Series 2, Episode 7: Present Bias
Welcome back to the bitesize behaviour podcast, and today we look at a behavioural bias that can have a significant impact on how your life turns out. A behavioural bias where there is a constant battle being fought between your present self and your future self… a battle between what is and what may be.
In essence, Present Bias is our tendency to place too much value on immediate rewards at the expense of our longer-term plans and since it centres around instant gratification - that needing or wanting something now - it impacts lots of our decisions. It’s what makes us buy the latest gadget instead of saving the money for a rainy day. It’s what makes us eat that donut instead of the salad.
To bring this to life, let me ask you this question… and play along… and be honest!
Here’s the question…
Would you rather have £160 in one year, in 52 weeks, or £150 in 48 weeks, so four weeks earlier?
Now, I’m guessing that most of you listening to this podcast will have decided that you’ll wait the extra four weeks and go for the £160, and that makes perfect sense.
But - what if I changed the timeline and asked you this instead…
Would you rather have £160 in one month, or £150 right now? So, £160 in 4 weeks time, or £150 immediately?
Well, this changes things - right? Bringing the payment right slap bang into the present makes a difference, even though the delay between the smaller reward and the bigger reward is still only 4 weeks. Put it all in the future, and those four weeks don’t really matter, But, bring it all to the present, and it flips on its head. Now I’m NOT willing to wait four weeks just for an additional £10.
This is present bias in action, and it can have a real impact on your future life, especially when it comes to money and health or, more importantly, it can have an impact on your overall wellbeing.
The battle between the present you and the future you is very real and takes place every single day.
And this future-self versus the present-self predicament has fascinated me for a long time. I guess my interest in this was woken up the first time I watched Back to the Future 2. You may remember that in the film Marty McFly and Doc Brown visit the future to prevent Marty’s son from going to prison.
I remember thinking at the time, if you could really interact with your future-self, would it make a real difference to your present-self or is the present self just way too powerful?
Well the simple fact is, that it is powerful. Incredibly powerful and worryingly, it can become super-charged when we need to make a decision when we are in a heightened emotional state and this includes things such as a lack of sleep, feeling hungry, or feeling stressed.
These can all make us become even more present minded when we make decisions, which is why, and to repeat an example I gave earlier, it's easier to grab the donut that eat the salad when you’re feeling emotional.
But in this app driven, digital world we live in, there is hope - ways to give more power to the future self with tech solutions available that can automate certain parts of your life to help the future self gain a bit of an upper hand. This is especially true in finance, where apps are available to help you save money, for example, by automating the process so your present self becomes partially blind to what’s going on. Anything that can help, has to be a good thing.
Ultimately, our present and future wellbeing is reliant on us having good control of those instant gratification points in life. The more you choose today over tomorrow, the more your long-term wellbeing may suffer financially, physically, and mentally. Let’s take control and be confident enough to give ourselves the best chance possible at building, and then enjoying a bright future.
Being confident in our abilities to take positive action has already been discussed in a previous episode, but there’s more we can discuss around this, so in the next episode of Bitesize Behaviours we’ll look at a behaviour which is very closely linked with overconfidence that we discussed in episode 5.
We’ll be looking at The Dunning-Kruger Effect.
See you next time on bitesize behaviour.