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May 27th, 2011

Time Discounting_Interesting

via a couple of times a week or so email from Productivity501

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There is a psychological phenomenon known as time discounting. Basically, it means that a desired result in the future is perceived as less valuable than one in the present. For example, if you allow people to choose from being paid an amount in one year as opposed to being paid a smaller amount now, they will settle for a much smaller payment right now than they will in the future. There has been some research done on this and scientists found that a $100 payment in 12 months is just as attractive as $68 right now for the average person. This means that on average, people will discount the value of a gain made in one year by 32% over how they would value the gain made immediately.

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Time discounting applies to areas other than money as well. In particular it effects the way we perceive our efforts in the area of time management and organization. For example, spending half a day organizing your work space will give you benefits in the future, but it has a present cost. Because of time discounting, you are likely to underestimate the amount of benefit being organized will give you in the future. Another task that is 31% less beneficial, but with immediate results will likely appear to be more attractive.

Time discounting explains some of the reasons we procrastinate. Working on something that isn’t due for 2 weeks often has a lower perceived benefit than doing something much less important right now. This explains why it is sometimes easier to spend an evening watching television instead of preparing for a presentation that is coming up in a few weeks.
Just being aware of time discounting can be a big benefit. If you realize that you are likely to underestimate the value of future gains, you can compensate in your planning. Another possibility is to assign a “value” metric to each of your tasks. If you can do this ranking from a third person perspective and think about the value of the task and not when it needs to occur, it will give you better insight into its actual benefit.

Reference:
Individual Differences in the Use of Time Management Mechanics and in Time Discounting” in Individual Differences Research, Vol. 4 No. 3, pp. 194-207

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