The Psychological Trap That’s Keeping You From Making Smart Career Choices
By understanding ‘temporal discounting,’ you can learn to make better decisions
Would you rather have one apple today or two apples tomorrow?
When faced with this choice, you’d likely have to think a bit. You’d start pondering how much you like apples, how hungry you are right now, and what your current refrigerator situation is looking like. But what if I offered you this choice: Would you rather have one apple in a year, or two apples in a year and one day? Now that one is obvious.
The premise is identical: Wait one additional day, and get twice as many apples. So why is it that one of these choices feels difficult, while the other feels easy? The answer lies in a psychological concept called temporal discounting, which, when you really understand it, can have a great impact on your career — and your entire life.
Our judgment is skewed by time
Temporal discounting means that when you weigh the value of different rewards, you take into account the matter of time. We’re willing to take a discount on a future reward if we can receive it earlier. But it becomes a problem when we let the discount derail what we really want.
The Nobel Prize winner Richard Thaler studied the phenomenon in 1981. He told a group of students to imagine this hypothetical scenario: They just won the lottery, but they could take home more money if they waited. He wanted to know how much money the students would want if they had to wait a month, a year, or even 10 years to receive it.
Thaler found that the amount of the initial reward made a difference. For example, if the students could take home $15 right now, they wanted a payout of $60 if they had to wait a year. That’s a 400% increase. But if the initial reward was $3,000, they only asked for 33% more for having to wait 12 months. With regard to time, our reasoning capabilities fall apart.
While Thaler believed these judgmental errors don’t matter much in the short term, they can have a “pronounced impact” on a 10-year time frame. When we make similar judgment errors when making career decisions, we can end up looking back…