This YouTube video discusses the importance of long-term thinking in business and life. The speaker argues that most people fall prey to short-term gratification, neglecting second-order consequences. Using examples like the marshmallow experiment and the failure of Valiant Pharmaceuticals, he emphasizes the exponential benefits of delayed gratification and consistent effort, advocating for prioritizing long-term gains over immediate rewards. So probably the biggest mistake I see entrepreneurs and business people make is it's just short term thinking. And short term thinking is basically that it's instant gratification, You know, short-term thinking is, well I want to have a better today at the cost of tomorrow. You know, it's it's basically, you know, pretty much everything bad for you is short-term thinking. So let's take a look at debt. So debt is basically enjoying a better today at the cost of tomorrow. So you can live better today. You can buy light that 42 inch TV today, then you can start watching it or you can buy that Xbox today, you can start playing, but you'll pay for it tomorrow and later on down the path, you know, that's gonna whip back around and bite you in the face and hard. And most of the time, it's not worth it. But what people do is they just kind of brush it under the rug and they just forget about it. And same thing with like fast food. it's like I want to have a burger that tastes real good right now. But at the cost of, you know, my health and potentially shaving years, off my life tomorrow, or exercise, I don't want to sweat and work hard now. I just want to lie and lay down on the couch and be lazy now at the cost of heart disease tomorrow. we see this, this is prevalent right now in 2018 with social media and things, You know, if you post on Instagram, or whatever then you get a bunch of likes you know then that's kind there's a dopamine spike and so you're training your brain to appreciate that loop do the section get this instant reward slash chemical in my brain that feels good do it again and it's reinforcing right that's a instant gratification feedback loop and it's to do with dopamine is very addictive the same way slot machines and everything are addictive and you know once you get hooked on that now you need to find that everywhere in life and so you know you'll want fast food you'll want instant business results which basically don't exist and you'll want everything instant now and you'll become an impatient person and you'll basically end up suffering horribly in every way shape and form in every different facet of your entire existence However on the inverse of that is long term gratification and so you know if we go to the gym now it's kind of sucks. Now we got to sweat and work hard but in the future is great. If we eat healthy now it's not they're tasty right now but in the future it's great if we read books now instead of playing Xbox it's awesome right. It's not that awesome right now but in the future it's great if we save money, not that awesome right now a future great So you get you get my point yet like things that are good for you, things that are good for you immediately be careful of them but things that kind of suck a little bit in the beginning but a good for you basically what they did is they got a group of children together young children like four or five years old or something and they presented them with two options. Option one was to have one marshmallow and you could eat it right now. An option number two was you could get two marshmallows if you waited for a period of time And what happened is you know a lot of kids, most kids they just chose the one marshmallow right now in a real small group of kids they chose to delay that and they chose to get two marshmallows after a period of time. Now what's fascinating here is two things. First thing is that most people chose the instant gratification which i'm totally not surprised at. I mean just go look outside your front door and you'll see this it's privileged everywhere. And but the second thing is, is the more interesting thing and that is that they tracked these children over the course of their life and they measured them in terms of success, not just financially but in the light their health, their income, their happiness, their like family, their family life and their fitness and their everything. So they tracked them on a basket of metrics which together represents like success which I think is quite accurate. You know, they weren't just measuring them on wealth because obviously there's more things to success than just wealth. Right. So if you're thinking that they had a basket of things and that P the children that the children that delayed the gratification and chose to wait some time before getting to marshmallows, they did better in life way But like I said earlier the the second thing I wanted to talk to you about was time in the context of business and really the thing that I see people that are terrible at like CEOs, entrepreneurs, business owners and I'm gonna draw this on the whiteboard is it's something called second, just make sure you can see this second-order consequences. All right. so you can see there so this is something that nobody understands in. Actually I shouldn't say nobody because obviously some people understand this thing but almost nobody by 99.9 percent right. They do not understand this. Even business owners who are making money, they don't understand this. And if you don't know what a second-order consequences, then you obviously don't know what it is right. So you should pay attention right now if that's you And what seeking order consequences are is you know when we make a choice or a decision there is you know the things happen, things change right? and so there but those decisions like those, you know those actions they create reactions and then those reactions create actions which create reactions and it keeps going All right keeps going overtime and it feeds back on itself and it goes exponential. All right. And so this not only not only is this second-order consequences, but there is third order consequences for thought of consequences for thought of consequences all the way like to infinity basically. But most people and especially actually it's it's most people in everything. If there are human they're doing this and well if they're human they don't know what this is and they're making this mistake. And so most people they only think about the first-order consequence because they're it's just the easy thing to see. All right. And so what this is, is they may give you an example. Let's say you know I want to buy a 42 inch TV and I don't have enough money for it. And so I buy it using debt at a high interest rate because my credit rating sucks because I've been doing this sort of dumb for four years and I haven't learned my lesson right and so let's say buy this TV and you think oh it's not that bad I just got some interest payments like that's all you can see as the as the first--order consequence but that comes and creates something else so now that you've got this TV in your house it's not only is it bad that you've spent money you didn't have and that you're now in debt and you're going to have to face that debt in the future but now you have this TV in your house and in order to get any sort of satisfaction from this TV you just pour you just purchased you're gonna have to watch this TV and so now you're watching this TV and now you're wasting your time and first of all you already wasted your money that you didn't have that you're paying ridiculous amounts of interest on but now you're wasting your time watching this damn thing right so let's say first decision here at this block in the chain let's say here we buy TV with debt right now the second order consequence is that I'm going to be watching TV and here I'm wasting time now what's going to happen is now that I'm watching TV wasting time and I'm in debt which already is bad now what I've done is I've trained myself psychologically to be lazy and now what's going to happen is whenever I come face to face with some hard work or some challenges or something I'm going to be more disposed to to taking the lazy path and just forgetting about it. all right and so now the third order consequence is that pattern of lazy behavior repeats over time. right? And so already you can see that a small decision that we thought wasn't that bad because we're just gonna have to pay a bit of interest, right? And we might think, oh, well, it doesn't matter because I might be getting a pay rise next year or something like that, right? So most people they just look at this, they just look at the first-order consequence but they just they can't even see the second one, which is sorry, it's a bit wonky here They can't even see the second one, which is that they're gonna have to watch the TV and waste time and they can't see the third one that this pattern of behavior is going to become their new mode of operation and it's going to ruin them. And also it's going to become their new mode of operation when faced with the decision where it looks like this, where if we can have a better today at the cost of tomorrow, then we should go with the better today at the cost of tomorrow's. So, you know, in so many different ways. This one thing that looks trivial and small screws us royally. And, you know, I see people do this all the time. I see people do it with like fancy cars. I see people do it to themselves with like choosing to fly on private jets. And, you know, if you if you choose to fly on private jets, and you've got more than 100 million dollars in your bank account, Sure, go go for it. Right. But, you know, if you if you have less than like a hundred million dollars in your bank account and you're constantly flying on private jets, you're you're an idiot because not only is that a waste of money is a poor use of money. but second of all, you're now training yourself to what to like expect this level of luxury and if you expect this level of luxury, it's very hard to go back. All right, it's hard now to go back to it. So you're probably going to continue this habit of behavior, even when it's probably not the best best thing for you to be doing. Even if your company starts making less and you start having less money, you're still going to keep up this pattern of behavior. And you see people get into these vicious loops all the Like think about not just what will happen if you make this decision and take the section. But if you take the section, what is that going to automatically create? And then what's that automatically going to create? And what's this chain? What is the chain of events that's going to unfold and start like developing? And a lot of people don't understand this one, like it you I see it all the time with books too and online courses and trying to do anything meaningful. But if you read a book today, you're not gonna see money appear in your bank account tomorrow and so people can't get the hit around there. They're like, why would I pay money to do a course? Why would I buy a book and then read it if I'm not going to make any money and they just don't understand like they're like why would I pay money and then have to spend I'm doing something that isn't really fun to then not even make any money immediately and it's because you know these people have been conditioned to doing work by the hour or whatever and then getting paid so it's the instant feedback interesting gratification and when work presents itself and they have to pay to do work they're like well this looks weird scam you know like if I'm gonna have to pay to do work scam because I know what happens in life is I do work to get paid so if they see the inverse of that it's obvious why blows the little mind and then when they see to that they're gonna have to pay to do work that then they don't get paid for immediately they're like this, an ultimate scam, right? But these people can't think properly, and so sure that is true in the short term. But what happens in the long term? Well, you get smart. What happens when you smile? Well, then you make better decisions. What happens when you make better decisions? Well, you have a bit of life, and you have more fun, and you make more money, because all you need to do to make more money than the average person is be smarter than the average person, and therefore make better decisions than the average person. So in order to achieve all of these things, all we have to do is have something on the positive side that the average person does not ever I move into a new place, I just moved into this place here in LA. It happened when I was in New York -I get like a new internet connection, right? And I typically get like the fastest best one I can because engineers pretty important ingredient for what I do and then pretty much all the time what comes with that fast internet connection is free cable connection to TV, right with like a whole bunch of channels and the landline and all of this crap. And whenever I talked to the person on the phone that works at the company like what is it like Verizon or whatever this lady's like sir, You know that if you get cable, it's free, You get like 250 channels or whatever. Maybe it's two and a half thousand channels. I don't know. and you know what? You get it for free sir. And also you get a landline for free. She was like, it would be stupid not to get this free cable connection and this free landline and I'm like, look lady, you don't understand it.'s not free I don't want this do not put this thing in my house and you know what in fact you couldn't pay me to hook that cable up to my TV I was like you couldn't pay me to talk it in and she was like Sue I don't think you understand it's free like why would you not get it and this is I was playing with her just to see because there's no way in hell I'm hooking their cable up to my TV even if you paid me to do it not doing it why because I don't want to create any sort of thing in my house that is going to distract me and suck my time into something that isn't going to have like positive benefits it's thinking about the second third order consequences you know sure it's free to hook up this TV in my house to cable but what isn't free is wasting finite hours of my life in my existence watching TV right. that is a cost and so the lady couldn't see that and so this thing is everywhere once you learn to see it it'll change your life and you'll get way better at everything. this is just a really good case study. in a really good lesson in long--term thinking and second consequences, because that dude who purchased valiant? Well, sorry, the dude who ran valiant and purchased all of these different companies and cut off their own D departments. He was only thinking about the short-term. and he wasn't thinking about second order, third order consequences. He was only thinking about first order, first order, he makes more money. He looks like a God. Second order, he fails, and looks like an idiot. And, you know, he didn't see that one. and it got him. It flew back around and bit him in the face. And I see this happen to people and business all the time. And I know because I have overtaken many of them. And what I see, that's common among all of these people, which generally fall behind is bad decision-making when it comes to time. And second order consequences And what these people do is they typically, once they get good, and they're winning, they start spending a lot of money. And when they start spending a lot of money, they now have all of these toys. And now they've got these toys, they need to use these toys. And now that they're rich, they're famous. And or semi famous. And now they want to hang out and talk about how cool and famous and rich they're and how many new toys they've got, right? And then very quickly, this person has forgotten what actually created all of the stuff, right? They forget that the hard work and the frugality and working on their craft is the original like source thing that created the wealth that created the things they could buy, that created the fame that created the ability to talk about how cool they were. They forget about what created it. And now they spend all of your time screwing around with all of these things that are just a like fifth order consequence byproduct of this original thing. And so now the original thing goes away. And now they're busy like neglecting the original thing, focusing on talking about how cool their, and then it disappears. And then they can no longer talk about how cool their, because it's gone. And this happens all the time. like this is a pattern that exists through history, Since the beginning of time, it's how like empires and civilizations fall. it's how like great companies fall. It's basically how everyone makes a spectacular mistake and blows stuff up. And so you can never forget this, You can never forget, like what the main thing is. You must keep the main thing, the main thing, and the main thing is always going to be in business, the product or the service that you're delivering to your customers. Or if you're an athlete, the main things going to be playing basketball and being the best winning, right? And so this happened to Michael Jordan -i've watched pretty much all of his documentaries. they're great. The one I'm going to reference right now is called Michael Jordan to the max. It's really good. You should watch it. And he said that, like in one point of his career, he got really who's the best in the world? right? And he had all of these sponsorships So he was doing all of these ads, getting all of these photos with all of these products going out and doing all of this cool stuff because everyone who was famous in the world wanted to hang out with them. And very quickly, he just got overloaded He it just became too chaotic and he started making errors in his game And he sat down and he thought to himself like, you know, all of these things, they're byproducts of being the best. And if I let these byproducts distract me from the thing that created these byproducts, they're not only am I going to lose and not be the best, but then everything that I'm distracted by is going to evaporate and disappear. -So he was like, this is a really dangerous trap. And so he decided at that moment to just black out like completely shut everything off, He can't solve all of his sponsorships he stopped doing media interviews, everything he just said no -everyone told his agent, I don't want to talk to anyone about anything. I don't want to do any sponsorships I don't care how much money they're paying no. And then he just shut off everything and then just focused on the game. And then he climbed back up to be the bass player of all time. And you know, he was one of the smart ones he was able to see the second-order consequences and he was able to analyze the time variable and his decisions. And you know, he was he's an example of doing it end. they're typically the inverse of each other. One will have immediate upside Terrible shocking long--term downside. The other will have the inverse which is which will have short--term downside in long awesome upside which is the good decision and option A is what we call the motorized wheelchair path. This makes it simple and then option B is the the hill and you generally always come into these two, you always face these decisions all the time and you always just got access to yourself to make it simple. Forget about this logarithmic exponential stuff because this might blow some people's minds if they haven't looked at these sorts of things before. So just think it, think about it like this, We all share path or the hill, take the hill and if you keep taking hills then you'll learn to like the hills and when you learn to like the hills then you'll kick everyone's ass because they're all afraid of the hill in doing whatever they can to avoid it. And you just want to eat the hill and when you start doing this you'll start winning big time and your life will be better and you'll be having wet, much more And I'll give you something that's helped me a lot, I'll destroy him. it's whenever I'm thinking about a decision right, I will think of like its effect horizon and like an effect horizon is basically you know let's say we have this this chart here and across here we have time on the x--axis and then let's say here we have like upside. and what I mean by up sight is it's basically like positive results. So that could be how fitness relationships it could be financial, it could be improved product, it could be anything right anything positive. and then down here the inverse of this we have downside and so like an example of down, so I could be dead. An example of upside could be profit right in time. Well that could be like down here it could be like, you know, today, this hour, this minute, the shorter we get. And the longer we get along this axis, we're gonna have like a month, a year, five years, whatever, right? So you understand this simple model. Now whenever you're making a decision, you want to just mentally map this. and well, this is what I do in my mind whenever I think about a decision, it just happens automatically because this has been practiced and trained. But I'm looking at a decision and I want to look at what happens if I make this, if I choose this option, or that option, right? And if there's a decision with more than one option, you want to really boil it down to its core options. Like which should, you know, most of the time is like two. And you know, if you've got more than five options, then you haven't broken the decision down into a small enough piece. And you've got you're looking at a macro problem, and you need to break the macro one into a micro piece and work on all the micros and in the some of the micro uses the macro which will give you your decision for that. And so that's what happens if you can't partition the the thing the session into something that has less than or equal to five options, right? And so when you're looking at this, what you want to do is let's say you've got option A and it has immediate upside and then with in the short term, and then with time it has like catastrophic downside, like for for a long time, right, net1 got pretty long, so doesn't do that. and then this is option A by the way, and this one looks like a typical instant gratification debt, stupid decision, right? Have you been it today? Get the 24, let me get the 42 inch lcd TV and the Xbox complete with lots of games. Start playing it today. Satisfaction is big immediately about what happens with time as I get really screwed and fail with everything. And then option B is to would look like this. they'd say it has immediate downside, but then it has long-term upside. Alright, we'll call this one option B. Now typically two options that are going to be the inverse of each other are going to look like this. they're basically going to be mirror reflections of each other. So if one has this sort of, what do we call this pattern? If this one is this sort of pattern, then it's obvious that the inverse of this is going to have the inverse pattern. which is going to look like a mirror reflection on the other side. And so what is the opposite of buying a 42 inch TV on Dear Today? Well, it would probably be not buying that TV and instead starting to read some books. Right? And this one has immediate downside in the in the perspective of the person making the decision because it's not very fun. You know, I'd admit, it would be more fun for me to not to read a book and to just play Xbox with my friends all day like today, That would be more fun and that I don't think that ever changes. Like I think some people think that people who are successful, they're in business and they seem to have more discipline that. they're just weird people that don't enjoy the same things that other people enjoy. The Core Problem: Short-Term Thinking: The speaker identifies a fundamental flaw in human decision-making – the tendency towards short-term gratification at the expense of long-term well-being and success. This is the central issue explored throughout the entire piece. Debt as an Example: Debt is introduced as a classic example of short-term thinking. Enjoying a purchase (like a 42-inch TV or an Xbox) today with borrowed money, despite the future financial consequences. This highlights the conflict between immediate pleasure and future pain. Instant Gratification Loop: Social media likes are used to illustrate the dopamine-driven cycle of seeking instant rewards, which can become addictive and lead to impatience and a desire for instant results in all areas of life. This loop reinforces the habit of choosing the path of least resistance. Long-Term Gratification: The concept of long-term gratification is contrasted with short-term thinking. The speaker emphasizes that actions that require effort and sacrifice now (like going to the gym or saving money) lead to much greater rewards in the future. The "Wheelchair Path" vs. "The Hill": This metaphor underscores the two paths in decision making. The "wheelchair path" represents easy, short-term options leading to negative long-term consequences, while "the hill" signifies the challenging but rewarding long-term choices. The Marshmallow Experiment: The speaker introduces the famous psychology experiment, illustrating how children who delayed gratification (waiting for two marshmallows instead of eating one immediately) demonstrated greater life success later on. This reinforces the idea that choosing long-term rewards leads to success. Second-Order Consequences: The concept of second and higher-order consequences is presented as a crucial element missing from most people's decision making process. This emphasizes that decisions have ripple effects beyond the immediate outcome, creating chains of reactions and feedback loops. The 42-inch TV Example (Detailed): This case-study explains how buying a TV with debt is not just a financial issue, it leads to wasted time, encourages laziness, and establishes a negative pattern of choosing the easy path. It's used to showcase how small decisions can create significant negative snowball effects. Valiant Pharmaceuticals Failure: This case-study provides a business example of short-sighted thinking. Valiant, a company that drastically cut R&D for immediate profit, faced a catastrophic failure because it neglected the long-term need for innovation, showcasing the dangers of focusing solely on first-order consequences. Michael Jordan's Struggle and Comeback: The story of Michael Jordan illustrates how distractions (endorsements, fame) can detract from the core purpose (basketball). Jordan had the insight to eliminate these distractions in order to regain his focus and dominate his field. The Speaker's TV Story: This is a personal anecdote about refusing a "free" cable TV package to avoid distractions. This shows a practical, real-world application of second-order thinking, illustrating how seemingly small things can have a substantial impact over time. The Book/Course Dilemma: This section discusses people who can't understand the value of self-improvement (like paying for a course or buying a book), because they only focus on short-term gains instead of long-term knowledge accumulation and value creation. Effect Horizon: The speaker outlines his framework for decision-making by considering the "effect horizon" – a timeline that maps the potential upside and downside of a decision over time. This highlights the idea that a decision with immediate benefits might have severe long-term negative consequences. Exponential Growth and Feedback Loops: the speaker highlights that the long term upside of good decisions tend to grow exponentially because of feedback loops rather than linearly. This is exemplified by referencing Warren Buffett's net worth over time. The Importance of Choosing "The Hill": The speaker reinforces the idea of choosing difficult and challenging options (the "hill") over the easy path. When a person embraces the difficult choice the benefits will be amplified by feedback loops over time. Call to Action: The speaker urges viewers to adopt long-term thinking, consider second-order consequences, and prioritize the challenging but ultimately rewarding paths ("the hill") in life.