Reflection: High Time Preference vs Low Time Preference

In the finance and investment world—something I’m admittedly not very privy to—there is a special language that’s spoken. My husband, who's into that space, will sometimes thoughtlessly slip this special language into our conversations when we’re talking about our investments and purchases.

In a recent conversation, he started to use these terms: “high time preference” and “low time preference.”

Given the context of our conversation, I could sort of insinuate what he meant by these words, but I still asked for clarification. This is what I got:

High time preference thinking is more concerned with the needs of the present moment, whereas low time preference thinking delays present gratification and places more emphasis on future needs.

So, for example, let’s say you want your dream Chanel bag. You don’t have enough money to afford your dream purse now, but you’re dying to satiate your urge to add a new purse to your collection. So instead of waiting and saving for the purse that you really want, you go ahead and purchase a less-expensive bag today. This would be an example of high time preference thinking (the low time preference choice would be to continue to save for the dream bag).

I think, to some degree, we have this predicament all the time — the concept of delaying gratification now for something better in the future. We choose whether or not to eat cookies now, understanding how that choice impacts our bodies later. We choose whether or not to invest in a degree now, understanding how it may impact our career later.

As much as I appreciate the present moment—because, in my eyes, it is the only moment that truly exists—I’ve noticed how, ironically, I’m more of a low time preference thinker. At least, I try to be, because I think the themes of low time preference are preferable to high time preference.

For example, low time preference seems a bit slower, intentional, and patient, whereas high time preference seems faster, impulsive, and impatient. Really, modern society seems to be on a high time preference rhythm — think of our fast food, fast fashion, immediate digital responses, quickly built (and sometimes unstable) architecture, etc.

Contrast this with what seems to be our previously low time preference thinking — the Great Pyramids, hand-sewn garments, writing and mailing a letter, food preparation and mealtime. It seems we have jeopardized beauty and integrity for a quick fix, a willingness to settle, a fast profit, an immediate response.

Call me old school, but as I move forward in my 30’s, and ultimately the decisions I want to make for myself and my family, I think about these older (perhaps “traditional”) ways of life that seems to hold a strong foundation. As much as I appreciate the moment before me, I also value the longterm impact of my choices made right here, right now. Whether it’s something I put into my body, a piece of furniture that goes inside my house, or the response I provide to a direct message on Instagram — I want it all to be slow, thoughtful, and intentional.

Given the state of the world, I sometimes wonder we are headed into a split — those that prefer the low time preference and those that run towards the high time preference. A fragmentation of society, as I’ve heard people utter. If that’s the case, I think I’m heading towards the low time preference.

What direction would you head towards?