Finance theory tells us that a dollar tomorrow is less valuable than a dollar today. I had always assumed that the argument rested primarily on the issue of opportunity cost – what could I have invested that dollar in today, and how much would it have been worth tomorrow?
But with interest rates as low as they are right now and markets as volatile as they are right now, the issue becomes less about opportunity cost and more about certainty. The reason why a dollar tomorrow is not worth as much as a dollar today is because it is less certain, rather than because I could have used the dollar to earn a higher return over the next 24 hours.
When you add into the occasion the observation that humans weight losses approximately three times as heavily as gains, you understand why certainty commands such a high premium. Or, put another way, you understand why the long term is at a steep discount.
This is a big problem for marketers. A significant proportion of marketing activity is aimed at short term returns but a large proportion is focused on laying the foundation for success in the future. If the certainty of future returns are in doubt, then the value of marketing is decreased.
Unless, of course, we can show that brand-related profits are more certain than others forms of profit. The argument for brands then becomes as much one of risk mitigation as it is of demand generation.
Some interesting research is already underway in academia about the impact of brands on firm-specific risk. It sounds esoteric – but it is certainly relevant to the value we place on the long term.
of uncertainty, this a dollar tomorrow is