246. Past, Present, and Future Biases (Refreshed Episode)

Welcome to episode 246 of the Brainy.

Business Understanding the Psychology of why People Buy. Today's episode is all about present and future biases.

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You are listening to the Brainy Business Podcast where we dig into the psychology of why people buy and help you incorporate behavioral economics into your business, making it more brain friendly. Now, here's your host, Melina Palmer.

Hello. Hello everyone.

My name is Melina Palmer and I want to welcome you to the Brainy Business Podcast. Today's episode is another refresh from that series I did on all the biases back in 2019. Two weeks ago, on episode 242, we had the one on the numbers biases called Math is Hard and this week is all about time. It focuses on the past and the future and how we don't look at them in the same way and how that can impact our behavior. It isn't always the same and our preferences definitely change when we're looking forward versus backward and how this changes the way we value things and so much more. I chose to refresh this episode today because this coming Friday, Dr. Dolly Chug is on the show to talk about her new book, A A More Just Future. And we talk specifically about how the way we look backward isn't the same as when we look forward and how that impacts our likelihood to take action, even when we think we would absolutely do something in the moment because the past and future don't impact our behavior in the same way. It can really be problematic when we're looking at history, whether it's current or very far in the past, and using that to help right the wrongs of the past and the present. As you listen today, I encourage you to consider how the past, present and future are different for you. Think of a time where you were outraged by something in the moment and said either aloud or in your head that you were absolutely going to do or say something and never did. Why is that? When you remember that incident, do you feel as upset about it today as you did then? What if you heard that same thing was going to happen tomorrow or a week from now? What might you do to prevent it? Why do the past and future feel different and how can this knowledge change the way you support other humans? That's just a little food for thought as you go into this episode and get ready for that conversation with Dolly on Friday. Now, one last thing before we jump into the episode. As always, I want to remind you that there's a lot of great stuff waiting for you in the show notes, including links to past episodes, many that weren't out at the time this first aired three years ago, as well as related books and articles. It's all waiting for you in those show notes for the episode, which are found within the app you're listening to and at the brainy business.com246 all right, let's talk about present versus future biases. As a note, this episode's also going to get into risk because that's rooted in the difference in how we think about today versus tomorrow.

It seems fitting to start with present bias. People want their payoffs now, so when considering trade offs that are between two points in the future, humans tend to place a greater weight on the date that's closer to now. This is very closely tied to my favorite concept, time discounting or hyperbolic time discounting, or as I like to call it, the I'll start Monday effect. People want immediate payoffs, so they tend to make decisions today that their future self would not be happy about or would prefer not to have made, even though the reasoning is the same. One great example of this would be that when planning meals for the coming week, 74% of people chose fruit. When the food was for the current day, 70% chose chocolate. I call this the I'll start Monday effect because of all the times we've said we'll start our diet or exercise plan or saving money or quit smoking or whatever on Monday, but we're recommitting a future self which our brain sees as a different person. Don't worry, there will be a whole episode about this soon. It's easy to commit future Melina to do things, but when it comes time for me to actually get up at 5am to run, it's easier to hit snooze, which benefits present me even though it's at future me's expense. Due to diversification or projection bias, we may think our future self will want more variety than we really want or will use, which is why you might pack three books for a one week trip or pack eight outfits for three days. I may or may not do this. This probably also ties in optimism bias when your diversification makes you think you'll want options that are virtuous, like reading business books but also bring magazines or whatever your vice books may be and you only end up reading those ones and completely ignore the virtuous things you would aspire to read because you didn't actually need to bring them with you, but because you had this picture of who could be or who you would want to be or all the things you might want to do on vacation or on that business trip or whatever it is. You bring a wide assortment of options that you don't really need because you think your future self will want the choices, but then it's going to revert and wear the same sneakers over and over again. Or just read the, you know, whatever magazine you like. I personally read Real simple and HGTV magazine. I don't know what you read. You should let me know on social media, give me a shout out on Twitter. Twitter where I'm at the brainy biz and let me know your favorite magazine or sort of guilty pleasure. So maybe you would be scanning through Instagram instead of actually reading the book you brought. I may have done that before. Anyway, Due to impact bias, we overestimate the duration of intensity of the impact of how we will feel in the future. So if you lost a job or a client today, you may think you will feel awful forever and make bad decisions today based on the assumption that that emotion will maintain its intensity longer than it actually will. So try not to make big decisions when something really good or really bad happens, as your choices about the future may be clouded. We are also victim to projection bias, which means we overestimate how much our future self will share the preferences we have today, which can lead to less than optimal choices. This might be why you buy into a program today that you think you may need in the future or will want to invest time in but will not care about six months from now. Or as I learned from my Uber driver this morning, why 11% of people get their tattoos removed at some point One reason some people might get tattoos in the first place is because of reactance. This is the urge to rebel and do the opposite of what someone wants you to do, to hold on to some form of control and power. If you're having visions of a small child, I'm definitely thinking about a tantrum My almost 3 year old was pitching today, yesterday, the day before. This is something that, you know, children do all the time. And remember our subconscious brains are basically just small children, so those biases stick with us forever. The thing you might want to ask yourself if you've ever done this or if you might be doing this is to say to prove a point. Now you might be making a choice that will negatively impact your future self and know that employees or children may be doing this as well. One thing that I don't think has negatively impacted my life, but is an interesting example of this that I always sort of reflect on is I have somehow managed. I don't. I guess it was came out in 2014. So in five years I have managed to never see the movie Frozen and I've never heard the entire song of Let It Go. And yes, I have a three year old girl in the house and yes, I've been to Disneyland since Frozen has come out and actually they've all seen Frozen, but I've managed to not do so. And I feel like now it's sort of a point of pride and I'm rebelling to where I would go out of my way to not watch it, even though I would probably like it. I like the actors that are in it and I love Disney movies. But now it's sort of this control piece to say that I've never done it and I'm rebelling against I don't even know what. But so far I have managed to not see that and I have chosen not to do so for whatever reason. But I continue to rebel against whomever. Anyway, this might lead to. I'm looking at my notes which says this might lead to irrational escalation. I kind of went off on a tangent to talk about Frozen. I suppose it's an irrational escalation that I am now at this point and I sort of refuse to watch a movie and I have no idea why. But this is also known as the sunk cost fallacy, where people will keep spending and justify pouring money into a bad prior investment even though evidence shows it's bad. This is throwing more money at the problem to try and fix it and recoup the costs and win. And it almost never works. Someone addicted to gambling may lose $5,000 and then take out another $5,000 to try to win their way out of the and then another 10 and so on instead of just accepting the loss and moving on. In business, if you invest in something that doesn't pan out, your brain is biased and hardwired towards you putting more money into fixing this. Is that loss aversion at play instead of just scrapping it and moving on with what might be a better investment and accept that that was a learning opportunity and that you may be paid, you know, five, ten, however many thousands of dollars or whatever it is to learn a lesson. And maybe the lesson was that you don't have time to do this project right now, or that it isn't really a great investment for you, or that your customers don't like or want this thing. The lesson learned doesn't have to be what you intended going in. And hopefully that sort of reasoning can help you to overcome that bias so you don't just keep pouring money into a sieve because that never going to be beneficial for you. I talked about willpower and ego depletion in episode 32 about the overwhelmed brain and the studies by Texas A and M on the battery versus snowball brain. In case you don't remember or haven't listened to that episode yet. It's essentially, you know, if you make a good choice in the morning to go for a run and then the cupcakes come around the office at 2 o' clock and you justify your choice to eat a cupcake because you ran in the morning and you earned it, your willpower is a battery which is depleted and you're giving in to the whim of your present minded subconscious at the expense of your future self. Whereas if you say no to that cupcake because you ran and you don't want those extra calories to undo what you had done and you know how terrible it was to run for that amount of time or whatever, and it's a snowball which keeps you on track. As your brain gets overwhelmed, your subconscious is more likely to take the reins, meaning you will make more battery and present focused decisions instead of snowball future focused decisions. An important bias to know when thinking about future decisions is the hot cold empathy gap, which finds that in a cold state it's much easier to commit yourself or say how you will behave, but when the time comes, you may behave much differently. For example, people say they want to save for retirement and that they'll increase their allocation when they get a raise. But when left to their own devices, they likely will not do it if it's on them if they're tasked with doing so. However, if they commit themselves while in a cold state and the process becomes automatic, they can combat the time discounting and this hot cold empathy gap by removing their bias self from the equation when they're in a hot state. So in that case, and the study that was done is if you ask somebody today, when you get raises in the future, do you want a certain percentage of that increase to go toward your retirement? And you can say yes. And I've signed this sheet of paper saying that this will happen until I opt myself out. So in the cold state, you know it's a good idea. You commit yourself so that when you're in a hot state and you realize, hey, this extra money is going to be coming to me, you don't have the option to let that hot brain, that hot self, take over and make a bad decision about the present and how you want that money today and the things you could get or could pay off or what you could do with it and let it sit and stay and honor the commitment that you made for your future self way back when you were in the cold state. There will definitely be episodes about the hot, cold empathy gap as well as, of course, I talked about time discounting already and this next one, which is the reverse, which is the cold to hot empathy gap. One study had smokers in either a hot state or a cold state making predictions about how much they would be likely to smoke and their cravings at a future session. Those who were in the cold state underestimated how much they would value smoking in the next session. So if you've just finished smoking, you're in a cold state, you don't have a craving anymore. You underestimate how much you're going to want to smoke in the future. So this can help to explain why someone trying to quit would place themselves in a situation where they're at high risk of slipping up and smoking. So going out with friends or hanging at someone's house while they smoke, or going to places where you would usually smoke yourself. And this is also why people would underestimate their likelihood of becoming addicted in general in all sorts of situations. And of course, this extends beyond addiction. This extends beyond smoking. That's just an example that I'm giving to you here. But to know that people think that when you're in that cold state, you're not going to require or need or want, whatever the thing is, as much as you actually will, when your body chemistry has changed and you're now in this hot state and your subconscious wants whatever reward it's trying to get, you think you can logic your way out of it, but you know you can't. I mean, you can sometimes, but it's really difficult. All right, now that we finished that, let's talk a little bit about losses and risk. I won't talk too much about loss aversion, since that was the focus of episode nine. But for those of you who have not yet listened, people are impacted more by losses than gains. And it takes double the joy felt by a gain to equal the pain that's felt by a loss. Similarly, we also have dread aversion. And just like loss aversion, dread results in double the emotional impact of savoring. So it takes twice as much savoring of a positive moment to equal the emotional toll that is felt by dread. While it may seem like we don't like to dread, the human brain will often get stuck and into this fear based state and get addicted to dread and things. And it is a painful sort of emotion and a state to be in. It is still providing some sort of a reward for the brain. And the reward is more than the emotional impact, the reward and benefit of savoring something good. So what you would want to keep in mind from this is knowing that while you may consciously want to come out of dreading something in the future, as long as your subconscious is still getting some sort of a reward or a benefit from the physical act of dreading, you would need a lot of extra savoring and positive benefit and something to enjoy in the moment to combat the dread at least twice as much to help you kind of get out of that space. So whether it's, you know, employees overcoming something or fearing something that's coming to get them to think about the present moment and savoring and enjoying the now, the now needs to be a lot more impactful than the thing that they're dreading in the future to kind of jog out of that and get out of the space. So you have to make more efforts for today to make the benefit more real and get them out of that future spot. As I discussed before in the same episode on Loss Aversion, humans are biased toward maintaining the status quo. We like things to say the same and are not big fans of change. We tend to beef up the status quo and definitely defend it more than may be warranted. Because of system justification and due to normaly bias and not wanting to think about change, we may refuse to plan for or have the proper reaction to a disaster which has never happened before, even if it's completely justified and could happen and there's evidence to support its possibility. Because of the endowment effect, we overvalue things we own even when we came by them arbitrarily. So if I gave half of the listeners an envelope with $2 cash inside and the other half a $2 lottery ticket, when asked if they would like to trade, most people will not because they've placed a higher value on the item they have. Those with the cash will see the lottery ticket as a potential worthless piece of paper, while those with the lottery ticket in hand see the possibility of it being a winner and not wanting to lose out on that potential, even though the likelihood of winning is very small and their future self may be disappointed when they do not win and realize they could have had $2 in cash. Now, as we think about reducing risks, we do not really like risk and we'll avoid it when we can. Due to a zero risk bias, we humans prefer to reduce a small risk down to nothing, then we would like to take a bigger reduction in a larger risk. So we would rather have a sure thing even if it reduces the loss from 1% to zero, then take a 50% chance of losing down to 40 or 45%. That is, having that sure thing just feels better to our brain. And we would want to take the benefit now instead of waiting later. This is the if you give a kid a marshmallow and say, if you wait two minutes, then you can have two marshmallows, what if it was that you had to wait a day or a year or a week or three months or whatever? That ends up being that the risk of waiting longer is not beneficial. And if you were to say, well, instead of waiting one week, what if you only waited two days? It's not enough of a benefit as to going from, you know, waiting two minutes to just taking the marshmallow now. And because of risk compensation or the Peltzman effect, we're more likely to take a greater risk when our perceived safety increases. The basic example here is because there's more perceived safety achieved by driving with a seatbelt on, people may actually drive worse and pay less attention than if they were not forced or mandated to wear a seat belt. So when you think you are more safe, when something has been put in place that makes you feel safer, you're more likely to take risks in other areas. I don't know if this is necessarily in a rebelling way on behalf of the brain, but you sort of just accept that that is something that's providing you safety, and so you don't take these other areas into account. So potentially wearing a seat belt knowing you have airbags means you are more likely to text and drive than if you were in a car where you didn't. They're all, you know, important things to keep in mind. And one does not by any means outweigh the other, but it's the way our brains make decisions. So where are other areas where you feel like you're really safe in your business, where you are comfortable and so you're more likely to take a risk somewhere else that might not be warranted or justified or even tied together at all. They have no impact on each other, and you're taking unnecessary risks because of a true or Perceived safety somewhere else, much like the sunk cost fallacy I talked about earlier in the episode. Because of the pseudo certainty effect, we're more likely to make choices that avoid risk if the expected outcome is a good one, but seek out a risk in an attempt to avoid a negative outcome. And this could lead to the ostrich effect, which is where you ignore an obviously negative situation. Sort of what I don't know can't hurt me. And people who don't check their credit score because they're afraid of how bad it could be. For example, knowing or not knowing does not change the score. I guess that's like Schrodinger's credit score. And knowing can help relieve dread, as we already talked about, but because that dread is providing some sort of a reward. And the thing that you would savor in knowing what the score is or the benefit that you get today is maybe not enough to help overcome that dread aversion. And so you may ostrich instead. In the first episode on the series, I talked about all the ways we tend to think of ourselves as the greatest beings in the world and that we are uniquely talented special snowflakes. There are also biases when thinking about the future where we can get to the opposite of this, and it's tied to dread and fear of regret and status quo bias. In many ways, because we don't want to change, we may ostrich and avoid the potential negative even at our own personal cost. A predisposition toward viewing the past in a positive way, which is rosy retrospection that I talked about last week and the future in a negative way, is called declinism. And the opposite of optimism bias, which we talked about on episode 34, is of course the pessimism bias, which is for some people, especially those suffering from depression, to overestimate the likelihood of negative things happening to them in the future, which can impact the way they behave today. This can create a self fulfilling prophecy and not necessarily in a way the future self would appreciate. A zero sum bias is where you think that the only way one person gains is at the expense of another. This is also called a zero sum game. This can impact business in so many ways. And as you've heard me talk about on the podcast, very often, I'm all about looking for the win win for one person to succeed. It does not mean everyone else has to lose or fail. But if you're a victim of the zero sum bias, it may feel that way and where you're always, you know, in it for number one. But that's not necessarily the way that.

It has to be.

Negativity bias or the negativity effect is when it's easier for us to remember unpleasant memories over positive memories. Those individuals may be victim to the worse than average effect where we believe we're worse at difficult tasks than others are. And of course, you do not need to have a pessimism bias or a negativity bias to feel this way. Everyone feels this from time to time, and it can be extremely common when learning a new task. Kids learning to read may say or think they're terrible and will never get it and are worse than everyone else, but it isn't true because reading is hard for everyone to learn, but that's not necessarily what they see every day. And so the people who are teaching them find it very easy and so it makes them feel like they're worse and not doing as well as everyone else and they're never going to get it. This can come into play in business and social media has definitely made it so we compare our real selves, possibly in our worst states, to everyone else's best selves. I talked about this in episode 13 on mindset and readjusting your anchor, so definitely check that one out if this is something that is really resonating with you. One of my favorite quotes is to not compare your bloopers with everyone else's highlight reel and know that everyone feels the same way from time to time. If you're starting to feel really negative, also listen to the episode on personal biases about how awesome you are and try to pump yourself up. Also remember that a mood begets more of the same mood. As I talked about in that optimism bias episode. Acting like a confident, optimistic person can create the benefits as if you are confident and optimistic. Smiling makes you happier, even if it's just looking like you're smiling and actually holding a pencil between your teeth, which might feel awkward and is not very comfortable, but it's still putting your actual the muscles of your face into the position of a smile. And that can be enough to make your brain think that you're smiling and you're happy when you know the rules of the game. All these biases I've been talking about. It can be easier than you think to trick your brain into doing more in your own favor and use these biases to your advantage so you can make decisions today that you'll appreciate tomorrow or help get yourself out of a negative spiral. You have the power to change the decisions you make today, right now, and Use these future biases as fuel for things that you can do well and think about how important future you is. Try to bring your future into today and think about making future you real to you today so that you can have stronger decisions. As I said when I actually closed out last week's episode, and as I said a little bit on today's episode, this conundrum between the future and the present is one of my favorite areas of study and research within the brain. And I've done some of my own studies in this area. It is something I find fascinating and what I truly strive to help people to understand because I think this is where we as humans misstep more often than really any of the other bias groups that we're a victim to and where it can have the most impact. This is where we overeat or have too much sugar and chai tea lattes or caffeine. As I'm sitting here with my, you know, coffee on my desk and where we don't exercise or we don't save as much or we don't do any of the things that we know that we want, we say we want to do them, but it's so difficult to do and overcome today. So this is an area that I know I will continue to study throughout my life and career. And if this is something that you have struggled with or if there's an area that I haven't addressed here yet and that you have questions about and you want future episodes to be talking about, when I do get into, you know, the hot, cold empathy gap and time discounting and all of that, please.

Do reach out to me.

You can always put your questions or thoughts out on social media where you can find me as the brainy biz or you can send an email to melinathebrainybusiness.com if it's an area that is, that feels more personal and you don't want to put it on social media, I can appreciate that. And I promise that if you don't want names or anything referenced in an episode, I could keep you anonymous if I'm answering a question there in the episode, but able to answer you without calling you out directly if you didn't want that. So I always want to be able to have these episodes catered so that they're answering your questions and helping all of us to be stronger, better people, our best selves today and building a life that we will love tomorrow.

So what got your brain buzzing as you learned about our present and future biases today? For me, I love that this episode talks about time discounting. Surprise, surprise. I know, as I mentioned in the episode, it's one of my favorite concepts and it does have its own dedicated episode number 51, which was not out when this came out, and it is linked for you in the show notes here today when it's that's a benefit of refreshing, right? So the way we think about ourselves differently in the future and how that impacts our decision making has always been fascinating to me, which is why I dedicated my research for my thesis to this. Whether it's saving money like I looked into, or exercising or dieting or putting too many things on the to do list, time discounting is such a big hurdle for us. But knowing about it and how it combines with Bike shedding, Planning Fallacy and Optimism Bias episodes I have linked for you in the show Notes is the first step in tackling this yes, it'll still get you sometimes. We are human after all, but you can train yourself to be less susceptible to it, especially when it counts. And as I mentioned at the beginning of the show, my conversation with Dr. Dolly Chug, which comes out in just a couple days in episode 247, is about her new book, A More Just Future, and in our conversation we talk about how the past feels further away and how that impacts our behavior. It's so fascinating, and I wanted to get your brain buzzing on that a.

Little bit as you get ready for.

That episode in a couple days. Now that you've listened to this one, here are those questions again that I asked when we started. Think of a time where you were outraged by something in the moment and said either aloud or in your head, that you were absolutely going to do or say something and never did. Why is that? When you remember that incident, do you feel as upset about it today as you did when it happened? What if you heard that the same thing was going to happen tomorrow or a week from now? What might you do to prevent it? Why do the past and future feel different? And how can this knowledge change the way you support other humans? As always, share your thoughts with me on social media. You can find me as the Brainy bizarre pretty much everywhere, and as Melina Palmer on LinkedIn. Okay, before we close things out, don't forget about the show notes, which have related past episodes like those on Time Discounting Bike Shedding and Planning Fallacy, as well as related books including dollies and articles. It's all waiting for you in the show notes at the brainy business.com246 and just like that that episode 246 on past and future biases is done. Join me Friday for a brand new episode when I talk to Dr. Dolly Chug to discuss her new book, A More Just Future. It's going to be a lot of fun. You don't want to miss it. Until then, thanks again for listening and learning with me. And remember to be thoughtful.

Thank you for listening to the Brainy Business Podcast. Molina offers virtual strategy sessions, workshops and other services to help businesses be more brain friendly. For more free resources, visit thebrainybusiness. Com.