Here is the full transcript of Adam Carroll’s TEDx presentation on When Money Isn’t Real: The $10,000 Experiment at TEDxLondonBusinessSchool conference.
Listen to the MP3 Audio: When money isn’t real- the $10,000 experiment by Adam Carroll at TEDxLondonBusinessSchool
TRANSCRIPT:
I recently completed an unsanctioned, unsupervised psychological experiment on my children. The premise of which was $10,000 in cash on the kitchen table and a sign next to it that said, “Don’t touch the money yet!”
And before I dive into it, you should know that we are a game playing family. We play ball games, board games, dice games, card games; we play all sorts of games. But the games that my children love to play most are games like Monopoly. And when they play Monopoly, they play marathon games of Monopoly that last hours and hours over days of play.
Each of my kids has a unique strategy and personality when they play Monopoly. My daughter who is 11, she is always the dog. She plays entirely for chance and community chest cards. You could say that she uses the luck strategy. My 9-year-old son is always the car, a very strategic player. He buys all of the railroads and all of the utilities and then proceeds to put houses and hotels on the most expensive properties; very savvy. And then his younger brother who is seven, he buys everything that he lands on with no exception, which is fitting because he is the wheelbarrow.
Now before I tell you how my experiment unfolded, first, I have to share an observation that led me to the creation of it. One Monopoly Marathon, Saturday morning I was playing with my kids and noticed that they were all playing just outside of the rules of the game.
So I started watching how they were playing, listening to their banter, getting a feel for how they were making decisions. And I had this thought: what if they’re playing this way because the money isn’t real. And it’s this concept, I’ve been reading a lot about lately it’s called financial abstraction, the notion that when money becomes more and more of an idea, less tangible and therefore more abstract, it changes the way that we interact with it on a regular basis. And there’s anecdotal evidence of abstraction everywhere around us. All you have to do is listen carefully to people who say, “I loaned my child or grandchild the phone and a month later I had all these errant in-app charges showing up on my bill.
In 2014, Apple reimbursed customers for in-app purchases that were unapproved, mostly by children to the tune of $32.5 million. This is in a US Federal Trade Commission settlement. In the documentation it said, “It was just too easy for kids to make an in-app purchase.” The Imagineers at Disney were charged with making the parks frictionless, it’s what they called it. So they invested $1 billion in a magic band, a wearable device that functions as your room key, your park ticket and your ID and wallet when you’re on park property. So if your child wants a set of ears and they want a desert in a magic kingdom, Bibbidi-Bobbidi-Boo, your vacation just costs a whole lot more, magically, magically.
Last but not least, I had a conversation with some teenagers who told me that $100,000 a year really wasn’t that much money. And I said, “Really? Why do you think that?” They each said, “Well, we both have $500,000 in our ATM machines on Grand Theft Auto, which is a very popular and somewhat skeptical sketchy video game popular today.
So as I’m playing with my kids and I’m watching them play, I’m listening to them talk about this, I thought: what if the money were real on the table, would they play differently? And so I calculated real quickly on the box: how much would it take in capital and currency to play a physical game of Monopoly with my kids that they actually tangibly got to feel the money in their hands? And I estimated for four or five players, that’s about $10,000 US dollars.
So one Friday I stopped at the bank, I got all the denominations of bills you would get on the Monopoly board, with the exception of a $500 bill, hard to get. And one Sunday, I rounded the family up for a high-stakes game of Monopoly where the winner takes all — all of $20 — by the way, all of $20. You have never seen kids’ eyes light up the way mine did when I handed each of them $1500 in starter capital. And you have never seen anyone’s eyes light up like my wife’s when I took it back on Monday, all of it.
So our Marathon game only lasted two and a half hours, far shorter and more strategic than most of the games that are normally played. True to my hypothesis, two of my three kids actually played differently. My daughter still played the luck card. She was the first one bankrupted, and she happily retired to the living room to read a book.
My youngest son, the wheelbarrow, did not buy everything that he landed on. Instead, he carefully calculated how many rolls away he was from one of his brother’s properties and how much he would owe his brother if he landed on said property and made his decisions based on that. In effect, having real money on the table and a cash prize at the end made him more conservative.
And my middle son, very strategic, still bought all of the railroads, still bought all the utilities but did not buy Boardwalk and Park Place or Mayfair in Park Lane. But instead he put hotels immediately on Oriental and Baltic Avenue or Coventry in Leicester Square on the UK version. And when I asked him why he did that, in his own words he said, ‘Dad, they’re just more affordable properties,” Right? At which point I cried a tear of pride. He got it.
In the end, my son finished with 28 properties, more cash than he’d ever seen in his entire life and held, and he now knows the meaning of the phrase “making it rain”. Look how happy he is, and now annoyed as brother and sister are.
So in the confines of my experiment there is an idea worth spreading and it is this: I believe that kids today are being raised in a world where money is no longer real, it’s actually an illusion but it has very real consequences. Peter Drucker, famed leadership guru said that banking and finance industries today are less about money and more about information. And yet, young people today don’t get that information, they don’t get the experiences of money early on.
Three researchers from the Center for Creative Leadership in a study done two decades ago, that’s been replicated many many times over, they interviewed over 200 executives in a report called Key Events in Executives’ Lives. And in this report, they found that of the 200 top-level executives who were the top of their game, all of them had similar characteristics, and one of them was that early on in their career they have been thrust into a leadership role that required them to make decisions that had serious consequences. They also had a mentor in place that helped them appreciate the lessons they were supposed to learn from those experiences. The study created a leadership framework that basically said in essence that someone with potential, if given the opportunity to engage in strategically relevant experiences and given the ability to learn the lessons from those experiences, would have a higher likelihood of success in their career in a leadership capacity.
Now if you took that study framework and my $10,000 experiment and you looked at it through the Kaleidoscope, you would get a statement like this: If kids are given financially relevant experiences in their life and someone is there to help them learn the lessons from those experiences, they have a higher likelihood of achieving financial success later in life. And in my humble opinion, they need to have them early and they need to have them often.
We are under this not-so-subtle societal shift in the way that we pay each other today. It’s estimated that there are trillions of dollars circling the globe in our global economy every single day, yet only 4% of that money is actually in coin or currency, the rest is all digital, data packets: 1’s and 0’s. And today’s digital native youth they don’t see people paying with cash or checks. In fact, if ever you’re in a line and someone in front of you pulls out their checkbook to pay, you are liable to save yourself really a checkbook, this is going to take forever. You’re laughing because it’s true.
The currency of today is digital. Many of these kids equate spending with credit and debit cards with Google Wallet and Paypal and Zap, right? All of these are what they equate spending to and by the way I am NOT pooh-poohing the technological advancements in payment technology today, far from it. I think tokenization and randomization and biometrics are the wave of the future. The first time that I used Apple Pay, it was like showing the caveman fire. It was amazing! But what snapped me back to reality was hearing my son behind me say, “I sure wish I had a phone so I could buy stuff.”
You see, money to a young person is somewhat abstract anyway. And when we further the abstraction by waving a magic band or putting our phone over a sensor and giving the thumbprint, all it does is it furthers the abstraction. It’s actually a recipe for financial disaster later in life to the uneducated, because to a young person they see money as limitless, because they have no concept of the back end until it comes around to bite them in the back end. I’ve seen this firsthand in my work with university students, young people that borrow and spend untold amounts of money having no concept or understanding of the increase in payments, the decrease in lifestyle and the challenges they’ll face later on.
In the UK and the U.S. student debt is a ballooning problem. In the U.S. we are at $1.2 trillion in student loan debt, second only to mortgage debt in the U.S. One in three students are delinquent, one in five are in default. It’s a huge problem. And the reason that this is concerning for all of us as a global economy is this: Dun & Bradstreet found that people spend 12% to 18% more when using credit cards over cash. They have yet to do a study: how much more will spend with a magic band or a phone, but I can imagine it would be 15% to 20% or 18% to 25% and all you need to do is read the headlines in the newspapers and magazines across the world today, places like The Guardian and The Washington Post, Fortune and Forbes, these are the headlines we’re seeing: new consumer debt reaching a seven-year high in the UK; consumer debt hitting an all-time high in the US; choking on credit card debt, the credit card debt crisis, the next economic domino.
And what happens when people overspend and they get in over their head with money, unfortunately the money charity says that in the UK right now one person every five minutes and three seconds is either declared insolvent or bankrupt. To put this into perspective, since I started speaking today, two people in this country are declared bankruptcy. In the UK, DMOZ.org says that Americans aged 25 to 34 have the second highest rate of bankruptcy. 25 year olds! And the question on everyone’s mind should be why — why is this happening? And in my simplistic view it is this, because the money they’re spending isn’t real, it’s an abstraction.
So to stem this tide with the next generation we have to bring them up to understand that they are living in a world where they have to make very real money decisions in a world where money is largely an illusion but has very very real consequences. Because I want your children and mine to be super successful financially, consider any of the following: If you’re going to spend money on children, give them a set amount of money and let them spend it, let them tangibly feel the money go through their hands, let them succeed or fail with minor consequences, so that later in life when they’re making major decisions, they understand there are major consequences that go along.
For older kids, it’s this: set a budgeted amount for school clothes and supplies and what have you, and give them that amount of money and when they are done spending it, it’s done. And here’s the key: they get to spend it with your subtle guidance, your subtle mentorship, your subtle supervision, and whether you call it an allowance, you call it chores — commission for chores or you call it a weekly stipend, every single child from the age of five on and up, needs to be given some tangible amount of money on a weekly basis so that they understand how to function in a cashless society someday. Better to teach young people the habit of saving when they have a little bit of money to save, then try to teach savings when they have no money because they’re in over their head.
I met an American named Jose who was a 20 year old student at an American University. He was the child of two Cuban-born parents and at the age of 15 his parents told him, “Jose, we will give you food, we will give you shelter and we will give you $50 a month but the rest is up to you.” And I asked him what was that like. He said, “Clothing, toiletries, school supplies, entertainment, gas, it was all on me. I resented my parents for a year.” And then he said, “but you know what I realized it was the single best thing they could have ever done for me.”
When I met Jose at 20, he was on a full-ride scholarship at the University he attended. He had $20,000 saved in a savings account from working part-time in high school and this kid exuded financial prowess and unmistakable leadership potential.
At the heart of my message today is this: it does not take a $10,000 board game and it doesn’t take cutting kids off financially to make a difference. The first step is honestly quite easy: it’s about educating the next generation to make decisions in a world where money is largely an illusion but has very very real consequences. And the reason it’s so important for all of us as a global society to do this is this next generation coming up will inherit the global economy that we are handing to them and we will precariously place it on their shoulders, we owe it to them to set them up for financial success.
Thank you.
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