Wednesday, November 17, 2010

Does Your Strategy Pass The Marshmallow Test?

When he was a psychology professor at Stanford University, Walter Mischel developed the marshmallow experiment. If you don’t remember studying Mischel’s famous behavioral experiment in your undergraduate Intro to Psychology class, you can actually duplicate his work at home:
You’ll Need:
A 4- to 6-year-old child
Two marshmallows

The Experiment:
Give the child one of the marshmallows. Tell them that they may eat the marshmallow right now if they want to, but if they wait 15 minutes before eating it, you will give them a second marshmallow.

Results:
If you were to perform this experiment with enough subjects, you would find that only about one-third of the children are disciplined enough to wait for the second marshmallow. According to Mischel’s longitudinal studies, the children who waited for the second marshmallow tended to be more successful when they grew up. (They had better test scores, were more likely to attend college, etc.)
This was one of my favorite psych experiments back in college, largely because it involved giving sugar to children. Over the years, I’ve come to think of the marshmallow test as an easy-to-use business tool.

The experiment was designed for small children, so you would think that adults would have developed the logical reasoning skills and the patience to perform better on the test than the typical preschool kid. And yet, the world is full of ample evidence to the contrary: Imagine the same experiment, but instead of marshmallows, the subject is asked to forgo profits in this quarter in exchange for sustainable growth several years from now.

See what I mean?

Every time a business sacrifices the better payoff of a long-term strategy in exchange for the immediate gratification of a short-term strategy, they are failing the marshmallow test.

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