The insights of behavioral economics help us explain behavior that is familiar, and frustrating, to us all. Last week we posted an entry about how to increase productivity in the workplace. Today, I will discuss the heart of the problem brought up in that entry — why do we procrastinate to begin with? Traditional economics assumes that we are all rational actors; that is, we always act to increase our utility. But anyone who has put off a major project until the night before it was due only to have to spend a painful night scrambling to create a worse product than you are capable of knows this isn’t true. Same goes for other hurtful behavior, such as smoking or not working out.
procrastinate. Just Do It.
In a nutshell, behavioral economists have found we put most value on what our current self is doing. You, right, now, are the most important factor when making any decision. Current costs and benefits are weighed most heavily; future costs and benefits are considered less. That means that we put off doing unpleasant things because we overweight the pain it will cost us in the first period. We assume that in the next period, tomorrow, usually, the pain will be less and therefore we will do whatever it is we have to do. Lo and behold, when the next day comes around, we now overweight the cost of performing the task today. And so we wait until tomorrow, when we think it will cost us less. And so on, until there are no time periods left, and you’re up all night drinking Amp and cursing.
We also overweight current pleasure. This is part of why we procrastinate — we think that the fun we will have today watching TV instead of programming will be so much greater than the pleasure the same program will give us the next day. Turns out that the next day “It’s Always Sunny in Philadelphia” is just as funny as it was the day before.
So what is the relevance of present-biased preferences to the aspiring CEO? Winners don’t put off for tomorrow what can be done today. Whether in real life, or in a management simulation such as the CEO Game, time is money. But how can you prevent something that research finds, over and over again, is part of how we, as irrational actors, function? Firstly, knowing is half the battle. Being aware of the implicit decisions you make when putting something off and making real, hard decisions about what things will actually make you happier can help. Secondly, you can use something called a commitment device. A commitment device is anything that increases the cost of procrastination. One effective way is to have to pay out to a third party when you procrastinate — stickk.com helps you create your own commitment contracts. For instance, you can be forced to donate $10 to your least-favorite charity every day you put off an assignment. Try these tips at work or in a serious game and thank the behavioral economists for the success that will come!
The CEO Game.
