What is your time horizon?

I have a hypothesis: different people think in different “time horizons.”  By that I mean, some people think way into the future and past when they make decisions or observations, and other people don’t.  Maybe this is just obvious?

For example, let’s say that Alice and Bob are in a meeting trying to make a decision about where to go to eat lunch.  Alice may tend not to think about the future, so she recommends bean burritos.  Bob is thinking about the future (specifically, the level of ventilation in their shared working area) and may recommend a lunch that’s less likely to produce side effects later.

Or, let’s say Alice and Bob are deciding whether to invest in company A or company B.  Alice may remember that five years ago company A made a really bad judgment call, and Bob may not remember (or care).

Or, let’s say Alice and Bob are deciding whether to build a lamp that’s powered by phone lines.  Alice may want to go ahead, but Bob may resist because he thinks phone lines may go away in a few years.

When we’re making decisions, or trying to communicate with other people, I think a big assumption each party makes is that we’re thinking over the same time horizons.  At work I may resist us going in a certain direction because I believe that five years from now a particular type of technology will no longer exist.  Someone else at the table may want to go forward, because they know the technology would be useful now.  The conversation is frustrating for both sides because we’re taking past one another–my point, although perhaps true, is not relevant for someone who’s more focused on today.  The other person wants to make people happy now, but four years from now we might be in a pickle.

I’d like to posit some factors that might lead to different time horizons:

  • how accurate you feel your mental models are for the situation–do you feel comfortable projecting what will happen in the future?
  • along those lines, how much experience do you have with this type of situation?  how much have your mental models been validated/adjusted by experience?
  • how detail-oriented are you? the more details you care about, the more difficult it may be to approximate the future
  • to what extent is past performance an indicator of future results?
  • related to that, is the thing you’re doing today/this week/this month seem cyclical?  can you project what might happen in the future because it’s a pattern?

This immediately leads me to a couple of tentative conclusions:

  • very, very few people are going to be good at retirement planning until retirement is really close, because you just don’t have the “time horizon”–few people have any idea what it looks like to be retired before they’re retired, and except in rare circumstances (like if you’re a retirement fund manager) you’re not going to get any practice by which to improve
  • someone who tends to “pattern-match,” or look for similarities between things, would probably have a longer time horizon.  For example, if you work in retail and see each customer as a different person with their own unique needs, that’s great, but your job is going to seem more like past performance (past customers) are no indicator of future results (future customers).  However, if you work in retail and you see customers as more or less the same with variations, it may be easier for you to extrapolate to what next week’s business might look like
  • experience could help with extending your time horizons IF you are good at building better and better mental models through that experience
Anyways, at the least I will try harder to discuss the facts, observations, and mental models I’m using when I’m talking with other people about what I think the future may be.