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Team Favorite At the Money: How Much Money Is Too Much? · Masters in Business

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  Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
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  Speaker 2: Because if you fail.
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  Speaker 1: Money doesn't automatically lead to happiness. Our relationship with money
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  Speaker 1: is complicated. Speak to someone at the bottom of the
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  Speaker 1: economic ladder and they will tell you in no uncertain
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  Speaker 1: terms that a lack of money can lead to misery.
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  Speaker 1: But speak to enough millionaires and billionaires, and it's pretty
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  Speaker 1: clear that money doesn't automatically lead to happiness. As it
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  Speaker 1: turns out, money buys you a little bit of happiness,
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  Speaker 1: but only up to a point. And on today's edition
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  Speaker 1: of At the Money, we're going to discuss how and
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  Speaker 1: why money can buy you happiness. To help us unpack
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  Speaker 1: all of this and what it means for your financial health,
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  Speaker 1: let's bring in Brian Portnoy. He is the author of
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  Speaker 1: the Geometry of Wealth, How to Shape a Life of
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  Speaker 1: Money and Meaning. Okay, we'll start with an easy enough question,
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  Speaker 1: does money buy happiness?
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  Speaker 2: Let me give you a very simple, clear answer. Yes, no, maybe,
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  Speaker 2: sort of not really.
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  Speaker 1: Kind of Okay, I get that. So you're saying it's
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  Speaker 1: complicated and it really depends on a lot of factors.
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  Speaker 1: Let's start really basic with Maslow's hierarchy of needs, safety, security, food, shelter, etc. Obviously,
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  Speaker 1: if you don't have those things, lack of money is
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  Speaker 1: certainly going to bring misery.
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  Speaker 2: So that's exactly the right place to start. Let's talk
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  Speaker 2: about the elimination of misery as distinct from the achievement
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  Speaker 2: of happiness. There's no doubt that money's most powerful impact
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  Speaker 2: on our emotional lives our physical lives is the elimination
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  Speaker 2: of misery. So we're built to to survive. That's our
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  Speaker 2: evolutionary story. And money buys us shelter, it buys us food,
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  Speaker 2: it buys us warmth, it buys us safety. At a
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  Speaker 2: higher level, it can allow us to afford getting rid
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  Speaker 2: of aggravation or certain people you don't want to see,
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  Speaker 2: or certain commutes you don't want to make. We can
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  Speaker 2: think of money as a way to mitigate or even
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  Speaker 2: eliminate sadness, disappointment, and misery. That is by far the
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  Speaker 2: most powerful relationship between money and a particular emotional state.
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  Speaker 1: So I've seen a couple of studies that look at
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  Speaker 1: where does money stop buying contentment so to speak? And
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  Speaker 1: I know these are all from different eras and so
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  Speaker 1: they may not be inflation adjusted numbers. But one study
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  Speaker 1: says it peaks around seventy k and then starts to
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  Speaker 1: roll off. That seems like in America that buys you shelter, food, clothing, healthcare,
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  Speaker 1: and maybe even some education. Then I've seen three hundred
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  Speaker 1: thousand and five hundred thousand, where does the marginal utility
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  Speaker 1: of each earned dollar really begin to matter less and less?
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  Speaker 2: So you've pointed accurately to a number of studies on this,
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  Speaker 2: and maybe it's seventy five thousand or ninety thousand. I'd
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  Speaker 2: also point out that a dollar spent in Manhattan, New
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  Speaker 2: York versus Manhattan, Kansas. Those are very different conversations. Let
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  Speaker 2: me intervene first, though, and say there's two different definitions
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  Speaker 2: of happiness that we should make sure are clear. One
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  Speaker 2: is sort of just the day today, good mood, bad mood,
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  Speaker 2: having positive emotions. The other sort of happiness, going back
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  Speaker 2: to Aristotle, what he called youd ammonia, is a deeper
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  Speaker 2: source of meaning and contentment. As it relates to the
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  Speaker 2: first definition of happiness, you are correct. There's been study
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  Speaker 2: after study that shows that once you can afford the
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  Speaker 2: basics in life, having that marginal dollar isn't necessarily going
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  Speaker 2: to put you in a good mood or a bad mood.
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  Speaker 2: You're sort of wired with a certain disposition, and if
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  Speaker 2: you're a generally cheerful person, you're going to be that way.
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  Speaker 2: And if you're generally kind of dour or miserable while
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  Speaker 2: making hundreds of thousands of dollars a year, aren't going
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  Speaker 2: to make an impact. I'd go to the second definition
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  Speaker 2: of what we call happiness. It's a difficult word. You
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  Speaker 2: go to the sourus. There's thirty different words for this thing.
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  Speaker 2: But we're going to talk about day to day happiness
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  Speaker 2: versus contentment what Aristotle called you'd ammonia. And there's some
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  Speaker 2: interesting research from Danny Khneman and Angus Deaton that shows
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  Speaker 2: that if spent wisely, money can underwrite a meaningful life,
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  Speaker 2: and there are different sources of meaning in our lives.
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  Speaker 2: When spent wisely on certain types of experiences and relationships,
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  Speaker 2: money can very much be used effectively to lead a happier,
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  Speaker 2: better life.
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  Speaker 1: So let's talk a little bit about other people. There's
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  Speaker 1: a famous ahl Manking quote was once they asked how
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  Speaker 1: do you define wealth? And his answer was one hundred
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  Speaker 1: dollars more than my brother in law. There's other studies
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  Speaker 1: that have asked people, would you rather have making up
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  Speaker 1: these numbers but their bullpark sixty thousand dollars when you
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  Speaker 1: live in a town when everybody else has fifty thousand dollars?
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  Speaker 1: Or would you prefer two hundred thousand dollars in a
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  Speaker 1: town where everybody else has three hundred thousand? I know
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  Speaker 1: what I would choose. I would take the latter. But
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  Speaker 1: that doesn't seem to be the answer that most people give.
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  Speaker 1: They say, well, I'd rather be the wealthiest guy in
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  Speaker 1: town at sixty K than the poorest guy in town
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  Speaker 1: at one hundred K. Why is that? Explain why that
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  Speaker 1: behavior and belief system exists, and what does that mean
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  Speaker 1: for our satisfaction?
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  Speaker 2: Welcome to the human condition, Welcome to the evolutionary path
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  Speaker 2: that we've been on. Status matters, tribe matters, and these
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  Speaker 2: aren't trivial things. These are deep down genetic codes that
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  Speaker 2: we all live with, and so when we have a
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  Speaker 2: little bit more than others, we feel better than ourselves.
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  Speaker 2: And so you're absolutely right. The studies do show, and
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  Speaker 2: I don't have the exact numbers, but people would rather
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  Speaker 2: have a one hundred thousand dollars income when others are making
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  Speaker 2: eighty versus one hundred and fifty thousand dollars income when
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  Speaker 2: others are making two hundred thousand dollars a year. You
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  Speaker 2: and I might say, well, I'd prefer one versus the other.
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  Speaker 2: But the fact is that the preponderance of responses reflect
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  Speaker 2: the fact that we want to feel connected to our
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  Speaker 2: tribe and safe in our tribe. And when you have
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  Speaker 2: a little bit more than others, it can make you
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  Speaker 2: feel pretty good. Go quote for quote. You gave me
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  Speaker 2: H'll make and I'll give you the original, JP Morgan.
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  Speaker 2: He said, nothing corrupts your financial judgment more than the
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  Speaker 2: sight of your neighbor getting rich.
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  Speaker 1: Especially if your neighbor's an idiot.
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  Speaker 2: Well, if your neighbors JP Morgan.
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  Speaker 1: I have a very vivid recollection in the early days
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  Speaker 1: of house flipping, in the two thousands leading up to that,
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  Speaker 1: and the early days of crypto. I can't tell you
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  Speaker 1: how often I've heard people say, my neighbor is making
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  Speaker 1: all this money and that guy's are more on It's
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  Speaker 1: almost as if it's insult to injury. What is it
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  Speaker 1: about seeing somebody else make a lot of money that
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  Speaker 1: gets our envy and greed buttons ranging?
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  Speaker 2: Yeah, so I don't know whether to quote neuroscience or
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  Speaker 2: the Bible go both ways, because I bet they're related.
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  Speaker 2: They are they are, you know, they both speak to
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  Speaker 2: kind of who we are as a human species. There's
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  Speaker 2: no getting around the fact that we feel envy or
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  Speaker 2: greed when others have more. I mean, I don't know
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  Speaker 2: if we need to provide a dissertation or Bible quotes
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  Speaker 2: to show why that's true. We just know that when
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  Speaker 2: others are getting ahead, we feel like we're falling behind.
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  Speaker 2: It's really important from a financial wellbeing point of view
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  Speaker 2: for people to have their own individual, authentic goals, hopefully
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  Speaker 2: baked into some form of a financial plan. You feel
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  Speaker 2: like you're making progress toward the things that you've said
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  Speaker 2: matter to you and your loved ones. That can be
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  Speaker 2: used to mitigate some of these negative emotional impacts. When
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  Speaker 2: it's just like, oh, I'm at the casino, I bet
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  Speaker 2: on black, he bet on red, he won, he's rich,
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  Speaker 2: I'm not, and you don't feel very good about yourself.
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  Speaker 2: That's not a great way to work your way through
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  Speaker 2: your financial life.
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  Speaker 1: So let's tie this together. Given the difference between the
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  Speaker 1: pursuit of happiness and the pursuit of contentment. What does
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  Speaker 1: this mean for how investors should think about pursuing gains
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  Speaker 1: in their portfolios.
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  Speaker 2: Investing outside of a well defined financial plan is speculation,
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  Speaker 2: and that might not necessarily be a bad thing. You know,
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  Speaker 2: you like to pick stocks?
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  Speaker 1: I don't, oh not anymore. I started began on a
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  Speaker 1: trading desk. GAT mean, look, I taken around with market
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  Speaker 1: timing is what I do. But that's just outside of
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  Speaker 1: professional that's just in my own little stupid Yeah you
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  Speaker 1: can personal account.
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  Speaker 2: Okay.
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  Speaker 1: So and by the way, that that two percent of
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  Speaker 1: my assets scratches such an itch, I can't begin to
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  Speaker 1: tell you.
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  Speaker 2: Yeah, that's why we advise advisors to, oh, allow some
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  Speaker 2: clients to have cowboy accounts. Yeah, absolutely, you will manage
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  Speaker 2: ninety seven percent of your assets. Three percent go wild
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  Speaker 2: by crypto all this stuff.
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  Speaker 1: And one of the funny things are is with those
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  Speaker 1: sort of accounts is if they go to zero, who cares?
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  Speaker 1: Was two percent of your assets? And if they triple,
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  Speaker 1: Hey they tripled because it was two percent. If it
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  Speaker 1: was actually all your money, you would never have been
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  Speaker 1: able to hold on that long.
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  Speaker 2: That's right.
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  Speaker 1: You would have taken Oh my god, I'm up thirty percent.
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  Speaker 1: I gotta I gotta take some profits.
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  Speaker 2: And by the way, there's nothing wrong with being interested
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  Speaker 2: in the stock or bond market, or in crypto or
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  Speaker 2: in any other market and seeing if you can deliver
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  Speaker 2: bring your insight into picking better securities or better outcomes. However,
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  Speaker 2: if we're really thinking about the relationship between money and
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  Speaker 2: half happiness, when you have a well defined plan, it
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  Speaker 2: means that you're heading towards something. It could be your
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  Speaker 2: kid's college education, it could be a comfortable retirement, it
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  Speaker 2: could be a particular vacation that you have in mind.
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  Speaker 2: So you pick your goal and you invest accordingly. You
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  Speaker 2: build a portfolio, you have time horizons, you have risk tolerance.
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  Speaker 2: It's not as sexy or as provocative as playing the markets,
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  Speaker 2: so to speak. But the conversation about money and happiness
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  Speaker 2: actually makes a lot more sense in the context of
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  Speaker 2: having well defined goals and the other stuff. It's kind
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  Speaker 2: of fun, but just let's call it what it is.
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  Speaker 2: It's not investing, it's speculating.
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  Speaker 1: Thanks Brian. That's really interesting. You know, this idea of
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  Speaker 1: money buying happiness comes up all the time. It comes
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  Speaker 1: up in conversations with clients and friends and family, and
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  Speaker 1: I always like to point to the example of the
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  Speaker 1: op of money leading to satisfaction and contentment, something I
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  Speaker 1: call purposeless capital. Bill Hwang ran the hedge fund ARCHI
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  Speaker 1: Ghost Capital Management, and they very famously ran up a
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  Speaker 1: stake of a few billion dollars using leverage and very
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  Speaker 1: aggressive trading up to twenty billion dollars before they ultimately
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  Speaker 1: just blew up. And I always suspected part of the
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  Speaker 1: reason that happened was because this was purposeless capital. There
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  Speaker 1: was no intent behind it. There was no plan to
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  Speaker 1: meet certain life goals, give money to philanthropy, build experiences
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  Speaker 1: with the family. It was just more for the sake
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  Speaker 1: of more. And as we've learned over time, sure money
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  Speaker 1: doesn't always buy happiness, but if used right, it could
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  Speaker 1: buy experiences, You can help others, and it can bring
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  Speaker 1: a life of funded contentment if applied correctly. You can
• 12:03
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• 12:16
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