Systems help create future value

People value immediate rewards over future rewards. We want instant gratification, not a future benefit.

This makes it difficult to make consistent, positive choices. We want to see the rewards right away and will even take less now just to make sure we get it without delay.

Those who are able to find ways to build value in the future find that doing so provides much greater returns. Think about investing. If we want to take $100 and double it overnight that is difficult.

But if we want to take the next the next 12 years, we will only need a 6% rate of return on our investment to make $100. So, do you want $100 right now or $200 in 12 years? I’m not sure many would choose the $200 in 12 years.

This is called hyperbolic discounting and refers to the fact that we are willing to accept less to have it sooner. It is normal but can be hurting your chances of success.

Let’s say we take our $100 and leave it in for 12 years. Then we decide to leave it in to make another $100. Instead of taking 12 years to make $100, it would take 7 years. After those 7 years, we would have $300. It would take 5 years to earn another $100.

If we had $1000, it would take less than 2 years to make $100. This is all basic investing knowledge and explains compound interest but shows the ability to use time as leverage to earn money.

But what if we expand beyond the financial realm. If we eat the junk food today, we will get the reward immediately but will sacrifice future health. If we want to be healthy, we often need to sacrifice our immediate desire for a far-out benefit.

If we worked out and then immediately lost 5 lbs., most would commit to an exercise routine. But this isn’t reality. Instead, we need to work out over and over to see some future weight loss.

This is the power of the systems and habits approach to improvement and the set the minimum technique. It allows us to start small and build up future value. As future value increases it becomes easier to stick with it.

We develop the habit and routine to drive our behavior. We don’t expect to leave it all to willpower (which is subject to hyperbolic discounting).

By building the right systems and habits in life it is possible to drastically improve your life. But it takes a different approach, one that focuses on future value instead of instant pleasure.

Over time it becomes natural to avoid the immediate urge and push the rewards to the future. Then, in a few years, you have built up much more value and have the habit of continuing to do that.

As time goes on, you build more and more value with less and less effort. You start to reap the rewards of previous work and discipline.

But if you continue to sacrifice that future value for a present-day discounted version, you will never build up enough value to make a difference. Instead, you will keep having the same question, $100 today or $200 in 12 years. You will never get the question of whether you want $1000 today or $1100 in a year and half.

The systems and habits approach to improvement is set up to use time to our advantage. Instead of hyperbolic discounting running things, our designed systems and habits drive our thoughts and behavior, creating more and more value as we go.