Daniel Goldstein: The battle between your present and future self

TL;DR

In this TED talk, the speaker discusses the concept of commitment devices and explores ways to change our relationship with our future self to encourage better financial decision-making.

Transcript

Do you remember the story of Odysseus and the Sirens from high school or junior high school? There was this hero, Odysseus, who's heading back home after the Trojan War. And he's standing on the deck of his ship, he's talking to his first mate, and he's saying, "Tomorrow, we will sail past those rocks, and on those rocks sit some beautiful women ca... Read More

Key Insights

• ✈️Commitment devices, like Odysseus tying himself to the mast, can help us resist temptation and make decisions that benefit our future selves.
• 💪Resisting temptation is difficult because our present selves are in control and our future selves are weak and not present to advocate for our long-term goals.
• 📉Many people struggle to achieve their goals because they lack self-discipline, not because their goals are physically impossible.
• 🔐Commitment devices can take power away from individuals and make them feel like they have no self-control.
• 🔗Commitment devices can also be easily bypassed or weaseled out of, leaving individuals feeling guilty or regretful.
• 💭Imagination and belief in our future selves are important in motivating us to make decisions that benefit our long-term financial well-being.
• 💸Saving for retirement is a classic example of a two selves problem, with our present selves focused on consumption and our future selves wanting us to save.
• 🌌Virtual reality and other tools can help individuals imagine their future selves and understand the impact of their current decisions on their financial future.

Questions & Answers

Q: What is the story of Odysseus and the Sirens?

Odysseus is a hero who is returning home after the Trojan War. He encounters the Sirens, beautiful women who sing an enchanting song that lures sailors to their deaths. Odysseus decides to hear the song for himself but takes precautions to protect his crew by having them plug their ears with wax and tie him to the mast of the ship.

Q: What is a commitment device?

A commitment device is a decision made with a cool head to bind oneself in order to avoid making regrettable decisions when one is in a more impulsive or emotional state. It is a way to balance the desires of the present self with the long-term goals of the future self.

Q: Why do we need commitment devices?

Resisting temptation can be difficult, and the battle between the present self and the future self is often unequal. The present self is in control and seeks immediate gratification, while the future self desires long-term benefits. Commitment devices level the playing field between the two, helping individuals stay on track with their goals and resist immediate temptations.

Q: What are some examples of commitment devices?

Some examples of commitment devices include tying oneself to a mast, locking away a credit card, not bringing junk food into the house, or unplugging the internet connection. These devices create barriers or restrictions that prevent individuals from giving in to immediate temptations, allowing them to focus on their long-term goals.

Q: What are some concerns about using commitment devices?

One concern is that using commitment devices can make individuals feel like they have no self-control, as it becomes a constant reminder of their lack of discipline. Another concern is that individuals can find ways to weasel out of their commitments, invalidating the purpose of the device. This can lead to self-criticism and frustration.

Summary & Key Takeaways

• The story of Odysseus and the Sirens highlights the concept of commitment devices, which are decisions made to prevent regrettable actions when one is overcome with temptation or a hot head.

• Commitment devices, such as tying oneself to a mast, help level the playing field between the present self and the future self, as the present self is often focused on immediate gratification while the future self wants long-term success.

• Using tools like virtual reality or simulations, individuals can better imagine and understand the consequences of their present actions on their future selves, encouraging them to make better financial decisions, such as saving for retirement.