Discounting the Future

by | Jan 9, 2019


A few years ago when my daughter Claire was in high school she was procrastinating on starting a school project. We admonished her to get started and warned how bad it would be to wait until the last minute. She replied “nope, not going to start it – I’m going to let future Claire worry about the project.” While we thought that her decision was ill-advised, she did seem to fully appreciate the concept of temporal discounting.

Temporal discounting is how we weigh current vs. future benefits. In economics, discounting relates to how we value future payments. For example, we may prefer $100 now vs. $200 in the future. Of course, if it is $100 today vs. $200 tomorrow, most everyone will wait the single day for the add’l $100 (unless we have a very pressing need today). Even though it makes a lot of sense to also prefer $200 in a year vs. $100 today, many people will find it hard to wait and instead take the $100 today. Interestingly, studies have found that our preferences are not linear. We may take $100 today vs. $200 in a year, but when asked if we’d like $100 in nine years vs. $200 in 10 years, most everyone will wait the additional year. The first example – $100 today vs. $200 in a year is not rational. The second example, $200 in 10 years vs. $100 in nine years is rational.

Thus, we often break our views of the future into (a) the immediate and (b) the somewhat distant. Our brains have evolved to greatly prefer immediate rewards. This makes sense as we evolved as a species during times when if you didn’t get something now, there might not be a future at all.

This biological preference for immediate rewards leads us to discount the future too greatly. Economist Tyler Cowen in his book Stubborn Attachments: A Vision for a Society Free, Prosperous, and Responsible Individuals, notes that “many people cannot fully grasp that when the future comes, it will be as real as the present is right now.

In her excellent book, Thinking in Bets: Making Smarter Decisions When you Don’t Have All the Facts, by former professional poker player Annie Duke, she relays the story of “Night Jerry” which is similar to the story above of daughter Claire:

For all the scientific research on the battle between our immediate desires and long-term goals, a particularly succinct explanation comes from Jerry Seinfeld, on why he doesn’t get enough sleep: “I stay up late at night because I’m Night Guy. Night Guy wants to stay up late. ‘What about getting up after five hours of sleep?’ ‘That’s Morning Guy’s problem. That’s not my problem. I’m Night Guy. I stay up as late as I want.’ So you get up in the morning: you’re exhausted, you’re groggy. ‘Oooh, I hate that Night Guy.’ See, Night Guy always screws Morning Guy.

We can all relate to the Night Guy vs. Morning Guy example. What can we do about it?

In Thinking in Bets, Ms. Duke suggests adopting the mindset of a time-traveler. When making decisions, mentally time travel to the future and observe your future self. Hypothetically bringing your future self into the decision helps you discount the future less.

For example, assume you’ve had a nice meal at a restaurant and you are full. The waiter brings by the dessert tray and the flour-less chocolate cake looks amazing. Your present self really craves that cake. Should you get it? Time-travel. Have your future self (next day self, next week self, or next year self) weigh in. Does your future self want you to have that cake? Similarly, you’ve had a few drinks. Now you want another one. Should you? Allow your tomorrow morning self to weigh in. Your tomorrow self definitely doesn’t think you should have another drink!

I’ve been trying out this time-traveling mental exercise since I read Thinking in Bets. I’ve found it interesting and beneficial with respect to my choices. Try it out.

In his book, Mr. Cowen goes further and suggests that we should be giving more weight to the very distant future, both individually and as a society. He makes the case that we tend to only focus on the present and near future as a society and we are not doing enough thinking about how to preserve our species and civilization into the distant future. He makes and interesting point that the “markets do not reflect the preferences of currently unborn individuals . . . [and thus] future generations cannot contract in today’s markets.” Yet, it is probable that the future people generations in the future would express different preferences for how our society is using resources. As a society, as we think about taxes, debt, the environment and the like, using Ms. Duke’s idea of time traveling is interesting. Should we imagine future generations at the table when making decisions? How would our decisions differ if our great-great grandchildren were sitting next to us whispering in our ears?


  1. One reason people discount the future is that linear extrapolations of what the future looks like have often not held up, because of changes and innovations not known in the present. At the beginning of the 20th century, New York City extrapolated than in the future horse manure would fill the streets up to the second floor of buildings. Obviously they didn’t anticipate the coming of the automobile. When I was in middle school in the early 1970s, scientists were making dire predictions about global cooling, not global warming. It doesn’t mean they aren’t right now, but this does contribute to the skeptism some have about the current global warming concerns.

    • Great points!

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