Why we value future more than the past

Consider this. Your friend offers to let you use his guest house at a hill station. Touched by his gesture, your family decides to gift him a bottle of wine. It turns out that the quality of wine that you gift depends on when you give him the bottle, before or after you visit the guest house. Why? Suppose you hire a carpenter to do woodwork in your house at an estimated cost of Rs 25,000. You pay half the money upfront. But you may be reluctant to pay the other half after the work is done. Why? When you pay half upfront, you look forward to beautifying your house: The joy of expectation reduces the pain of parting with the cash initially. But when the work is completed, you are more likely to be disappointed. This is because we typically overestimate the effect of a future event. In this case, it is highly possible that you do not derive the satisfaction that you thought you would after the carpentry work is completed.

As one psychologist puts it, it is the WOMBASSA - what you think you are going to get and what you do not get when you get what you want. Now, extend this argument to your friend's gift. If you buy the bottle before you visit the guest house, you are more likely to buy an expensive wine. Why? You look forward to having a great time at the guest house and want to express your feelings to your friend. If you, however, gift the wine bottle after you come back from the guest house, you are more likely to offer a less expensive bottle. Why? You did not derive as much as satisfaction as you thought you would.

TEMPORAL ASYMMETRY

Behavioural psychologists call this temporal asymmetry. This behaviour may have important implications. In one study, psychologists found that people demand a higher compensation for the work they will do in the future than for the work that they did in the past! Likewise, another study found that a court is more likely to award lower compensation for a victim who has suffered an accident in the past than for a victim who is likely to suffer in the future.

We typically tend to value the future more than the past. And what does that mean to you? If you run a business or offer professional services, receive your fees up front, if possible.