Hyperbolic Discounting

Tools for reaching your health & fitness goals

Today’s post is focused on health & wellness. I will be talking about hyperbolic discounting, its impact on our daily behaviors, and how we counteract the negative impacts which can result.

Hyperbolic Discounting is a Behavioral Economics Model for capturing many compulsive types of behaviors. Behaviors that are negative in the present, in relation to what our long-term selves need. Most of what I'm talking about today is based on the teachings of David Laibson from Harvard as presented in his 1997 paper “Golden eggs and Hyperbolic Discounting". But credit for developing this theory should be given also to George Ainslie, from the early 80's. Interestingly, what Ainsley discovered is that people would instead take a smaller benefit now over a more significant benefit in the future because we discount the value of future benefits. It’s just human nature. We would rather have money to spend today than save money for our retirement in 40 years. Research conducted by Ainsley was carried out as follows: He offered study participants $50 now or $100 in 6 months. Of course, most participants selected the $50 now. But if they were given the option of $50 in 3 months or $100 in 9 months, they would almost always pick the $100 in 9 months. What is the difference? There is still a 6-month gap between the two points of payout. They are the same scenario, just shifted 3 months into the future. This is an example of hyperbolic discounting. We value the present more than the future in almost every situation and decision. Therefore, more people would take the $50 now versus the $100 in the future. But when both possible payouts are in the future, we discount them similarly and, therefore, would be more willing to wait a little bit longer to get the higher payout. It's like saying, well, if I'm going to have to wait 3 months to get the $50, yeah, what's the difference in waiting another 6 months to get the $100 payout? I'll just wait and get the $100. Delayed outcomes are discounted in value. Back to that prior example, people see the $50 now as more valuable than the $100 in 6 months because of the hyperbolic discounting in our perception of the future reward. The future outcome is discounted in value by nearly all humans. Now, to a degree, hyperbolic discounting makes sense. We don't know for sure if we can trust that there will be a payout in the future, so we are motivated to take the smaller payout today versus the larger possible payout in the future. It's a bit dark, but it is a legitimate thought that people carry: I'll spend my money today instead of investing in the future because I could be dead tomorrow. Truly, in most cases, this is an irrational thought, and we can depend on the payout in the future, actually, in most circumstances. Some would theorize that this mental way of looking at situations goes back to our evolutionary roots. Back in cavepeople days, we had to focus on survival in the moment, and therefore, decisions were based on instant gratification and immediate need, and not much thought was given to the future. At that stage of evolutionary development it certainly made sense to focus on the here and now over the future. But then we developed agriculture, civilizations, and technology and moved into a world where the future is much more reliable, less scary, and more predictable. Hence, we need to stop discounting the future and stop investing so many resources into the here and now, and instead shift our decision-making to be more future-focused. At its core, hyperbolic discounting is procrastination, but there still is so much more to it; it is an in-depth, mathematical-based study of procrastination. As with so many things in life, if we understand why we do something, it becomes a lot easier to change our behavior. Hyperbolic discounting not only helps us understand why we procrastinate but it gives us formulas to prevent it from happening in the future. This is a deep subject again because it is mathematically based. There is a whole lot to this, and I will do my best to keep it simple and comprehensible, but for those who enjoy these deeper topics, I encourage you to go out and do some more research and exploration on your own and learn more about this concept. Learn how to apply the formulas and run your calculations on your behavior. Use that to assist you in making future decisions, prioritize your time, and optimize your schedules. There are links below to aid your research. If nothing else, just glance at the formula for Hyperbolic Discounting in link #2 below, pages 4 & 5. It will make you cry, either tears of joy at its beauty if you’re a math geek or tears of pain if you’re math-phobic.

So why do we need to know about hyperbolic discounting? Why do we procrastinate? The simple answer is that we discount the importance of the future over and over and over again. Pretty much every day, every one of us makes a decision that is detrimental to our future selves. We eat something we shouldn’t; we spend money on something we should not, we say something that harms our future self, and we constantly take actions that feel good now and even may seem right but are proven to be damaging to our future selves. We experience emotions only in the present, and we are not good at anticipating the emotions we will feel in the future. Therefore the emotions that we feel today are heavily influential on our choices. We feel stressed, worried, or anxious about something today, which drives our decision-making process, even if our choices today are contrary to the needs of our future selves. We apply Hyperbolic Discounting not only over weeks, months, and years, but often, we struggle to consider our future selves just a few hours into the future. An example, you are stressed out about a final exam at school right now today. That stress leads you to binge eat for a couple of hours. Not only are you adding unneeded pounds that could potentially harm your future self in a few months, but you wake up the following day, just hours later, with a food hangover, and you are even less ready to take that final exam now. Your emotional state in the moment leads you to make a decision. You said to yourself, "Eating will make me feel better, or I've earned this.” You discounted the way it would impact you in the future, both short and long-term. You did not take into consideration the physical and emotional state that you would be feeling in the future as a result of the decision you made today. That is human nature; we do it constantly. Then, the other side of the coin here is when we do not make a decision or take action today, and we put it off until tomorrow, or the more classic view of procrastination. What happens there is we look at our circumstances today and the way we are feeling and our emotional and mental state, and then we say, I'm going to take this task, and I'm going to put it off until tomorrow. What we discount is how we're going to feel tomorrow. We misjudge our state of mind in the future. We say to ourselves I'm too stressed to tackle that today. I'm not emotionally stable enough to take that on today; I'm not focused enough to complete that today. So we put it off until tomorrow, but we discount the likelihood that we will still be in a very similar mental state 24 hours later. So tomorrow comes, and we run another optimization calculation, and we say, you know, I’m going to take that task, and I'm going to put it off one more day. And then day three comes along and it gets put off again and again and again and we never accomplish the task. We see this with things like retirement savings, addressing climate change and physical fitness. It's reflected in both personal as well as large-scale societal decisions. We discount the reality that who we are, really doesn’t change much over time, for most people. If you are unmotivated to do something today, you likely will be just as unmotivated tomorrow. You aren’t going to the motivation store tomorrow morning to buy a 12-pack of drive and self-confidence, so it’s not ok to put off that task. We discount the fact that our future emotional state will likely remain rather stable. We suffer from Optimism and Confirmation Bias which tells us, “I’ll be better tomorrow,” or “I’ll be more driven tomorrow,” but it rarely happens.

Now, again, Hyperbolic Discounting is an actual mathematical formula. I'm not going to dive too deeply into that; it's a fascinating formula, and it's just amazing in its ability to capture human behavior in a mathematical equation to me. I love that about this model, but obviously, it is not conducive to this format to try and do math problems, so I'll focus today on the implications of the model and how it can be used to our benefit. For those who care to know, most human beings have a discount rate of 20%, simply meaning that most of us, about 70% of the population, discount the importance of the future by about 20%. Some people in studies have been found to discount as high as 50%, estimated at around 15 - 17% of the population. You know those people, right? The ones who are just so carefree and just really don't seem to give any thought to the future whatsoever, and you look at their behavior and their decision-making process, and you can see they absolutely live for the moment and just give no thought to the future consequences of the actions they are taking today. Then another small group, maybe 10% or so of the population, has a much lower discount rate, maybe as low as 5%, maybe even less, and those are the people you know who are phenomenally consistent, disciplined to an insane level, who just get everything done all the time on time. The opposite extreme of those carefree types of people, but not very many of us fall into that category either.

At its core, what this model does, is it takes into consideration the feelings we are experiencing in the present that drive us to make decisions that are contrary to the well-being of our future selves. Right now, we are feeling things, experiencing emotions, and under stress or pressure, and those factors will often cause us to make decisions in the present that harm the status of our future selves. When we think about our future selves, we can't imagine the emotions and feelings that we will be experiencing at that future point in time, so it isn’t easy to make decisions now that are intended to make our future selves feel better. Additionally, what the mathematics of this model do is that the further out into the future we try to forecast, the hazier it becomes. What I mean by that is the further into the future we try to think about our future selves, the less effective we are at it. I can make a pretty good estimate of how I'm going to feel tomorrow because I know what my schedule is going to be. I know what appointments I have. I have a pretty good idea of what stresses I will be under, what the weather will be like, what I’m going to wear, and all sorts of factors can be considered that might impact my mood. I can predict tomorrow pretty well, but if I need to predict my future self 20 years from now, that is far more difficult. I can't say for sure where I'll be living, I can't say for sure what will be happening with my kids and grandkids, I can't say for sure that I'll still be married, I can't say that I'll still be employed or will I have retired, I don't know any of those factors when I'm trying to think about myself in 20 years. This model takes into account the reality of that fact, that the further into the future we try to think of, the more inaccurately our assessment of the future becomes and, thus, as we try to change our behavior in the present to impact our future selves we are less and less likely to do it when we're trying to benefit a future self that is far into the future and just so hard to imagine. If you knew you were going to retire next month and you had no money saved up for that retirement, then you are likely not to spend any excess funds between now and next month; you should just save all the money you possibly can. You’ll take on odd jobs over the next month and do everything possible to obtain more funds to help you through that retirement. But when your retirement is 40 years from now, then it's just far too distant to imagine that day coming. So you spend your money today on something frivolous instead of investing it into your retirement plan for your future self in 40 years. This Hyperbolic Discounting model captures the fact that the further out into the future we are trying to plan for the less likely we are actually to do it. We discount the need to change our present behavior to benefit our future selves, and we not only discount it, but we discount it far more than ever could be justified, thus the reference, hyperbolic discounting.

Another element of this model is time inconsistency. This is the concept that we do not behave as we predict over time. Procrastination is when we tell ourselves I'm optimizing for time today, so I will put this activity off until tomorrow then tomorrow arrives, and once again, you tell yourself I'm optimizing for time today, I'm going to put that activity off an additional day, and then it just repeats day after day after day you continue to push off that particular activity it's not optimization it is procrastination, that is the time inconsistency. That is the challenge here, thinking about a present action we can take that will benefit our future self tomorrow or next week or maybe even a year from now, that often can be accomplished, but the further out into the future we go the more precipitously the drop in the ability to change our present behavior to benefit our future self. Time Inconsistency is what allows us to convert this into a mathematical formula. This formula shows us that, put as simply as I can, most of us only have the drive, the willpower, the capacity to alter our present behavior to benefit our future selves when we are considering our future self in the very short term, like a day, a week, maybe a month or two out into the future, beyond that time frame of a few months, we break down and lose that ability to change our present behavior for the benefit of our future selves. Again, this is all represented in a mathematical formula in the notes below, just for you to take a glance at, and for those who might be more mathematically inclined, I will also put a video link in the notes for you to check out as well. It is an utterly fascinating formula when you understand how it represents the way our brains discount the future self.

Okay, enough math talk; now let's discuss how this applies to our health and fitness.

The first place to begin is by not fighting the reality of hyperbolic discounting but instead, using it, owning it, and bending it to our will. We do this by setting short-term goals. Work in 90-day time frames or less. For example, we are approaching spring break season, and many of you will have vacation plans that will motivate you to be in better shape for a beach trip or pool party. It is much easier to make decisions now that will impact your future self on vacation because the time frame that we are dealing with is relatively short. Your vacation will happen roughly 90 days from now, and that is a much easier process for us to minimize the hyperbolic discounting that occurs in our brains over that short window. Comparatively, if you were thinking about a school reunion, which you want to show up to in great physical condition, but that isn't happening for two more years, that long time frame will assuredly be subjected to hyperbolic discounting. We would be far less likely to behave today in ways that will benefit our future self two years from now as we enter that school reunion. We discount the importance of our choices today and their impact on our future state two years from now. More simply put, we just say to ourselves, oh, there’s plenty of time; I can splurge a little bit today on my eating, I can skip a few workouts, and there’s more than enough time to catch up, and it will all be okay. Of course, hyperbolic discounting teaches us that we will repeat that same thought process day after day, week after week, until before you know it, that school reunion has arrived, and we are still 40 lbs heavier than we wanted to be. So, working in short-term increments helps us prevent, or at least minimize, hyperbolic discounting. It is great to have long-term goals but there need to be shorter sequences built in to carry us to that long-term goal successfully. We all know that, right? Hyperbolic Discounting is why we need smaller steps, taking us toward a bigger goal. Maybe you started the year with a goal of losing 75 lbs by the end of the year; that's awesome, but then take that objective and break it down into smaller, roughly 90-day steps with specific endpoints. So let me play that example I just gave out for you. You started January 1st 2025 with an objective of losing 75 lbs by the end of the year. Then, you begin by setting a commitment point within the first 90 days. Generally, when you begin a weight loss strategy, you can knock off a higher amount of pounds in the early stages primarily just because of shedding excess water weight, so you set a target of 20 lbs in the first 90 days. Then, you give yourself the critical endpoint. an example would be you arrange to have lunch with a friend or family member, someone you haven't seen in a while and who you don't have the opportunity to get together with often but whose opinion you value, someone who you want to view you in a positive light. This will create positive pressure to help you achieve that 20 lb weight loss objective and not discount your actions. You can remind yourself to skip that dessert because you have a meeting with your friend or family member in just a few weeks. You need to get up early and get in that workout because your lunch date is approaching quickly. Or you schedule a vacation or short getaway that would again motivate you to be in better physical shape before leaving town. Since it's only a few weeks away, it will be far easier to stick to your eating plan, workout routines, and minimize or eliminate the hyperbolic discounting effect. So let's say that you are successful, you drop the 20 lbs, you have lunch with that friend or family member, they notice your improvements in health, you feel good about their recognition and their support, that's phenomenal, and now we just move on to the next 90-day window, pretty much where we are right now in time, where you could start looking at summer vacation planning. Maybe a trip in June, something that would involve water, or maybe getting out in a swimsuit. Now you really have the motivation ramped up to continue on this path of improved health and weight loss. You book your vacation trip for mid-June, the reservations are made, flights are booked, and now you're locked in, which again will help you to make present decisions that will benefit your future self because we are working in these shorter time windows. Then, continue to do the same thing over and over again, working in 90-day increments or less. I've been implementing this strategy for years. I live in an area where our local school districts always hold spring break in mid-March. That has always been my first critical endpoint of each year. No matter what we do for spring break, I always make sure that it enables me to get into the water in some way, and therefore, I am motivated to look my best out in that swimsuit. Then it shifts to a Memorial Day weekend and/or June activity that motivates me to be in even better shape than I was in March. And then we shift over into something where I'm targeting the generally late August-September time frame most often that centers around a Labor Day weekend getaway. And then of course we move into the holidays and generally, for me I shift to a bulking phase through the holidays. It’s much more practical when it comes to managing your eating plan, but I'll be seeing lots of friends and family, of course, during the holidays, and I still want to be in a good physical condition, which certainly can still be achieved while bulking. So roughly every 90 days I have some type of event or meeting or friend and family reunion that keeps me focused on my goals, helping me make good present decisions that will benefit my future self, and reduces or eliminates the hyperbolic discounting effect.

Set up a similar structure for yourself and you will experience significantly more success.

I’m not perfect. I need these writings to help improve as much as any of you readers. Last Sunday evening, I paid my son to run to Taco Bell and buy me a Taco 12 pack and I ate 8 of them. It was totally emotionally driven. I was having a terrible day and I lost all concern for my future self. The me that woke up Monday morning was pretty mad at me from Sunday night. We’ve all been there, right? We will never eliminate Hyperbolic Discounting from our natures, but hopefully, all this talk and awareness will help you manage and minimize hyperbolic discounting in your life.

So that is hyperbolic discounting , what it is, why it works the way it does, what it means in detail, how we work with it. Hyperbolic discounting is a reality that will always exist , so just finding ways to minimize its damaging effects and even bend it to our benefit , that's the point of today's post. I hope it really helps you out. Now go crush your workout!

1. https://psycnet.apa.org/record/1993-97149-003

2. https://www.picoeconomics.org/Articles/APA.pdf