Have you ever had a mounting pile of work you know you need to do but for some reason didn’t? There’s an important deadline looming, your boss is breathing down your neck, the pressure is on — all signs are pointing to you getting it done. Yet you put it off, turn on Netflix, and fantasize about how you’re going to crush it tomorrow.
You’ve fallen victim to hyperbolic discounting.
Hyperbolic discounting is a cognitive bias, where people choose smaller, immediate rewards rather than larger, later rewards.
Researchers ran a classic experiment that illustrates the phenomenon. Imagine you’re given 2 choices: get a $100 today or $120 in a week. Here’s how most people choose:
But when the same question is asked with the same one week interval, but a year in the future, we largely choose the bigger reward.
We are impatient and prefer immediate rewards in the short-term. But we’re more patient and wait for better rewards in the long term.
Unfortunately, the choices you have to make in everyday life are not as clear or easily comparable. Say you’re going on vacation in a few of months. How do you choose between enjoying a cookie right now versus looking good at the beach?
Many important decisions concerning our health, wellness, finances, and careers are affected by hyperbolic discounting. All of these choices require trading off immediate pleasure for your future good.
When you procrastinate, you opt for the instant gratification of enjoying yourself now rather than the future reward of accomplishing the things you set out to do.
You know setting money aside in a 401K is important for your retirement. However, you instead choose to splurge on an expensive night out with friends, which is more fun right now, but might not be the best choice for future you.
Why am I this way?
Cognitive biases are mental shortcuts we use, which generally help us make quick decisions, but don’t always work out for the best.
Our brains were never wired to be truly rational because there is way too much information in the world for us to process. We evolved instead to make decisions quickly.
A caveman did not have to contend with the same complex choices we do today. Cavewoman Lakshmi never had to choose between eating a pig today versus investing it in a pig 401K that would yield a 4X return in the future.
Under harsher living conditions, we didn’t know if we would survive till the end of the day so our species evolved to choose the immediate option that most increased our chance of passing down our genes. Our brains are wired to choose immediate sure-things rather than the potential of a far-off future reward.
So.. am I screwed?
No! There are ways we can get better at making good choices …
1 . Empathize with your future self
You put things off to future you because it’s easy. It’s easy to assume that future you has boundless energy, drive, and motivation. Unfortunately, that perfect vision of future you is not reality.
Before putting something off, think about your future mental state — how tired, drained, and sleepy you will likely be. Consciously evaluating the dependability of future you can serve as motivation to actually do the things you want to do today.
Hyperbolic discounting tells we’re more likely to procrastinate when decisions are far away.
A pre-commitment is a way to lock future you into a decision. You increase your chance of success by removing a temptation future you may try and weasel out of. The idea is to make it hard for your future self to back out.
Research shows people who commit to saving portions of their future paychecks to their retirement end up saving more money than others.
Subscription meal delivery systems like Freshly and Blue Apron use a similar pre-commitment to keep customers receiving their food orders automatically. By subscribing to healthy food that shows up at your door every week you increase the odds of eating right when the time comes.
Other pre-commitment techniques may include planning out your day, getting someone else to hold you accountable, or in Nir Eyal’s case, burning cash if you don’t do the thing you said you would.
3. Break down big goals into small manageable chunks
You set big, lofty goals because they yield massive rewards, right? Not so much. Big goals, like learning to speak Spanish or losing 20 pounds, take a long time to achieve and so are susceptible to the far-off reward curse of hyperbolic discounting.
Given the choice between watching TV now (an immediate, but smaller reward) and working toward your goal (a big, but far away reward), you will most likely choose the immediate and small reward.
By breaking down big goals into smaller tasks, your reward comes after the completion of each small chunk instead of at the end. That way, the reward is no longer a far off possibility but something that is more immediate and achievable.
Acknowledging the effect of hyperbolic discounting on our daily decision making and consciously evaluating trade-offs between the present and future, can help you do what you really want. Trust me, future you will be thankful.
For insights on Behavioural economics and psychology visit https://www.nirandfar.com