1 00:00:00,120 --> 00:00:02,880 Speaker 1: I'm Barry Ridults and I'm excited to tell you about 2 00:00:02,920 --> 00:00:06,360 Speaker 1: my new podcast, At the Money. Each week, I'm going 3 00:00:06,440 --> 00:00:09,479 Speaker 1: to spend about ten minutes or so diving deep into 4 00:00:09,520 --> 00:00:14,319 Speaker 1: a specific topic that affects you and your money, acquiring it, 5 00:00:14,640 --> 00:00:18,640 Speaker 1: spending it, and most of all investing it. Strap in 6 00:00:18,760 --> 00:00:26,439 Speaker 1: for At the Money starting right now, because if you fail, 7 00:00:28,400 --> 00:00:33,640 Speaker 1: money doesn't automatically lead to happiness. Our relationship with money 8 00:00:34,000 --> 00:00:37,440 Speaker 1: is complicated. Speak to someone at the bottom of the 9 00:00:37,520 --> 00:00:40,839 Speaker 1: economic ladder and they will tell you in no uncertain 10 00:00:40,960 --> 00:00:44,080 Speaker 1: terms that a lack of money can lead to misery. 11 00:00:44,640 --> 00:00:48,320 Speaker 1: But speak to enough millionaires and billionaires, and it's pretty 12 00:00:48,360 --> 00:00:53,479 Speaker 1: clear that money doesn't automatically lead to happiness. As it 13 00:00:53,520 --> 00:00:57,360 Speaker 1: turns out, money buys you a little bit of happiness, 14 00:00:57,640 --> 00:01:00,440 Speaker 1: but only up to a point. And on today's edition 15 00:01:00,480 --> 00:01:03,840 Speaker 1: About the Money, we're going to discuss how and why 16 00:01:04,040 --> 00:01:07,440 Speaker 1: money can buy you happiness. To help us unpack all 17 00:01:07,480 --> 00:01:10,479 Speaker 1: of this and what it means for your financial health, 18 00:01:10,840 --> 00:01:14,040 Speaker 1: let's bring in Brian Portnoy. He is the author of 19 00:01:14,080 --> 00:01:17,280 Speaker 1: the Geometry of Wealth, How to Shape a Life of 20 00:01:17,400 --> 00:01:21,199 Speaker 1: Money and Meaning. Okay, we'll start with an easy enough question, 21 00:01:21,720 --> 00:01:23,280 Speaker 1: does money buy happiness. 22 00:01:23,680 --> 00:01:29,040 Speaker 2: Let me give you a very simple, clear answer. Yes, no, maybe, 23 00:01:29,319 --> 00:01:31,039 Speaker 2: sort of not really. 24 00:01:30,959 --> 00:01:36,080 Speaker 1: Kind of Okay, I get that. So you're saying it's complicated, 25 00:01:36,480 --> 00:01:38,800 Speaker 1: and it really depends on a lot of a lot 26 00:01:38,800 --> 00:01:43,720 Speaker 1: of factors. Let's start really basic with Maslow's hierarchy of 27 00:01:43,800 --> 00:01:48,920 Speaker 1: needs safety, security, food, shelter, et cetera. Obviously, if you 28 00:01:48,960 --> 00:01:51,800 Speaker 1: don't have those things, lack of money is certainly going 29 00:01:51,840 --> 00:01:52,600 Speaker 1: to bring misery. 30 00:01:53,160 --> 00:01:56,960 Speaker 2: So that's exactly the right place to start. Let's talk 31 00:01:57,000 --> 00:02:02,360 Speaker 2: about the elimination of misery as distinct from the achievement 32 00:02:02,440 --> 00:02:06,880 Speaker 2: of happiness. There's no doubt that money's most powerful impact 33 00:02:07,040 --> 00:02:11,519 Speaker 2: on our emotional lives our physical lives is the elimination 34 00:02:11,800 --> 00:02:16,840 Speaker 2: of misery. So we're built to survive. That's our evolutionary story. 35 00:02:17,200 --> 00:02:20,120 Speaker 2: And money buys us shelter, it buys us food, it 36 00:02:20,160 --> 00:02:24,000 Speaker 2: buys us warmth, it buys us safety. At a higher level, 37 00:02:24,320 --> 00:02:28,040 Speaker 2: it can allow us to afford getting rid of aggravation 38 00:02:28,720 --> 00:02:31,320 Speaker 2: or certain people you don't want to see, or certain 39 00:02:31,320 --> 00:02:33,440 Speaker 2: commutes you don't want to make. We can think of 40 00:02:33,560 --> 00:02:38,520 Speaker 2: money as a way to mitigate or even eliminate sadness, disappointment, 41 00:02:38,600 --> 00:02:43,279 Speaker 2: and misery. That is by far the most powerful relationship 42 00:02:43,360 --> 00:02:45,600 Speaker 2: between money and a particular emotional state. 43 00:02:45,960 --> 00:02:48,320 Speaker 1: So I've seen a couple of studies that look at 44 00:02:48,520 --> 00:02:52,560 Speaker 1: where does money stop buying contentment, so to speak. And 45 00:02:53,200 --> 00:02:56,000 Speaker 1: I know these are all from different eras and so 46 00:02:56,520 --> 00:02:59,840 Speaker 1: they may not be inflation adjusted numbers. But one study 47 00:03:00,080 --> 00:03:03,160 Speaker 1: says it peaks around seventy k and then starts to 48 00:03:03,240 --> 00:03:08,480 Speaker 1: roll off. That seems like in America, that buys you shelter, food, clothing, healthcare, 49 00:03:08,560 --> 00:03:12,639 Speaker 1: and maybe even some education. Then I've seen three hundred 50 00:03:12,680 --> 00:03:16,960 Speaker 1: thousand and five hundred thousand where does the marginal utility 51 00:03:16,960 --> 00:03:21,080 Speaker 1: of each earned dollar really begin to matter less and less? 52 00:03:21,480 --> 00:03:24,040 Speaker 2: So you've pointed accurately to a number of studies on this, 53 00:03:24,120 --> 00:03:27,839 Speaker 2: and maybe it's seventy five thousand or ninety thousand. I'd 54 00:03:27,880 --> 00:03:30,440 Speaker 2: also point out that a dollar spent in Manhattan, New 55 00:03:30,520 --> 00:03:34,880 Speaker 2: York versus Manhattan, Kansas. Those are very different conversations. Let 56 00:03:34,880 --> 00:03:38,720 Speaker 2: me intervene first, though, and say there's two different definitions 57 00:03:38,760 --> 00:03:41,720 Speaker 2: of happiness that we should make sure are clear. One 58 00:03:41,840 --> 00:03:45,080 Speaker 2: is sort of just the day today, good mood, bad mood, 59 00:03:45,200 --> 00:03:49,320 Speaker 2: having positive emotions. The other sort of happiness, going back 60 00:03:49,320 --> 00:03:52,640 Speaker 2: to Aristotle, what he called you a ammonia is a deeper 61 00:03:52,680 --> 00:03:56,800 Speaker 2: source of meaning and contentment as it relates to the 62 00:03:56,840 --> 00:04:00,880 Speaker 2: first definition of happiness. You are correct. There's been study 63 00:04:00,920 --> 00:04:04,200 Speaker 2: after study that shows that once you can afford the 64 00:04:04,200 --> 00:04:08,120 Speaker 2: basics in life, having that marginal dollar isn't necessarily going 65 00:04:08,160 --> 00:04:10,240 Speaker 2: to put you in a good mood or a bad mood. 66 00:04:10,240 --> 00:04:13,840 Speaker 2: You're sort of wired with a certain disposition, and if 67 00:04:13,880 --> 00:04:16,479 Speaker 2: you're a generally cheerful person, you're going to be that way. 68 00:04:16,480 --> 00:04:19,880 Speaker 2: And if you're generally kind of dour or miserable while 69 00:04:20,000 --> 00:04:23,080 Speaker 2: making hundreds of thousands of dollars a year aren't going 70 00:04:23,120 --> 00:04:26,920 Speaker 2: to make an impact. I'd go to the second definition 71 00:04:27,120 --> 00:04:30,200 Speaker 2: of what we call happiness. It's a difficult word. You 72 00:04:30,240 --> 00:04:33,320 Speaker 2: go to the sourus. There's thirty different words for this thing. 73 00:04:33,720 --> 00:04:35,760 Speaker 2: But we're going to talk about day to day happiness 74 00:04:36,080 --> 00:04:42,000 Speaker 2: versus contentment what Aristotle called you'd ammonia. And there's some 75 00:04:42,160 --> 00:04:46,360 Speaker 2: interesting research from Danny Kahneman and Angus Deaton that shows 76 00:04:46,400 --> 00:04:51,279 Speaker 2: that if spent wisely, money can underwrite a meaningful life. 77 00:04:51,360 --> 00:04:54,120 Speaker 2: And there are different sources of meaning in our lives 78 00:04:54,440 --> 00:04:59,160 Speaker 2: when spent wisely on certain types of experiences and relationships. 79 00:04:59,600 --> 00:05:03,960 Speaker 2: Money can very much be used effectively to lead a happier, 80 00:05:04,000 --> 00:05:04,680 Speaker 2: better life. 81 00:05:04,880 --> 00:05:08,040 Speaker 1: So let's talk a little bit about other people. There's 82 00:05:08,080 --> 00:05:12,000 Speaker 1: a famous ahl Menken quote was once they asked how 83 00:05:12,000 --> 00:05:15,960 Speaker 1: do you define wealth? And his answer was one hundred 84 00:05:16,000 --> 00:05:19,600 Speaker 1: dollars more than my brother in law. There's other studies 85 00:05:19,600 --> 00:05:23,919 Speaker 1: that have asked people, would you rather have making up 86 00:05:23,960 --> 00:05:27,680 Speaker 1: these numbers but their bullpark sixty thousand dollars when you 87 00:05:27,680 --> 00:05:31,160 Speaker 1: live in a town when everybody else has fifty thousand dollars? 88 00:05:31,640 --> 00:05:34,200 Speaker 1: Or would you prefer two hundred thousand dollars in a 89 00:05:34,240 --> 00:05:38,159 Speaker 1: town where everybody else has three hundred thousand? I know 90 00:05:38,279 --> 00:05:41,080 Speaker 1: what I would choose. I would take the latter. But 91 00:05:41,200 --> 00:05:43,960 Speaker 1: that doesn't seem to be the answer that most people give. 92 00:05:44,560 --> 00:05:46,839 Speaker 1: They say, well, I'd rather be the wealthiest guy in 93 00:05:46,880 --> 00:05:50,000 Speaker 1: town at sixty K than the poorest guy in town 94 00:05:50,120 --> 00:05:54,240 Speaker 1: at one hundred K. Why is that? Explain why that 95 00:05:55,279 --> 00:05:58,560 Speaker 1: behavior and belief system exists, and what does that mean 96 00:05:58,640 --> 00:05:59,960 Speaker 1: for our satisfaction. 97 00:06:00,560 --> 00:06:04,799 Speaker 2: Welcome to the human condition, Welcome to the evolutionary path 98 00:06:04,839 --> 00:06:09,680 Speaker 2: that we've been on. Status matters, tribe matters, and these 99 00:06:09,720 --> 00:06:13,560 Speaker 2: aren't trivial things. These are deep down genetic codes that 100 00:06:13,640 --> 00:06:16,120 Speaker 2: we all live with, and so when we have a 101 00:06:16,160 --> 00:06:19,160 Speaker 2: little bit more than others, we feel better than ourselves. 102 00:06:19,200 --> 00:06:21,440 Speaker 2: And so you're absolutely right. The studies do show, and 103 00:06:21,480 --> 00:06:23,880 Speaker 2: I don't have the exact numbers, but people would rather 104 00:06:24,560 --> 00:06:27,479 Speaker 2: have one hundred thousand dollars income when others are making 105 00:06:27,560 --> 00:06:30,840 Speaker 2: eighty versus one hundred and fifty thousand dollars income when 106 00:06:30,880 --> 00:06:33,680 Speaker 2: others are making two hundred thousand dollars a year. You 107 00:06:33,760 --> 00:06:36,000 Speaker 2: and I might say, well, I'd prefer one versus the other. 108 00:06:36,440 --> 00:06:40,279 Speaker 2: But the fact is that the preponderance of responses reflect 109 00:06:40,279 --> 00:06:43,600 Speaker 2: the fact that we want to feel connected to our 110 00:06:43,640 --> 00:06:46,279 Speaker 2: tribe and safe in our tribe. And when you have 111 00:06:46,400 --> 00:06:50,280 Speaker 2: a little bit more than others, it can make you 112 00:06:50,320 --> 00:06:53,159 Speaker 2: feel pretty good. Go quote for quote. You gave me, 113 00:06:53,360 --> 00:06:56,040 Speaker 2: H'll make and I'll give you the original, JP Morgan. 114 00:06:56,120 --> 00:06:59,320 Speaker 2: He said, nothing corrupts your financial judgment more than the 115 00:06:59,360 --> 00:07:00,800 Speaker 2: sight of your name getting. 116 00:07:00,600 --> 00:07:03,520 Speaker 1: Rich, especially if your neighbor's an idiot, all if. 117 00:07:03,480 --> 00:07:04,599 Speaker 2: Your neighbors JP Morgan. 118 00:07:05,520 --> 00:07:09,640 Speaker 1: I have a very vivid recollection in the early days 119 00:07:09,640 --> 00:07:12,720 Speaker 1: of house flipping in the two thousands leading up to that, 120 00:07:13,240 --> 00:07:16,480 Speaker 1: and the early days of crypto, I can't tell you 121 00:07:16,560 --> 00:07:20,200 Speaker 1: how often I've heard people say my neighbor is making 122 00:07:20,280 --> 00:07:24,160 Speaker 1: all this money and that guy's are moron. It's almost 123 00:07:24,200 --> 00:07:27,400 Speaker 1: as if it's insult to injury. What is it about 124 00:07:27,520 --> 00:07:30,680 Speaker 1: seeing somebody else make a lot of money that gets 125 00:07:30,720 --> 00:07:33,360 Speaker 1: our envy and greed? Buttons ranging. 126 00:07:33,720 --> 00:07:35,920 Speaker 2: Yeah, So I don't know whether to quote neuroscience or 127 00:07:35,920 --> 00:07:39,520 Speaker 2: the Bible go both ways, because I bet they're related. 128 00:07:40,280 --> 00:07:43,480 Speaker 2: They are they are, you know, they both speak to 129 00:07:43,880 --> 00:07:46,680 Speaker 2: kind of who we are as a human species. There's 130 00:07:46,720 --> 00:07:49,520 Speaker 2: no getting around the fact that we feel envy or 131 00:07:49,560 --> 00:07:53,360 Speaker 2: greed when others have more. I mean, I don't know 132 00:07:53,400 --> 00:07:56,920 Speaker 2: if we need to provide a dissertation or Bible quotes 133 00:07:56,960 --> 00:08:00,400 Speaker 2: to show why that's true. We just know that when 134 00:08:00,480 --> 00:08:04,120 Speaker 2: others are getting ahead, we feel like we're falling behind. 135 00:08:04,480 --> 00:08:07,240 Speaker 2: It's really important from a financial wellbeing point of view 136 00:08:07,520 --> 00:08:11,280 Speaker 2: for people to have their own individual, authentic goals, hopefully 137 00:08:11,320 --> 00:08:14,320 Speaker 2: baked into some form of a financial plan, so that 138 00:08:15,240 --> 00:08:17,240 Speaker 2: you feel like you're making progress toward the things that 139 00:08:17,280 --> 00:08:20,520 Speaker 2: you've said matter to you and your loved ones. That 140 00:08:20,640 --> 00:08:23,680 Speaker 2: can be used to mitigate some of these negative emotional 141 00:08:23,720 --> 00:08:26,560 Speaker 2: impacts when it's just like, oh, I'm at the casino. 142 00:08:27,080 --> 00:08:30,280 Speaker 2: I bet on black, he bet on red. He one 143 00:08:31,000 --> 00:08:33,520 Speaker 2: he's rich. I'm not. And you don't feel very good 144 00:08:33,559 --> 00:08:36,560 Speaker 2: about yourself. That's not a great way to work your 145 00:08:36,559 --> 00:08:37,960 Speaker 2: way through your financial life. 146 00:08:38,160 --> 00:08:42,360 Speaker 1: So let's tie this together. Given the difference between the 147 00:08:42,400 --> 00:08:46,199 Speaker 1: pursuit of happiness and the pursuit of contentment, what does 148 00:08:46,240 --> 00:08:50,600 Speaker 1: this mean for how investors should think about pursuing gains 149 00:08:50,600 --> 00:08:51,640 Speaker 1: in their portfolios. 150 00:08:52,320 --> 00:08:56,359 Speaker 2: Investing outside of a well defined financial plan is speculation, 151 00:08:57,040 --> 00:08:59,920 Speaker 2: and that might not necessarily be a bad thing. You know, 152 00:09:00,640 --> 00:09:01,800 Speaker 2: you like to pick stocks. 153 00:09:02,160 --> 00:09:06,200 Speaker 1: I don't not anymore. I started began on a trading desk. Look, 154 00:09:06,559 --> 00:09:09,080 Speaker 1: I taken around with market timing, is what I do. 155 00:09:09,160 --> 00:09:12,560 Speaker 1: But that's just outside of professional that's just in my 156 00:09:12,640 --> 00:09:15,920 Speaker 1: own little, stupid uh yeah, personal account. 157 00:09:15,960 --> 00:09:16,200 Speaker 2: Okay. 158 00:09:16,200 --> 00:09:19,760 Speaker 1: So and by the way, that that two percent of 159 00:09:19,800 --> 00:09:23,120 Speaker 1: my assets scratches such an itch, I can't begin to 160 00:09:23,160 --> 00:09:23,640 Speaker 1: tell you. 161 00:09:23,720 --> 00:09:26,920 Speaker 2: Yeah, that's why we advise advisors to, oh, allow some 162 00:09:27,000 --> 00:09:30,000 Speaker 2: clients to have cowboy accounts. Yeah, absolutely, you will manage 163 00:09:30,040 --> 00:09:33,600 Speaker 2: ninety seven percent of your assets three percent go wild 164 00:09:33,679 --> 00:09:35,360 Speaker 2: by crypto all this stuff. 165 00:09:35,400 --> 00:09:37,680 Speaker 1: And one of the funny things are is with those 166 00:09:37,679 --> 00:09:40,760 Speaker 1: sort of accounts is if they go to zero, who cares? 167 00:09:40,920 --> 00:09:44,480 Speaker 1: Was two percent of your assets? And if they triple, Hey, 168 00:09:44,520 --> 00:09:47,120 Speaker 1: they tripled because it was two percent. If it was 169 00:09:47,240 --> 00:09:49,480 Speaker 1: actually all your money, you would never have been able 170 00:09:49,520 --> 00:09:51,280 Speaker 1: to hold on that long. That's right, you would have 171 00:09:51,320 --> 00:09:53,640 Speaker 1: taken Oh my god, I'm up thirty percent. Got I 172 00:09:53,640 --> 00:09:54,800 Speaker 1: gotta take some profits. 173 00:09:54,840 --> 00:09:57,120 Speaker 2: And by the way, there's nothing wrong with being interested 174 00:09:57,200 --> 00:10:00,120 Speaker 2: in the stock or bond market, or in crypto or 175 00:10:00,200 --> 00:10:03,600 Speaker 2: in any other market and seeing if you can deliver. 176 00:10:04,760 --> 00:10:11,199 Speaker 2: Bring your insight into picking better securities or better outcomes. However, 177 00:10:11,280 --> 00:10:14,719 Speaker 2: if we're really thinking about the relationship between money and happiness, 178 00:10:15,000 --> 00:10:18,200 Speaker 2: when you have a well defined plan, it means that 179 00:10:18,240 --> 00:10:21,400 Speaker 2: you're heading towards something. It could be your kid's college education, 180 00:10:21,600 --> 00:10:25,600 Speaker 2: it could be a comfortable retirement, it could be a 181 00:10:25,600 --> 00:10:30,240 Speaker 2: particular vacation that you have in mind. So you pick 182 00:10:30,280 --> 00:10:34,920 Speaker 2: your goal and you invest accordingly. You build a portfolio, 183 00:10:35,040 --> 00:10:38,520 Speaker 2: you have time horizons, you have risk tolerance. It's not 184 00:10:38,679 --> 00:10:43,559 Speaker 2: as sexy or as provocative as playing the markets, so 185 00:10:44,080 --> 00:10:48,199 Speaker 2: to speak, But the conversation about money and happiness actually 186 00:10:48,200 --> 00:10:51,000 Speaker 2: makes a lot more sense in the context of having 187 00:10:51,080 --> 00:10:54,839 Speaker 2: well defined goals and the other stuff it's kind of fun. 188 00:10:55,360 --> 00:10:58,040 Speaker 2: But just let's call it what it is. It's not investing, 189 00:10:58,160 --> 00:10:58,960 Speaker 2: it's speculating. 190 00:10:59,080 --> 00:11:03,040 Speaker 1: Thanks Brian, that's really interesting. You know, this idea of 191 00:11:03,160 --> 00:11:06,040 Speaker 1: money buying happiness comes up all the time. It comes 192 00:11:06,080 --> 00:11:09,679 Speaker 1: up in conversations with clients and friends and family, and 193 00:11:09,720 --> 00:11:14,000 Speaker 1: I always like to point to the example of the 194 00:11:14,040 --> 00:11:18,960 Speaker 1: opposite of money leading to satisfaction and contentment, something I 195 00:11:19,000 --> 00:11:24,560 Speaker 1: call purposeless capital. Bill Hwang ran the hedge fund Archi 196 00:11:24,640 --> 00:11:28,360 Speaker 1: Ghost Capital Management, and they very famously ran up a 197 00:11:28,440 --> 00:11:32,280 Speaker 1: stake of a few billion dollars using leverage and very 198 00:11:32,320 --> 00:11:37,280 Speaker 1: aggressive trading up to twenty billion dollars before they ultimately 199 00:11:37,440 --> 00:11:40,200 Speaker 1: just blew up. And I always suspected part of the 200 00:11:40,240 --> 00:11:44,959 Speaker 1: reason that happened was because this was purposeless capital. There 201 00:11:45,080 --> 00:11:49,240 Speaker 1: was no intent behind it. There was no plan to 202 00:11:49,280 --> 00:11:54,240 Speaker 1: meet certain life goals, give money to philanthropy, build experiences 203 00:11:54,280 --> 00:11:57,360 Speaker 1: with the family. It was just more for the sake 204 00:11:57,400 --> 00:12:01,439 Speaker 1: of more. And as we've learned over time, sure money 205 00:12:01,480 --> 00:12:05,680 Speaker 1: doesn't always buy happiness, but if used right, it could 206 00:12:05,679 --> 00:12:09,200 Speaker 1: buy experiences, You can help others, and it can bring 207 00:12:09,480 --> 00:12:17,760 Speaker 1: a life of funded contentment if applied correctly. You can 208 00:12:17,800 --> 00:12:20,520 Speaker 1: listen to at the Money every week. Find it in 209 00:12:20,600 --> 00:12:24,520 Speaker 1: our masters and business feed at Bloomberg dot com, Apple Podcasts, 210 00:12:24,559 --> 00:12:27,760 Speaker 1: and Spotify. Each week, we'll be here to discuss the 211 00:12:27,840 --> 00:12:31,280 Speaker 1: issues that matter most to you as an investor. I'm 212 00:12:31,320 --> 00:12:34,480 Speaker 1: Barry Riddholts. You've been listening to Add the Money on 213 00:12:34,559 --> 00:12:37,360 Speaker 1: Bloomberg Radio.