Connecting With Your Future Self to Make Better Decisions ft. Hal Hershfield (EP.122)

0:28We all need to make smart decisions with our money. at UCLA's Anderson School of Management. His research sits at the intersection of psychology and economics, examining the ways that we can improve our long-term decisions. We discuss at length his newest book, Your Future Self, How to Make Tomorrow Better Today, and cover really interesting topics like how our identities change over time and why our future self feels like a complete stranger. As always, you can find links to all the resources mentioned in the show notes, at thelongterminvestor.com. And now here is my conversation with Hal Hirschfeld.

1:08Hal Hirschfeld, welcome to The Long-Term Investor. Hey, thanks, Peter. I'm looking forward to talking to you. Well, I absolutely loved your new book, Your Future Self. I'm just going to dive right into the good stuff and have you start with identity. How do you define identity? How do I know who I am? We're just going to go in nice and light here, surface level, right? Well, first off, thanks for the kind words. Identity is a very difficult concept to grapple with. And of course, you know, philosophers and psychologists have been trying to do so for millennia, you know. So the basic idea here is that I think a lot of people might think that, you know, you are who you are.

1:49You're roughly who you were when you were a kid and when you get older and whatnot. but then when push comes to shove, that idea is really hard to sort of square with reality. The idea that you are who you are butts up against the reality that so much changes in your life. You move, you might change your name, you have different preferences and values, you change careers, you have kids, and all of these things combined so that you might look back and say, I am from a large point of view, a different person now than I once was, and I may be different in the future. And so when I think of identity, when a lot of other thinkers think of identity, it boils down to the idea that there are sort of separate selves over time.

2:32And that identity almost is a collection of separate selves with some threads that make continuity between those selves, namely sort of a sense of like, what drives you? What's your values? What's your sort of essential moral core? That's my like two minute version of identity. Well, in your book, you talk about these five core personality traits that, as you were sort of saying there at the end, sort of define who you are. And, you know, I think generally stay stable over time, but there are pieces that change, right? Yeah. So psychologists talk about the big five. And that is, you know, if you haven't taken psych one in a while.

3:15It's, you know, openness to new experiences, conscientiousness, extroversion, agreeableness, and neuroticism. Now, we can dig into what those are. But I think the big point here is that the picture is complicated when we say what stays the same and what changes, because in some ways, there's some big changes. You know, some research has found that in a 10 year period, there's a decent chance that you will change significantly on one of those five traits. For me, I look back and I am decidedly less extroverted in my 40s than I was when I was in my early 30s. And, you know, there's COVID in there, there's parenthood, there's all sorts of different things.

3:59Extroversion, by the way, isn't whether you're the life of the party, but whether you get energy from interacting with other people. I get less of that now. What's interesting there is that if one thing changes, that also means that four stay the same. So 80%, you know, are pretty constant. So depending on where you sort of shine the light, it's hard to say you stay the same or you change. Aspects change. Aspects stay the same. One thing that we do know is that relative ranking remains relatively stable, but even that can change. In other words, you know, if you're like the third most outgoing person in your high school class, like you'll be near the top in your group of adult friends too.

4:41You're not going to suddenly become the least outgoing person. When one of the things in your work that I followed for a long time that I often talk to people about is how we think of our future self as a complete stranger. Can you talk a little bit about some of the work you've done and the work others have done to uncover this association that we have with our future self? Yeah, absolutely. You know, some of the early work there was done by Emily Pronin. She's a psychologist at Princeton. She did a great study where she asked undergrads, they're eating a meal. And she said, you know, describe the meal you have or a picture a meal that you're eating that you'd be eating right now.

5:18People sort of write down a little story about the meal. And then she asks a different group to picture a meal in the very distant future, which to an undergrad is like anytime over 40. But honestly, I was surprised that it wasn't like anytime over 25. And the people who are asked to think about the meal in the distant future are more likely to adopt a third-person perspective. They see their future self as if it's another person in the scene. Other researchers have replicated this on a conceptual level as well. My own research has found, you know, using neuroimaging, that in the brain, the brain activity that arises when we think of our future selves looks more like the brain activity that arises when we think about another person.

6:05There's lots of other data points, some of which I speak to in the book. But there's an interesting takeaway here, which is that on some sort of level, even if it's just sort of a metaphor, our future self seems like another person, almost a different person, possibly even a stranger. And why is that? I mean, what is it about our future selves that makes them feel like a stranger? Yeah, and that's a very deep question. Some of it is the uncertainty. We know a lot about the present because it's the time period we live in. We don't know much about the future. We know something, but it's inherently more uncertain.

6:42Some of the reason that we think of our future selves as a stranger is simply a matter of perception. You know, I see the things that are right in front of me clearly, and those that are off in the distance sort of blur together. And the same may be true for our future selves. They sort of seem relatively blurry. I can't know them. And I think you sort of put these things together, the uncertainty, the unknowability, the blurriness. It feels like this is now suddenly a different person. Somebody that isn't maybe necessarily, quote unquote, me. And I can understand, and we'll probably get into this a little bit, of the problem of not associating your future self as the same person as your current self.

7:27That can make for some challenging financial choices, consumption choices, personal choices. That seems very intuitive. But are there any reasons why it may not necessarily be a bad thing that we think of our future self as a stranger? Yeah. So it's a really good question because I don't think that we actually need to think of our future self as the quote unquote same. As an analogy, no one would say that the hallmark of a healthy romantic relationship is that you think of your partner as the same as you. They are fundamentally a different person. We recognize that. And a healthy relationship would be one in which you both have your own independent identities, but there's obviously a closeness.

8:09and a shared, you know, there may be a shared sense of self and a shared sense that, you know, I will sacrifice for you, you sacrifice for me, et cetera. And so your question about future selves, I think really applies here. My perspective is that the same general idea should be true for our future selves. They don't need to be the same as us. They can be a different person. What matters is the relationship we have with them. We don't want them to be a stranger. Like, you know, why should I do anything for us? Well, you know, from a almost rational perspective, why should I do anything for a stranger?

8:41Of course, I might, you know, if I see somebody on the subway fall, like I will help them, of course, right? But we're not doing sort of altruistic acts all the time. And if our future selves are strangers, we may not consider them altruistically all the time, leaving them in potentially precarious positions, especially financially, as you mentioned. When one of the themes throughout your book, and then I guess the research in turn, is that it's emotion that is somewhat necessary to connect our current self with our future self. Could you explain some of the studies that lead to that finding and maybe opine on why that is?

9:23Yeah. So, you know, what we've found is that the people who report a sense of emotional connection of their future selves are the ones who have accumulated more assets financially over time. They end up being happier over a 10-year period. They find more meaning in their lives. They're more likely to report exercising and being healthy. The reason we think that these relationships are there is partly the idea that if I can relate to and feel emotionally connected to my future self, it makes it easier to do things now that will benefit them later. In the same way that, you know, I will do things that possibly are unpleasant right now, but might help out my kid, you know, like give up a portion of Saturday to whatever the kid thing is, you know.

10:15I went to Sky Zone for 90 minutes two weekends ago, which was 89 minutes more than I wanted to be there. No offense to Sky Zone. But the same should be true for our future selves, right? So if we have that emotional connection, emotions drive behavior, and they'll make us be more likely to do things for that future self's benefit. Trust me, as someone who has had to go to Sky Zone a number of times, I certainly understand the sentiment. What is nice is how tired the children come back from Sky Zone. That is definitely something that benefits the future version of myself when I'm driving. There is a benefit there.

10:52There's absolutely a benefit there. So it's interesting, you'd mentioned the closeness and connectedness to your future self and how that compares with general well-being. Can you dig into that a little bit more? Why is that? So to some extent, this is an open question. This is research that I conducted with Joey Reif and Jordi Quadbach, who are just wonderful collaborators. We looked at a data set, a data set of thousands of middle-aged Americans where they were surveyed at two points in time, once in 1995 and then once in 2005. And in 1995, they were asked essentially how similar they thought they would be to their future selves, what sort of shared sense of similarity they would have there.

11:38Now, earlier I was talking about emotional connection. This is a slightly different concept, though it's related. If you and I share similarities, the theory is that we will be more emotionally connected as well. So all we were able to sort of dig into is how similar I thought I would be. 10 years later, they're surveyed again, and they're asked how satisfied they are with their lives. They were also, by the way, asked how satisfied they were, you know, back in 1995. What you find is that if you hold everything constant, you sort of take into account demographics, you know, age, gender, education, even initial levels of life satisfaction.

12:13And I don't mean to be talking too academically here. But if you basically take two people where everything is exactly the same between them, but one person perceives more similarity over time and the other doesn't, 10 years later, the person who had the higher perception of similarity, that's the person who ends up more satisfied with their lives. Now, why is this? That's the deeper question. We have sort of two speculations. One is there may be a sense that someone who perceives more similarity knows themselves better. I have good traits and I have bad traits. You know, I like definitely get overly anxious about certain things that I don't need to, you know, as one.

12:51I'm sure the people around me could point to other ones. I don't suspect that that will change in 10 years. Like I kind of know myself. I know that that's true. Could be the case that if I think suddenly somehow I will become a new person, 10 years later, I'll be disappointed with the way things worked out. Now, the other speculative reason why this relationship might be there is that going back to what I said earlier, if I find a sense of similarity between who I am now and who I will be, I am more likely to do the things that will make me more satisfied with my life. Whether that's exercising or eating healthier or taking trips that are satisfying because I know that they'll benefit me now and later.

13:35You know, it's not just the sort of monk-like things. There's all different types of ways to consider this relationship. You often use the phrase mental time travel throughout the book. And as people are mentally time traveling to think about their future, how accurately do people actually visualize this future? So we are hearing the importance of connecting with our future self. Can we reasonably be believed to accurately do so? And how does that impact our decisions? We're not great at it. We have the machinery to do it, which is incredible, right? A lot of animals don't, right? So I mean, there's debate about this.

14:15But in other words, humans have the ability to sort of do this incredibly sophisticated mental time travel, I can jump ahead in time and think about how I will feel about decisions that I'm making now. And at the same time, go back to the past and consider how I feel now about decisions I made then and on and on and on. The reality, though, is that even though we can do this, there's lots of errors that we make. We get overly focused on the beginning of an experience. We get overly focused on sort of the most intense moments of the experience. I fail to consider sort of a range of possibilities.

14:46If I'm thinking about, you know, what's the likelihood that a surprise birthday party will be fun, I might call to mind a great example of a time when it was wonderful, failing to consider all the other times that there was like an awkwardness involved of everybody waiting around, right? It's just one example. So even though we can simulate the future, even though we can mentally time travel, we do make mistakes when we engage in it. And those mistakes can then result in decisions that end up being sort of suboptimal. Well, there's a phrase that you use at some point called the end of history illusion.

15:23Is that related to why this happens? Do you mind explaining that one and is it related? Yeah. Yeah. The End of History Illusion, actually, one of the authors on that is Jordi Quadbach. Not that anybody cares about the sort of nuance of academia here, but my co-author on that other paper I just mentioned, he's the leader author on that. And it's an amazing concept. The concept is pretty straightforward, and it goes something like this. I recognize that I've changed from the past to the present. I think we all do. At the same time, many of us somehow think that now, in the present, I'm kind of fully baked.

16:00I am who I am. I know that I'll change a little bit from now to later, but I sort of think I've finally arrived. The reason that this is an illusion is because we're just as likely to change from the present to the future as we are to have change from the past to the present. And the sort of end of history part is the idea that we somehow think that even though we've progressed as we move through time, we think that the rate of progress will somehow slow down as we move forward. The mental time travel error there, or mistake, is that we don't give enough of a possibility for our future selves to be flexible and to change and to be different from who we are now.

16:48But if I sort of think I've now arrived, then a corollary of that is that the person I'll be in 10 years is going to be the same as me now. And that's just not, you know, most likely that's not going to be the case. Well, I'll admit how reading this book, and I've read your other work, I've read others work in similar fields where it's like, oh, look at you silly humans. And, and I can recognize in my own life where these things are true. And I assure for anybody listening or watching, you know, if you read this book, you will undoubtedly say, oh, yeah, I thought of it that way. And I have to admit this end of history illusion.

17:21I thought to myself, well, gosh, you know, I recognize how much I've changed in the last 5, 10, 15 years. But I will admit, I don't think all that much about how much I'll change into the future. And then I started thinking of my parents. So the immediately is I'm like, oh, my gosh, so who am I going to become? And we always joke, well, you become your parents. And there's some things about that that I'd be delighted about. There are some things I might be less than thrilled about. And my mom and dad listen to the show. So they're going to hear me say that, which is real fun. You know, but I think it's a really interesting concept that I do tell a lot of people who I work with, you know, when I'm mentoring younger people, the continual learning, the continual improvement is important.

18:03But yet, of course, for me, no, no, I'm fully baked, like you said. So it's really, it really hit me hard there. Well, it's, you know, it's funny because in a way it's not so silly, right? It makes sense that we would do this because I think it can be challenging to think of change moving forward. You know, we, we sort of, we spent a lot of our lives trying to grasp onto something with some permanence and the idea that I can somehow be different in 10 years is, is a little bit scary. Like we'd be forgiven for wanting to kind of have things be, yeah, sort of similar, but you're right. I mean, there's an elaborating aspect because you can say, oh, wow, I mean, I can change and what exciting things will happen.

18:39And then there's the scary aspect of what will happen. And my version of what you were talking about is, I love my parents too, but of course, I make fun of certain things. Then I think, oh my God, what things will my kids, what will they point to? And especially which things will get, quote unquote, worse as I get older. Absolutely. And I'll share another kind of personal anecdote as it relates to some of what I was reading in your book two years ago, I made a 15 year vision of what I wanted my professional and personal life to look like. And I followed a path that a number of companies will do for strategic planning.

19:15So like if I wanted this series of bullet points to be true in 15 years, what has to be true 12 years from now? And if I want those to be true, what needs to be true 10 years and then seven years, then five years. And I worked all the way back and then I had what I needed to do for the next year. And it was an extremely helpful exercise for getting me focused on what I personally needed to do to achieve what I thought it was I would want in 15 years. And so here's where you come in, is you talk about how we will make decisions in the future based on our present feelings. And that isn't necessarily wrong, but we maybe give too much weight to those present feelings.

19:51And that just shook me at my core. Why don't you share with the audience, maybe some of the research and some of the implications around that particular finding? Yeah. So I mean, researchers call this the projection bias, you know, and the idea is that I project my present day feelings onto my future self in a way that may be unfair, right? So the classic example, you know, the, you know, this example, going to the grocery store when you're hungry, it's a version of mental time travel, because I have to think ahead to what I want for the week, but I may end up overbuying because I'm really hungry right now.

20:25Or the flip is true as well. George Lowenstein, by the way, who's the economist, who's done a lot of work on this, when I talked to him about it, he said, you know, when I'm depressed, I think I'll always be depressed, right? And when I'm full of energy and elated, it's hard to imagine how I may at some point not be. And, you know, I think there's another analogy here of, you know, getting gifts for your partner. If you were to shop for them, my wife's birthday is next week. Like if I were to get her a brand new projector so that we could watch movies and like hire deaf outside, that would be sort of taking my own interest in projecting them onto her.

21:02Like I don't think she really wants that. And in the same way, you know, we can make decisions for our future selves that are relying too much on our present selves feelings. The sort of really difficult aspect to grapple with here is that we have made a plan. Like we've convinced ourselves we're making a plan. And so we should celebrate that. But, you know, the problem can arise when we make a plan that's so focused on what I want right now, we get into trouble later. You know, you see this with sort of intergenerational planning to families that are trying to make a plan for their, you know, older adults making plans for their adult children.

21:37They may focus too much on what they think that kids want right now, moving 20, 30, 40 years down the line, and not allow for enough flexibility there. So I think, you know, the sort of antidote to this is to, it's not to stop planning, but it's to make plans with a healthy degree of flexibility baked in so that we can update those plans as things change. That seems like excellent advice. And one of the parts of research that you talk a lot about throughout the book, and we've referenced a little bit in passing throughout our conversation that I think people will enjoy hearing about is just how viewing age rendered or age progressed versions of themselves can really impact their decisions.

22:19Do you mind giving us a little overview of both your work and maybe the field's work on that topic and what sort of results we've seen from that? Sure. I mean, so the basic idea here is that, look, it is really hard to connect with our future selves because they are abstract, because they're uncertain. And if we can do anything to make them more vivid, whether it's telling a story about them or really sort of thinking deeply about who they'll be, if we can do anything to make them more vivid, that may end up helping to shift some of our behavior from now to later. So in my own work, one way that we've done that is to show people what they'll actually look like in the future.

22:56When I first started doing this, the technology was pretty bad. It was pretty, pretty low budget. Now, there's all sorts of ways to do this. In fact, just last week, TikTok released, you know, an age progression filter. I only know this because a reporter, you know, reached out and wanted to talk about it. Yeah, I'm not on TikTok because I'm because I'm a self-respecting adult. No, I'm kidding. I looked at some of the videos and it's insane. I mean, it's just, it's wild because people press a button and then they're looking at basically like the 75-year-old version of them. Now, in my own work, we found that exposure to these images, it's motivating.

23:37It motivates people to want to save. It actually makes people save a little bit more in sort of a real financial context. One of my favorite versions of this, it's not age-progressed images, but it's just a vividness exercise. Researchers went to women in rural Kenya and had them engage in this sort of like deep vividness exercise where they're really fully imagining what their future selves will look like. And they found that these women were considerably more likely to save and they were more likely to take preventative health actions for their kids to chlorinate their water, which is great for preventing stomach illnesses, relative to say like a control group.

24:15And the gist there again, is that we're making that future self more vivid, more emotional, someone I can really attach to. transitioning a bit to some maybe practical applications that people can use how can people think in some deeper ways about what will happen to us as time unfolds like in what way can we have conversations with our future selves to just promote some better decisions i don't know better decisions the right way but decisions that are more positive for both the now and the future Yeah. You know, it's funny. I think I've grappled a lot with that, like better decision. Like I saw you sort of say, how do I describe it?

24:55The way that I think about this for what it's worth is decisions where I'm closing the gap between the things that I intend to do and what I actually do. Like those are quote unquote better decisions, right? If we want to be practical about it, I think you first have to recognize, you know, the sort of classes of decisions. Sometimes we have decisions that are sort of these big weighty decisions. Should I, you know, change my estate plan? Should I rebalance my portfolio? Should I switch careers? You know, should I move cities? These are big, single shot decisions. It's not that they can't be undone, but they're the types of things that we don't do all that frequently.

25:31In those particular cases, I think it may make sense to really have a sort of, if I can, conversation with your future self. One exercise I love is to write a letter to your future self, and then write a letter back from your future self. and it creates this sense that you're stepping into the shoes of your future self. I know some advisors do what's called the two chairs exercise where you have people literally sit in a chair and there's an empty chair across from them and they're talking to their future self and then they switch seats and then they talk back to their current self through the lens of their future self.

26:05There's something that's possibly a little cheesy about that, but also I think could work. So that sort of conversation is the type of thing that I think a lot of people implicitly do. A lot of people implicitly say, yeah, I'm thinking about my future. But there's a difference between thinking about your future and actually having a conversation with your future self. Because you can think about your future in a really abstract surface level way. But a conversation dials up the vividness. Now, after that, then there's a whole other class of decisions, which are the daily ones or the more than daily ones.