Also known as Time Inconsistency or Present Bias. We tend to value the present more than the future. This can influence our decision making and motivations. In evolutionary terms this makes sense: uncertainty over the future makes instant gratification logical. But this kind of thinking can be harmful in the long run.
Definition: The closer a reward is, the higher we value it.
Insight: "Live each day as if it were your last". If we followed this literally our health, financial wellbeing etc would quickly deteriorate. The statement expresses the high value we place on immediacy.
Insight: We do not respond rationally to interest rates.
Insight: "Immediacy magnetises us."
Insight: Our tendency to value the present over the future part of our hunter-gatherer past.
Principle: Avoid immediate impulses as much as possible.
Reference: Walter Mischel: The marshmallow test experiments 1960s.
Definition: The weight of now.
Example: We are comfortable with impulses because the perceived value of the future declines quickly.
Insight: We value the future less than the present.
Insight: Hyperbolic discounting is a key factor in why we are poor predictors of what will make us happy in the future.
Reference: Dan Gilbert: we "stumble on happiness" because we don't know where to look for it.
Definition: The idea that the present looms largest in our decision making, and the future is significantly discounted.
Example: Given the choice of a small box of chocolates today rather than a larger box of chocolates in a week - most people choose the small box. If the choice is the smaller box in a year or the larger box in a year and a week, most people would choose to wait a week for the larger box.
Insight: The future does not motivate us as much as what is in front of us.
Insight: Hyperbolic discounting is a reason why we over eat, under save, overspend.
Insight: We evaluate the value of rewards relative to when then are received.
Insight: We value the present more than the future.
Insight: The consequences of bad habits are delayed, but the rewards are immediate.
Insight: Resisting temptation is difficult because we are wired to fully account for immediate rewards but discount delayed or future rewards.
Principle: Push temptation far away, bring distant consequences closer in your mind.
Insight: In business, sport and life everyone wants to win now.
Insight: We discount rewards in the future relative to those in the present.
Key Insights & Principles
Decision Making
We value the present more than the future, and it impacts our decision making.
The consequences of bad habits are generally in the future, but we are rewarded in the present.
Evaluate and place high focus on the future consequences of present actions.
Avoid immediate impulses.
Personal Finance
We tend to overspend and under-save in the present because we value it more than the future.
Take a long term view.
Analyse the future opportunity costs of financial decisions in the present.
