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 and realizing we’ve taken the completely wrong path.
Overcome the trap
In his article “Climbing the wrong hill,” Chris Dixon, a partner at the venture-capital firm Andreessen Horowitz, tries to answer the question, “How can smart, ambitious people stay working in an area where they have no long-term ambitions?” He describes an investment banker who hates his job and has no interest in pursuing finance in the long run. The banker decides to quit so he can launch his own startup, but after he gives his notice, his bosses are able to lure him into staying with more pay and responsibility — in other words, a shorter-term promise leading to a less-than-optimal career choice.
“People tend to systematically overvalue near term over long term rewards,” Dixon writes. “This effect seems to be even stronger in more ambitious people. Their ambition seems to make it hard for them to forgo the nearby upward step.”
Our career choices are some of the most important ones we’ll ever make, and yet, because their rewards are far away — we appreciate the arc of our careers mostly in hindsight — we don’t make good calculations. We let the immediate next move blind us to the bigger picture of what makes the most sense.
So what’s the solution? Well, acknowledging the problem is a start. In math, hill climbing is a problem where, in an unknown terrain with hills of varying heights, you try to find and scale the highest one. It’s easiest to go with the simplest algorithm: “Take me one step in the next-highest direction.” However, that will lead you up the closest mountain, not necessarily the highest. The only way to reach your goal is to follow this rule: As soon as you discover the highest hill, you must immediately abandon the hill you’re currently on.
Think of the highest hill as the thing you value most in your career. Maybe you want to write great stories or bring your invention to life or be your own boss. Abandoning your current hill can be difficult. As Dixon writes, “The lure of the current hill is strong. There is a natural human tendency to make the next step an upward one.”
For example, as a writer, I sometimes feel tempted by ghostwriting job offers, which often pay a lot of money. But since I’m trying to build my own reputation as a writer and author, I have to remind myself that ghostwriting will not lead me up the hill I truly want to climb, and so I always reject those offers, even if, financially, I’m incurring a short-term loss.
Committing to climbing the right hill is hard. Sometimes, you’ll have to start all over again from the very bottom. But it’s the only way to overcome the trap set by temporal discounting. Don’t overestimate today’s bonus check when you compare it to your long-term career satisfaction, and don’t underestimate what you can do with enough time if you’re focused on something you truly care about.
Don’t discount your future.