by Gary North
(Editor’s Note: TIME is the only aspect of humanity in which there will ever be equality. Each of us gets 24-hour days, 365-day years. You can waste time and waste money. If you waste money, you can always get more. But you cannot get more time.)
“If I had just known at age 18 what I know today!” That lament is among the most universal among people aged 50 or older. Is there any society in which itr cannot be heard?
I was reminded of this when I watched a video of half a dozen of coach John Wooden’s most talented basketball players. It was produced in 2010, just after his death at age 99. He had retired 35 years earlier, yet he was still remembered and admired.
The story was basically the same for each of those now middle aged – or older – men. Wooden had been a great teacher, not just a coach. They all said how much sense his principles of living had meant to them two or more decades later. But all of them said that they had not paid much attention at the time. I had heard the same thing before he died from other former players.
Here was a legendary coach who taught some of the finest athletes in America. He was a very smart man, and more to the point, a very wise man. His chart of the pyramid of success has been seen by millions of people. Yet he was unable to get the basics of his outlook across to young men who had come from all over the nation to play for him. (Oddly, the group in the video had all come from southern California.) You can see it here.
What does this tell us? That youth is wasted on the young – a lament of oldsters throughout history and across many borders.
It is not a matter of brains. It is a matter of character. From time to time, we do hear of young men who seem to understand as teenagers how little time men have, and how large the payoff is for hard work, high thrift, and dedication to the mastery of some field. These are the super-performers discussed in books like Malcolm Gladwell’s Outliers. They invest their crucial 10,000 hours before they reach age 21.
But it is not just character. It is something else. It is their understanding of time. They recognize that effort and assets invested early in life have a compounding effect. This makes an enormous difference at age 40 or 50, if a person finds the right niche in which to invest his time.
To do this, a young person needs future-orientation. This is exceedingly rare among the young. As Ben Franklin put it in 1750, “A child thinks that twenty pounds and twenty years can never be spent.” A few musical artists figure it out early, or at least consent to their parents’ demands while they are still forming their habits in life. But few understand it with respect to money.
GET RICH SLOWLY
You have heard the phrase, “Get rich slowly.” That is good advice. It applies to societies as well as individuals.
Why should getting rich take so long? Because it takes a long time to accumulate capital: the tools of production.
Economists have understood this for over a century. But, sadly, most people are into middle age before they figure out that it takes time to accumulate sufficient capital to provide for a comfortable retirement. When we are young, we rarely understand how much we must save, and how long we must save, to accumulate capital.
In Chapter XVIII of his magnum opus, Human Action (1949), Ludwig von Mises presented the case for the importance of time perspective as a source of thrift, capital formation, and wealth. He called this outlook “time-preference.” Some people are present-oriented. They want satisfaction now. They will not lend money at low rates of interest. They borrow at high rates. Others are future-oriented. They save at low rates of interest. They refuse to pay high rates of interest when borrowing.
He made a profound observation on why we are rich compared to earlier generations.
Our activities are designed for a longer period of provision because we are the lucky heirs of a past which has lengthened, step by step, the period of provision and has bequeathed to us the means to expand the waiting period.
Mises recognized that modern man is the heir of generations of capital formation and thrift.
We are in a position to rely upon a continuing influx of consumers’ goods and have at our disposal not only stocks of goods ready for consumption but also stocks of producers’ goods out of which our continuous efforts again and again make new consumers’ goods mature.
Today, we possess far more capital goods than society did in 1949. Around the world, the message is taking root. The free market social order provides incentive for people to innovate. Innovation requires capital. This requires thrift. Thrift is the result of future-orientation.
A generation ago, Harvard University’s political scientist, Edward Banfield, suggested that time perspective, not wealth, is the correct basis of class. Lower class people are present-oriented. Upper-class people are future-oriented. He wrote this in the late 1960s, at the height of the counter culture. Chapter 3 of his book, The Unheavenly City, made this explicit. Radical students complained so much that he left in 1972 for four years, In 1976, he returned to Harvard from the University of Pennsylvania. He told Robert Nisbet that the students at Penn were just as hostile as the students at Harvard. Nisbet passed this tidbit along to me years later.
TIME PREFERENCE AND SUCCESS
Professor Philip Zimbardo has studied the long-term effects of time perspective in children. Beginning with studies begun over two decades ago by a colleague, Zimbardo has tracked the lives of an early group of children. He has concluded that a child’s future-orientation – the psychological ability to defer gratification – is a major indicator of future success in a child’s life. He has produced two videos on this.
The person who is willing to defer present consumption for the sake of future income is in a strong position in society. He has the internal make-up necessary for building capital in the broadest sense.
A person who is ready to consume all of his income now, and even borrow to consume more, is not going to accumulate capital. He will not have the tools, including education and skills, to maximize his contribution to a paying society.
By neglecting the investment required to increase a person’s productivity, the present-oriented person finds that he has gotten what he wanted: high consumption at the expense of future income. In contrast, the future-oriented person gets what he always preferred: lower consumption for the sake of future income.
The great benefit of the free market is that it allows people to buy what they want if they are willing to pay the price. The present-oriented person says” Buy now, pay later.” The future-oriented person thinks, “Save now, buy later.”
In school, we are taught many skills. But what is rarely taught is goal-setting and time management. Perhaps this would be wasted. But if I were to design a curriculum – and I am doing this – I would emphasize goal-setting and time management as soon as a child is capable of adopting a self-taught curriculum. This is probably around age 8. The only one I know like this is Dr. Arthur Robinson’s, which at $200, grades K-12, is a bargain.
By the time a student is a teenager, he or she should understand the basics of lifetime success. Coach Wooden looked for quickness above all other categories. That one is too limiting. Here are the ones I would look for, in this order.
“A man’s word is his bond.” That is an ancient principle. It should be basic to any person old enough to make a binding promise.
In a free society, the division of labor is crucial. People must learn to delegate. They cannot do everything by themselves. But decentralization is risky. The person who promises to perform a service may not deliver.
I have said that there are three principles of success.
1. Do what you say you will do.
2. Do it at the price agreed on.
3. Do it on time.
These may sound trivial. They are difficult to achieve for the vast majority of people. Perhaps I should add a fourth.
4. Do it without being reminded or monitored.
At this point, the character set is difficult to find, especially in employees under age 30.
Any teenager who is governed by habit to meet the three requirements of performance has an enormous advantage over his peers. It will be difficult for them to compete with him.
FIRE IN THE BELLY
There are good employees who meet the criteria of predictable performance. But they will remain employees if they do not have fire in the belly.
Some people call this character trait an obsession. It probably is. Others call it ambition. It often is. Still others call it visionary. It always is.
The person with no fire in his belly is unlikely to take the risks that mastery require. Mastery is a high-risk endeavor. It is more than routine maintenance. It is a matter of putting your reputation on the line in something like full public view.
Rockefeller and Carnegie had fire in the belly. They helped to create a new, far richer world. Both of them switched to charitable giving when they got old. Their money bankrolled some of the most insidious projects of the so-called New World Order. They were better at piling up wealth than giving it away. They had no skills at giving it away. They would have done more good for mankind in their lifetimes if they had stuck to their knitting. But super-rich men cannot escape their responsibility for managing great wealth in this way. Their piled-up capital will be inherited. By whom?
Consider Howard Hughes. Leonardo DiCaprio got it right in The Aviator. Hughes was unbalanced from the beginning. He was brilliant. He was creative. He was also rich at a young age, because of his father’s invention of a unique oil-drilling bit. He more than outperformed his father. Yet he was unbalanced to the degree that he became unhinged. He had too much of a good thing. But no one ever called him poor.
Bill Gates had fire in the belly at a young age. He made a lot of money. Then he married an eminently sensible woman. She was able to give him a new vision of service other than designing and marketing digits.
I think a person must have this fire in the belly: his calling. I define calling as the most important thing you can do in which you would be most difficult to replace. This may be a person’s occupation, but only rarely. It was an aspect of John Wooden’s job, but it reached far deeper than his job. After he retired, his calling remained. His influence grew greater over the years as a result of the foundation of his life, which was also the foundation of his occupational success.
After Wooden’s death, Kareem Abdul-Jabbar commented on this aspect of Wooden’s coaching. When Kareem/Alcindor went to UCLA in the fall of 1965, Wooden’s office was a Quonset hut. This was after two NCAA championship seasons.
Fire in the belly keeps a person from getting sidetracked. He may go over a cliff. Surely Hughes did. But it keeps him moving forward.
Ludwig von Mises had this characteristic. Nothing could stop him. He was still teaching and writing at age 85. So was his disciple, F. A. Hayek. Hayek’s book, The Fatal Conceit, is a masterpiece. It can easily serve as the tombstone of the idea of socialism. Hayek finished it at age 86. I visited him in the Austrian Alps in 1985. He handed me a chapter, which I had photocopied by the hotel. He could not be stopped.
ATTENTION TO DETAIL
Hughes had this, obviously. Had he not had it, he would have died in a plane crash. Others have it. They present their work to the public without loose ends. They may revise later on – hooray for eBooks – but they bring a ready-for-prime-time product to the public the first time.
The devil is in the details. So are the failures. This is where a producer pays attention to the customer. He makes sure that the product works as promised, at a price promised, delivered on time. Again, if it is released as a beta-version, fine. The customer knows. But it is best to release it free of charge.
This is a matter of going the extra mile.
Success comes at a price. The earlier someone begins paying it, the more success he should expect. The compounding process is a power for personal and economic change.
This outlook requires faith in the future. But it requires more than faith. It has to be accompanied by future orientation. A person needs to discount the future by a low interest rate in order to maintain a high present value of his forfeited income.
The time to get rich is in your teens. The longer you wait to begin the process, the higher the rate of return that you must achieve.
I wish I had more teenage readers. But, then again, Coach Wooden had his share. It took time for what he told them to register.
Gary North is the author of Mises on Money. Visit www.garynorth.com
Copyright © 2011 Gary North