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So you suck at delayed gratification? Can’t consistently invest your savings for the big pay off for when you retire? Or perhaps you’re ...
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Res enim se praeclare habebat, et quidem in utraque parte. Non est enim vitium in oratione solum, sed etiam in moribus. Sin kakan malitiam dixisses, ad aliud nos unum certum vitium consuetudo Latina traduceret. Duo Reges: constructio interrete. Cur ipse Pythagoras et Aegyptum lustravit et Persarum magos adiit? Et ille ridens: Video, inquit, quid agas; Itaque primos congressus copulationesque et consuetudinum instituendarum voluntates fieri propter voluptatem; Levatio igitur vitiorum magna fit in iis, qui habent ad virtutem progressionis aliquantum. Non enim, si omnia non sequebatur, idcirco non erat ortus illinc. Recte, inquit, intellegis. Tenesne igitur, inquam, Hieronymus Rhodius quid dicat esse summum bonum, quo putet omnia referri oportere?
Hanc ergo intuens debet institutum illud quasi signum absolvere. Et certamen honestum et disputatio splendida! omnis est enim de virtutis dignitate contentio. Tum Triarius: Posthac quidem, inquit, audacius. Itaque mihi non satis videmini considerare quod iter sit naturae quaeque progressio. Quod idem cum vestri faciant, non satis magnam tribuunt inventoribus gratiam. Egone non intellego, quid sit don Graece, Latine voluptas?
- For decisions, use slow thinking to interrupt your bias.
Organise processes or teams to interrupt ...
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Quaesita enim virtus est, non quae relinqueret naturam, sed quae tueretur. Num igitur dubium est, quin, si in re ipsa nihil peccatur a superioribus, verbis illi commodius utantur? Tum Quintus: Est plane, Piso, ut dicis, inquit. Quae diligentissime contra Aristonem dicuntur a Chryippo. Te ipsum, dignissimum maioribus tuis, voluptasne induxit, ut adolescentulus eriperes P. Cur, nisi quod turpis oratio est? Sed ad haec, nisi molestum est, habeo quae velim. Quid turpius quam sapientis vitam ex insipientium sermone pendere?
Some criticise the evidence behind Hyperbolic Discounting as, similar to so many behavioural science research, largely relying on university students as they are a cheap and available group of test subjects. Such critics argue that more experienced and older people consider longer views and criteria for their decision making, though this has not been proven through research yet.
Other criticisms do not undermine the observed behaviour behind Hyperbolic Discounting — of people choosing instant gratification — rather the reasoning behind it. So, for example, some point to the role of cravings, arousal and emotions in people seeking immediate rewards — though again, in my view this is relatively academic as the end result remains the same.
$100 versus $120.
Hyperbolic discounting is perhaps best known for the $100 versus $120 experiment. Participants in this experiment were offered a choice between receiving $100 today versus $120 in a week. Most people would choose the $100 immediately. Then they were offered the choice between $100 in a year versus $120 in a year and a week. From a rational perspective, these questions are identical — yet when adding the ‘year’, most people chose to take the $120 option.
Climate change.
This one’s a bit opinionated perhaps, but is it really? It is now pretty clear that climate change is a massive threat to humanity — there, I said it. Yet humans are reticent to act. Compare that to how most governments invested in dealing with the threat of covid when it was having clear immediate impacts. The immediate threat gets the attention, the distant one can be all too easily ignored.
Hyperbolic discounting is a core model in behavioural economics and has countless implications.
Use the following examples of connected and complementary models to weave hyperbolic discounting into your broader latticework of mental models. Alternatively, discover your own connections by exploring the category list above.
Connected models:
- Fast and slow thinking: the model that explains the broader backdrop of heuristics and behavioural economics.
- Loss aversion: another fundamental and intrinsically linked model
Complementary models:
- Habit loop: particularly B.J. Foggs idea of ‘tiny habits’ or immediate rewards.
- Systems versus goals: in establishing the routine over relying on a distant goal.
- Divide and conquer: in respect to breaking down large projects.
- Cialdini’s six principles of persuasion: particularly in terms of freemium and quick value in relation to reciprocity.
Hyperbolic discounting was built on the work of Richard Hernstein who developed a ‘matching law’ before coining the term ‘hyperbolic discounting’ in a 1961 paper.
My Notes
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