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    Pages From The Art of Thinking Clearly-8

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    This document discusses the concept of hyperbolic discounting, where people value immediate rewards more than long-term rewards, even if waiting provides greater benefits. It notes that while the saying "live each day as if it were your last" sounds noble, actually following it would lead to negative consequences as bills go unpaid and health declines. The document also presents an example where most people would choose $1,000 today over $1,100 in a month, showing an inconsistency in how people evaluate immediate vs delayed rewards. This phenomenon of hyperbolic discounting comes from our animal past of prioritizing immediate needs and gratification.

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    Pages From The Art of Thinking Clearly-8

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    Mechanical
    129 views1 page
    This document discusses the concept of hyperbolic discounting, where people value immediate rewards more than long-term rewards, even if waiting provides greater benefits. It notes that while the saying "live each day as if it were your last" sounds noble, actually following it would lead to negative consequences as bills go unpaid and health declines. The document also presents an example where most people would choose $1,000 today over $1,100 in a month, showing an inconsistency in how people evaluate immediate vs delayed rewards. This phenomenon of hyperbolic discounting comes from our animal past of prioritizing immediate needs and gratification.

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    Pages from The Art of Thinking Clearly-8

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    This document discusses the concept of hyperbolic discounting, where people value immediate rewards more than long-term rewards, even if waiting provides greater benefits. It notes that while the saying "live each day as if it were your last" sounds noble, actually following it would lead to negative consequences as bills go unpaid and health declines. The document also presents an example where most people would choose $1,000 today over $1,100 in a month, showing an inconsistency in how people evaluate immediate vs delayed rewards. This phenomenon of hyperbolic discounting comes from our animal past of prioritizing immediate needs and gratification.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    129 views1 page

    Pages From The Art of Thinking Clearly-8

    Uploaded by

    Mechanical
    This document discusses the concept of hyperbolic discounting, where people value immediate rewards more than long-term rewards, even if waiting provides greater benefits. It notes that while the saying "live each day as if it were your last" sounds noble, actually following it would lead to negative consequences as bills go unpaid and health declines. The document also presents an example where most people would choose $1,000 today over $1,100 in a month, showing an inconsistency in how people evaluate immediate vs delayed rewards. This phenomenon of hyperbolic discounting comes from our animal past of prioritizing immediate needs and gratification.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    of 1

    51

    LIVE EACH DAY AS IF IT WERE YOUR LAST – BUT ONLY ON


    SUNDAYS
    Hyperbolic Discounting

    You know the saying: ‘Live each day as if it were your last.’ It features at least
    three times in every lifestyle magazine, and has a slot in every self-help manual’s
    standard repertoire, too. For such a clever line, it makes you none the wiser. Just
    imagine what would happen if you followed it to the letter: you would no longer
    brush your teeth, wash your hair, clean the apartment, turn up for work, pay the
    bills?. . .?In no time, you would be broke, sick and perhaps even behind bars.
    And yet, its meaning is inherently noble. It expresses a deep longing, a desire for
    immediacy. We place huge value on immediacy – much more than is justifiable.
    ‘Enjoy each day to the fullest and don’t worry about tomorrow’ is simply not a
    smart way to live.

    Would you rather receive $1,000 in a year or $1,100 in a year and a month?
    Most people will opt for the larger sum in thirteen months – where else will you
    find a monthly interest rate of 10% (or 120% per annum!). A wise choice, since the
    interest will compensate you generously for any risks you face by waiting the
    extra few weeks.
    Second question: would you prefer $1,000 today cash on the table or $1,100 in
    a month? If you think like most people, you’ll take the $1,000 straight away. This
    is amazing. In both cases, if you hold out for just a month longer, you get $100
    more. In the first case, it’s simple enough. You figure: ‘I’ve already waited twelve
    months; what’s one more?’ Not in the second case. The introduction of ‘now’
    causes us to make inconsistent decisions. Science calls this phenomenon
    hyperbolic discounting. Put plainly, the closer a reward is, the higher our
    ‘emotional interest rate’ rises and the more we are willing to give up in exchange
    for it. The majority of economists have not yet grasped that we respond so
    subjectively and inconsistently to interest rates. Their models still depend on
    constant interest rates and are correspondingly questionable.

    Hyperbolic discounting, the fact that immediacy magnetises us, is a remnant of


    our animal past. Animals will never turn down an instant reward in order to attain

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