Have you ever eaten an extra slice of pie for dessert only to promise yourself a diet just hours later? Or gone grocery shopping on an empty stomach and bought far more ice cream than you needed? These are classic examples of thehot-cold empathy gapat work.
What are empathy gaps?
The hot-cold empathy gap occurs when “hot” visceral factors - such as excitement, hunger, stress, or fear - lead us to act in ways that contradict our “cold”, rational, calm intentions. This gap can result in overspending, risky investments, or failing to save enough for the future. When we are in a "cold" state, we struggle to predict how "hot" emotional states will influence our behavior.
Why do empathy gaps happen?
- Many individuals haveself-controlblind spots which means they choose short-term rewards over long-term benefits. While this can occur even in a cold state, self-control bias becomes more pronounced in a "hot" state, where emotions like excitement or stress drive people to prioritize immediate gratification over their long-term goals. For example, a person may spend money impulsively to satisfy a momentary desire while neglecting long-term financial goals, such as saving for retirement.
- Projection biasleads us to believe that our tastes remain the same overtime. In reality, our tastes may slowly evolve over time - for example, many people grow to enjoy coffee or tea despite initially disliking their bitterness as children. Moreover, temporary factors like hunger can also influence our preferences. In the context of empathy gaps, projection bias means that we fail to realize that our tastes may be different in a hot than in a cold state. A study highlights this effect: participants were asked to choose between healthy and unhealthy snacks (e.g., an apple or a Snickers bar) for delivery a week later. Initially, 74% chose the healthier option. However, when participants returned a week later—before lunch and presumably hungry—many changed their minds, with 70% ultimately opting for the unhealthy snack.
Real-Life Financial Scenarios
- Savings and spending:a calm state encourages saving and prioritizing long-term goals, but in a “hot” state, stress or instant gratification can override this logic. For instance, someone might dip into their emergency savings to splurge on non-essential items, overlooking the future regret they’ll feel when a real emergency arises. In a calm state, individuals underestimate how much emotional or situational pressure will tempt them to spend impulsively.
- Impulse purchases:during emotional highs, like a celebratory mood, or lows, such as dealing with sadness, people may overspend to maintain or change their emotional state. The rise of buy-now-pay-later services tend to exacerbate this behavior, allowing instant gratification with deferred consequences. In a “cold” state, people struggle to foresee how much emotions will sway their decisions, often overestimating their future financial discipline.
- Panic selling:In a calm state, people understand the value of "staying the course" and benefiting from market rebounds but fail to connect with their likely panic-driven responses during volatile times. When markets tumble, fear takes over, and rational investment strategies are abandoned. Investors often sell assets at a loss, driven by the immediate need to escape perceived danger.
Fortunately, there exists ways to counteract the effects of empathy gaps.
Strategies to help mitigate empathy gaps
- Cooling-off periodsallow people to cancel a purchase within a certain timeframe after the sale. Though mostly intended to protect against high-pressure sales tactics, they are also useful when you have buyer’s remorse or need time to reconsider an emotional purchase decision. Imagine that you visited a house and, feeling that you had found your dream home, made a hasty offer. Many real-estate transactions now give buyers a few days to sit on their decision, with the possibility to withdraw their offer with no or little penalty.
- Commitment devices: the most self-conscious individuals - who are aware of their self-control issues during hot states - may use commitment tools to mitigate the effects of empathy gaps
- Credit card users can set spending limits to curb overspending.
- Gamblers can place themselves on self-exclusion lists at casinos.
- Impulsive buyers can use web browser extensions to disable or limit access to shopping websites during specific hours, removing the convenience of online shopping during emotionally vulnerable times.
- Accountability partners: a trusted friend, partner, or financial professional can act as a calming influence and provide a rational perspective during emotionally charged moments, such as a market crash.
Conclusion
Hot-cold empathy gaps tend to reveal how strong emotions may lead us away from our preferred course of action, and how difficult it is to predict their influence beforehand. Whether you're planning your holiday budget or navigating investments, we encourage you to stay mindful of empathy gaps.