I have been thinking a lot about Time Preference lately after reading @saifedean's Bitcoin Standard.
0/A thread on Intergenerational Time Preference.
1/As a reminder the definition of Time Preference in economics is the current relative valuation placed on receiving a good at an earlier date compared with receiving it at a later date. (en.wikipedia.org/wiki/Time_pref…)
2/The main pillars that drive one’s time preference are discipline and patience. It takes the discipline to quell urges that arise in the moment. It takes patience to wait for something desirable that one could have immediately.
3/By expressing a low time preference you are by definition expressing both of these desirable (in my opinion) traits.
4/Furthermore, time preference applies to most (if not all) aspects of our lives: relationships, exercise, consumption.
5/This is intuitive to most of us so whats your point?
6/Where I get stuck is on something I would like to call Intergenerational Time Preference - How the time preference of one generation is passed down to next. To be more explicit, how the time preference of parents relates to the time preference of their offspring.
7/I get stuck because I have hard time seeing kids of disciplined/patient parents with a low time preference—those that have socked away $, put off expensive life-style choices so they could “set their kids up”— manifesting a similar time preference.
8/Quite simply, the incentives are just not there.
9/Sure, we all know people who were born rich and are super cheap (usually derived from some scarcity driven mentality that has been ingrained in them somewhere along the way) but more often than not, the opposite occurs.
10/Just look around. Anecdotally, I see more evidence of kids with extremely high preference (“How could I drive anything else aside from a black on black Range Rover on dubs?”). Maybe I’m just jaded because I live in NYC. I am open to that possibility but I question it.
11/Either way, I guess what I see happening is just a cycle of Intergenerational time preference where each generation passes on the opposite trait to which they themselves manifest.
12/The generation that got rich because they expressed low time preference (and perhaps were also lucky, born at the right time, etc etc—thats all fair) has kids who are incentivized to express a very high time preference and consume unabashedly.
13/Perhaps this leads them to spend too much or beyond their means causing some level of hardship that the next generation sees this and learns that the low time preference model is more value accretive.
14/Wash, Rinse, Repeat.
15/The intergenerational Time Preference cycle is perhaps a meta cycle that occurs over time.
16/Just a random thought.
(h/t @saifedean, @MartyBent, @pierre_rochard , @_Kevin_Pham, @vgr, @MustStopMurad, @arjunblj, @CantHardyWait and @BMBernstein for inspiring this thread).
(h/t @saifedean, @MartyBent, @pierre_rochard , @_Kevin_Pham, @vgr, @MustStopMurad, @arjunblj, @CantHardyWait and @BMBernstein for inspiring this thread).
17/Oh, and buy BTC.😎
