Show notes
Today, we are getting back to our behavioral economics foundations episodes to discuss time discounting. I hope you enjoyed the last three episodes in our series on all the biases, where I told you about memory biases, our biases toward the future and how that impacts our decisions today, and how our selective attention and focus can color our decisions. Time discounting is one of my favorite concepts. I recently did a research project centered around the concept of time discounting and saving money, and there is a white paper about it coming out this summer. Time discounting is the basis behind a lot of the future versus present biases which I talk about in Episode 49. In this episode, we will learn all about time discounting and why I love it so much. I tell people to think of time discounting as the "I'll start Monday effect." In this episode, you'll learn why. CLICK HERE FOR YOUR FREE DOWNLOAD! Show Notes [07:30] Have you ever said you would start your diet, or exercise plan, or quit smoking, or be more organized or whatever it is… "on Monday"? [08:58] So, what happened? Why do you feel like a completely different person when the alarm goes off than the person who set the alarm the night before? [09:26] When we think about ourselves, a certain part of the brain lights up, and it does this differently when we are thinking about ourselves versus thinking about someone else. [10:05] For most of us (and especially for particularly impatient people) when we talk about our future self, the brain lights up as if it is talking about a completely different person! [10:34] It's easy to talk about our future selves doing something early in the morning, but when the alarm goes off it's actually us who is waking up. [11:08] We have a hard time judging what is best for us today from what is best for us tomorrow. [12:30] We aren't inherently good are bad at this...more like we are great at this in some situations but terrible at it in others. [12:54] When looking at this from your business perspective (and in understanding more about yourself…which we will talk about both later on in the episode) try to think about the concept in general and how it could apply to you, your peers and current or potential customers. [13:16] The term hyperbolic time discounting shows us that the way we discount is not consistent over time, and studies have found it does not occur at a rate that is constant or linear. [15:40] Our lazy brains (which is the topic of an upcoming bias episode) don't take the time to do all this logical thinking, and the subconscious wins out with its present-focused mentality. [16:10] Think of some of the ways that time discounting has affected you, because I'm sure it has come up in many ways. [17:14] Just because it is hardwired doesn't mean you can't change it. On the contrary, understanding how this concept works and how it is genetically conditioned in your brain allows you to set up a sort of brain hack so you can work WITH your brain to change and accomplish your goals. [19:46] If a client came to me with this problem (of helping employees save more for retirement), the first thing I would do is recommend we dig into the current plans. What are the offering, how do they present it to employees, when do they get it, what are the options, how difficult is it, etc. And then I would remind them that just because a plan has always been set up a certain way…doesn't mean it is the right way or that it has to stay that way. [21:35] One other question to consider when thinking about the power of time discounting is opting in versus opting out. Forcing people to choose more often and consciously think of what they are doing does not always encourage them to make better decisions. [23:11] It's easy for the brain to commit when it is in a cold state. [25:17] BRINGING TOMORROW TO TODAY One other way to make the future self of you and your customers to be more visible in the present, is to look at renderings. Consider how you could help someone make tomorrow more real today with the help of technology. [30:02] OTHER BUSINESS EXAMPLES I once worked for a company that changed the review process for managers so that every manager's ability to get their full raise potential was dependent upon having their reviews done in a timely manner. [32:43] I also used to encourage my employees to keep lists of all their accomplishments throughout the year and would reach out to them a month before their review to let me know what they were especially proud of. [33:30] I would also recommend for companies to not stack reviews so they are all needing to be completed at once. [37:37] Vagueness can produce inaction even when people are informed about risks and potential improvements. What can you provide to your staff to help them find the blood drive or voting booth or get their flu shot? [39:03] Making the experience real and actionable (you can picture that today even if your day/time is not for a week or so) makes it more real. This also activates mirror neurons. [40:12] Every customer who is not signed up for a recurring plan with you of some kind is having to take on some sort of action and give up their precious money to do business with you. [42:00] If you have people delaying to buy for whatever reason, think about why they are putting off the decision. [42:48] The brain wants the benefit now, so make it as easy as possible to say yes when they are on the fence. [43:27] The next example is a little taste of what I did in my research project with the credit union in Oregon. [44:25] Constant reminders of saving keep it on your brain. [45:24] One thing many of us do is set far too many goals for ourselves. Due to our optimism bias, we think we can do a lot more than we really can. One reason we have an optimism bias is because of time discounting. [47:13] If you only had one top priority to get done, you would be much more likely to accomplish it. [48:07] You can use loss aversion to motivate your clients by putting money in a jar if they keep their commitment, but if they don't they lose it all. This makes future consequences tangible today. [49:26] When you are looking for ways to apply the solution to time discounting, it doesn't have to be directly related to the thing that is causing the delay. [52:53] I want to help everyone realize their future dreams by taking the right actions today - how can we work to combat time discounting in your business? Thanks for listening. Don't forget to subscribe on Apple Podcasts or Android. If you like what you heard, please leave a review on iTunes and share what you liked about the show. Links and Resources: Episode 48. An Overview of Memory Biases Episode 49. Present Versus Future Biases Episode 50. Selective Attention Biases Episode 19. Behavioral Economics Foundations: Herding Episode 11. Behavioral Economics Foundations: Anchoring and Adjustment Buffalo Seamery on Instagram Impulsivity and Cigarette Smoking: Delay Discounting in Current, Never, and Ex-smokers. Time Discounting and Time Preference: A Critical Review Increasing Saving Behavior Through Age-Progressed Renderings of the Future Self Golden Eggs and Hyperbolic Discounting Initial Examination of Priming Tasks to Decrease Delay Discounting Unstuck in Time: Episodic Future Thinking Reduces Delay Discounting and Cigarette Smoking Simpler: The Future of Government by Cass Sunstein Episode 21. Behavioral Economics Foundations: Habits Episode 22. The Power of Habit Nudge: Improving Decisions About Health, Wealth, and Happiness Implementation Intentions: Strong Effects of Simple Plans. Procrastination, Deadlines, and Performance: Self-Control by Precommitment The Power of Small Wins Episode 20. Behavioral Economics Foundations: Defaults Episode 35. Behavioral Economics Foundations: Nudges and Choice Architecture Episode 32. The Overwhelmed Brain and Its Impact on Decision Making Episode 19. Behavioral Economics Foundations: Herding Save More Tomorrow: Using Behavioral Economics to Increase Employee Saving Episode 9. Behavioral Economics Foundations: Loss Aversion Save More Tomorrow: Using Behavioral Economics to Increase Employee Saving Oldify - Age Your Face Change My {FACE} Human Behavior Lab About the Research Episode 36. Behavioral Economics Foundations: The N in NUDGES – iNcentives Episode 39. Behavioral Economics Foundations: The E in NUDGES – Expect Error Episode 31. Mirror Neurons Episode 34. Behavioral Economics Foundations: Optimism Bias