Why does this matter? Well, making progress toward our goals is all about balancing short-term and long-term rewards, and clearly prioritizing our time and attention toward what matters most to us.
For example, most people understand the benefits of long-term investing. By leveraging compounding returns, like Warren Buffett, it’s possible to build wealth, even if each incremental investment is small. In most cases, the rational thing to do is to adopt a slow and steady approach to investing.
Of course, no one is purely rational, which is why so many of us (myself certainly included) make suboptimal decisions, whether it be what to eat at lunch, or how to invest a windfall of unexpected cash. We’re all affected by cognitive biases that lead us astray. While we all prefer big rewards over smaller ones, most of us have an even stronger preference for present rewards over future ones—even when the future ones are much bigger. This concept, or cognitive bias, is called “hyperbolic discounting.” In short, the farther away a reward is in the future, the smaller the immediate motivation to achieve it.
Because it’s hard to stay focused on the long term, objectives and transformations that take long periods of time to cultivate often remain out of reach.
