term, foresight, short term sacrifice for long term gain, and more. I think that advice and encouragement from her helped lead me down the path of financial success and top one percent of households.
I see short term decision making and not preparing/think about impact in business as well. I have mentored clients in which they make a short term business decision vs. having the foresight to think about long term impacts. I had someone decide to take out a loan against their home on a “whim” without even running the numbers or considering that if their business failed, they would lose their house to the lender. I know for a fact that this person did not understand the ramifications of such a decision and they were not thoughtful about it. Now that is one example, but I have encountered a number of others who lacked foresight and act without thinking it through.
When I was in the corporate world, I can’t tell you how many meetings I was in which decisions were made without having the proper data to understand the impact of said decision. I also had employees who wanted a promotion, but passed on projects or opportunities to stand out. These are just a couple more examples of people not having the foresight to understand that a decision will impact future growth of the company or their own personal careers.
Foresight is critical when investing too. One of the keys to building wealth is the magic of compounding, which is all about foresight in seeing your money grow. When I was a teenager, buying my first stock, I believed that it was worth making short term sacrifice in saving and investing and I knew that as I aged…into my 20, 30, and now 40s is when I would see the main benefits of that investing, which has now grown to millions of dollars.
Foresight, and not making short-sighted decisions, is very important. I have read up on this lately, and it made me reflect on my past personal experiences and interactions with others. While there are many mistakes I have made over the years, I think in general I have done a decent job of thinking about the future. I always stress this in an business mentoring I do not these days…do not go always just got for a quick, easy win. While this can be done to some extent, there also needs to be energy given around preparing your business for future opportunities. Foresight…always think about and prepare for the future.