Behavioral economists are constantly trying to find ways to convince us do the “right” things like save for retirement. Why is it so hard to give up short-term perks for larger, long-term rewards? For example, take my True Cost of Holiday Shopping calculator and this Warren Buffett anecdote from a 2011 WSJ article:
Warren Buffett is one rare—and extreme—example. When he was a young man, according to Alice Schroeder’s biography “The Snowball,” Mr. Buffett often asked, “Do I really want to spend $300,000 for this haircut?” He was thinking about the vast amount of money he wouldn’t have decades in the future because of the small outlay he might make in the present.
I think it’s fair to say that most people don’t think like that. (It appears he did get haircuts at least once in a while.) According to Stanford researchers, one big reason is because we struggle to identify with our future selves. The researchers are quoted in this Wired article:
To people estranged from their future selves, saving is like a choice between spending money today or giving it to a stranger years from now.
In their study, they used advanced virtual reality goggles make some people see older versions of themselves. Afterwards, the test subjects who saw their elderly avatars stated they would save twice as much as those who didn’t. Merrill Edge, the brokerage arm of Bank of America, has created an online version of this aging process called Face Retirement. It takes your picture via webcam and ages your face to help you better visualize “old” you. I got to see myself at age 47 to 107, in 10-year increments.
Will it work? I’m not sure. My wife says I just look like a zombie, especially at 107. Maybe there would be more shock value if it showed me eating dog food or something.
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Not to brag, but like George Clooney I have to say I get better with age 🙂 I have the “Aging Booth” app on my phone that does a similar thing. I think all it’s done is brought be to the realization that I will desparately need plastic surgery to maintain my strikingly good looks in 35 years. I better start a savings goal now 😉
That face ager thing is a fun tool. Apparently it thinks I will never have gray hair even when I’m 107 years old! 😉
Is that a photo of you or someone else?
The tool turned my hair gray at 107, although I’ll be thrilled if I have ANY hair at that age (and be alive of course). My friend’s mom is now 98 and still lives by herself.
Is it me? I’ll be mysterious on that one. 🙂
I think it’d be a more effective tool if it showed you poor your future lifestyle could be depending on the amount of savings you have at the current time. Pretty neat tool in any case.
nice to have finally met you, Jonathan.
Ditto what jo poe noted
Keep in mind I’ve been aged over 30 years! If you want to see what I really look like, find me on Google+.