Among the many cognitive biases that are bugs in our internal software, present bias is one of the more vexing. Present bias is the tendency, when considering a trade-off between two future events, to disproportionately value the event closer to the present. It is why companies reduce their long-term value in favor of short-term gain, and why humans are bad at saving for retirement.
Hal Herschfield, a marketing professor at UCLA, thought that Americans’ notorious inability to save for retirement – even when there are enough funds to do so – is a result of their “estrangement from their future self”. After all, a 25 or 45 year old doesn’t know the 70 year old version of him or herself. As a result, Herschfield said that “saving is like a choice between spending money today or giving it to a stranger years from now.”.
So Herschfield designed a clever experiment where a group of students were asked to allocate a $1,000 windfall. One group of students, however, were first shown an avatar of their future self at age 70. Not surprisingly, this helped those students “see” their future self as a real person with real needs. These students subsequently allocated considerably more for retirement than the students in the control group.
This exercise can be applied to your business career, and the future of your company. I have written about the importance of predicting the near-term future of your company/industry, and then acting upon it. In combating present bias, we might integrate a visual of ourselves and our company to better “feel” how we might address tomorrows challenges, today.
Speaking of cognitive biases, here’s a visual one which is known as the Müller-Lyer illusion. Looking at the image below, which line is longer?
To our eye, the top line is longer than the bottom line. But in fact, they’re exactly the same length. The direction of the arrows on either end create the effect. See below.
This is more than a visual illusion, because even with the knowledge of illusion in our minds, most of us refuse to believe what we “know” – even if we use a ruler to measure the two lines (which would reinforce that they are the same length). So we “know” the two lines are the same length, but even with that knowing we still perceive that there is a difference.
This gap between knowing and perceiving is a key part of Daniel Khaneman’s book Thinking, Fast and Slow. Khaneman refers to intuitive, fast-twitch thinking that we commonly use as we sort through our daily priorities as “System 1”, whereas “System 2” is the more logical, ordered form of thinking that often occurs later and can be diametrically opposed to System 1 output. System 1 isn’t necessarily bad – it’s what enabled our ancestors to not be eaten by lions. It’s just that in today’s world it isn’t fully trustworthy.
Overcoming these cognitive bugs is borderline impossible, as the Müller-Lyer illusion demonstrates. There can be hope, however. To read more on some small but encouraging signs, I highly recommend this excellent article by Ben Yagoda in The Atlantic. Hershfield’s experiment results show that it is possible to make better decisions. The young version of you might pay little attention to the challenges of your older self, but spending a minute looking at a realistic, age-advanced photo of your future self helps orient your thinking more clearly.
Understanding present bias is a way to understand flaws in decision-making at work and at home. The first place to start is to be aware of it.
P.S. I have written about cognitive biases a number of times on this site. To read them, use the terms “bias”, “Thinking, Fast and Slow” or “nudge” in the search box.