Which would you rather have – one marshmallow now, or two marshmallows tomorrow?
In the Stanford Marshmallow Experiment, a four year old child was offered a choice by a researcher – one marshmallow now, or two marshmallows when the researcher returned to the room in a short time (about 15 minutes). The children participating in this experiment were then tracked for many years, and various metrics of attainment were assessed. The children who deferred their gratification by waiting to receive two marshmallows had better outcomes in various areas, including educational attainment and SAT scores.
Even though recent studies have shown the marshmallow experiment failed to control for many variables – the most important being the relative affluence of the child's family – I still view the Marshmallow Experiment as a useful parable about the benefits of instant versus delayed gratification.
This parable came to mind as I was thinking about a recent prospect and the decision the business owners faced – obtaining asset-based financing to address a cash crunch, or selling the business. I was disappointed when it became clear they were leaning towards selling the business – they were taking one marshmallow now, versus rebuilding the business and selling it later for a better price.
Discussing this with one of my associates, I noted it seemed to me the owners were not playing the long game – after all, facing a cash crunch that should be alleviated once the economy recovers is a short-term pain, while selling a business should really be a long-term decision and not a decision made during a "dip" when you are stressed or panicked.
Longevity of Our Clients
A few days later, my associate asked me about past Todd Herman Associates (THA) clients that had permanently shut their doors and no longer existed in any form. I thought for a few minutes and came up with 5 such clients.
We discussed what caused them to shut their doors, and it boiled down to these factors:
- Business model for success had changed
- Competition eliminated premium pricing
- Management unable to change unprofitable customer mix
- Changing consumer tastes
Let's double this number and say 10 clients no longer exist, in case some closed for good without my knowledge. These 10 clients are less than 5% of roughly 220 total clients.
The Five M's
As I was neatening my office later that day, I picked up a book given to me by a friend, No Man's Land: A Survival Manual for Growing Midsize Companies, by Doug Tatum. Written by the former Chairman and CEO of Tatum LLC, the author shares the following five challenges that trip up a small company (from 1 to 20 employees) in its quest to cross the "No Man's Land" to become a successful midsize company (100 or more employees):
- Market Misalignment – Growing out of touch with customer needs
- Outgrowing Your Management – Expanding beyond what an entrepreneur can handle without effective managers
- Outgrowing Your Model – Increasing business beyond the company's ability to profitably deliver its value proposition with the necessary cost structure
- Outgrowing Your Money – Failing to obtain funding needed to sustain growth to become a midsize company
- Losing Your Momentum – Hitting a dangerous stagnation and never again generating positive motion
While there is some overlap between the factors on this list and my list of factors influencing the long-term success of our clients, I still felt something was missing from both lists.
The Missing Factor and Its Impact on Decisions
I put my finger on the missing factor after reading a blog post by Lisabeth Saunders Medlock, PhD, titled We All Lose If We Don't Learn To Play The Long Game. Here's the key passage:
Another critical aspect of playing the long game is learning from not being stellar or fabulous all the time. ... Sometimes we call this perseverance or grit, and it is key in long term success. That ability to try and try again, like the Little Engine That Could, and to learn from failures is inherently linked to a longer term plan.
While all the factors in both lists certainly contribute to a business successfully playing the long game, I believe the grit of its leaders ultimately determines the business' destiny.
The prospective client I described at the start of this article? To me, what the owners lacked was grit. They did not put the short-term pain of a cash crunch into perspective – instead, they let short-term pain during a dip in business influence what really should be a long-term decision. They were not playing the long game.
How I Play the Long Game
To me, the longevity of THA is due to the investment of time and effort I made early on – and that I continue to make – in marketing. Over more than 31 years, I've tried various combinations and types of marketing, networking, and selling activities, and found marketing enables and improves both networking and selling. As one speaker at an after-hours event succinctly shared, "The purpose of marketing is to shorten the sales cycle."
My business has a long sales cycle because not every company needs the help we can provide right now. Thus, the goal of our marketing is for people to know, like, and trust both THA and me. And the best marketing vehicle for achieving this goal? This newsletter.
Making time to develop ideas and turn them into written words is not always easy or convenient, yet it's an investment I've made EVERY month since June 2005. Sometimes, I don't have an idea. Other times, I begin writing, find I don't like the direction it's going, toss what I've written, and start looking for a different idea. Many times, the words just won't come. These are the times when my grit kicks in – I persevere and produce something I'm proud to share with my readers.
Marketing activities – including writing a newsletter – are like a farmer sowing seed. Some seed will land on good soil and grow quickly, some will lie dormant yet eventually grow, and some will never grow at all. Still, the only way for the farmer to reap a harvest is to sow seed.
Without sowing, there is no harvest – without marketing, THA would have no business. The farmer and I both play the long game, which means we both must defer gratification for months or perhaps years.
Instant versus Deferred Gratification
I asked the same associate what types of gratification arise in her tasks – here's a summary of her answers.
|Instant Gratification Tasks||Deferred Gratification Tasks|
Distilling key factors affecting when she achieves a sense of accomplishment:
- Instant gratification tasks are those where a known amount of progress can be achieved in a fixed amount of time, because there are few to no uncontrollable factors.
- Deferred gratification tasks are those where progress is not predictable in a certain amount of time, because there are many uncontrollable items, especially never knowing when her concentration will pay off or when creativity will strike.
Deferred gratification tasks require a belief you can and will complete a task, even if the timing of results, amount of effort, or need for collaboration are not known.
What Roles Do Instant and Deferred Gratification Play In Your Life?
Let me conclude by asking you to think about the roles instant and deferred gratification play in your work or personal life. I would love to hear your ideas on how you defer gratification for important tasks.
Todd L. Herman