Here is the full transcript of Harvard Business School Professor Michael Norton’s TEDx Talk: Money Can Buy Happiness at TEDxCambridge 2011 conference.
Michael Norton – Social science researcher
I want to talk today about money and happiness, which are two things that 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, so we see it in religions and self-help books, that 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, it’s not so much that money can’t buy happiness.
It is not so much that money can’t buy happiness, it’s that – if you think that, you’re just not spending it right. So that 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 that 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. CNN a little while ago, wrote this interesting article on what happens to people when they win the lottery.
People think when they win the lottery, their lives are going to be amazing. This article is about how their lives get ruined. So, what happens when people win the lottery: 1) They spend all the money and go into debt. 2) All of their friends and everyone they’ve ever met, find them and bug them for money. It ruins their social relationships in fact. They have more debt and worse friendships than they had before they won the lottery.
What was interesting, people started commenting on the article, readers of the thing. Instead of talking about how it had made them realize money doesn’t lead to happiness, everyone was saying: “You know what I would do if I won the lottery?”, fantasizing about what they’d do.
Here are 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.”
Another person wrote: “I would fill a bath tub with money and get in the tub while smoking a big fat cigar and sipping a glass of champagne.”
This is even worse now. “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. I told you that it ruins people’s lives and that their friends bug them, it also makes us feel very selfish and we do things only for ourselves. Maybe the reason why money doesn’t make us happy is that we’re always spending it on the wrong things.
In particular, we’re always spending it on ourselves. And we thought, what would happen if we made people spend more money on other people? So, instead of being antisocial with your money, what if you’re a bit more prosocial with your money and we thought let’s make people do it and see what happens.
Let’s have some people do what they usually do and spend money on themselves, and let’s make some people give money away, measure their happiness and see if in fact they get happier.
The first way we did this, on one Vancouver morning, we went on a campus at University of British Columbia. We approached people and said: “Do you want to be in an experiment?” If they said yes, we asked them how happy they were, and then we gave them an envelope. One of the envelopes had things in it that said: “By 5 pm today spend this money on yourself.”
We gave some examples of what you can spend it on. Other people in the morning got a slip of paper that said by 5 pm today to spend this money on somebody else. Also, inside the envelope was money.
We manipulated how much we gave them. So, some people got this slip of paper and 5 dollars. Some people got the slip of paper and 20 dollars. We let them go about their day. They did whatever they wanted to do.
We found out that they did spend it the way we asked them to. We called them up at night and asked: “What did you spend it on and how happy do you feel now?” Well, these are college undergrads, a lot of what they spent it on for themselves was things like earrings and make-up. Apparently, some of them were women.
What about for other people? Very different things. One woman said she bought a stuffed animal for her niece. People gave money to homeless people. Huge effect here of Starbucks. If you give undergraduates 5 dollars, it looks like coffee to them and they run over to Starbucks and spend it as fast as they can. Some people bought a coffee for themselves, the way they usually would, but other people said that they bought a coffee for somebody else. So, the very same purchase, just targeted towards yourself or towards somebody else.
What did we find when we called them back 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 that the amount of money doesn’t matter much. So, people thought that $20 would be way better than $5. In fact, it doesn’t matter how much money you spend, what really matters is that you spend it on somebody else rather than on yourself. We see this again and again when we give people money to spend on other people instead of on themselves.
These are undergraduates in Canada – not the world’s most representative population. They’re also fairly wealthy, affluent and all these sorts of things. We wanted to see if this holds true everywhere in the world or just among wealthy countries.
So we went to Uganda and ran a very similar experiment. Imagine instead of being in Canada, where we would say to people: “Name the last time you spent money on yourself or other people? Describe it, how happy did it make you?” Or in Uganda: “Name the last time you spent money on yourself or other people and describe that.” Then we ask them how happy they are.
Again, what we see is amazing because there are human universals on what you do with your money, and real cultural differences on what you do, as well. For example, these are some similarities. These are two gentlemen from Canada and Uganda. Here is one guy from Uganda, who says this. We said: “Name a time you spent money on somebody else.” Men frequently talk about spending money on women, as it turns out. He said: “I called a girl I wished to love.” I think he means romantically love, though it’s unclear if he means physical love. “We went out on a date.” At the end he says that he didn’t achieve her until now.
Here is a guy from Canada, very similar thing. “I took my girlfriend out for dinner. We went to a movie. We left early. Then went back to her room for only cake.” Human universal: you spend money on other people, you’re being nice to them. Maybe you’ve something in mind, maybe not. But then we see these similarities, but also extraordinary differences.