About Intertemporal Discounting
This episode covers the mechanism of intertemporal discounting, the effects on our lives, and how to overcome it.
Related articles
Podcast Transcript
Good morning, everybody. And hello to my fellow earthlings. Welcome to the second episode of the DART cast. The podcast to help you claim back your life and thrive peak performance levels. It’s another beautiful sunny Friday morning here in Switzerland. This is Marc, and I’m your host on your journey to peak performance.
Now without further ado nor any advertising, let’s just jump into it. I hope you enjoy.
Let me start with thanking you for the feedback and the encouragements. I got Adrienn, and she writes on linked in. I’ve read your article yesterday about why we fail. And I must say I can resonate at every level. It was very interesting to read about the decision disconnect. And she goes on. Like, I am also thinking we often don’t execute because we self sabotage our capabilities and don’t believe enough in ourselves to be capable of doing things that are bigger than us.
That’s what I call the Mount Everest syndrome. And we are going to talk about it in one of the next episodes on this very podcast. Then we got another feedback from Fabienne and Fabienne says, I caught myself thinking I should go back to the gym. It was all well planned, but I have a surgery coming up. Well, Fabienne, let me tell you this over the past, about 30 years since I am doing sports and I’m living a pretty active life.
There was not a single year, I have to admit were not something happened that got me out of the rhythm. And I do relate absolutely how difficult it is to get back in. So Fabienne, if you’re listening to this all encouragements from my side, just get into its, hop into your gym stuff and head all over to the gym just for doing like 10 minutes or so, just to get back into the that’s really, really important.
In the last episode, I talked about the decision disconnect, which occurs when you have a disconnect between the point in time, when you decide on doing something and the point in time, when you have to execute on your decision. So we found that the brain isn’t two different States. You have a shift in priorities.
You have certainly a different focus of attention and a different emotional state.
So I provided four strategies to overcome the self-sabotaging and I encourage you strongly to listen to the first episode in order to understand a bit more about how to overcome that decision disconnect.
In 1972, Stanford psychologist, Walter Mischel offered 16 boys and 16 girls in the age range of three years and six months to five years and eight months her marshmallow. He also told them that they could have two marshmallows. If they just waited for 15 minutes alone in a room, not eating a marshmallow, just setting in front of them on a desk.
So far for the over simplified and partially twisted story told, well, who hasn’t heard about the marshmallow experiment by now, in reality, there was a prior experiment with animal cookies and pretzels involved. The marshmallow experiment was eventually conducted in three different experiments and marshmallows were only part of the story.
There were oppressors involved as well as toys available to allow the kids distracting themselves from the object of desire.
This discrepancy between what really happened and what is told is a good example of over-simplification or model building that is part of human nature. I however, think that many issues, conflicts, and generally speaking, erroneous behaviors that we observe in the modern world are a consequence of inappropriate generalization.
Simplification and such model building one could argue that simplification is a necessary process and well seen from the angle of evolutionary benefit. I would agree it is a required mechanism to cope with the complexity and unpredictability of our world nowadays more than ever. However, Simplification of complexity that result in plainly wrong conclusions and drives undesired and erroneous behavior.
In my view, poses a huge risk to the individual and to the society as a whole,
But let’s close this parentheses and return to the original topic, which were marshmallows. The basic principle of the marshmallow experiments was always the same. Get a small reward now, or a larger reward. Later. Environmental conditions were changed between the three experiments with differences and procedures.
More specifically, the children were given various opportunities or none to distract their attention from the object of desire. Some with toys, some with mental tasks. Now, what do you think kids did as you may have either heard by now or suspected some did eat the marshmallow within the time span provided.
Sam did not eat it. And a rather waited for the larger award at the end of the 15 minutes. But why imagine yourself, given the choice between a hundred dollars in your pocket right now, or 120 and four weeks, you would either take the 100 or wait for four weeks to walk off with a 120. And your choice depends on what a follow up study was performed in 2011.
It involved part of the original 90, 72 test subjects then in their mid forties and neuro functional imaging. Part of the conclusion of that study reads and I quote there as the prefrontal cortex differentiated between no go and go trials to a greater extent in Heidi layers. The ventral striatum showed exaggerated recruitment in low D layers, thus were systems to temptation as measured originally by the delay of gratification.
Task is a relatively stable individual. The real difference that predicts re liable biases in frontal . Circuitries that integrate motivators and control processes. End of quote. Translated into plain English. That means people’s ability to delay the reward is based on the activity levels of the prefrontal cortex and the ventral striatum in their brains.
The prefrontal cortex is the brain region behind your forehead, responsible for mediating intellectual and executed functions. The ventral striatum is part of the limbic system. Located at the core of the brain and is involved in the processes of reward, motivation and decision making.
Now unsurprisingly people who perform better at delaying rewards expose a higher activity level in the prefrontal cortex. As that brain region is involved in inhibiting impulses originating in the limbic system.
Arguably, this is a highly simplified representation of hugely complex and only partially understood brain processes. May the neuroscientists forgive now, how does this translate into real life? As a matter of fact, in our civilized educated and highly complex life immediately, ward is as cars for resource.
We work to be paid at the end of the week or the month. We learn every day for six months to pass a language XOM we expose ourselves to countless varieties of impediments and fuck-ups four months to deliver a project, just to get a handshake and a 200 word mention in the company journal. At the end, we sweat every day in the gym, on the bike, on the treadmill.
And you can’t put your favorite object of self inflicted pain here. To lose all that super fluid body fat gram by gram over months and months. Yes. Immediately reward is rare and sometimes reward is even invisible. Following a supposedly healthy lifestyle, running, hiking, working out, eating healthy, staying away from alcohol and other drugs, limiting or eliminating coffee, another fancy drug and chocolate.
Meditating journaling, conscious breathing yoga for what reward, staying healthy and living longer useless. If you’re hit by a bus tomorrow,
The lack of reward translates equally to the consequences or threats, similar to the rewards that lose perceived value. The further they are in the future threats lose their fear factor. We all know that smoking significantly increases the risk of cancer. Not varying a seatbelt, significantly increases the risk of dying when involved in a car accident.
Not completing the presentation today will fuck up your work plan for the rest of the week. Not preparing the requested report with the required diligence will result in not only an unhappy bus, but also in an inefficient marketing strategy. Now you may think. Yeah, but, well, he’s talking about procrastination.
Sorry. Wrong answer. I am talking about not procrastination, but rather about one, if not the key reason for procrastination, that is the disconnect between current priorities due to the relative loss of significance of the outcome. Behavioral scientists have coined a name for this phenomenon and they call it intertemporal discounting.
Much research has been done about this topic. And it’s known by a number of different names by now, for example, a war discounting or hyperbolic discounting at the end, it all means the same. What you will get later is much less relevant than what you get right away. Most of the studies I have came across are rooted in the field of behavioral science or behavioral economics, and the focused on the reward discounting aspect.
What I get next year is less valuable than what I get today. However, throughout many years of coaching, I noticed repeatedly and important other facet of the same pattern.
That’s what I call lost as counting taken to the extreme and a pretty a Tory one. I want to refer to the loss of your own life, your own death. I know that sounds a bit very extreme and strange, but we all know that one day will be our last one. Don’t we.
We afford hurt, intelligent, kidding quotes, such as Lyft every day as if it was your last one. Why would I spend every single day contemplating my life? That’s what I would do on my knowingly last day. However, every single time I take willfully and with an explicit consent, a client on the journey to her last day and let her comp template her life.
I get a Holy fuck moment that contemplation rarely results in a peaceful state of mind filled with accomplishment and satisfaction where people would say something like there was awesome and now I’m ready to pass on more often, they go like, crap, I didn’t live fully. I did this and that. And it wasn’t in line with my values.
I should have done this or that more often. I should have taken better care of my spouse, close friends, kids. I should have had deeper relationships. I should have reckless in short. It demonstrates the perceived gap between the true desires and the actual actions, the actual lifestyle. Interestingly enough.
I have not once heard somebody say, Oh fuck, I have not bought that new Apple watch, or I never had a Bugatti. Veyron they’ll as a huge gap between what we think is important in the present and what people regret when we truly face death. Suddenly we realize that life is not about having owning things, even though we spend significant lifetime chasing precisely these things.
In short ignoring the fact that intertemporal discounting who were discounting lost discounting and death discounting is continuously distracting us from what we would consider relevant at the end will lead to drama. When it’s too late to remedy. Now, what can we do to navigate around this trap?
Let me refer to this quote, let us prepare our minds as if we’d come to the very end of life. Let us postpone nothing. Let us balance lives books each day. The one who puts the finishing touches on the life each day is never short of time. Quote, ed. This is Seneca urging in his smaller letters to Lucillius.
And the stoic school. This is called memento. Mori. Remember that you must die.
I started without knowing how it’s called Nora dated back to the Romans, this practice, following the near Delhi shooting. I survived in Syria when I was just 14 years old. Remember, you must die is a thought that I’m telling myself frequently. And I asked myself the question, how would I feel about this?
Looking back from my death bed. Well, clearly this is not a call to crutch in every single decision we take and every single action by placing them into the frame of what is contributing to our lives since humanity, it is however a call to ask ourselves whether we are living our lives as consciously and considered as this most likely single instance of our experience here on earth deserves.
It is also a call to, we think our divergence from rationally and well-planned courses of action. When it comes to going to the gym, finishing the difficult presentation, responding the challenging phone call or email that we have placed into our calendars in a lucid moment, and now spontaneously skipping them because we suddenly feel like it.
It is a call to exert control of our emotional and shortsighted desires that a met immediately award by browsing through the eighth hundredth cat photo or fail army posts on Facebook. It is also a call to we think our practice of discipline and ownership of our own lives. Memento, Mori.
I hope you enjoy it. The second episode of the dot cast and encourage you to head over to the website, marckilian.com. Find me on LinkedIn. Find me on Facebook and just subscribe to the podcast. Subscribe to the newsletter to receive high value information.
As always, I am looking forward to receive your feedback and well hear you next time.