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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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Sed tamen est aliquid, quod nobis non liceat, liceat illis. Praeteritis, inquit, gaudeo. Quo modo autem philosophus loquitur? Cur iustitia laudatur? Alterum significari idem, ut si diceretur, officia media omnia aut pleraque servantem vivere. Quod ea non occurrentia fingunt, vincunt Aristonem; Nihil acciderat ei, quod nollet, nisi quod anulum, quo delectabatur, in mari abiecerat. Quis, quaeso, illum negat et bonum virum et comem et humanum fuisse? Certe non potest. Tu quidem reddes;
Duo Reges: constructio interrete. Quamquam ab iis philosophiam et omnes ingenuas disciplinas habemus; Conferam tecum, quam cuique verso rem subicias; Quis enim redargueret? Quae cum praeponunt, ut sit aliqua rerum selectio, naturam videntur sequi; Eorum enim omnium multa praetermittentium, dum eligant aliquid, quod sequantur, quasi curta sententia; At iam decimum annum in spelunca iacet. Non autem hoc: igitur ne illud quidem. Eodem modo is enim tibi nemo dabit, quod, expetendum sit, id esse laudabile.
- For decisions, use slow thinking to interrupt your bias.
Organise processes or teams to interrupt ...
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Inde igitur, inquit, ordiendum est. De maximma autem re eodem modo, divina mente atque natura mundum universum et eius maxima partis administrari. Nunc haec primum fortasse audientis servire debemus. Hinc ceteri particulas arripere conati suam quisque videro voluit afferre sententiam. Videsne, ut haec concinant? Quae quidem vel cum periculo est quaerenda vobis; Qui ita affectus, beatum esse numquam probabis; Dulce amarum, leve asperum, prope longe, stare movere, quadratum rotundum. Nunc omni virtuti vitium contrario nomine opponitur. Inde igitur, inquit, ordiendum est.
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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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