Long Term vs Short Term Thinking Pt 1 - Hypberbolic Time Discounting
Sometimes it’s hard to make decisions about the future with a clear head. Life is full of opportunities to make trade-offs between short term and long term pain/gain. The closer the short-term, and the farther the long-term, the better your chances of making a short-sighted decision. This kind of thinking is well-understood in behavioural psychology, and they even have a term for it: hyperbolic time discounting. The further an event is from you, the more you discount the anticipated effects of that event, with a strong bias to favouring things that are happening very soon.
What does this mean in practice? Well consider the classic example, something which may have affected a large portion of the “99%” who are currently occupying Wall Street. If you need a TV today, but you also need to retire comfortably 20 years from now, its easy to discount the importance of an event 20 years in the future and buy that TV instead of saving for retirement. Compound decisions like that over a number of years and when that 20th year arrives, there may be some difficulties.
But this phenomenon is hardly restricted to just money. Most students can attest to how far away a mid-term seems compared to hanging out with friends. Until of course the midterm shows up and now maybe playing Frisbee in the quad seems less important than it did at the time. Hyperbolic time discounting can happen anywhere and everywhere, and its consequences are usually a lot of regret, and some self-reproach since it was usually avoidable.
But what can we do to combat this terrible force? Well they say that knowing is half the battle, and knowing that hyperbolic time discounting exists can help us fight back. But knowing is only half the battle, and the fighting half is no easy thing. Recognizing the role of hyperbolic time discounting in your decisions can help you make better ones, but it still requires some tough action to be taken. So the next time you’re tempted to pick up a donut instead of picking up a weight, or to play one more game of Sodoku instead of finishing that big report, just remember that time is not on your side, and tomorrow will definitely come.
