In finance, when evaluating a possible transaction, you look at its cash flows. For instance, here are the cash flows for a 30-year fixed mortgage: ![[Cashflow1.png|300]] You get the lump-sum money, and then pay it over the course of 30 years. Clearly the red parts are not equal to the green parts - you end up paying more money than you receive. This is called **interest**. How much more you pay is impacted by the duration you hold the debt for, and the interest rate. For a 30-year fixed at 7% APR, you will pay ~$2.40 for every dollar borrowed. Here's how a bond investment (or generally a loan) might look like: ![[Cashflow2.png|300]] You gave the money at the beginning (red part), got the interest over the lifetime of the loan, and then got the principal back. For a 10-year loan at 5% interest, the lender will end up receiving $1.50 for every dollar loaned. ### Payoff curves for actions Enough about finances! Let's talk about real life. I submit that a lot of decisions in the world result in one of the below payoff curves: ![[Payoffs.png]] On the left, it's everything that the devil tells you to do: * Eat the chocolate * Skip the workout * Pack your bag in the morning * Splurge * Stay up on a late-night rager On the right, it's everything that that the good angel tells you to do: * Eat the veggies * Do the workout * Pack your bag tonight * Be thrifty * Get 8 hours of sleep Good payoff curves is about being kind to your future self. This is not a novel insight. It's said in Psalms, "Those who sow in tears shall reap in joy". It's the moral of Aesop's [The Ant and the Grasshopper](https://read.gov/aesop/052.html). It's what [the marshmallow test](https://en.wikipedia.org/wiki/Stanford_marshmallow_experiment) measures. But perhaps Jerry Seinfeld explains it best:  The time horizons here can be hours, days, or years, depending on the habit. But positive and negative curves are always there. And lest it appear like I'm an ascetic robot, no you can't take either your money or your abs to grave. Yes, just like there are times where companies and individuals should borrow money, there are times where you should go with the negative curve. Yes, you can and should organize your environment so choosing positive curves is less taxing to your will power. And yes, there are times where you need to set [[Sharpen your saw|time for renewal]]. But as a good first approximation, stick to the positive curves when you can. #published 2025-02-16