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 five 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.

The projection bias becomes problematic when it goes beyond influencing insubstantial daily decisions (such as what to buy when you're hungry) and starts affecting economic decisions or medical decisions. In the case of the latter, the projection bias can have significant implications for the care patients receive and their future quality of life. Research into what's known as affective forecasting shows that non-patients consistently underestimate the quality of life associated with chronic illnesses and disability. In other words, healthy people tend to think that those living with these conditions have a worse quality of life and lower levels of happiness than they actually do. This inaccurate forecasting can result in family members or making erroneous health decisions and declining certain treatment because they believe it will lead to a worse quality of life. 

From a financial perspective, planning for the future can be difficult when we're prioritizing our current experience and needs. For example, a person trying to deal with negative emotions or a difficult situation in their life might splurge on a luxury holiday that takes them over their budget, thinking that their future self will be thankful for the rest and self care. However, while on holiday, the individual can't fully relax because in the back of their mind they're worrying about debt they need to pay off. In other words, they poorly predicted the impact their present plans would have on their future happiness levels. 

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. This can present challenges in a number of situations. Suppose someone likes loud, crowded places to have a drink and assumes that their friends feel the same way. They organize an evening in a bustling bar with live music, only to find that their friends actually prefer quieter environments where everyone can talk. Similarly, people often give gifts that they themselves would enjoy, thinking that the recipient will feel the same way. The projection bias has been the culprit behind many unwanted Christmas gifts!

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. 

For policy makers, projection bias can lead to ineffective policies if they rely too much on the current environment rather than considering the future intentions of beneficiaries and how they will adapt or respond over time. A notable real-world example of this can be seen in India's 2016 demonitization policy. Overnight, the government demonetised 86% of its currency in circulation, affecting two of the country's highest-denomination notes (₹500 and ₹1,000).¹ The objectives of the move were to reduce corruption, destroy counterfeit currency, seize undeclared income, speed up formalization of the economy, and move towards a cashless economy.

The projection bias led to the policy failing in several ways. First, policymakers misjudged people's future experience with the new changes and projected that the public would quickly adapt to cashless transactions and digital banking. However, they grossly underestimated the population's heavy reliance on cash, particularly among rural communities, people working in informal jobs, and small businesses. Second, the abrupt cash shortage that the demonetization caused massive losses for small businesses and daily wage workers who couldn't quickly switch to digital payments. And finally, much to the disappointment of the policy makers, the initiative had minimal impact on "black money" (untaxed, unaccounted-for cash). Although it was projected that those holding illicit cash would not deposit it in banks, nearly 99% of the demonetized currency returned to the banking system, suggesting that people found innovative ways to legitimize their cash.

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.² Our brains like to use shortcuts, so when it is time to make a decision, these anchoring points are leveraged as references. As the example above demonstrates, the projection bias usually occurs when we are in a "hot" state of mind or our emotions are heightened. 

Why can't we accurately predict our needs?

There are many reasons why we find it difficult to accurately predict our future needs. First, the projection bias can occur because we're being influenced by external, influential factors that are out of our control, such as the weather, the stock market, or world events. A study conducted by Michael Conlin, Ted O'Donoghue, and Timothy Vogelsang at Michigan State University, for example, looked at how the weather impacted people's decision to buy a winter coat and whether they kept it. They found that on colder days, customers were more likely to purchase a coat but that shoppers were more likely to return the item if the weather was 30F warmer on the day of return than it was on the day of the order.³

We also tend to overestimate the impact of significant events on our lives, believing that they will have a long-lasting impact. This can work both ways; the loss of a job or a family member can, in the moment, feel like life will never be the same again, while the purchase of a new car or dream item can make us believe that we'll feel content for a very long time. Yet this is rarely the case. In the late 1970s, researchers brought together a group of lottery winners who had received on average $480,000 over the past year, and a control group who hadn't been so lucky. They asked the two groups to rate their happiness and found that the lottery winners were no happier than the control group a year after winning. In fact, the lottery winners reported finding less pleasure in daily activities. So the assumption that many of us have that we'd be happier if only we’d win the lottery is a deception courtesy of the projection bias.⁴

What is the projection bias in the hiring process?

During the hiring process, several cognitive biases can impact how candidates are assessed and who actually gets the job. The projection bias can make hiring managers feel more attracted to candidates who share their values, thoughts , and ways of working. This can lead to companies hiring a literal 'army of clones,' ultimately stifling innovation and growth due to a lack of diverse experiences and perspectives. However, Patrick Leguide, CEO of Central Test, a HR assessment consultancy firm, argues that this may not always be a negative; at the end of the day, if you need to work closely with someone, you need to get along. The key, Leguide believes, is to work out if the position really needs to be filled by someone whose opinions and values align with those of the rest of the team.⁵

What is the difference between projection bias and consensus bias?

As mentioned above, these two biases are closely related. Both deal with how we think our current opinions or behaviors are perceived by, and shared, by other people. However there is an important difference. While the projection bias is about believing others feel or think the same way as you do based on your current emotional or physical state, the consensus bias is about assuming your beliefs or behaviors are widely shared by others, regardless of your current state.

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.

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.

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 smoking6 meaning that the odds are against us being able to resist the addictive nature of cigarettes.

The projection bias, although only officially coined and researched in 2003 by Loewenstein et al., 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.” Their research focused on two economic applications. First, how people’s underestimation of habit-formation in spending leads to people spending too much in their early life not realizing 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. 

Since the popularization of the projection bias, our brain's limitations around the forecasting process have been explored across various fields and in different scenarios. In particular, research by Murray et al.⁷ shows that while our future preferences are often shaped by our current preferences, the latter is actually subject to several other influential factors such as social pressure, framing, and the weather. This means that all our predictions are 'present-biased.' Gilbert et al.⁸ describe this phenomenon as 'presentism' and describe it as a' 'tendency to over-estimate the extent to which people's experience of future events will resemble their experience of current events. 

Product design is a balancing act; products need to satisfy people's current needs while also remaining relevant to future tastes and trends. Understanding the projection bias can be helpful not only for consumers trying to figure out their actual preferences, but also for product designers who need to fully grasp their users' fluctuating tastes. 

Loewenstein et al. argue that the projection bias can cause people to make misguided purchases of durable goods. Our satisfaction with a product often varies from day to day; the new all-weather coat you bought for going hiking in winter is unlikely to bring the same satisfaction if you wear it to go to the supermarket. The projection bias leads us to under appreciate how much our future valuations of an item may differ from the current valuation. As a result, people tend to overvalue an item on high-value days and undervalue it on low-value days. In practical terms, this means that a person making a one-time purchasing decision is likely to buy something when they really shouldn't, or not buy something when really they should.

Projection bias can significantly influence product design and innovation by leading designers and developers to overestimate the degree to which users' needs, preferences, and behaviors will align with their current ones. Perhaps the most famous example of this is when Blockbuster, the video rental giant, turned down the chance to buy out Netflix in 2000 believing that people wouldn't give up their old habit of browsing for movies in a physical store for digital streaming. 10 years later they went bust. Similarly, features or design elements of a product that may be appealing to customer's immediate preferences in the short term can become irritating or irrelevant over time. Take for instance the Duolingo language learning app; daily reminders and friendly encouragement notifications on your phone may be helpful for kick starting your new linguistic journey, but as time goes on these regular reminders might become irritating and put you off engaging with the app altogether.

Have you ever purchased an item of clothing and thought 'do I really need this?' To help with the decision-making process, you start imagining different scenarios in which you might use the item. However, what if there was a way to get a helping hand from someone or something that intimately knows your purchase history? AI is often used to generate customer recommendations and provide personalized online experiences. E-commerce platforms, for example, use machine learning to suggest products that align with a customer's previous purchases and browsing history. If AI can show a customer what they have consistently been looking for and recommend available items, the shopper will have an easier time picking what they want to buy.

AI developers can be susceptible to projection bias when designing systems and algorithms as they may inadvertently project current user preferences and behaviors onto future contexts. As a result, AI models may be overly tailored to present conditions but not optimized to adapt to user needs, behaviors, and environments that change over time. For example, a developer might build an AI assistant for an online shop and optimize it for current communication styles and market trends. However, as user behaviors shift and new communication trends emerge, the assistant may become less relevant or effective. To overcome this, AI developers need to design systems that are adaptable and capable of learning from changing user interactions.

As we’ve already seen, 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.9 Cars are durable goods, meaning that we have to predict the future utility of the car when deciding to purchase.

Busse et al. 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. 

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 2017.¹⁰ 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.

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.

George Loewenstein

A pioneer in behavioral economics, George Loewenstein has brought emotions back into the realms of economic theory to understand their significant role in shaping human behavior. In this article, we explore the life and work of Loewenstein and how his insights continue to shape several fields to this day.

Planning Fallacy

Similar to the projection bias, the planning fallacy demonstrates just how bad we are at predicting the future. The planning fallacy describes our tendency to underestimate the amount of time it will take to complete a task, as well as the costs and risks associated with that task. We look at some famous examples of when the planning fallacy has led to some pretty costly mistakes!