• Joumana Elomar

Hyperbolic Discounting: The Ultimate Behaviour Bias

Prioritising the present is only human. In psychology, this powerful phenomenon is driven by hyperbolic discounting: a cognitive bias where we tend to choose immediate rewards over long-term rewards. Or in simpler terms, we're biased towards the present.


It's why we might snooze our alarms, skip a workout, binge Netflix or eat junk food, even if it goes against our goals. Our perception of value is influenced by our perception of time. It looks like this:

So how does it play out, why does it happen and what are some practical strategies we can use?


Scenario

To illustrate hyperbolic discounting more clearly, imagine this. You win a contest and the prize is some money. You're standing in front of the prizegivers, and they offer you two options:

  1. A $100 right now OR

  2. A $110 in one week?

What do you choose? Stop to think about it. If you're like most people, you'd choose $100 right now. You might be thinking but it depends or no way! I'd wait for $110. If that's the case, then you'd be in the minority. Interestingly, when we stretch this into the future, we see different results. So what if the prizegivers offer you these two choices:

  1. A $100 in a year OR

  2. A $110 in a year and a week?

Now what do you choose? If you're like most people, you'd pick $110. When options are far off in the future, we tend to make more rational decisions and are less influenced by instant gratification. But when we're in the present, we discount the future and the reward it holds. So even if the reward is larger and we know it would benefit us more, it fails to motivate us and we generally choose the pleasure of the present. So why does it happen?


Why It Happens

When we unpack hyperbolic discounting, researchers posit a few reasons:

  1. Evolution. Researchers theorise that hyperbolic discounting emerged in response to evolution. In a world packed by predators, our ancestors lived in such precarious times that choosing immediate rewards often took priority over distant future needs. It was a matter of survival. This is the main theory behind the bias.

  2. Risk aversion. When we make decisions, we tend to favour certainty. Research shows that we're often willing to accept small but certain reward over a larger but less certain reward. So when we're in the moment, we might be swayed by the certainty of receiving the reward now.

  3. Temporal myopia. Myopia is when we have trouble seeing. Temporal is talking about time. Meaning, temporal myopia is when we have trouble seeing the long term consequences of our decisions in time. The core premise is that because we can't clearly see the future, we find it difficult to evaluate decisions effectively.

  4. Perception of time. Waiting is difficult, especially as we experience time in a non-linear way. Basically, as time seems to go slower or faster depending on our individual situation and expectations, waiting for a small amount of time can feel really slow if the reward is something we really want. Therefore, impacting how we make decisions.

So what can we do to break this bias?


Practical tips

The world we live in today is completely different to our ancestors, and prioritising the present can lead to unhealthy behaviours. Take not saving for retirement, or eating junk food everyday. So here are some practical strategies for breaking the bias:

  • Bring your future self to the moment: Try to visualise yourself in the future. Is this a decision that helps you get closer to that moment? Research shows that imagining your future self helps you favour the long-term.

  • 10-10-10 rule: Consider the long-term impact of your decisions. Ask yourself: "What will the consequences be in 10 minutes? 10 months? 10 years?" This is a technique of second-order thinking. You can take this further by asking: what are the compounding effects of this decision?

  • Pre-commit: Lock future you into decisions, now. For example, research shows that people who commit to saving a portion of future paychecks end up saving more money than others. Another form of pre-committing is planning your day or asking someone to hold you accountable. Making it difficult to back out of decisions that serve you in the future means you're more likely to skip immediate rewards.

  • Design your environment: Your environment plays a huge role in influencing what you do. If you want to sleep better, eat healthier or reduce distractions: what can you do now to make it easier for your present self to choose your future self? Let's say you want to eat healthier. Can you put sugary treats out of sight or on higher shelves? Or let's say you're eager to start the day with a run, can you lay out your clothes and shoes the night before? The basic premise here is: How can you use your environment to your advantage?


Tying it up

Hyperbolic discounting is deeply ingrained in how we behave. It's our tendency to choose immediate rewards over future rewards. Fighting this tendency is not always easy, and you may not be able to make the right decision all the time. However, by inviting your future self to the present, you can create the possibility of a better outcome.


 

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