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The Marshmallow Test

The Marshmallow Test was a milestone 1972 psychological study, which aimed to understand impulse control amongst children. But in a world where poor impulse control is endemic across all age groups, how can we use its results to learn more about investing, and what has any of it got to do with marriage…?


Several years ago, an article by the philosopher Alain de Botton appeared in the paper, and we found it so thought-provoking that we put it up on the fridge.

The piece grappled with the question of why on earth people in this day and age get married. And it’s a good question: why should we rationally think it a good idea to legally bind our lives to another human being, in a way which makes it at best difficult, and at worst financially – and emotionally – ruinous to relinquish?

To try to answer this question, de Botton references the Marshmallow Test, the celebrated psychological experiment created to try to gauge the ability of children to delay gratification. In this experiment, children were offered a marshmallow, with the promise of receiving two if they could resist eating the first one for a brief period. The ability to delay gratification was met with an increased reward.

What has this got to do with marriage?
He relates the experiment, to the rationale behind marriage: that deep down, we are aware of the benefits of sacrifice today in exchange for gain later. Long-term thinking rather than short term flights of fancy. Marriage, he argues, creates an obstacle to us making potentially destructive short-term choices. He explains how couples will come across many different tempting marshmallows throughout a marriage:

“Escaping, finding freedom, running away. We are excited by a new person and want to abandon our current partner at once. And yet as we look around for the exit, every way seems blocked. It would cost a fortune; it would be so embarrassing; it would take an age.”

De Botton’s argument is that marriage is a ‘giant inhibitor of impulse’ that we set up to keep our libidinous desiring self in check.

“It is to lock ourselves up willingly because we somehow acknowledge the benefits of the long term.”

Whether you agree with him or not, it’s an interesting take.

What else do we consider to be long-term…?
We think that the same kind of dynamic exists around investing.

Investing one’s money into an asset which isn’t immediately realisable could also be seen as a ‘great inhibitor of impulse’. Indeed, we see numerous similarities with the psychology of investing more generally, and the learnings from the Marshmallow Test.

“I invested my bonuses each year as soon as possible because otherwise I’d just spend it”

It’s a common phrase we hear from many clients who have realised large sums multiple times. Bonuses received early on in one’s career tend to be spent rather than saved; in subsequent years the discipline of investing excess cash creates a tangible obstacle to spending it immediately – with the added benefit of potential growth.

If diversification is the only free lunch in investing, taking a long-term view is being invited back for a second course. Investing regularly and remaining committed to investing for the long-term is one of the very few levers over which investors have any control (for those interested the others are asset allocation and cost).

The path that leads to truth wealth is littered with the bodies of the ignorant marshmallows
And you can be sure that that over the course of the journey you will come across many tempting sugary marshmallows, dressed up as opportunities to make a quick profit. Share tips, the latest crypto currency, NFTs, the desire to liquidate a little of the portfolio to invest into something with stratospheric ‘promised’ returns, we know that all of the above and more will more than likely deliver nothing, but the sugar-like buzz of a dopamine hit.

Ok… so where does planning fit in?
The hurdle can be raised by how we hold the investment. And as we know (all together now) how you hold your investments has a much bigger impact on whether your wealth meets its purpose, than what it’s invested into.

The most efficient way for a UK taxpayer to save over their lifetimes is to use a pension. Other wrappers are useful in different ways as well but the reason that the pension is particularly interesting here, is the inability to draw from the pot until the age of 55.

This lockup creates the ultimate barrier to spending the money: it’s not quite marriage pre-Henry VIII (release from the contract comes at age 55, rather than with the sweet freedom of your own demise) but having to wait decades to access the capital essentially forces good investor behaviour: you take a long-term time horizon in return for greater gains.

Pensions and other wrappers also create a tax favourable environment which enables your capital to benefit from the wonder of gross compounding – an effect which the human brain struggles to comprehend properly but which has a breath-taking effect on wealth creation. In fact, we would argue that gross compounding should join ‘Diversification’ and the ‘Long-Term View’ as the third course of our free lunch.

A nudge towards better behaviour
Corporate pension schemes and many pension platforms today enable automatic contributions to take place without the beneficiary having to do anything at all. Recognising that humans are generally biased towards inaction over action, asking beneficiaries to opt-out of contributions rather than asking people to opt-in has had an enormously positive impact on the savings habits of the workforce, leading in the UK alone, to 10 million people newly saving for retirement.

There’s further to go. In pensions, nudges are evolving from binary opt in/ opt out models to more sophisticated systems which auto-escalate pension contributions. In the day-to-day payments world, several banking providers will round up spending to the nearest pound, transferring the difference to a high interest savings account. Some even transfer it to an ISA, to be immediately invested. There is significant scope for AI to rewrite the language of the nudge; it wouldn’t be a huge leap to imagine an algorithm analysing income/ expenditure patterns and identifying appropriate planning opportunities for excess income, gifting, or other succession planning strategies. The potential for change is massive.

Just say ‘no’
We have a lot of time for simplicity here at Six Degrees, a quality which we believe to be incredibly underrated.

And it’s simple to get an invite to that three course free lunch: you simply have to buy into the behaviour, and the rest will look after itself.

Simple? Yes. But easy…? Not at all.

The human brain left to its own devices tends to be a terrible investor. Buying high and selling low, reacting to short term events, led by fear (and sometimes greed), it is incredibly hard to override our natural urges.

Having evolved to help us survive a very different environment from that of today’s world, our brains are still focused on trying to prevent us from becoming a lion’s lunch, and will always place a higher value on minimising losses than it will on maximising gains.

Having evolved to help us survive a very different environment from that of today’s world, our brains are still focused on trying to prevent us from becoming a lion’s lunch, and will always place a higher value on minimising losses than it will on maximising gains.

A good advisor however, will bring a coaching mentality to the wealth relationship, encourage the right behaviour to meet the purpose, and will ultimately help you to muster the willpower to just walk past that next sugary treat and remain on track.






This blog is for information purposes and does not constitute financial advice, which should be based on your individual circumstances. The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.