Friday, March 4, 2011

In which Doughnuts are Promised

Hello everyone,
Here are a few thoughts of mine as I’ve been working and studying the past couple days. It’s not super-organized, but I tried to make up for it with interesting examples.

Hyperbolic Discounting

Hyperbolic Discounting is an interesting and extremely common cognitive bias. Basically it has to do with how the temporal proximity of a reward or good changes its perceived value. One dollar today is worth more to you than two dollars next week, though mathematically computing inflation, the two dollars next week is the better deal.

So say we’re walking down the street, and we pass a Krispy Kreme shop. I run in, and come out with a doughnut. You want aforementioned doughnut, so I say, “Hey, tell you what, I can give you either one doughnut right now, or two donuts tomorrow.” You think about this. You come to some conclusions.
1. Donuts are good
2. Two donuts are better than one doughnut
3. But I want a doughnut now.

“Give me the doughnut now, and I will be happy!” you say seconds before biting into the delicious raspberry filled jelly doughnut.


We are once again walking down the street- no, let’s shake it up a little. We’re rollerblading down a hill, and I say “Hey, tell you what, I can give you either one doughnut in a year, or two doughnuts in a year and a day.” Now, you think me a little strange for planning doughnut -gifts a year ahead of time, but donuts are donuts. You think about this, and say “Of course I’ll take the two donuts. It’s just one day more.”

So in these two different cases, you were offered one doughnut at a specified time, or two donuts 24 hours after that specified time. It’s the same 24 hour difference, but your answer was different. What would happen if you waited the whole year, and I asked you once again: one doughnut today or two tomorrow? Your answer might actually change.
Why? Hyperbolic discounting.

We as humans process a lot of information. Our brains are incredibly complex, but we’re not all like Thufir Hawat, calculating exact utility values and possible outcomes. We guess, we use heuristics, rule of thumb, approximations. And for our brain, the two future-donuts are vague and maybe-ish, whereas that doughnut is right there in front of me. A lot could happen between now and tomorrow. I could skip the country to avoid my doughnut-debt. Krispy Kreme could catch on fire. The world might end. To your brain, one doughnut now is a doughnut I can eat. Two imaginary doughnuts tomorrow might never even happen. Therefore, a now-doughnut is worth more than two maybe-doughnuts. A bird in the hand is worth two in the bush.

But consciously, we know that contracts will be fulfilled, two dollars tomorrow is worth more than one today, and that we can count on Joseph to keep his promise and deliver two donuts. That conscious knowledge doesn’t do anything to the little voice whispering “delicious donuts...” that makes us pick the short term gain over the long term gain.

So you might ask, “Why did I say I’d wait the year and a day in the second offer then? Wasn’t I waiting longer?” In that case, there’s no immediate benefit available, only a long wait and a slightly longer wait. It’s when the payoff is immediate that we cave in to the temptation of short-term gain. When we look at things in the long run, we often make better choices. When we look only at what we want here and now, we tend to make more shortsighted ones.

You may think my example is unrealistic (the me giving free donuts part, not the me performing manipulative psychological experiments on you). Want some real life examples? Then think about what happens whenever you get something from a vending machine. You could buy that snickers bar for 25 cents cheaper at a store, but that would mean waiting. To you in that moment, whether from hunger, lack of time, excess of quarters, whatever the case may be, you have just said “I am willing to pay 25 cents more to have this now, instead of when I go to the store.” The wait of two hours, a day, or whatever it may be has just been given a price: 25 cents.
This is why vending machines and convenience stores can sell the same quality (or even lower quality) stuff for higher prices. Convenience.
Bigger example: credit cards or loans. In order to have something I want or need now, I’m willing to pay more later.

The concept of Delay of Gratification plays into this as well. Delayed gratification is how able you are to put off immediate desires or needs, in order to get something you want. A lot of really good things are require a lot of work before the reward, compared to immediate pleasures are instantaneous. We all want to be healthy and active, and not have cancer. But the great physique, feeling of well-being, and lowered cancer risks are all distant future rewards and therefore uncertain, and they require work and sacrifice. Sleeping in another hour on Saturday morning is an immediate, certain reward.

This hyperbolic discounting is also why many people pass up the opportunity to continue schooling, even though there’s a much bigger payoff at the end of it. The 12$ an hour now is more appealing than the idea of going through years of school and work for a better paycheck in the future. When we’re at the supermarket thinking about getting ice cream, it’s a lot easier to say no and stick to our diet than it is when somebody plops a bowl in front of us and says eat up. Ice cream now has a lot more oomph than ice cream in 6 hours when I finish shopping and making dinner.

So, I just gave a very rambly and mixed up account of hyperbolic discounting, delay of gratification, and I even threw in some utility value and motivation theories in as well.

What’s the point?

The things that really matter in life are not instantaneous. Getting an education, a career, staying healthy, strengthening relationships, making a difference in others’ lives, etc. They require work, sacrifice, and good choices. If you want to reach a goal, plan ahead. Remind yourself often of why you want to reach that goal, and how you’re going to do it. Make your decisions ahead of time, so you’re not pressured by the temptation of short term gains in the moment. Don’t trade long term happiness for temporary enjoyment.

So that when you want to stop studying and leave your essay unfinished, you’ll remember what you really want is to succeed in school and learn, not goof off for a few hours and then suffer come exam time.
So that when you want to snap at a friend for messing up or letting you down, you’ll remember that what you really want is a long-lasting friendship, not a few minutes of angry venting.

When I look at all of you all, you’ve already shown so much preparation and self-control, by getting good grades, following your interests, and getting into college so you can work in the fields you love. You’ve all had incredible successes. Ruth, you’re graduating, Andrew, you’re already a writer for the Guilfordian, not to mention you're fulfilling a lifelong dream of going to Kenya! Adrianna, you have developed an amazing singing voice and are going to nursing school! Richard, you’re well on your way to being an awesome architect, and Johnny, you might not be in college quite yet, but getting Second in states takes an awful lot of delay of gratification. You’ve put hours upon hours of practice and training into wrestling, and it’s certainly paid off. Exercising self-control is how to get what you really want.

Looking at the New Testament, Christ was always trying to point his disciples towards the ultimate reward of eternal life. We’re promised an incredible blessing, and asked to do certain things to receive it. But it’s still hard, because the reward is delayed, it’s far off in the future. But it’s also certain, and worth far more than anything we sacrifice for it. Keep the long term goals of life in mind.

Matthew 6:19
19 Lay not up for yourselves treasures upon earth, where moth and rust doth corrupt, and where thieves break through and steal:
20 But lay up for yourselves treasures in heaven, where neither moth nor rust doth corrupt, and where thieves do not break through nor steal:
21 For where your treasure is, there will your heart be also.

And guys, for the record, I give you donuts all the time. I’m a veritable doughnut-gifter. ;)



  1. Whoa... I realized shortly after posting this how incredibly long it was. I should have done a word count.

  2. WOOOTTT!! I took time to read all this for the instant gratification of enjoying my brothers psychological insight to humanity while sacrificing time from the long term goal of AP Biology :P THANK YOU JOSEPH!