What's Your Time Preference?

In economics, time preference is the notion that the value of something changes depending on whether you receive it at an earlier date as compared to receiving it a later date. That’s a really complicated way to describe something quite intuitive, so here are a few examples.

This is a companion discussion topic for the original entry at https://commoncog.com/your-time-preference/

This was a good thought provoking post.

I have played many Eurogames as my father loves them but I wasn’t aware they were considered their own category. I never thought of comparing careers to Eurogames but that is an excellent analogy. It makes me ponder the “moves or bets” that I or my friends have made and whether they are increasing our chances of something good happening in the future. I’ve already seen some bets go wrong (poor choice of graduate degree, too much leverage, working on the wrong side of a dying industry) but you make a good point that it is foolish to judge a unsuccessful bet by a short time frame. There can always be unforeseen second order effects that appear later in life. This ties in with a James Clear blog post that I reread earlier this week ( Absolute Success is Luck. Relative Success is Hard Work. (jamesclear.com). Much of the early stage career work should be focused on increasing your chances of absolute success later on in the middle and end stages of a career. It makes much more sense to me to view the various jobs, skills, and projects that I have as stacking Catan settlements and roads that make absolute success later on more likely but not 100% ensured. That forces me to think probabilistically about career moves and not to discount serendipity.

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I’m really glad you like it, Nate. :slight_smile: I’ve actually gotten very little feedback on this post, so it was a delight to read this comment.

I was talking to a friend about this, and I realise that the core idea behind this post (and how I came up with a default frame for careers) is simply that one should just respect the base rate — if most careers are about 40 years long, then you should probably assume that your career would be, too.

The peak earning years thing was also useful — if most people hit peak earnings at 45-55, then it’s probably a good idea to assume that yours would as well. The key, then, is to simulate both forwards and backwards in time to figure out how it would feel. I’ve found that a useful exercise, as a way of anchoring my expectations.

I like the saying that goes ‘the days are long but the years are short’. There’s probably some of that here.

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