Why we make wrong decisions – instant gratification

One of the things that I learned while dealing with professional marketeers is that instant gratification is very important for any successful product promotion. But I often wonder why people prefer instant gratification.  

It reminds me of my sons' childhood days when we would struggle in shopping malls to resist their desire to buy toys. They would demand and nag and at one point, start to cry refusing all our efforts of negotiations.

At times we would even promise to get them something better just to manage the situation at hand. I am pretty sure that most parents have had similar experiences although there may be an exceptional few who may have managed their children without the usual tantrums. But what amuses me is that most of these children haven't changed much in their behaviour even as adults. You don't agree? Let's find out.

In the last article, we discussed errors in comparison. The problem of shifting comparisons is even more difficult when these choices are arrayed over time. Psychologists and behavioural economists have discovered that people use two simple rules: more is better than less, and now is better than later. Let me take three tests to explain!

Test 1: You can have Tk 6,000 now or Tk 5,000 now. Simple, you all answered it right. All of us prefer more money as we understand more is better than less.

Test 2: You can have Tk 6,000 today or Tk 6,000 after a month. Again, an easy decision, because we all know that now is better than later.

Test 3: You can have Tk 5,000 now or Tk 6,000 after a month. Now, this has you thinking for a moment as two rules are conflicting.

Most of you may have preferred the instant benefit of Tk 5,000. Why? By and large, people are enormously impatient. Popular research also suggests the same.

Let's play with people's impatience here. Let's assume you can have Tk 5,000 after 12 months or alternatively Tk 6,000 after 13 months. Most of you would be happy to wait and grab Tk 6,000 after 13 months. The simple logic here is: if one can wait 12 months, he/she can also wait 13 months.

The moment we bring a conflict into the two rules, dropping a variable, unexpectedly it gives rise to a dynamic contradiction, bewildering everyone. We suddenly find people opting to leave with Tk 5,000 instead of waiting a month unless if the wait time is reduced.

Let's understand it better. Let's visualise a father with a height of six feet and his young daughter with a height of five feet, standing side by side.

From a close distance, the height difference will be apparent. Seen from a hundred metres, the difference will be less visible and from further afar, the height difference will not be visible at all. But that does not mean that the actual height difference is not there. You can see Tk 5,000 now more clearly than Tk 6,000 after a month!

Humans are the best creatures on earth and yet we have psychological inconsistencies which lead us to make wrong decisions. As humans, we underestimate the odds of our future pains and overestimate the value of our present pleasures. And this is the key reason behind biased decisions.

The author is a telecom and management expert.