Money = Happiness!

July 2, 2013

It seems that money can buy happiness but only if you spend it in the right way. In their new book, Happy Money: The Science of Smarter Spending, Elizabeth Dunn and Michael Norton lay out the five principles for turning cash into pleasure:

  • Buy experiences. Activities like concerts, days out and vacations are more satisfying than buying objects.
  • Make it a luxury. Only have your favourite things occasionally, that way you will continue to enjoy them.
  • Buy time. Extra time and the freedom to do what you want are more satisfying than money.
  • Delay gratification. Having to wait will make you appreciate things more, so buy now and experience later.
  • Treat others. Spending money on other people makes us happier than spending it on ourselves.

What’s this got to do with business? To pick one of the above – Make it a luxury – this can be used to shape behaviour by using the power of scarcity. People are programmed to want things more if there is limited availability (the power of ‘sales’); and if it’s memorable, which can of course be enhanced by having to wait (the power of anticipation)…

Book: Happy Money: The Science of Smarter Spending by Elizabeth Dunn and Michael Norton (Simon & Schuster, 2013)

Talk: Great presentation by Michael Norton:


Social psychology explains collapse of world economy!

September 16, 2011

Well almost. But in the short list for this year’s Financial Times/Goldman Sachs Business Book of the Year is Willful Blindness: Why We Ignore the Obvious at Our Peril by Margaret Heffernan (Walker & Co, USA; Simon & Schuster, UK). Reviewed on this very blog way back in February and a really good read. An excerpt from the book and the other finalists can be found at:

http://www.mediabistro.com/galleycat/free-samples-from-business-book-of-the-year-shortlist_b38302


Twitter mood predicts the stock market

August 23, 2011

Does emotion operate at a societal level? Does mood influence the way in which we collectively make decisions? It would seem so. There’s all sorts of stuff out there now on ‘sentiment tracking’ and whether it’s linked to measures of economic activity like the stock market. Well, interestingly, it seems that global emotion and mood, as measured via something like Twitter, does predict stock market activity. Indeed trading seems to lag behind positive or negative Tweeting! Or, if you’re using the fancy stuff, tweets analysed in terms of the Google Profile of Mood States (Calm, Alert, Sure, Vital, Kind and Happy). And no, I’m not making this stuff up. And yes, you’re right, there’s money to be made here!

Read one of the original papers at: http://www.battleofthequants.com/Research/sdarticle.pdf

Also, if you’re quick, you can listen to this BBC Radio 4 programme on the topic: Word of Mouth: Counting Word Incidences


Wilful Blindness

February 21, 2011

Peer pressure, role modeling, obedience to authority, group think, cognitive dissonance, selective attention, love… it’s a wonder we can think straight.  Well actually a lot of the time perhaps we don’t. Quite apart from the forces of social psychology messing with our minds, the plumbing of the brain itself does a great job of physically reducing the flow of what we know. Perhaps that’s not surprising as we all have to deal with about 34GB of data every day. But does all this matter? In one sense, no, because it’s what gets us through life. And you could argue it’s what makes us uniquely human. But, and it’s a big ‘but’, when it stops us seeing what we should see, and stops us doing what we should do, then it can be a major problem.  Far more damaging than courageously ‘turning a blind eye’ in a sea battle (Nelson at the Battle of Copenhagen), because not ‘seeing’ or acknowledging uncomfortable truths can literally lead to disaster. The sort of disaster that can end in ecological calamity, world financial meltdown, health scandals, military failure and always, ruined lives. Small things like that.

If you want to know how this can be, and how we can all be unconsciously (and consciously) wilfully blind, then get a copy of Margaret Heffernan’s new book: Wilful Blindness: Why we Ignore the Obvious at our Peril. It’s just out in the UK and is published by Simon & Schuster. You can also catch a video trailer on YouTube at:

http://www.youtube.com/watch?v=DCUKGK6JOJo


The psychology of Christmas presents

December 10, 2010

The present giving business is an emotional minefield. And so as you might imagine there’s all sorts of interesting research on the psychological meaning of gifts. But before getting into that, Anthropologists also have a take on the subject and predictably the whole thing is thought to be down to sex. Evolution it is claimed favours those who give generously. Thus in early man someone who gifted food or ‘possessions’ had more reproductive success. And even to this day there are tribes in which extreme gift giving (potlatch) is celebrated. Well it could all be about sex and status (times haven’t changed much, have they?), and it certainly gives a new slant on taking someone out for a meal.

However, back to the psychology: to start, you may feel in a Grinch-like way that you would be happier keeping the money you spend on Christmas presents for yourself. After all buying presents is hard, cold work, and what thanks do you get? Surprisingly in all sorts of ingenious experiments it has been shown that those who give presents are happier than those who spend the money on themselves. Also, perhaps even more surprisingly, people think beforehand that the Grinch is right – personal spending brings greater happiness than spending on others. It doesn’t.

Additionally there’s evidence that men and women react quite differently to receiving ‘good’ and ‘bad’ gifts. The background being that we assume that if someone knows us well they will give us an appropriate gift. If they don’t, it says something about the quality of the relationship. But here’s the thing: men and women seem to have a different way of dealing with a bad (poorly chosen) gift. Women are far more likely to react positively, even if they don’t like it; whereas men tend to say what they think. By the way, men, this is not an excuse for giving poor gifts… cheap, tatty, ill-thought out presents will chip away at any relationship.

Oh, and watch out if you’re thinking of giving money. The problem is that it cannot send a meaningful message about the quality of a relationship, and certainly sends the wrong message about its status. I presume this doesn’t necessarily hold for large wads of cash, but be careful when you distribute the £10 notes, and maybe those book tokens are looking a bit problematic…

Believe me there’s lots of this stuff. The bottom line appears to be that men are more price conscious and practical when it comes to what they give, and also with regard to what they would like to receive, whilst women are far more concerned with emotional meaning. And you know what?  That’s why it’s harder to buy a present for a woman rather than a man. Buy a man an expensive gadget and he’ll be happy, whereas getting it right for a woman is far more complex – meaning and emotional symbolism really are the name of the game.

Finally it’s good to report that there is now scientific proof that Santa Claus does exist, but unfortunately he cannot work any magic on the gifts we buy for each other. That’s down to us.

Want to give your present buying expeditions a psychological make-over? Start here:

Dunn, E.W., Aknin, L.B. & Norton, M.I. (2008). Spending Money on Others Promotes Happiness. Science, 319, 1687-1688.

Dunn, E.W., Huntsinger, J., Lun, J. & Sinclair, S. (2008). The Gift of Similarity: How Good and Bad Gifts Influence Relationships. Social Cognition, 26(4), 469-481.

Burgoyne, C.B. & Routh, D.A. (1991). Constraints on the Use of Money as a Gift at Christmas: The Role of Status and Intimacy. Journal of Economic Psychology, 12(1), 47-69.

Photo credit: FreeDigitalPhotos.net


The theory of relativity

April 22, 2010

Money has an absolute value but it’s funny stuff. Why am I happy to spend £250 on a jacket I will wear only occasionally, but I would never spend that much on a pair of jeans I might wear continuously? And why can I spend £80 on a meal out, but need to think twice about a book costing half as much? Not very rational is it. Having bothered myself with these questions I can now report that the reason is the brain is not very good at dealing with comparisons across categories. We prefer to work in a relative way. Even jacket versus jeans is quite hard because in my mind this is a choice between work and leisure. As for the meal or the book, far too difficult to compare the relative merits. I just go for the one that has the most value to me. Seems we actively avoid making comparisons between things that are too dissimilar, but when we do it isn’t a truly rational choice. Which means we may act out of character, or rather more worryingly, be open to a good sales pitch – more of this in Dan Ariely’s new book, Predictably Irrational.


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