Just Look The Other Way…

Im so sick of hearing about the marshmallow test.

Youve probably heard of it. If not, heres the short story.

In the 1960s, a psychologist named Walter Mischel studied a group of four-year olds. Mischel was fascinated with his own childrens cognitive development, and how like most children they seemed incredibly impulsive.

I realized I didnt have a clue what was going on in their heads, he said recently.

He wanted to measure impulse control, so he came up with a game. A group of children could have one marshmallow right now. It sat on a plate in front of them. Or, if they waited a few minutes while he stepped out, they could have two when he returned.

Some impatiently took the first marshmallow. Others waited.

Mischel followed the kids for 50 years, measuring how impulse control correlated with future success in life.

It was huge.

Kids who delayed gratification in the marshmallow test went on to achieve higher standardized test scores, had higher educational attainment, even better BMI scores. (One girl ate the marshmallow before the games instructions were even explained. Bless her.)

The marshmallow test made its way into seemingly every book, article, and speech about behavioral psychology. Ive seen it countless times. Its way overused.

But the most important part of the study is often left out.

The original takeaway from Mischels research, and one still told today, was that people with more willpower are set up for more life success than their impulsive peers.

But after watching hundreds of kids take the marshmallow experiment, Mischel discovered something different.

The marshmallow test wasnt necessarily about willpower. Almost every kid will take the first marshmallow if its put in front of them. If theyre looking at it, theyre nearly incapable of not eating it, even if a bigger reward awaits.

Instead, Mischel found that kids who successfully waited for a second marshmallow were often just better at distracting themselves, taking their minds off the treat.

They hid under a desk. Or sang a song. Or played with their shoes.

Impulse control isnt really about a four year olds ability to patiently wait for a second marshmallow. Its more about that four year olds propensity to say, Hey, look, a soccer ball!

Smokers trying to quit consistently overestimate their ability to turn down a cigarette. Dieters do the same. What Mischels research shows is if we want to be better at self-control, trying to have more willpower isnt the solution. Instead, not putting yourself in a position where youll be tempted by cigarettes or junk food may be the best answer. Because if youre around them, youll smoke, or eat. You cant help it.

As Jonah Lehrer once put it: Willpower is really about properly directing the spotlight of attention, learning how to control that short list of thoughts in working memory. Its about realizing that if were thinking about the marshmallow, were going to eat it, which is why we need to look away.

It is the same in finance.

Bad investing behavior is the greatest cause of investor misery (fees are a close second).

People get excited and buy high, then panic and sell low. They fall for bubbles. They trade. They rotate. They fidget. They worry. They get a new idea, and go all in. Then change their mind, sell it all, and go to something else.

Its devastating. If you can find a way to be less emotional and feel less need for constant action in investing, youve figured this game out.

But how do you do that?

Just like the four year old who found a path to the second marshmallow. You distract yourself with something else.

If watching financial news constantly tempts you to tweak your portfolio, turn it off.

If reading market forecasts has caused you to make regrettable decisions, stop reading them.

Go do something else.

Maybe read more books and fewer articles.

Be more choosy about who youre willing to listen to.

The amount of financial information available has exploded over the last decade, but the amount of financial information that you need to be informed has not.

You have to learn how to sift through the news, and filter out what you dont need. A wealth of information creates a poverty of attention, Herbert Simon said. It also creates a dangerous tendency to lose self-control over your ability to be a patient long-term investor.

Just look the other way.