Present Bias

Present bias is the tendency to rather settle for a smaller present reward than to wait for a larger future reward, in a trade-off situation. It describes the trend of overvaluing immediate rewards, while putting less worth in long-term consequences.

present bias. People of all ages and walks of life discount the future, favoring the rewards of today over the rewards of tomorrow. We would rather have $100 this month than $150 next month. We choose the chocolate cake and the new outfit now and face the gym and the credit card bill later. This isn’t a twentysomething tendency. It’s a human tendency, one that underpins addiction, procrastination, health, oil consumption, and, yes, saving for retirement. It is often difficult to imagine and give weight to things that will happen down the line.

Present bias, the tendency to favor immediate rewards over larger, later rewards, is also known as hyperbolic discounting, present-orientedness, or time discounting. It’s a cognitive bias that influences our decisions, making us more likely to choose smaller, sooner rewards rather than waiting for larger, more significant ones in the future.

Hyperbolic Discounting: This term refers to the way we discount the value of future rewards. Our valuation of a future reward decreases rapidly as the delay increases, following a hyperbolic curve.

Present-Orientedness: This term emphasizes our tendency to focus more on the present moment and its immediate consequences, often at the expense of considering the long-term implications of our choices.

Time Discounting: Similar to hyperbolic discounting, this term highlights the tendency to undervalue future rewards compared to present ones.

These terms are often used interchangeably with present bias because they all describe the same underlying phenomenon of prioritizing immediate gratification over delayed benefits.