In a world where instant gratification often takes the forefront, the wisdom of deferred gratification emerges as a timeless principle for achieving success.
Charlie Munger, legendary investor Warren Buffett's esteemed business partner, shared invaluable insights on the topic, shedding light on its profound influence on wealth accumulation and ethical financial management during the 2017 Daily Journal Annual Meeting.
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Munger elaborated on how individuals practice deferred gratification throughout their lives. He's witnessed people who willingly sacrifice enjoyment in pursuit of wealth, persistently deferring their desires until the very end. They delay their desires for so long they never have the opportunity to enjoy their wealth.
"And it does cause you to get rich," he said. "So we're going to have a lot of rich, dead people."
At the heart of deferred gratification lies a powerful strategy for financial success. It involves the willingness to sacrifice immediate pleasures and consumption in favor of strategic investments that yield growth over time.
Munger paints this picture with a colorful metaphor. "We can excite a lot of envy," he said. "A lot of you when the people walk by your grave and there will be this nice grave with this nice monument and they'll say, ‘God what a great grave — I wish I were under.'"
Munger's commitment to this philosophy shines through in his financial practices. He has never drawn funds from his company the Daily Journal Corp. in the form of salaries or directors' fees. His focus has been on nurturing the long-term growth and success of the business.
Munger's message emphasizes the importance of aligning resources and efforts with businesses that continually evolve and thrive.
But Munger emphasizes that deferred gratification should not be synonymous with self-deprivation. He advises against excessive spending that exceeds a person's income — a pragmatic perspective that extends beyond financial matters and resonates with broader life choices.
The importance of deferred gratification is underscored by the findings of the marshmallow experiment, a series of studies conducted by psychologist Walter Mischel in the 1960s and 1970s. In the experiment, children were given a choice between eating one marshmallow immediately or waiting 15 minutes for two marshmallows. The researchers found that children who were able to delay gratification and wait for the two marshmallows tended to have better academic performance, higher SAT scores and lower levels of substance abuse later in life.
By learning to defer gratification, investors can develop the self-control and discipline necessary to achieve their goals and build a better future for themselves. But the goal is to strike a balance and not delay so excessively that life's opportunities pass you by.
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