Is the Present More Important than the Future?

February 1, 2013 — Leave a comment

Some people believe that the present is far more important to them than the future. This article argues that this is not true for most people.

Say you believe that the future, 5 years from now, is substantially less important to you than today. Please answer the following questions:

  1. Did you hold a similar belief 5 years ago? If yes, read further.
  2. Do you believe that the present is at least as important as 5 years ago?

If you answered “yes” to the last question (as most people would), there is a contradiction: 5 years ago you believed that the future 5 years away (i.e. today) will be substantially less important, yet, today, you disagree. This means that you had trouble accepting the importance of your future needs, and there is a good chance that you are acting the same way today.

More considerations:

  1. While the present is tangible and certain, you have to be sure that you will not be around in 5 years in order to ignore this future. I haven’t met any person aggressive enough to ignore the possibility of living beyond a certain age.
  2. Humans keep living longer. Please don’t underestimate this effect, and be wary of naming any age that you are certain to never reach.
  3. Future needs are easier to finance thanks to the likely growth of your investments over the years (twice as easy after 6 years with 12% real growth, and 4 times as easy after 12 years).

Conclusion

You can assess for yourself the importance of the present compared to the future, but be aware of a psychological bias that may lead you to prefer the present too much, simply because you discount future suffering compared to present suffering.

Disclosures Including Backtested Performance Data

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Gil Hanoch

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