by Carol-Anne
Present bias is our natural inclination to over-value present benefits and rewards at the expense of benefits further into the future. In simpler terms, we over-value the here and now at the expense of the future.
Here's an example:
Which would you rather: $150 in 52 weeks or $130 in 48 weeks?
Most people said that they’d wait the extra 4 weeks to get the additional $20.
But what about this? Would you rather have $130 today or $150 in 4 weeks?
A lot of people say they'd take the IMMEDIATE benefits of the $130 TODAY instead of waiting 4 weeks for the extra $20.
In both instances, you are being asked if you value $130 sooner or $150 4 weeks later. If you prefer to wait the 4 weeks in the first scenario, you should prefer to wait the 4 weeks in the second.
But many don't. This is present bias.
Daniel Kahneman describes human thinking as being composed of two systems. System 1 and System 2.
System 1 functions automatically, quickly and is emotional. There is very little effort involved and relies mostly on impulse.
System 2, on the other hand, is logical and involves mental activities that do require effort, such as calculations.
Your present self, mostly uses System 1 to make decisions. It is constantly looking to satisfy its immediate needs and desires. It pays little or no attention to the future.
The other self is your future self. Your future self is logical, and thinks before it acts or speaks. It’s like the old angel on one shoulder and devil on the other scenario.
The problem is, your present self seems more “real” and is much more persuasive. This is because you know this person. You arI one in the same this person. However,
Your future self, is like a stranger. You don’t know that person. They’re just too distant. So when you go to make a decision, your present self’s best interests almost always win.
Therefore we make illogical decision. Such as choosing to opt for less money now when you get a reward immediately.
Critiquing:
Honestly, I wish I had known about this sooner. The amount of money this could have saved me is crazy! I would have opted for the patient option a lot more if I had known. I think the best way to get past this bias thinking would be to sit down and ask ourselves:
”What do I want my present self to be doing in x years?” As well as the impact on those around them. I feel as though asking yourself questions about your future self will lessen the feeling of that person being a stranger and open more thoughts about how to engage with them. If we made the future a benefit of the present, we’d most likely feel inclined to save money and choose options that benefit us in years to come.
https://www.google.ca/amp/s/youngandthrifty.ca/save-money-by-going-back-to-the-future-countering-present-bias/amp/
