Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Because money doesn't automatically lead to happiness, our relationship with
Speaker 2: money is complicated. Speak to someone at the bottom of
Speaker 2: the economic ladder and they will tell you in no
Speaker 2: uncertain terms that a lack of money can lead to misery.
Speaker 2: But speak to enough millionaires and billionaires, and it's pretty
Speaker 2: clear that money doesn't automatically lead to happiness. As it
Speaker 2: turns out, money buys you a little bit of happiness,
Speaker 2: but only up to a point. And on today's edition
Speaker 2: of At the Money, we're going to discuss how and
Speaker 2: why money can buy you happiness. To help us unpack
Speaker 2: all of this and what it means for your financial health,
Speaker 2: let's bring in Brian Portnoy. He is the author of
Speaker 2: the Geometry of Health, How to Shape a Life of
Speaker 2: Money and Meaning. Okay, we'll start with an easy enough question,
Speaker 2: Does money buy happiness?
Speaker 1: Let me give you a very simple, clear answer. Yes, no, maybe,
Speaker 1: sort of not really.
Speaker 2: Kind of Okay, I get that. So you're saying it's
Speaker 2: complicated and it really depends on a lot of factors.
Speaker 2: Let's start really basic with Maslow's hierarchy of needs, safety, security, food, shelter, etc. Obviously,
Speaker 2: if you don't have those things, lack of money is
Speaker 2: certainly going to bring misery.
Speaker 1: So that's exactly the right place to start. Let's talk
Speaker 1: about the elimination of misery as distinct from the achievement
Speaker 1: of happiness. There's no doubt that money's most powerful impact
Speaker 1: on our emotional lives our physical lives is the elimination
Speaker 1: of misery. So we're built to survive. That's our evolutionary story.
Speaker 1: And money buys us shelter, it buys us food, it
Speaker 1: buys us warmth, it buys us safety. At a higher level,
Speaker 1: it can allow us to afford getting rid of aggravation
Speaker 1: or certain people you don't want to see, or certain
Speaker 1: commutes you don't want to make. We can think of
Speaker 1: money as a way to mitigate or even eliminate sadness, disappointment,
Speaker 1: and misery. That is by far the most powerful relationship
Speaker 1: between money and a particular emotional state.
Speaker 2: So I've seen a couple of studies that look at
Speaker 2: where does money stop buying contentment so to speak? And
Speaker 2: I know these are all from different eras and so
Speaker 2: they may not be inflation adjusted numbers, but one study
Speaker 2: says it peaks around seventy k and then starts to
Speaker 2: roll off. That seems like in America, that buys you shelter, food, clothing, healthcare,
Speaker 2: and maybe even some education. Then I've seen three hundred
Speaker 2: thousand and five hundred thousand, where does the marginal utility
Speaker 2: of each earned dollar really begin to matter less and less?
Speaker 1: So you've pointed accurately to a number of studies on this,
Speaker 1: and maybe it's seventy five thousand or ninety thousand. I'd
Speaker 1: also point out that a dollar spent in Manhattan, New
Speaker 1: York versus Manhattan, Kansas. Those are very different conversations. Let
Speaker 1: me intervene first, though, and say there's two different definitions
Speaker 1: of happiness that we should make sure are clear. One
Speaker 1: is sort of just the day today, good mood, bad mood,
Speaker 1: having positive emotions. The other sort of happiness, going back
Speaker 1: to Aristotle, what he called youd ammonia, is a deeper
Speaker 1: source of meaning and contentment. As it relates to the
Speaker 1: first definition of happiness, you are correct. There's been study
Speaker 1: after study that shows that once you can afford the
Speaker 1: basics in life, having that marginal dollar isn't necessarily going
Speaker 1: to put you in a good mood or a bad mood.
Speaker 1: You're sort of wired with a certain disposition, and if
Speaker 1: you're a generally cheerful person, you're going to be that way.
Speaker 1: And if you're generally kind of dour or miserable while
Speaker 1: making hundreds of thousands of dollars a year, aren't going
Speaker 1: to make an impact. I'd go to the second definition
Speaker 1: of what we call happiness. It's a difficult word. You
Speaker 1: go to the sourus. There's thirty different words for this thing.
Speaker 1: But we're going to talk about day to day happiness
Speaker 1: versus contentment what Aristotle called you'd ammonia. And there's some
Speaker 1: interesting research from Danny Kahneman and Angus Deaton that shows
Speaker 1: that if spent wisely, money can underwrite a meaningful life,
Speaker 1: and there are different sources of meaning in our lives.
Speaker 1: When spent wisely on certain types of experiences and relationships,
Speaker 1: money can very much be used effectively to lead a happier,
Speaker 1: better life.
Speaker 2: So let's talk a little bit about other people. There's
Speaker 2: a famous ahl Mann quote was once they asked how
Speaker 2: do you define wealth? And his answer was one hundred
Speaker 2: dollars more than my brother in law. There's other studies
Speaker 2: that have asked people would you rather have making up
Speaker 2: these numbers, but they're bullpark sixty thousand dollars when you
Speaker 2: live in a town when everybody else has fifty thousand dollars?
Speaker 2: Or would you prefer two hundred thousand dollars in a
Speaker 2: town where everybody else has three hundred thousand? I know
Speaker 2: what I would choose. I would take the latter. But
Speaker 2: that doesn't seem to be the answer that most people give.
Speaker 2: They say, well, I'd rather be the wealthiest guy in
Speaker 2: town at sixty K than the poorest guy in town
Speaker 2: at one hundred K. Why is that? Explain why that
Speaker 2: behavior and belief system exists, and what does that mean
Speaker 2: for our satisfaction?
Speaker 1: Welcome to the human condition, Welcome to the evolutionary path
Speaker 1: that we've been on. Status matters, tribe matters, and these
Speaker 1: aren't trivial things. These are deep down genetic codes that
Speaker 1: we all live with, and so when we have a
Speaker 1: little bit more than others, we feel better than ourselves.
Speaker 1: And so you're absolutely right. The studies do show, and
Speaker 1: I don't have the exact numbers, but people would rather
Speaker 1: have a one hundred thousand dollars income when others are
Speaker 1: making eighty versus one hundred and fifty thousand dollars income
Speaker 1: when others are making two hundred thousand dollars a year.
Speaker 1: You and I might say, well, I'd prefer one versus
Speaker 1: the other. But the fact is that the preponderance of
Speaker 1: responses reflect the fact that we want to feel connected
Speaker 1: to our tribe and safe in our tribe. And when
Speaker 1: you have a little bit more than others, it can
Speaker 1: make you feel pretty good. Go quote for quote. You
Speaker 1: gave me H'll make and I'll give you the original,
Speaker 1: JP Morgan. He said, nothing corrupts your financial judgment more
Speaker 1: than the site of your neighbor getting rich, especially.
Speaker 2: If your neighbor's an idiot. Well, if your neighbor's JP Morgan.
Speaker 2: I have a very vivid recollection in the early days
Speaker 2: of house flipping, in the two thousands leading up to that,
Speaker 2: and the early days of crypto. I can't tell you
Speaker 2: how often I've heard people say, my neighbor is making
Speaker 2: all this money and that guy's are more on It's
Speaker 2: almost as if it's insult to injury. What is it
Speaker 2: about seeing somebody else make a lot of money that
Speaker 2: gets our envy and greed buttons rawning.
Speaker 1: Yeah, so I don't know whether to quote neuroscience or.
Speaker 2: The Bible go both ways, because I bet they're related.
Speaker 1: They are, they are, you know, they both speak to
Speaker 1: kind of who we are as a human species. There's
Speaker 1: no getting around the fact that we feel envy or
Speaker 1: greed when others have more. I mean, I don't know
Speaker 1: if we need to provide a dissertation or Bible quotes
Speaker 1: to show why that's true. We just know that when
Speaker 1: others are getting ahead, we feel like we're falling behind.
Speaker 1: It's really important from a financial wellbeing point of view
Speaker 1: for people to have their own individual, authentic goals, hopefully
Speaker 1: baked into some form of a financial plan, so that
Speaker 1: you feel like you're making progress toward the things that
Speaker 1: you've said matter to you and your loved ones. That
Speaker 1: can be used to mitigate some of these negative emotional impacts.
Speaker 1: When it's just like, oh, I'm at the casino, I
Speaker 1: bet on black, he bet on red, he won, he's rich,
Speaker 1: I'm not, and you don't feel very good about yourself.
Speaker 1: That's not a great way to work your way through
Speaker 1: your financial life.
Speaker 2: So let's tie this together. Given the difference between the
Speaker 2: pursuit of happiness and the pursuit of contentment. What does
Speaker 2: this mean for how investors should think about pursuing gains
Speaker 2: in their portfolios.
Speaker 1: Investing outside of a well defined financial plan is speculation,
Speaker 1: and that might not necessarily be a bad thing. You know,
Speaker 1: you like to pick stocks?
Speaker 2: I don't, oh not anymore. I started began on a
Speaker 2: trading desk. Gay, mean, look, I taken around with market
Speaker 2: timing is what I do. But that's just outside of
Speaker 2: professional that's just in my own little stupid uh yeah,
Speaker 2: personal account.
Speaker 1: Okay, so I'll start.
Speaker 2: And by the way, that that two percent of my
Speaker 2: assets scratches such an itch I can't begin to tell you.
Speaker 1: Yeah, that's why we advise advisors to, oh, allow some
Speaker 1: clients to have cowboy accounts.
Speaker 2: Yeah, absolutely, you will.
Speaker 1: Manage ninety seven percent of your assets. Three percent go
Speaker 1: wild by crypto all this stuff.
Speaker 2: And one of the funny things are is with those
Speaker 2: sort of accounts is if they go to zero, who cares?
Speaker 2: Was two percent of your assets? And if they triple,
Speaker 2: Hey they tripled because it was two percent. If it
Speaker 2: was actually all your money, you would never have been
Speaker 2: able to hold on that long. That's right, you would
Speaker 2: have taken Oh my god, I'm up thirty percent. I
Speaker 2: got to I gotta take some profits.
Speaker 1: And by the way, there's nothing wrong with being interested
Speaker 1: in the stock or bond market, or in crypto or
Speaker 1: in any other market and seeing if you can deliver
Speaker 1: bring your insight into picking better securities or better outcomes. However,
Speaker 1: if we're really thinking about the relationship between money and happiness,
Speaker 1: and you have a well defined plan, it means that
Speaker 1: you're heading towards something. It could be your kid's college education,
Speaker 1: it could be a comfortable retirement, it could be a
Speaker 1: particular vacation that you have in mind. So you pick
Speaker 1: your goal and you invest accordingly. You build a portfolio,
Speaker 1: you have time horizons, you have risk tolerance. It's not
Speaker 1: as sexy or as provocative as playing the market, so
Speaker 1: to speak. But the conversation about money and happiness actually
Speaker 1: makes a lot more sense in the context of having
Speaker 1: well defined goals and the other stuff. It's kind of fun,
Speaker 1: but just let's call it what it is. It's not investing,
Speaker 1: it's speculating.
Speaker 2: Thanks Brian. That's really interesting. You know, this idea of
Speaker 2: money buying happiness comes up all the time. It comes
Speaker 2: up in conversations with clients and friends and family, and
Speaker 2: I always like to point to the example of the
Speaker 2: opposite of money leading to satisfaction and contentment, something I
Speaker 2: call purposeless capital. Bill Hwang ran the hedge fund ARCHI
Speaker 2: Ghost Capital Management, and they very famously ran up a
Speaker 2: stake of a few billion dollars using leverage and very
Speaker 2: aggressive trading up to twenty billion dollars before they ultimately
Speaker 2: just blew up. And I always suspected part of the
Speaker 2: reason that happened was because this was purposeless capital. There
Speaker 2: was no intent behind it. There was no plan to
Speaker 2: meet certain life goals, give money to philanthropy, build experiences
Speaker 2: with the family. It was just more for the sake
Speaker 2: of more. And as we've learned over time, sure money
Speaker 2: doesn't always buy happiness, but if used right, it could
Speaker 2: buy experiences, You can help others, and it can bring
Speaker 2: a life of funded contentment if applied correctly. You can
Speaker 2: listen to At the Money every week finding in our
Speaker 2: Masters and business feed at Bloomberg dot com, Apple Podcasts
Speaker 2: and Spotify. Each week we'll be here to discuss the
Speaker 2: issues that matter most to you as an infestor. I'm
Speaker 2: Barry Ritolts. You've been listening to At the Money on
Speaker 2: Bloomberg Radio