Save to My Latticework unsave

Hyperbolic Discounting
Hyperbolic Discounting
Hyperbolic Discounting
save0 saved view11K views
Share this with your network
Share this with your network
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. Invidiosum nomen est, infame, suspectum. Duo Reges: constructio interrete. Esse enim quam vellet iniquus iustus poterat inpune. Item de contrariis, a quibus ad genera formasque generum venerunt.

Innumerabilia dici possunt in hanc sententiam, sed non necesse est. Potius inflammat, ut coercendi magis quam dedocendi esse videantur. Ut necesse sit omnium rerum, quae natura vigeant, similem esse finem, non eundem. Negat enim summo bono afferre incrementum diem. Quae cum ita sint, effectum est nihil esse malum, quod turpe non sit. De ingenio eius in his disputationibus, non de moribus quaeritur.

Re mihi non aeque satisfacit, et quidem locis pluribus. Nunc vero a primo quidem mirabiliter occulta natura est nec perspici nec cognosci potest. Haec dicuntur inconstantissime. Animi enim quoque dolores percipiet omnibus partibus maiores quam corporis. Si verbum sequimur, primum longius verbum praepositum quam bonum. Aliter homines, aliter philosophos loqui putas oportere?

Share this model with your network to be smarter, faster, together!
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. Hoc dixerit potius Ennius: Nimium boni est, cui nihil est mali. Prodest, inquit, mihi eo esse animo. Non enim, si malum est dolor, carere eo malo satis est ad bene vivendum. Sed potestne rerum maior esse dissensio? Duo Reges: constructio interrete. Color egregius, integra valitudo, summa gratia, vita denique conferta voluptatum omnium varietate. Gracchum patrem non beatiorem fuisse quam fillum, cum alter stabilire rem publicam studuerit, alter evertere. Scientiam pollicentur, quam non erat mirum sapientiae cupido patria esse cariorem. Quamquam tu hanc copiosiorem etiam soles dicere.

Nunc omni virtuti vitium contrario nomine opponitur. Maximas vero virtutes iacere omnis necesse est voluptate dominante. Ut scias me intellegere, primum idem esse dico voluptatem, quod ille don. Sunt enim prima elementa naturae, quibus auctis vírtutis quasi germen efficitur. Eam si varietatem diceres, intellegerem, ut etiam non dicente te intellego; Polemoni et iam ante Aristoteli ea prima visa sunt, quae paulo ante dixi. Quid est, quod ab ea absolvi et perfici debeat? Eaedem enim utilitates poterunt eas labefactare atque pervertere. Heri, inquam, ludis commissis ex urbe profectus veni ad vesperum. Hoc est dicere: Non reprehenderem asotos, si non essent asoti.

Sed quid minus probandum quam esse aliquem beatum nec satis beatum? Deinde disputat, quod cuiusque generis animantium statui deceat extremum. Etenim semper illud extra est, quod arte comprehenditur. Callipho ad virtutem nihil adiunxit nisi voluptatem, Diodorus 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

    Nothing here yet. Join ModelThinkers and login to be the first to comment.
Already a ModelThinkers member? Please log in here.

Oops, That’s Members’ Only!

Fortunately, it only costs US$5/month to Join ModelThinkers and access everything so that you can rapidly discover, learn, and apply the world’s most powerful ideas.

ModelThinkers membership at a glance:

Small mark
UNLOCK EVERYTHING
Access all mental models and premium content.
Small mark
BUILD YOUR LATTICEWORK
Save models to your personal list.
Small mark
QUICKLY MEMORISE MODELS
Use our Learn function to embed models to memory
Small mark
PERSONALISE MODELS
Add your own notes and reminders.
Small mark
BUILD YOUR ‘EXTERNAL BRAIN’
Discover a new idea? Capture it by adding a new model.
Small mark
JOIN THE MT COMMUNITY
Rate models, comment and access exclusive events.

“Yeah, we hate pop ups too. But we wanted to let you know that, with ModelThinkers, we’re making it easier for you to adapt, innovate and create value. We hope you’ll join us and the growing community of ModelThinkers today.”

Arun Pradhan & Shai Desai
CoFounders, ModelThinkers.

You Might Also Like:

- Actionable summaries of the world's most powerful ideas.