Based on a web article by Anita Hamilton in 2017
Future cost or consequence doesn’t seem like a big deal in the moment you make your choice, but combined together, these choices can add up to a pattern for which behavioral economists have a name: temporal discounting. This is a prime culprit for the poor decisions we make about money, life and what will really make us happy in the long run – by incorrectly feeling today’s indulgence is worth more than an abstract future reward.
“Humans are not good at thinking about the future,” said Moran Cerf, a business and neuroscience and professor at Northwestern’s Kellogg School of Management. “We are the best animal out there in doing that, but still not good.”
Study after study has shown that we humans tend to make myopic choices, because they feel like a good idea at the time – even when they really aren’t. These include using high-interest credit, big spending on vacations but saving only a little for retirement; and focusing energy on immediate urges, like a craving for dessert, despite long term health and savings goals.
The good news is that our brains are equipped to think deliberately about future-looking abstract concepts – if we make the effort. What this might mean for you is that simply becoming more aware of poor choices could help you resist them. Whether you’re trying to build your business or just stop being impulsive in general, long-term thinking is your friend.
Take it from Jeff Bezos, who titled his first shareholder letter, in 1997, “It’s all about the long term.” As he later told Harvard Business Review, “Long-term orientation is essential for invention because you’re going to have a lot of failures along the way.” Turns out, Bezos is onto something. Publicly traded companies with a long-term focus tend to perform better on everything from profits to market capitalization, according to a 2017 report from McKinsey, which analyzed 615 large-cap and mid-cap firms from 2001 to 2015.
So how do you hack your brain to get what you really want in life? The first trick is to understand your biases, be aware of your tendencies and keep perspective through having time for reflection, or consulting with a friend or coworker before making a decision to take on something new.
So how does one suppress these self-defeating impulses? Here are some steps you can take:
1- Prioritize your “needs” over your “wants.”
When you go out to eat, do you find yourself staring at the menu and wanting to order every single thing, from appetizer to dessert, because it all looks delicious? One way to make a quick decision that won’t leave you with way more than you can eat – or afford – is to ask yourself the questions: Do you really need it?
2- Gain perspective on when less now means more later.
In one classic study, participants were asked to choose what food to eat in a week, with the options of a piece of fruit or chocolate. Seventy-four percent went for the healthier option of fruit. But when they were asked what they wanted right now, 70% chose the chocolate.
A variation on this idea, known as hyperbolic discounting, shows that the further you delay rewards, the more likely you are to make the smarter choice. For example, given the choice between one piece of chocolate now and two in a week, more people are likely to choose one now, Cerf said. But if you were given the option of one piece in a year or two pieces in a year and a week, most people would hold out the extra week.
3- Make it difficult to choose poorly
Sometimes it is hard to make the right choice when there are choices. One strategy is to take away the choices so for example do not keep chocolates within easy reach in the house.
4- Create accountability
Say you want to commit to going to the gym three times a week. If you decide to pay in advance for personal training sessions, for example, you are much more likely to follow through on your goal than you would be otherwise. Having a trainer makes you go when you are tired as the trainer adds a component of accountability.