Why are we so hopeless at forecasting our futures?

Hello again from Melo.

This is the second of four posts to help you explore your motivations for exiting your business – and help you design your future work life if that’s in your plans.

What we’ve covered, and what’s coming up?

In the first post in this series, we listed the big factors pushing advice firm owners to consider selling up – and warned of the risks of rushing this process.

So, if you’ve not read that – start there.

In this post, we’ll explore why we’re so hopeless at forecasting what will make us happy in future years – and suggest two proven ways to get better at that.

Then, in the final two posts (for those who’ll continue working after selling their business), we’ll dig into the experts’ advice for designing your future work-life.

Of course, personal life planning is easier if we’re clear about what we value upfront.

So, let’s start with a powerful new way to think about values.

What do you value most in life?

If you search ‘How to work out your values’, you’ll find nearly 3,000,000,000 results on Google!

Three thousand million!

We’re not sure how many of those pages offer wise guidance, but we all know it’s hard work to discover and describe our values.

So, we were pleased to find a new perspective on this challenge in the book ‘A Path Through the Jungle’ by Professor Steve Peters.

Peters is the author of Chimp Paradox, a Psychiatrist and was the Mind Coach to the British Olympic Cycling Team that won Eight gold medals at the 2012 Olympics in London.

And he says we should clearly distinguish between ‘what we value’ and our ‘values’ – which are more of a moral guide to our conduct.

We’ll probably only have a short list of values (as a moral compass) like these examples from Peters’ book.

• Respect for others.
• Justice and fair treatment.
• Loyalty.
• Compassion and kindness.
• Integrity.
• Respect for the uniqueness of each person.
• Equality without prejudice.
• Promotion of peace and goodwill.

Our values help us to know we’re doing the right thing. So, they give us peace of mind and inner strength in challenging situations.

Of course, it’s for each of us to develop our own set of values – which may be different to those listed above. And, as Peters has made clear (in this Diary of a CEO podcast), it’s wise to remember that not everyone adheres to that list!

Our ‘values’ are based on our personal judgements – which draw on our group and personal beliefs – and we generally only get a real sense of someone’s values from their actions.

Our moral values are quite different from the things we value, and Peters urges us to avoid muddling up these two lists.

The list of things we value could be significantly longer – and might include:

• Being accepted by others as a friend.
• Having enough time to spend with family and friends – and our partner if we have one.
• Being a supportive friend to all of those people.
• Our relationships (and the banter) at work.
• Giving our time or skills (or money) to help others.
• Being entertained  – with music, drama, books or sports.
• Entertaining ourselves with our hobbies and interests – and our work.
• Entertaining others!
• Achieving a state of calm and contentedness.
• Having a quiet and private space to find that calm!
• Having long breaks from work.
• Creating new (Physical, Intellectual or Artistic) things.
• Having good health.
• The good health of others – and our pets.
• Getting a lift from exercise or moments of awe in the natural world.
• Our special possessions and keepsakes/reminders of special times.
• Making a lovely home.
• Our skills and our knowledge.

And much, much more.

This list might include physical objects, works of art, valuable ideas, people, practices, habits and states of health and mind.

So, while it might be a long list, Peters says these are the things we believe will make us feel secure and happy, so it helps to know what they are – and give them some priority in our life now.

The challenge is to know what we might value in the future.

What will we want to have, become and do (or not do!) for ourselves and our loved ones 5 or 20 years from now?

These are the things that should inform our personal financial plan, of course, but research shows we’re particularly bad at forecasting what will make us happy in the future.

So, let’s explore this thinking challenge now – and outline some solution ideas.

What’s this forecasting problem all about?

Like many questions of Psychology, this is a big and complex area.

So, we can only skim the surface here and recommend these books for further reading on this challenge of planning a happier future life.

The first is by Professor Dan Gilbert, a professor of psychology at Harvard University who is well known for his research into these areas.

The second is by Hal Hirshfield, a Marketing and Behavioural Decision Making Professor at UCLA and described by other academics as “one of today’s leading behavioural scientists”.

So, as we’ll see, our brains can let us down, but it’s worth remembering their immense power.

According to Gilbert, we humans are unique in our ability to think ahead in a more deliberate way than other animals using their instincts.

We can play thought experiments.

We can imagine futures that are different from today.

We don’t have to learn every life lesson through experience.

So, we don’t have to bang our thumb with a hammer to know that’s a bad idea.

So, yes, we can imagine – you just imagined doing that – didn’t you?

The problem is that our minds don’t pay attention to everything happening in front of us right now.

We don’t have an infinite memory capacity, so when we go on our mental time travels to the past – or to imagine the future – our views are often hazy.

It turns out that those views also depend on our moods – with low moods causing us to remember and predict more negative events.

Places and people’s faces are not well-defined in our mind’s eye.

So, we fill in the details with images and ideas that fit our story – and those details are often not a good reflection of what was (or will be) true.

The fact is that most of us are poor at forecasting how we’ll feel about change in the future. 

We might think we know the circumstances and events that will delight (or upset) us.

However, our predictions are often wildly wrong, and there are various reasons for this – including these three:

First, we’re generally quite adaptable and resilient. So, both positive and negative experiences have less of a lasting impact than we’d expect.

Second, we’re affected by something Psychologists call ‘The end of history illusion.’

The End of History Illusion!

The end of history illusion is a fascinating paradox.

It describes our tendency to recognise our significant personal growth and change over the past, say, 10 years – while not expecting that we will change much in the future!

Yes, go figure!

Studies show that those in their 30s and 40s are more susceptible to this illusion than those in their 50s and 60s – although most of us (from young adults to grandparents) are affected by this illusion to some extent.

We seem to regard the present moment (whenever it is!) as a watershed moment when we’ve finally become the person we will be for the rest of our lives!

It sounds like a silly view of life to adopt – but this is how we tend to think.

Why do we think like this?

We can’t be sure, but some Psychologists speculate that we evolved this outlook as a rational self-protection device.

Acknowledging the possibility that we’ll change significantly in the future may feel like a threat to our positive self-image and sense of stability.

So, it’s natural (albeit annoying when we see it in others!) that we feel confident and ‘complete’ as we are.

And this means alongside teenagers, we all need an occasional reminder that we will continue changing and growing into our futures.

The third reason we’re awful forecasters of our future happiness is that our imaginations are influenced by our current feelings – which draw on our current circumstances and beliefs.

We all know how this works.

If we’re hungry when grocery shopping, we buy far too much of the wrong types of food.

If we’re overworked now, we might dream of a life without work – which might suit some, but it does not make everyone happy.

If it did, why do we regularly see billionaires working into their 70s, 80s or 90s?

Similarly, our financial plans might go wrong if we base our future income needs on what we earn today.

This is an enormous challenge for high earners – where the approach can make escaping from work look horrendously expensive.

And this planning failure puts many young people off pension saving altogether.

So, we must take care when planning our futures – and try not to assume that what we’ll want in the future can be forecast by what we want today.

A great plan does not require us to work long days for decades before taking a big break.

We may not have the energy, health or inclination to do what we dream of doing now – when we’re 20 or 40 years older!

A “plan for tomorrow and live for today” approach makes much more sense – to us.

In the future, it’s unlikely that our happiness will depend on the success or otherwise of a plan we made 20 years ago.

We’re generally more resilient (and kind to ourselves) than that, especially when the going gets tough – and thank goodness we are.

We must remember that our forecast errors (based on what we want today) can cause us to overpay (in many ways) for our futures.

How can you overcome these forecasting challenges?

Some psychologists compare this struggle – to understand the needs and wants of our future selves – as being like talking to a stranger.

So, it might seem impossible, but there are two proven approaches to help.

Future planning trick 1: Exchange letters with your future self.

The first idea, outlined in Hershield’s book, is to write a letter to ask questions of our future self – to help us reflect on our long-term goals and values.

For example, we might ask:

• “What are you most proud of?”
• “What do you wish you had done differently?”
• “What are your biggest regrets?”
• “What brings you the most joy?”

These questions help us to consider the perspectives and needs of this future self stranger – and result in more thoughtful decisions in the present.

The exercise can also help reduce stress by giving us a broader perspective on our current challenges.

The aim is to develop a conversation with this stranger.

Yes, it sounds like an odd idea – but it’s proven to work. 

So, why not give it a try?

You could ask this other person what activities they plan to start, do more of, do less of or stop – now that they’ve sold their business.

Maybe your exchange of letters will reveal their desire to continue working, if only part-time, for many years.

Or maybe it will not.

You’ll only find out if you have that conversation – with your future self. 😉

Future planning trick 2: Get some neighbourly advice.

The second idea comes from Professor Dan Gilbert’s book, ‘Stumbling on Happiness’.

This is about talking with others who’ve been through the experience we’re heading into.

And Gilbert suggests that we pay particular attention to those in the thick of the change we’re heading towards.

Those who dealt with an event decades ago will remember less about those times – and any negative memories will have faded faster than the positive ones.

So, they may see that distant past through hazy and rose-tinted spectacles!

Now, if you’re thinking it sounds obvious to ask for experienced advice, we’d agree.

Whether we’re thinking about having children, starting a new career, leaving our job (or our partner) or heading into retirement – we all know we can learn from those who’ve been there and done it.

Or rather, you’d like to think so.

However, according to Gilbert’s research – very few of us do this obvious thing.

We get stuck with the assumption that what we’ll want in the future is what we want today.

What’s more, we assume that our reactions to future events will be unique to us personally.

So, we see little value in hearing about the experiences of others.

Of course, we are unique in multiple ways – but we’re similar in many ways, too.

For example, most of us share:

• A desire for freedom – in our speech and our actions.
• A desire for meaningful personal relationships.
• A desire to belong (and contribute) to a community that’s larger than us.
• A desire for purpose and meaning in our work.
• A desire to create and innovate through art and problem-solving.
• A desire for joy and happiness.
• A recognition that other emotions like sadness and fear are valuable, too.
• Some self-awareness  – to reflect and learn from our thoughts and feelings.
• An ability to grasp abstract concepts – to imagine, reason and plan – albeit imperfectly at times!
• Some core ‘values’ about the right and wrong ways to behave.

And we have hundreds more things in common as well.

Our challenge, as Gilbert points out, is that these similarities fascinate us less than our differences.

We’re alert to people’s differences – because they help us distinguish between friend and foe, Jack and Jill – or Jill and Jacqueline!

So, we may have to nudge ourselves to take some neighbourly advice.

And if you’d like proof that this works, read the research in ‘The Surprising Power of Neighborly Advice’ (2009) here.

Bottom lines and next steps.

In this post, we’ve explored the challenge of making good forecasts of what will make us happy in the future – and outlined two ideas to help you improve your planning in this area.

If you’d like some ‘neighbourly advice’  – from peeps who’ve been there and done it – and regularly help others do the same, say ‘elo melo’ at hello@melo.co.uk or call us for a chat on 0113 4656 111.

The market for selling advice firms is always shifting, and it has changed significantly in the last couple of years, largely due to regulatory changes and reviews.

At Melo, we live in this challenging market with our business owner clients daily.

So, no, we don’t wear the hazy and rose-tinted spectacles of those who exited a few years back when the market was easier.

Just sayin!

Coming up.

In the next post (for those who wish to work after selling their business), we’ll explore several key questions to help you design a future work life that’s right for you.

See you there, if that’s relevant to you, when you’re ready.

And thanks for dropping in.