Michael Norton – Social science researcher
So I want to talk today about money and happiness, which are two things a lot of us spend a lot of our time thinking about, either trying to earn them or trying to increase them. And a lot of us resonate with this phrase, we see it in religions and self-help books: money can’t buy happiness. And I want to suggest today that, in fact, that’s wrong.
I’m at a business school, so that’s what we do. So that’s wrong, and in fact, if you think that, you’re just not spending it right. So instead of spending it the way you usually spend it, maybe if you spent it differently, that might work a little bit better.
Before I tell you the ways you can spend it that will make you happier, let’s think about the ways we usually spend it that don’t, in fact, make us happier. We had a little natural experiment. So CNN, a little while ago, wrote this interesting article on what happens to people when they win the lottery. It turns out people think when they win the lottery their lives will be amazing. This article’s about how their lives get ruined. What happens when people win the lottery is, one, they spend all the money and go into debt; and two, all of their friends and everyone they’ve ever met find them and bug them for money. It ruins their social relationships, in fact. So they have more debt and worse friendships than they had before they won the lottery.
What was interesting about the article was, people started commenting on the article, readers of the thing. And instead of talking about how it made them realize that money doesn’t lead to happiness, everyone started saying, “You know what I’d do if I won the lottery …?” and fantasizing about what they’d do. Here’s just two of the ones we saw that are interesting to think about. One person wrote, “When I win, I’m going to buy my own little mountain and have a little house on top.”
And another person wrote, “I would fill a big bathtub with money and get in the tub while smoking a big fat cigar and sipping a glass of champagne.” This is even worse: “… then I’d have a picture taken and dozens of glossies made. Anyone begging for money or trying to extort from me would receive a copy of the picture and nothing else.”
And so many of the comments were exactly of this type, where people got money and, in fact, it made them antisocial. So I told you it ruins people’s lives and their friends bug them. Also, money often makes us feel very selfish and we do things only for ourselves. We thought maybe the reason money doesn’t make us happy is that we’re spending it on the wrong things; in particular, we’re always spending it on ourselves. And we wondered what would happen if we made people spend more of their money on others. So instead of being antisocial with your money, what if you were more pro-social with it?
We thought, let’s make people do it and see what happens. Let’s have some people do what they usually do, spend money on themselves, and let’s make some people give money away, and measure their happiness and see if, in fact, they get happier. The first way we did this was, one Vancouver morning, we went out on the campus at University of British Columbia, approached people and said, “Do you want to be in an experiment?” They said, “Yes.” We asked them how happy they were, and then gave them an envelope. One of the envelopes had things in it that said, “By 5pm today, spend this money on yourself.” We gave some examples of what you could spend it on. Other people got a slip of paper that said, “By 5pm today, spend this money on somebody else.” Also inside the envelope was money.
And we manipulated how much money we gave them; some people got this slip of paper and five dollars, some got this slip of paper and 20 dollars. We let them go about their day and do whatever they wanted. We found out they did spend it in the way we asked them to. We called them up and asked them, “What did you spend it on? How happy do you feel now?” What did they spend it on? These are college undergrads; a lot of what they spent it on for themselves were things like earrings and makeup. One woman said she bought a stuffed animal for her niece. People gave money to homeless people. Huge effect here of Starbucks.
So if you give undergraduates five dollars, it looks like coffee to them, and they run over to Starbucks and spend it as fast as they can. Some people bought coffee for themselves, the way they usually would, but others bought coffee for somebody else. So the very same purchase, just targeted toward yourself or targeted toward somebody else. What did we find when we called at the end of the day? People who spent money on others got happier; people who spent it on themselves, nothing happened. It didn’t make them less happy, it just didn’t do much for them.
The other thing we saw is the amount of money doesn’t matter much. People thought 20 dollars would be way better than five. In fact, it doesn’t matter how much money you spent. What really matters is that you spent it on somebody else rather than on yourself. We see this again and again when we give people money to spend on others instead of on themselves. Of course, these are undergraduates in Canada — not the world’s most representative population. They’re also fairly wealthy and affluent and other sorts of things.