Why a Bird in the Hand Looks So Good
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Have you ever opted for instant gratification over a future benefit? You're not alone. This bias, called hyperbolic discounting, explains why we might choose $50 today instead of $100 next year. The further away a reward is, the less we value it and this observed not just in humans but in animals too and it can lead to regrettable choices later on.
We often prioritize immediate gratification, even when it's not the best choice. Hyperbolic discounting highlights our impulsive tendencies and how cognitive biases influence our decisions. As the wait for a reward increases, its perceived value decreases (discounting curve). This explains our time-inconsistent decision-making, leading to "temporal myopia" - short-sighted thinking that clouds long-term plans (procrastination, impulsive spending).
Strategies to Counteract It:
Pre-commitment: Lock yourself into a future course of action (automatic transfers into savings).
Future Self Visualization: Imagine your older self. Would they be happy with your choices today? Techniques like this can make immediate rewards less tempting.
Hyperbolic discounting goes beyond money. It impacts how we think and act as individuals and societies. The desire for immediate pleasure can lead to harmful habits. People don't always act rationally, and this challenges the idea of perfectly efficient markets. Focusing on the present can lead to poor choices like gambling or sticking with familiar but sub-optimal options.
Here is a GREAT and short explanation of hyperbolic discounting in simple terms (the only kind I can understand). It is a good watch!
