Have you ever been in a situation where you have been waiting for an event with great anticipation, but when the event finally comes to fruition it isn’t all that you thought it would be? Maybe you have been working hard to get that next promotion, making sure that you put in the extra effort (especially when you think your boss was watching you!), and when after several months of this incessant exertion you finally get your promotion, the feeling of achievement and satisfaction is rather fleeting, and very soon things fall back into the same old routine. Or, you have been saving all your life to buy that luxury car, but once you buy it, you don’t feel as elated as you thought you would. Why is it that the reality so often disappoints us? Why is it that our daydreams are fancier than the realization of those dreams? Why do we tend to dramatically overestimate the emotional impact of future positive and negative events? Since it is well known that we make numerous decisions on the basis of how we will feel about the outcome in the future, this gap between anticipation and reality can lead us to accumulate products that fail to satisfy us as much as we expect them to.
This gap is the result of our amazing ability to adapt to change. We never really give ourselves enough credit for this adaptability. When we are anticipating an outcome, we are thinking of a different state of being (say, from driving an old Maruti 800 today to being an owner of a swank Honda City tomorrow). There is obviously a huge difference between the two states and that’s why the future state looks so appealing. However, as soon as the anticipation becomes a reality, your mind recognizes that the change has happened and starts using its wonderful adaptability feature to adjust to the new reality. And the more adaptable you are, the sooner the new reality becomes old news and stops giving you the pleasure you anticipated from it.
Maybe there is a good reason why our brains are programmed like this. From an evolutionary perspective, it is very important that we recover from our setbacks rather quickly to get back into the game. Notice that the impact bias works both for positive and negative events. Thus, we may anticipate that a particular negative event will leave us totally devastated and incapacitated, but in reality we adapt to and cope with the new harsher reality faster than we anticipate.
Time tends to dull the impact of emotional events quickly and we don’t take this dulling—an emotional decay effect—into account when we anticipate future events. While we may be delighted when we first get our brand new luxury car, that delight decays very quickly and a few weeks from the day we took possession of the car, it doesn’t give us as much pleasure as it did on day one. However, when you’re imagining buying the car and how happy you’ll be with the car, you don’t take into account the quick decay in your delight and tend to feel that your new luxury car will keep you happy for a long time. The same emotional decay happens for negative events as well. Right after a disaster strikes an individual, the brain starts getting adapted to the new low and dulls the pain that comes with it. So, we think we will be unable to get on with life if a loved one dies or if we lose our job, but most people do survive such crises. The very resilience that works in our favour in tough times works against us when things change for better.
We recently heard an NRI (living in Minnesota, USA) shake his head when discussing India and wondering in amazement, “I don’t understand how they manage with the power cuts, the crowds, the heat, the pollution…” When asked how he is managing in the extreme (cold) climate of Minnesota, after having grown up baking in Delhi, he said something like “you get used to the extremes after a while.” Ironically, his answer to the question is really also an answer to his original wonderment.
Once you know how this bias works, you can use it to your advantage. The knowledge of this bias can be quite comforting when you are anticipating something terrible to happen in the near future (like losing a loved one or being transferred to another location). You know that you’ll be able to cope with it much better than you currently think you will. Similarly, you can use the knowledge of this bias to temper your anticipation of “happy” events. Realizing that the peak emotions caused by the happy event won’t last and would begin losing their lustre rather quickly may give you a reason to pause and re-evaluate what you may be willing to give up in the present to get that prized “possession” in the future.
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Praveen Aggarwal is an associate professor of marketing at the Labowitz School of Business & Economics at the University of Minnesota Duluth and Rajiv Vaidyanathan is a professor of marketing and director of MBA programmes at the University of Minnesota Duluth.