(Watch on YouTube: https://youtu.be/Mr25ejYz3qg)
This is Session 3 of a 4 session journey exploring 16 behavioral science concepts that take emotional intelligence to the next level. In this third lecture, we explored how to use time and tradeoffs to your advantage through four behavioral science concepts: present bias and hyperbolic discounting, planning fallacy, sunk cost fallacy and opportunity cost neglect, and goal-gradient effect.
Pre-reads
Slides & Transcript
Welcome
In Session 1 last month, we explored how emotions and perceptions shape judgement. We looked at how feelings, emotional states, and the emotional climate around us can influence what we notice, how we interpret a situation, and ultimately what we decide. That session was mostly about noticing.
In Session 2, we moved from noticing to doing something about it. We looked at how decisions are shaped by the way choices are framed and designed, through Prospect Theory, Defaults, Friction, and If-Then Plans.
Today, we introduce another dimension: time.
Use Time and Tradeoffs to Your Advantage
A decision is rarely just about comparing option A with option B. We are also comparing now with later: what we have already invested, what we might do next, a distant goal and things that suddenly feels close and present. We are not neutral about time. We give different psychological weight to the past, the present and the future. The four concepts today will explore that.
We will look into Present Bias and Hyperbolic Discounting, Planning Fallacy, Sunk Cost Fallacy and Opportunity Cost Neglect, and Goal-Gradient Effect.
Present Bias & Hyperbolic Discounting
Present bias is our tendency to give disproportionate weight to rewards and costs that are immediate, compared with rewards and costs that come later.
This helps explain two familiar behaviors. The first is impulsivity. Something rewarding is available now, so we take the smaller immediate reward rather than wait for the larger one. The second is procrastination. Here the immediate cost matters. The task is difficult or unpleasant now, while the benefit sits somewhere in the future. Avoiding the task gives us an immediate reward: relief.
We tend to think our pull for immediate gratification is a willpower problem, but actually, it is not just that. Behavioral economists call it time-inconsistent preferences, and present bias is one of the most common forms of this inconsistency, driving people to systematically overvalue immediate gratification at the expense of long-term outcomes.
Hyperbolic discounting helps explain the phenomenon. Imagine I offer you $100 in 30 days, or $110 in 31 days. In studies, the majority of people chose to wait the extra day and take $110. Now I offer $100 right now, or $110 tomorrow. This time the majority of people took the $100 now option. It’s the same difference of one day and $10, but tomorrow versus today does not feel the same as day 31 versus day 30. This is hyperbolic discounting and the curve is particularly steep near the present.
So, what’s the implication? Long-term wins lose to short-term pull. You sincerely intend to do something later, and when the moment comes you do something else. What changed is not your resolve, it is the valuation, because one of the options moved from the future into the present.
Imagine on Friday you reserve Monday morning for an important strategic project. Looking ahead, three protected hours feels sensible. Then Monday arrives. There are a few emails in your inbox, several quick problems you already know how to solve. Do you stick to the plan and work on the strategic project, or change your mind and clear the emails?
The force is to do the emails, and defer on the strategic work.
Monday morning, reality hits. The cost of strategy work has become immediate. You’ve got three hours of complex, ambiguous work to do. Meanwhile, the benefit of this work will come to fruition in the future.
On the other hand, the emails staring at you, if you take care of them now, they pay you a small immediate reward. You get closure, a sense of progress, responsiveness and the feeling of being useful to someone. “What a productive and satisfying Monday morning that was!”, right? Umm, what happened to the strategy work…? I know, we fool ourselves that easily.
Now that we know this, what can we do to stop fooling ourselves?
Again, it’s less of a matter of willpower. You can tell yourself to be more disciplined, but it means fighting the decision at the exact moment when the immediate option holds its strongest advantage. So, design around it instead, in advance, while you are still calm.
Remember the hot-cold empathy gap? Yes, it’s relevant here too. If you missed Session 1, we have the recording and pre-reads so please take a look and you’ll find the hot-cold empathy gap there.
Separate deciding from doing. Make the priority call at a calm moment and treat the protected time as implementation rather than a fresh decision. Make recurring long-horizon work regular and automatic, so it does not have to compete for attention every week.
Lower the immediate cost of the important work. Prepare a small concrete first step already when you plan it in your calendar, so the block starts with doing rather than setting up. When you start the work and the first thing you need to do is think about what to do, that’s already cognitive load. So, start by doing. And commit to fifteen minutes rather than to the whole three hours. Three hours is overwhelming, but if you say I’ll start with 15 minutes, that lowers the entry cost.
Raise the immediate cost of the tempting alternative. Put the phone out of reach, close your email, silence notifications. Add friction to the temptations. One I also find useful is an override rule: if I want to abandon the committed work, I have to write down why in my notes before I switch.
And finally, bring some of the payoff forward. Chunk the goal into short winnable milestones, identify a leading indicator so that progress can be tracked, and involve a real audience early, so you can get feedback and recognition during the work, rather than just at the end.
Planning Fallacy
Things rarely go as planned; we know that. A project estimated at three months takes six, a two-day task consumes the whole week, a budget that looked reasonable blows up. We’ve been there, done that. Yet when we sit down to plan the next initiative, we somehow convince ourselves that this time it will be different.
The planning fallacy is our tendency to underestimate the time, effort, cost, and risk that a piece of work will take, even when past experience tells us otherwise. Kahneman and Tversky named it in 1979, and the pattern has been found repeatedly since, from personal tasks to large public projects.
So why do we fool ourselves? Planning feels like a rational exercise, but we are not only calculating time and resources; we are imagining a future. And when we do that, several predictable biases shape what we see and what we leave out.
Optimism bias. We picture the best-case path, where each step follows the last without interruption. Sick days, late approvals, changing requirements, rework, and competing priorities are harder to picture, so they tend not to make it into the estimate.
Inside view. Kahneman and Lovallo, in 1993, described our tendency to treat the problem in front of us as unique, and build a relatively neat, linear plan, scoped to what we can see and control. We tend not to consider the outside view: that our problem may not be entirely unique, and there may be things we can learn from similar situations elsewhere.
Illusion of progress. Planning itself feels productive. A clean timeline, a color-coded chart, or a well-structured deck creates comfort through order and control, and can give us a sense of accomplishment before the real work has begun.
Present bias and hyperbolic discounting. Yes, our friend from a few minutes ago. The effort of the work sits in the future when we plan it, so it feels lighter than it will be when the moment arrives.
And strategic misrepresentation. Sometimes estimates are shaped not only by what we believe will happen, but by what will help a proposal win approval or funding. In a 2002 study of large transport infrastructure projects, Flyvbjerg (fly-burg) et al. found that some cost underestimation is better explained by strategic misrepresentation than by forecasting error alone.
Now the consequences of bad planning. In organizations, bad planning is often not an occasional lapse but a recurring vicious cycle. Risks and costs are downplayed to win approval. Execution begins, reality hits, and the assumptions start to break. By then the organization is already committed, so rather than recalibrate, the team pushes on, because what has already been spent feels more important than the value of what remains ahead. We’ll talk about this more in the next sunk cost fallacy. And when things become unmanageable, the project is replanned: scope reduced, budget increased, deadline moved, all without anyone asking why the first plan was so far off.
When that repeats, people stop taking planning seriously. Everyone knows the numbers are an opening position rather than a forecast. Replanning becomes part of the plan, and deadlines become negotiable. People stop pushing back, and apathy settles in: plans never work here anyway, so why bother.
My hypothesis is that bad planning tends to be tolerated because its cost, while likely staggering, is very hard to surface. An obvious overrun is visible, but much of the real loss is scattered across the organization: extra meetings, rework, firefighting, delayed decisions, competing work pushed aside, and opportunities that were never pursued. The costs appear across different budgets, teams, and periods, while replanning resets the baseline and makes the original miss easier to forget.
And much of that cost is not absorbed by the organization at all, but by individuals. The gap between the plan and the work gets closed by people staying late, working weekends, and taking on more than was ever agreed. Hours that are never counted as overtime, effort that no one else sees, and the strain of being permanently behind on something that was never achievable in the first place. The work may somehow get delivered, but at the expense of the people who make up the difference, with little or no recognition for it.
So how do we plan better? The useful shift is to treat a plan as a model to learn from rather than a prediction to defend.
Adopt a value-oriented, objective lens. Treat the plan as a means to create value, not an output to protect. When the evidence changes, ask whether continuing still creates enough value to justify the remaining cost, time, and opportunities forgone.
Take the outside view. Before trusting your own estimate, find comparable situations and look at what actually happened. Others may already have paid for lessons we can learn from for free.
Run a premortem. Before the project starts, imagine it has already failed and ask people independently to explain what went wrong. Gary Klein proposed this in a 2007 Harvard Business Review article as a way of making it easier for people to voice reservations during planning, rather than discovering them after things go wrong. Premortems are powerful, I highly recommend this practice.
Finally, measure, and make progress transparent. Notice where estimates repeatedly miss and which assumptions fail. That lets teams course-correct early and creates evidence that improves the next plan.
My last practical advice is to choose the right planning approach for the situation. As work becomes larger, more complex, and more uncertain, a detailed end-to-end plan becomes progressively less reliable. Consider this an application of the Cynefin framework; simple, complicated, complex, chaotic.
For relatively simple work, a task list is often enough. My rule of thumb is the one hand rule: if the main steps can be counted on one hand, write them down and get them done.
When the work gets larger, plan in chunks. Break it into manageable pieces rather than specifying everything upfront. Complete one chunk, learn from it, then move to the next.
Then adaptive planning. After each chunk, inspect and adapt. Decide whether to continue, adjust, or pivot, rather than holding on to the original plan.
And for really complex situations where an end-to-end plan is unlikely to survive, do game planning. Think in terms of an opening game, mid-game, and end-game. Be specific about the opening moves, because they are closest and best understood. In the mid-game, identify plausible scenarios and how you might respond. Keep the end-game focused on the outcome, rather than pretending to know exactly how you will get there.
The progression is important. Good planning is not about making every plan more detailed. Sometimes good planning means less detail, more evidence, shorter horizons, and greater capacity to adapt.
Now, if you are an Agile practitioner, much of what we covered here may sound familiar. Indeed, practices such as working in smaller increments, making progress visible, inspecting what happened, and adapting the next step are embedded in approaches such as Scrum.
With or without the Agile label, what’s important is that we still need to do some good planning.
Behavioral science gives us a deeper explanation for why we repeatedly get planning wrong; decades of practice, including Agile, give us useful ways to do them better.
Sunk Cost Fallacy & Opportunity Cost Neglect
Of all the concepts in this series, these two are the ones I genuinely struggle with myself. I can explain them, teach them, and spot them in other people immediately, and I still lose to them, pretty much every week. I wrote up my own two cases in the pre-read article, so if that interests you, take a look there.
Let’s start with the definitions. The theory is simple.
A sunk cost is something already invested that cannot be recovered. Sunk cost fallacy occurs when the resources we have already invested become a reason for continuing an endeavour, even though those past investments cannot be recovered.
Economically, these are very simple ideas. What has already been spent is gone. The rational question is: starting from where we are now, where should the next dollar, the next hour, or the next unit of attention go?
Simple in theory. Extremely difficult in practice. Knowing does not release us. Let’s explore why.
In the simplest terms, these biases happen because our emotions are attached to the past and the present, and detached from the future. Imagining a future and its outcome is hard to do, let alone imagining what it would actually feel like, while our feelings about what we already have and have done are real and present. Hot-cold empathy gap from Session 1, in that language, the past and the present are hot, while the future is cold.
Start with the attached side. What we already have, have done, or might lose.
Stopping makes the loss real. As long as the project continues, we can still tell ourselves it may work out. Stopping forces us to acknowledge that some of the time, money or effort will not produce what we originally hoped. That is loss aversion from prospect theory, which we covered in Session 2.
Persistence feels virtuous. We have been taught not to give up, and we admire grit and perseverance. Those are valuable qualities, but persistence is only useful when we are persisting with something worth doing.
We believe we can do better next time. And that belief is reasonable. The trouble starts when “I can do this” crowds out the question of whether this is still worth continuing at all.
Past effort carries meaning. Time, money and effort come with pride, sacrifice and attachment, so letting go can feel like declaring that investment wasted, a big sense of loss.
Identity gets involved. Skills, projects and specialties can become part of who we are, so changing direction feels less like changing a decision and more like giving up something about ourselves.
And indecision carries less emotional cost. Continuing requires no explanation; stopping does. So deferral quietly wins by default.
Now the detached side. The future is hard to imagine.
Stopping to reflect takes maturity. When we are grinding our way through execution, solving problems and trying harder, our attention stays inside the current path. It takes deliberate effort to self-interrupt and ask, am I doing the right thing, and am I doing it the right way?
Alternatives are invisible. What we have now is right in front of us; what we might create by choosing differently does not yet exist. Between a visible current path and an invisible future alternative, it takes considerable conviction to back the latter.
Imagining alternatives is a capability. Even when we do pause, credible alternatives do not simply appear. Generating them draws on curiosity, experience, perspective and imagination. Some people are considerably better at it than others. It is a capability, not only a willingness.
And the future is both uncertain and hard to feel. The current path may be disappointing, but at least it’s familiar. We can intellectually understand that another path might create more value, but it’s hard to feel it.
Then there is one more asymmetry, and this is the one I find most useful. We rarely regret an unlived future, because we never experienced it. We see clearly what we would lose by stopping, but we do not see what we might lose by continuing.
Organizations amplify both of these, because an existing initiative acquires social ownership. There is a sponsor, a project team, targets, milestones and people whose credibility has become connected with its success. So the exposure is no longer just financial. Pride, reputation, consistency and face become attached to the investment. Barry Staw’s 1976 research on escalation of commitment showed that people can commit more resources after receiving negative results, particularly when they were personally responsible for the original decision, and that is why this happens even when intelligent people understand perfectly well that the money already spent is gone.
And opportunity cost neglect is amplified the same way. The current initiative has people speaking for it. The alternative usually has nobody, because nobody has been asked to produce it. The current path remainss hot. The alternative future is cold. Guess which survives in the organization.
So what can we do? Before going through these countermeasures, note that this is an exercise best done at a calmer moment. By the time we are in the meeting room making the decision, the past is emotionally present and the alternative is already absent, so no point doing these remedies on the spot.
If anything, just remember this: cool the past, and warm the future.
First, cool the past.
Hit the reset button. Ask, if I inherited this situation today, knowing what I know now, what would I do next? Removing your own authorship from the question is what makes it useful, because it lets you assess the situation on its merits, with less of the emotional baggage from the history.
Ask before simply trying harder. Are we facing an execution problem that deserves more effort, or are we putting more effort into the wrong path? Don’t just bulldozer your way.
Make changing your mind cheaper. “This made sense then, but I would choose differently now” should be an acceptable thing to say out loud. Leaders often make course correction socially expensive by treating consistency as strength. If changing direction is interpreted as failure, people will naturally defend yesterday’s decision far longer than they should.
Separate the time from the experience. The time, money and effort already spent cannot be recovered, but you have the many capabilities, knowledge, relationships or partial progress that still have a lot of value. Making the call to stop is painful, but not everything is lost. Much of what you have learned or built can still be carried forward into the next decision.
Decide the stopping criteria while you are still cold. Before the emotional investment grows, agree what evidence would tell you to stop, pause or reconsider, and build those review points into the approval.
And treat deferral as continuation. “Let’s revisit this next quarter” sounds neutral, but it isn’t. Resources continue to be consumed during the delay, so make that cost visible and recognise deferral as an actual decision.
Then warm the future.
Build in a deliberate pause where alternatives have to be considered, and use your imagination liberally when you get there. Imagination is a capability, and like any capability it develops through use, not on the day you urgently need an alternative.
Develop alternatives in parallel, rather than waiting until the current path has failed completely. Allocate a small amount of capacity to it, because when a critical moment arrives it is very difficult to generate good options on the spot under pressure. This is an exercise called scenario planning, and it’s a systems thinking tool.
Make those alternatives visible. Do not stop at “What else could we do?” Generate specific, credible options. Opportunity costs remain abstract until we can point to what the same time, money or attention could actually be used for instead.
Give the alternative an owner. The current initiative already has advocates. Ask somebody to develop the competing option and be its advocate so it can actually be seriously compared.
Shrink the bet. Run a small experiment on an alternative before deciding a full switch. It lowers the risk and cost of a fork, and stops uncertainty from being a reason to stay on course.
And bring the future forward. Imagine yourself one or two years from now. What would you be glad you had started? What would you be glad you had stopped? What might you regret still doing? We cannot remove uncertainty, but we can make the alternative future less invisible.
Sunk cost fallacy makes the past too powerful. Opportunity cost neglect makes the future too weak. So for your next decision: cool the past, and warm the future.
Goal-Gradient Effect
The closer we get, the harder we push. When jogging, you probably notice your pace picks up in the last mile as the finish line comes into view. That is the goal-gradient effect, our tendency to increase effort as we get closer to achieving a goal.
Clark Hull first documented it in 1932, observing that mice in a maze ran faster as they neared food. The finding sat largely in the animal-learning literature for decades until Kivetz et al. revived it in 2006 with something more familiar: coffee loyalty cards. Customers bought coffee more frequently as they approached the free cup. More tellingly, they compared a blank ten-stamp card with a twelve-stamp card that had two stamps already filled in. Both groups still needed to buy exactly ten coffees. But the people with the twelve-stamp card completed the card faster. They felt they were making progress and closer to the goal.
So what is actually going on? What moved people was not the amount of work remaining but the sense of being already underway. People accelerate effort when completion feels near, driven by anticipation and a release of dopamine in the brain’s reward system that starts paying out before we actually arrive.
Perceived progress, not just actual progress, drives the acceleration. Good design does not necessarily change how much work remains; it changes how far away the finish line feels. Progress needs to be felt, not just made.
And the same logic applies at work. When a team can see that a goal is within reach, work speeds up, focus sharpens, and energy rises. When a goal is distant or vague, motivation stalls. And this stall is easily misread: a leader looking at a team that has gone quiet may judge that they lack commitment. Perhaps. But the more accurate diagnosis may be that the goal simply feels too far away to exert much psychological pull.
So, now what. The practical answer is to move the finish line closer.
Break large goals into smaller, tangible milestones, so people have nearer finish lines to work towards.
Visualize progress, using simple tools such as a burn-down chart, progress bar, roadmap, or Kanban board.
Shorten feedback cycles, so people learn quickly whether they are getting closer, rather than working for months before discovering whether anything has improved.
And celebrate small wins, then reset. Kivetz et al. saw purchase frequency drop back to the starting level once the free coffee was redeemed. A similar dip can happen after a team delivery. The dip is normal; mark the arrival, then set up the next visible stretch.
But, be very aware that overuse has a cost.
The goal-gradient effect is an accelerator, and accelerators need brakes. If every piece of work is framed as a sprint to a nearby finish, people end up in a permanent state of “almost there”. Always sprinting, never arriving. That creates a hamster-wheel effect. Constant near-goal momentum drives stress, fatigue, anxiety, and eventually burnout. It also nudges people to optimize for finishing rather than for thinking, learning, quality, or mastery. And if leaders continually move the goalposts or manufacture urgency, people will feel managed rather than trusted, and morale will erode.
The goal-gradient effect is a great accelerator. Use it intentionally, not endlessly.
Past, present and future are not equal
We give each temporality a different psychological weight.
Starting with the past. Sunk cost fallacy lives here. “We have invested too much to stop.” What is already spent is gone, but it does not feel gone, and so it keeps buying itself more time.
Then the present. Two of our concepts sit here. Present bias and hyperbolic discounting: “this is easier and more rewarding now.” Whatever is immediate wins, because immediate is the one thing we can actually feel.
And the future. Opportunity cost neglect: “the alternative future remains invisible.” Imagining the future is hard, so we ignore it. And the planning fallacy: “this should take only three months.“
So what’s our big learning from today?
Notice what every countermeasure we discussed today has in common. Decide while you are still cold. Borrow somebody else’s real past instead of imagining your own future, that’s the inside and outside view. Make a failed future vivid before you begin. Set the stopping criteria in advance. Give the invisible alternative an owner. Put the next milestone within reach.
Every one of these changes how far away something feels. They help you with the feelings that get distorted by time.
That is the lever, and it is the takeaway I would like you to leave with. You cannot make yourself or your team neutral about time. But you can change what feels near and what feels far, and reflect that in your design.
And if you want just one line to takeaway: cool the past, and warm the future.
That brings us to the end of the lecture. I’ll stop the recording, and let’s move into the discussion.
About the Series
16 Behavioral Science Concepts Most Leaders Were Never Taught
Taking Emotional Intelligence to the next level | A Four (+1) Part Series
Business schools, my alma mater INSEAD included, give serious attention to behavioral science today, taught through behavioral economics and decision science. The field has produced two Nobel Prizes in economics in the last twenty-five years, Daniel Kahneman in 2002 and Richard Thaler in 2017. Yet it has not made its way into mainstream leadership education with much effectiveness. The closest crossover is Emotional Intelligence, which earned its place in leadership development because it translated psychology into language leaders could use. Behavioral science has not had that translation done for it. Most leaders, even very senior ones, have never been taught it in any structured way.
This is a focus area for me. The premise I am working with is that behavioral science is most approachable for leaders when it is offered as an extension of Emotional Intelligence rather than a separate discipline. EI gave leaders permission to take feelings seriously in decisions. Behavioral science adds the mechanics: how emotions, perceptions, framing, time, and group dynamics actually shape what gets decided in the room.
This Dōjō series is my first attempt at that approach in a teaching format. I have selected 16 concepts and grouped them under four umbrellas, one per session, with a fifth session for application. The choice of concepts, the grouping, the sequence: all of it is a learning experiment. I am running this as a free Dōjō session to see how this lands and get feedback. Leaders, people professionals, fellow coaches and professors, come join.
The Four Parts + Wrap-Up Session
- Part 1 (completed) — Understand How Emotions and Perceptions Shape Judgement: Affect Heuristic. Integral vs. Incidental Emotions. Hot-Cold Emapathy Gap. Emotional Contagion.
- Part 2 (completed) — Frame Decisions and Design Choices: Prospect Theory. Defaults. Friction. If-Then Plans.
- Part 3 (completed) — Use Time and Tradeoffs to Your Advantage: Present Bias and Hyperbolic Discounting. Planning Fallacy. Sunk Cost Fallacy and Opportunity Cost Neglect. Goal-Gradient Effect.
- Part 4 (October 28 Wednesday, sign-up open) — Decide Better Together: Hidden Profiles. Wisdom of Crowds. Evaluation Apprehension. Leader Speaks Last (but not to judge).
- Wrap-up Session (November 2026, sign-up opens after Part 4) — A working session, not a recap, where we will run through the four lenses from the previous sessions on current leadership situations, a decision, a stuck initiative, a team dynamic, that participants will bring to the session.
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