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Hyperbolic Discounting
Hyperbolic Discounting
Hyperbolic Discounting
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Overview

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 ...

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Huic ego, si negaret quicquam interesse ad beate vivendum quali uteretur victu, concederem, laudarem etiam; Res enim fortasse verae, certe graves, non ita tractantur, ut debent, sed aliquanto minutius. Avaritiamne minuis? Sed eum qui audiebant, quoad poterant, defendebant sententiam suam. Nam et complectitur verbis, quod vult, et dicit plane, quod intellegam; In his igitur partibus duabus nihil erat, quod Zeno commutare gestiret. Hanc ergo intuens debet institutum illud quasi signum absolvere.

Illud urgueam, non intellegere eum quid sibi dicendum sit, cum dolorem summum malum esse dixerit. Conclusum est enim contra Cyrenaicos satis acute, nihil ad Epicurum. Duo Reges: constructio interrete. Haec non erant eius, qui innumerabilis mundos infinitasque regiones, quarum nulla esset ora, nulla extremitas, mente peragravisset. Tum Lucius: Mihi vero ista valde probata sunt, quod item fratri puto. Quid ergo hoc loco intellegit honestum? Quando enim Socrates, qui parens philosophiae iure dici potest, quicquam tale fecit? Praeteritis, inquit, gaudeo.

Quid ait Aristoteles reliquique Platonis alumni? Sin kakan malitiam dixisses, ad aliud nos unum certum vitium consuetudo Latina traduceret. Sed vos squalidius, illorum vides quam niteat oratio. Summum ením bonum exposuit vacuitatem doloris; Summus dolor plures dies manere non potest? Ne amores quidem sanctos a sapiente alienos esse arbitrantur. Terram, mihi crede, ea lanx et maria deprimet. Quodsi ipsam honestatem undique pertectam atque absolutam. Sin kakan malitiam dixisses, ad aliud nos unum certum vitium consuetudo Latina traduceret. Tecum optime, deinde etiam cum mediocri amico.

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Actionable Takeaways
  • For decisions, use slow thinking to interrupt your bias. 

Organise processes or teams to interrupt ...

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut placet, inquit, etsi enim illud erat aptius, aequum cuique concedere. Quod cum dixissent, ille contra. An est aliquid, quod te sua sponte delectet? Quae rursus dum sibi evelli ex ordine nolunt, horridiores evadunt, asperiores, duriores et oratione et moribus. Quid affers, cur Thorius, cur Caius Postumius, cur omnium horum magister, Orata, non iucundissime vixerit? Negat enim summo bono afferre incrementum diem. Duo Reges: constructio interrete. Me igitur ipsum ames oportet, non mea, si veri amici futuri sumus.

Quis istud possit, inquit, negare? Zenonis est, inquam, hoc Stoici. Nos paucis ad haec additis finem faciamus aliquando; Primum quid tu dicis breve? Iam quae corporis sunt, ea nec auctoritatem cum animi partibus, comparandam et cognitionem habent faciliorem. Tertium autem omnibus aut maximis rebus iis, quae secundum naturam sint, fruentem vivere. Quod si ita sit, cur opera philosophiae sit danda nescio. Quid est igitur, inquit, quod requiras?

Quod autem ratione actum est, id officium appellamus. Nec mihi illud dixeris: Haec enim ipsa mihi sunt voluptati, et erant illa Torquatis. Atqui eorum nihil est eius generis, ut sit in fine atque extrerno bonorum. Neque solum ea communia, verum etiam paria esse dixerunt. Summum ením bonum exposuit vacuitatem doloris;

Limitations

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.

In Practice

$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. 

Build your latticework
This model will help you to:

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. 
Origins & Resources

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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