The ‘marshmallow’ test, which dates back to the 1960s, is one of the most popular psychological studies to test ‘delayed gratification’. Designed by Stanford professor Walter Mischel, the experiment explored self-control in a group of pre-schoolers and its ramifications as they grew into adults.

The children were put in a room, individually, and given a treat (a marshmallow). Each child was then told that the researcher had to leave the room for a few minutes, but the child had a choice. If he/she waited until the researcher returned (after 10-15 minutes) to eat the treat, he/she could have two treats. If the child couldn’t wait, he/she would have only one treat.

Most children said they would wait, but were unable to resist temptation and settled for just one marshmallow. Only a few had the self-control to sacrifice the immediate pleasure of a chewy marshmallow in order to indulge in two marshmallows at some later point.

Long-term consequences

What surprised the researchers was that this ability to delay gratification seemed to influence the participants’ behaviour throughout their lives.

When Mischel and his colleagues revisited the participants when they had become adolescents, they found that the teenagers who had waited to eat the marshmallows as pre-schoolers were more likely to score higher on the SAT, and their parents were more likely to rate them as having a greater ability to plan, handle stress, respond to reason, exhibit self-control in frustrating situations and concentrate without becoming distracted.

When the researchers again tracked down the test subjects in their 40s, they discovered that the kids who had shown the ability to wait were healthier, enjoyed greater professional success, and proved better at staying in relationships — even decades after they took the test.

Basically, delayed gratification was correlated with longer term success. The lesson is that it’s not just intelligence that matters, but being able to control one’s immediate impulse to indulge for the sake of longer term benefits — both personally and professionally. This is quite logical — after all, longer term success is often associated with short-term pain. For instance, to get rich in the future one needs to save money and be frugal in the present.

Lessons for business

The marshmallow test offers an important lesson for today’s companies, entrepreneurs, managers and investors.

The world of business and investing has, of late, become increasingly short-term oriented with longer term priorities getting compromised due to the urge to meet and beat quarterly earnings expectations. Entrepreneurs in Silicon Valley want to start a company with the primary goal of flipping it within a few years so they can become millionaires.

Professional managers are increasingly tempted to do whatever it takes to achieve short-term profits and pocket bonuses and/or exercise stock options without worrying about the longer term consequences that some of their actions may have on their firms and investors. As a result, the investing community, too, has come to believe that staying invested in a company for a year is long-term.

But despite the latest fad on short-termism, history indicates that for businesses to thrive over the long term they need to think and act long term.

This requires characteristics such as having an audacious vision/mission much larger than oneself, strong and deep-rooted values, sustainable culture, preserving cash, shying away from undue risk especially driven by leverage, and sacrificing current earnings or dividends to sow and nourish seeds for the future. Businesses that have withstood the test of time such as Coca-Cola, IBM, Wells Fargo and Washington Post possess most of these characteristics.

What’s heartening is that even in an industry as fickle as technology, there are a few companies that are building themselves to last. For example, Google’s mission is to organise the world’s information and make it universally accessible and useful — which is quite audacious. Steve Jobs always thought of changing the world through Apple and so does Jeff Bezos with Amazon. Mark Zuckerberg wanting to learn the essence of longevity has got Don Graham (of Washington Post ) to be a director at Facebook.

What’s also interesting is the large cash reserves that these companies choose to hoard for the future rather than strip them out for immediate gratification.

(The author is a business consultant. Feedback can be sent to >perspective@thehindu.co.in )

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