So why do people save the best option for last? When reflecting to this decision you might’ve had thoughts like you’ll save the fancy choice until the end so that I can look forward to it that is you wanted to have a feeling of anticipation.

Anticipation is an extremely powerful motivator for decisions

Anticipated gains lead people to purchase lottery tickets that have astronomically low chances of winning. Anticipated regret pushes people away from risky investments even when those investments are strongly in our interest and feelings of anticipation can override the normal decrease in value that comes with temporal discount.

But, there is also some dread involved, that feeling you get when you know that something bad will happen. You know it’s coming it’s going to be unpleasant you can’t avoid it and you just want it over with. For many people an effective way to elicit dread is to think about unpleasant upcoming experience, say that you’re going to have to give a speech to a large audience.

Even though dread seems more like a feeling that an object for scientific study behavioral economists and neuroscientists have sought to understand causes. One approach in the laboratory involves the delivery of moderate electric shocks. If you are in one of these experiments the researchers would bring you into the laboratory sit you down in a comfortable chair and then attach an electric lead to your forearm.

They then give you a set of calibration shocks to determine your maximum pain tolerance, the strongest shock you can bear. Then they give you choices between pairs of socks that differ in their strength and timing, say between 10% and 90% of your maximum pain tolerance and with delays between one and 30 seconds. This might sound like an unpleasant sort of experiment to be in and it is. Participants find these shocks very aversive.

The fear factor

Even though they are being paid for being in the study they still want to minimize her discomfort throughout so you might think that people want to put off the aversive shocks as long as possible or at the least they just choose whatever option gives them the least pain overall. But that’s not what happens.

Many people actually prefer to get a larger shock immediately instead of waiting a long time for a smaller shock such behavior runs exactly opposite that of standard temporal discounting models. The neural economist Greg Berns used functional MRI to examine brain responses what people were awaiting these sorts of delayed shocks. He found that while people waited for the upcoming shocks those people who showed the most read also showed an anticipatory response in brain regions that process pain.

It was as if their brain simulated the upcoming negative experience that waiting period, that feeling of dread is itself aversive people actually find the experience of dread sufficiently aversive that they’re willing to take their lumps now so they don’t have to wait and dread any longer.

Better intertemporal decisions

Because of all these phenomena temporal discounting preference reversal sequence effects and dread choices that involve time seem very hard and that’s true most of the time. We do make mistakes we are inefficient we are impatient in the face of temptation. It’s a wonder that any of us have adequately plan for next year’s expenses much less our distant retirements, but there are surprisingly simple things that we can do to make better intertemporal decisions.

The first of these is straightforward expand your time horizon, don’t think about consequences occurring a single moment per day but is unfolding over a long window of time. This is particularly important for long-term decisions like saving for retirement. In one study researchers gave different information for groups of employees who are planning for their retirement.

One group viewed a distribution of annual returns from bond funds and for stock funds and most people allocated their retirement funds to bonds. You can imagine why, the stock funds were far more variable year-to-year than the bond funds. But the other group of employees saw an estimated 30 year returns for the same bond funds and stock funds and 90% of them allocated their retirement money to stocks.

Over a 30 year period, which is much closer to the normal working lifetime, the variability associated with stocks washes out and the overall returns are much higher. By expanding your time horizon will be more accurate and how you envision an uncertain future.

A second rule requires a little more work but only a little change your reference point. Think not about delay but acceleration. Suppose you have a choice between a $50 gift certificate that you can spend today or $75 gift certificate that you can spend in three months. The natural reference point for that decision is today, people naturally think about the second reward is being delayed from the present, you are giving up the opportunity for reward over that period of delay.

But you can change your reference point. Let me break apart that same decision and presented in a different manner. First you receive a $75 gift certificate that you can spend in three months. it’s yours if you want, but you also have the option to sacrifice $25 of that gift certificate leaving $50, if you would like to spin the gift certificate today. Do you want to make that sacrifice?

When the same decision is framed as an acceleration, giving up money to get a reward sooner, people tend to become much more patient they don’t want to give up some of their reward in order to receive it sooner. This phenomenon which is called asymmetric discounting provides a pretty simple tool for making more patience decisions. Just use the most patient outcome as your reference point and frame the sooner option as being a sacrifice not a gain.

The final rule requires the most effort but is potentially the most helpful: think about your future self. I don’t mean that you should just acknowledge that you have a future or that you should remember that you’ll have expenses later that you don’t have now. I mean something much more literal: think about your future self as a person and consider that future self needs as explicitly as you can.

If you are say 40 years old and planning for retirement you may find this difficult or even aversive, you still think of yourself as young and vibrant and you don’t know what sorts of activities your retirement age self will seek out. Suppose you receive a windfall inheritance how do you way say the purchase of a used sports car gets a contribution to your retirement savings?

At a minimum make the trade-offs between the present and the future very explicit. Let’s see I can either spend that $30,000 now investing zero in my retirement or I can spend zero dollars now and have about $100,000 to spend a retirement assuming a relatively conservative investment. It turns out the just thinking about those zeros investing zero dollars and my retirement makes people more patient

But, ideally you should think about your future self, try to bring to mind what your future self might enjoy it’s easy to do that for your current self seal have to work extra hard to make things fair for your future self. What activities might you like? where did you go? What different hobbies might you explore? Whom could you help and how?

Construct a story for your future so it doesn’t have to be perfect just think about your future self as a person and think about the moral responsibility to do right by your future self. After all there’s no one on whom your future depends more than you.

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