The philosopher Descartes wrote (I paraphrase):

“Consciousness is the greatest gift of humanity, which is most actively given back.”

The theory of evolution (Darwin) transformed science and explained that given time seemingly enormous change was in fact gently incremental. Humans tend to size everything to themselves so beyond a few hundred years is a very long time to us, for nature it is the blink of an eye.

Becoming conscious of human thought process and default behaviours can enable those conscious of them to both better predict actions / reactions and when these are not smart to do the opposite and profit (the basic theory of contrarian investing).

One of the simplest and most predictive guides to human behaviour is explained by the “Pain Pleasure Principle”.

As an example a predictor of the future success of a child is to test their ability to defer gratification at an early age.

The test to measure this uses a reward such as sweets and the challenge put to them is – “you can have one sweet now or perform a task first to gain more sweets after”. There are a number of variations on this theme but the key question being asked of the child is, you can have what you want now or do something you don’t want to do first for more of what you want latter.

Those children that choose to defer initial gratification for greater subsequent reward proved on average to be higher achieving both at school and in later life


In the majority of cases the “Pain Pleasure Principle” asserts that instant pleasure (gratification) is in fact painful longer term:

  1. Alcohol – hangover
  2. Food / overeating – obesity
  3. Smoking – illness
  4. Spending in excess of income – debt

The deferral of gratification in the short term (pain) by comparison often brings longer-term rewards (pleasurable):

  1. Hard work – achievement and status
  2. Saving – wealth
  3. Exercise – longer, healthier life
  4. Giving – receiving

So put simply if as humans we satisfy our immediate desires for excess we pay for this later and vice versa.

Present situation

If we apply the principle to the economies of the West and the huge levels of debts built up in the last 25 years it can be seen there was little attempt to defer gratification, it was a time of gratuitous consumption and we borrowed to satisfy our desires, we wanted all the sweet things and we wanted them immediately.

After the feast came the famine

The West gorged itself on debt until it reached a tipping point in 2008 with the collective realisation that it could not continue, that we were full to bursting (Mr Creosote’s one last wafer thin mint).

We are now experiencing the pain of the enforced diet of abstinence. We are not happy – we liked it the way it was, we don’t want to defer our gratification and we object to being forced to do so.

In the US the average citizen is today SIX TIMES better off than in the 1920’s (an era looked back on by most Americans as a golden age and before the great depression).

The US Government currently spends 25% of its gross domestic product a year and generates only 15% in taxes, it is overspending by 66% year on year but even with this unsustainable imbalance there  is enormous resistance to either tax increases or entitlement cuts by the electorate (sweets now please!).

It is a truth that once benefits are acquired they are not happily relinquished.


It is interesting to invert the common perception of the current situation.

It is generally assumed that things are bad, that problems are mountainous and that painful unpleasant times lie ahead.

The alternative (inverted) view (that of deferred gratification) is that prior to the crisis of 2008 the situation was unsustainable and closing in on terminal; that fortunately the problem was identified just in time and that there is treatment, there is a road to recovery and although for a time this will be uncomfortable, balance can be restored.

Whilst it is true that people will have to accept less than was promised it is a fact that in the West the standard of living on average is unimaginably higher than for citizens even 100 years ago, we live today in the richest part of the world at the time of its greatest abundance

If the West collectively accepts greater discipline and financial prudence in the short term the initial pain will yield longer term economic and societal rewards.

This however will require consciousness of thought and deed and as Descartes said……..


NOTE: This is written in a personal capacity and reflects the view of the author. It does not necessarily reflect the view of LWM Consultants. The post has been checked and approved to ensure that it is both accurate and not misleading. However, this is a blog and the reader should accept that by its very nature many of the points are subjective and opinions of the author. This is not a recommendation to buy any product or service including any share or fund mentioned. Individuals wishing to buy any product or service as a result of this blog must seek advice or carry out their own research before making any decision, the author will not be held liable for decisions made as a result of this blog (particularly where no advice has been sought). Investors should also note that past performance is not a guide to future performance and investments can fall as well as rise.