Why do we think our current preferences will remain the same in the future?

The 

Projection Bias

, explained.

What is Projection Bias?

The projection bias is a self-forecasting error, where we overestimate how much our future selves will share the same beliefs, values and behaviors as our current selves, causing us to make short-sighted decisions.

Where this bias occurs

Imagine that you are starving and go to the grocery store to get some food. You might load up your cart with heaps of snacks: chips, chocolate, pizza, crackers. You get home, pop the pizza in the oven and start eating some other things you bought while it cooks. When the pizza is done, you realize you’re not hungry anymore. How can that be — you were starving! Now you have all this junk food that you don’t even want anymore.

That’s the projection bias at play. In this classic scenario, we predict how hungry we were going to be while we are in a hungry state, causing us to make decisions that do not consider that our future selves, once no longer hungry, would not feel the same. We project our current state of hunger into our predictions of how much we could eat later and as a result waste money and food. The popular phrase, “having eyes bigger than your stomach”, is really about our current vision for our future self being inaccurate.

Individual effects

The projection bias causes us to make decisions that are short-sighted and based on current emotions, beliefs and values that will not necessarily hold up in the long run. Optimal decision-making requires us to make predictions about our future tastes but often these predictions are based on the logic that we will continue, in the future, to feel the way we feel today. Unfortunately, that is often not the case.

We are unable to put ourselves in the emotional or visceral state of our future selves. This is also known as the “empathy gap”. We end up making decisions that will satisfy our current emotional state, such as eating a doughnut when hungry, but do not line up with our long-term goals, like trying to lose 5 pounds. Unfortunately, many of the decisions we make that involve the projection bias have to do with harmful behavior, such as over-indulging or trying harmful substances like cigarettes, thinking that our future selves will be able to resist addiction. The projection bias can easily lead to decisions we will later regret.

Systemic effects

Economical thinking rests on the idea that behavior can be explained by assuming that people have stable preferences and beliefs, and that their choices reflect those preferences and beliefs. Yet, if we all make decisions that are based on short-term tastes rather than long-term tastes, then that model, which is used in a number of fields, can be flawed.

The projection bias also surfaces in our interaction with other people. One of the reasons the bias comes about is because of the belief that our current ideas, feelings and values are accurate and appropriate, so not only will they remain stable, but that they must be shared by others too. The projection bias is therefore associated with the false-consensus bias, where we overestimate how much other people are like us and agree with us.

Why it happens

We have to make daily decisions by predicting our future preferences. These range from small decisions, such as what we might want to eat for dinner later, to much larger ones, like who we want to marry and spend the rest of our lives with. We have to look somewhere to find a rationale for these decisions, and we cannot ask our future selves how we feel.

 

As Loewenstein, O’Donoghue and Rabin, the economists who coined the term “projection bias”, suggested our current emotional states become the “anchoring point” for our tastes, behaviors and beliefs.1 Our brains like to use shortcuts, so when it is time to make a decision, these anchoring points are leveraged as references.

It is difficult to avoid the projection bias because we need anchoring points for our decisions, and present emotions have a great influence over our cognitive processes. When you are really thirsty, it is difficult to think of anything other than drinking water, so being aware of the projection bias does little to reduce its effect.

Why it is important

As various examples in this article have explained, the projection bias is embedded into many aspects of daily life. Emotions are powerful catalysts and can trigger undesirable behavior that has negative consequences on finances, health, or work productivity. An awareness of one of our intrinsic cognitive biases can help us make more rational decisions that are more likely to benefit us long-term, instead of being rash and acting on emotion alone.

Being aware of the projection bias is important because it is also used as a sales tactic to get people to spend money. Stores often play happy music, have aesthetically pleasing ambiances and have positive and high-spirited employees. These factors all go into creating a sense of happiness for the customer and putting them in a good mood. In our ‘good-vibe’ mood, we might purchase something that later, when we are back to a more ‘regular’ or neutral mood, we might regret.

Another example could be a ski resort offering you a 10% discount on an annual pass when people return their equipment at the end of using a day pass. They are banking on the projection bias; that, in the moment, we will overestimate how many times we will come skiing that year, because our current self had an enjoyable day of skiing. Later, when we are not in the same emotional state, we might realize that your future self does not value the ski pass as much as our past self did.

Since the projection bias also causes us to overestimate the degree to which people agree with us, awareness of the projection bias could also help us be more open-minded. Instead of assuming that our beliefs are correct and held by a majority of the population, we may seek out alternative opinions and widen our world-view.

How to avoid it

As emotional states are often overwhelming and supersede rational, logical decision-making (consider the popular phrase “blind with rage”), previous awareness of the projection bias cannot always help us in the present moment. However, being aware of the projection bias might help us avoid situations where we know the projection bias occurs, to avoid sub-optimal outcomes. Loewenstein, O’Donoghue and Rabin suggested the model of a “sophisticated projection bias” to describe these kinds of situations, using the example of a sophisticated grocery shopper who knows not to shop on an empty stomach because they are aware of the projection bias, either from experience or from knowledge of cognitive biases.1 Even though awareness of the projection bias alone cannot change our cognitive processes, it can lead to the implementation of certain rules, like not going grocery shopping on an empty stomach, that are useful in ensuring our short-term decisions lead to long-term happiness.

For example, consider that Jack wants to buy a car, which is a big financial decision. After reading this article and learning about the projection bias, Jack decides that he has to want the car for a year before he allows himself to buy it. In other words, he has to value the car more than the money it costs for a full year. Making a future prediction based on a year’s worth of wanting the car rather than a day’s worth of wanting the car improves his chances that his projections about his future self will be accurate, even though they still won’t be perfect.

Jack waiting to buy a car is an example of when we regularly make predictions about our future selves, instead of doing it once and assuming that prediction will stick. The day he first thought about buying the car, Jack might have just gotten a work promotion. However, six months later, he might realize the salary raise was not so great as to be able to change his spending habits. Making it a habit to regularly make future projections can help avoid the projection bias.

Additionally, since the projection bias is often caused by intense emotions, we can try to base our decisions on evidence to improve the likelihood that our preferences will be stable long-term. The evidence can come from experience, or it can come from facts such as knowing that in 2018, fewer than 1 in every 10 adult cigarette smokers in the U.S. were actually able to quit smoking,2 meaning that the odds are against us being able to resist the addictive nature of cigarettes.

How it all started

The projection bias, although only officially coined and researched in 2003 by Loewenstein, O’Donoghue and Rabin, has been under study in tangent with various other cognitive biases, such as the empathy gap and the false-consensus bias which have already been described for much longer.

Loewenstein, O’Donoghue and Rabin wanted to investigate the projection bias because they believed it “is important for many economic applications, and that it can provide an intuitive and parsimonious account for many phenomena that are otherwise difficult to explain.” The economic applications that they focused on were firstly, how people’s underestimation of habit-formation in spending leads to people spending too much in their early life not realising that it causes us to become habituated to higher consumption levels and wants to ‘consume’, or spend, more in later life. The second was how the projection bias leads to ill-guided purchases of durable goods, because we underestimate how much our future values will differ from our current values.

The weather

The projection bias often impacts our purchasing decisions. When making a purchase, we have to estimate how much utility we will derive from the good in the future. However, even something as simple as the weather is able to influence our predictions.

Meghan Busse, a professor of business strategy, along with a team of researchers, wanted to examine if weather conditions could activate the projection bias in a high-stakes environment: the car market.3 Cars are durable goods, meaning that we have to predict the future utility of the car when deciding to purchase.

Busse and her team looked at sales data from dealerships across the U.S. for both used and new vehicles, alongside weather data such as temperature, cloud cover and snowfall.

The researchers found that warmer weather leads to an increase in convertible sales, both in the warmer and drier summer months, or when there was an abnormal increase in temperature in winter months. This purchasing behavior is likely due to the projection bias, where because it is a sunny warm day, consumers predict that their future utility of a car like a convertible, suited for summer weather, is greater than it actually is.

A similar pattern was found for cold weather, with sales of four-wheel-drive vehicles increasing during cold and snowy weather. These vehicles are more suited to winter conditions, and consumers incorrectly predict that their future selves will value the vehicle the same amount as their current selves, not realizing that they are currently being affected by the weather.

Example 2 - Time management

In the workplace, the projection bias can come into play with time-management, as found in a model designed by Mark Kauffman, a professor of economics, in 2017.4 Kauffman predicted that often, when we take on a task, our current emotional state is optimistic. It might be the beginning of the work week when we are feeling well-rested and motivated. We mistakenly assume that we will continue to feel well-rested and motivated as we continue to work on the task, and will continue to work at the same level. Because of the inaccurate projection bias, we end up spending too long on the beginning sections of a task because we think we will be able to continue working for hours longer.

Kauffman used an example of a student studying for an exam to make his point clear. Imagine Becky, a college student, has a midterm tomorrow and it is 10am. Becky got a good night’s sleep and had a big breakfast, causing her to be in a well-rested and positive mood. She thinks she will be able to study all the way until midnight, meaning she can spend two hours on each chapter. Becky follows that plan, spending two hours on each chapter before moving on to the next. However, at 4 p.m, Becky begins to feel very bored, tired and hungry. Either it begins to take her much longer to go through chapters, because her quality of work has decreased, or she eventually gives up, say at 6 p.m, despite having two chapters left to study. Becky incorrectly projected her current state onto her future state and therefore made the decision to spend two hours on each chapter, leading to suboptimal outcomes.

Summary

What it is

The projection bias is the overestimation of how much our future selves will hold the same values, beliefs and behaviors as our current selves, leading us to make decisions that are short-sighted.

Why it happens

The projection bias occurs because we use our current emotions, values and beliefs as anchoring points to predict the tastes and preferences of our future selves.

Example 1 – Weather fluctuations cause the projection bias to impact our decision-making process for a vehicle

The projection bias causes us to focus too much on current conditions and beliefs when making decisions that will impact us long-term. Such conditions include the weather, which depending on whether it is warm and sunny or cold and snowy, can influence our decision to buy vehicles that we believe are appropriate for either weather condition, such as convertibles or four-wheel-drive vehicles.

Example 2 – The projection bias and time management

When we are in a good mood, it is easy to predict that we will be able to complete a big task, because our current selves are optimistic and well-rested. However, we underestimate how much fatigue will affect our future selves and render us incapable of completing the task, often leading to us abandoning our task or having to spend much longer than anticipated on it.

How to avoid it

Awareness of the projection bias alone often cannot overcome its effects in the present, as emotions can be overwhelming motivators for decisions. However, knowing about the projection bias can better set us up for creating rules for ourselves not to make rash decisions, such as not shopping on an empty stomach, or wanting an expensive object for a while before purchasing it.

Sources

  1. Loewenstein, G., O’Donoghue, T., & Rabin, M. (2003). Projection bias in predicting future utility. The Quarterly Journal of Economics, 118(4), 1209-1248. https://doi.org/10.1162/003355303322552784
  2. Centers for Disease Control and Prevention. (2020, May 21). Smoking cessation: Fast facts. https://www.cdc.gov/tobacco/data_statistics/fact_sheets/cessation/smoking-cessation-fast-facts/index.html
  3. Busse, M. R., Pope, D. G., Pope, J. C., & Silva-Risso, J. (2015). The psychological effect of weather on car purchases*. The Quarterly Journal of Economics, 130(1), 371-414. https://doi.org/10.1093/qje/qju033
  4. Kaufmann, M. (2017). Projection bias in effort choices. In progress.https://doi.org/10.1257/rct.4011-2.0