How to buy happiness | Michael Norton

Summary

This talk challenges the notion that money can't buy happiness, suggesting that it's not about how much we earn, but how we spend it. The speaker presents studies showing that spending money on others rather than oneself leads to increased happiness. Experiments conducted with college students and in Uganda demonstrate that even small acts of generosity can boost well-being. The talk encourages viewers to consider giving to others as a path to personal happiness, highlighting the universal truth that pro-social spending enhances life satisfaction.

Takeaways

• 💭 The common belief that 'money can't buy happiness' is challenged, suggesting that it's not about the money itself, but how it's spent.
• 😂 People often fantasize about how they would spend a large sum of money, like lottery winnings, but such windfalls can lead to financial and social problems.
• 🎓 A natural experiment showed that lottery winners often end up with more debt and damaged relationships, highlighting the negative impacts of sudden wealth.
• 💸 The study conducted at the University of British Columbia demonstrated that spending money on others rather than oneself can increase happiness.
• 🌟 The amount of money spent is less important than the act of spending it on others, suggesting that even small acts of generosity can have a positive impact.
• 🌍 The happiness-increasing effect of spending money on others was found to be consistent across cultures, including in Uganda, indicating a universal human response.
• 💼 In a Belgian sales team study, those who spent money on their teammates outperformed those who spent it on themselves, showing a pro-social spending benefit in a work context.
• 🏆 Even in recreational settings like dodgeball teams, spending money on teammates led to better performance and outcomes compared to personal spending.
• 🌱 The speaker encourages shifting focus from personal consumption to considering how even small amounts of money can benefit others, leading to greater personal happiness.
• 🔗 The talk concludes with a call to action, promoting DonorsChoose.org as a platform to practice pro-social spending and experience increased happiness.

Q & A

What is the main argument of the speaker regarding money and happiness?

The speaker argues that the common belief that 'money can't buy happiness' is incorrect, and suggests that people are not spending their money in the right way to increase happiness.

How does the speaker propose that spending money differently could potentially increase happiness?

The speaker proposes that spending money on others rather than oneself can lead to increased happiness.

What was the outcome for lottery winners according to the CNN article mentioned in the script?

The CNN article indicated that winning the lottery often leads to financial ruin and damaged social relationships due to excessive spending and people asking for money.

What was the purpose of the experiment conducted at the University of British Columbia?

The experiment aimed to measure the impact of spending money on oneself versus on others by giving participants money with instructions to spend it either on themselves or on others, and then measuring their happiness levels.

What did the study involving sales teams in Belgium reveal about the effects of spending money on others?

The study showed that teams that spent money on their teammates sold more products than those that spent money only on themselves, indicating that pro-social spending can enhance team performance.

How did the speaker's research in Uganda differ from the study conducted in Canada?

In Uganda, the study involved asking people to recall a time they spent money on themselves or others and describe it, whereas in Canada, participants were given money and specific instructions on how to spend it.

What was the global trend observed in the data from the Gallup Organization regarding charity and happiness?

The data showed a positive correlation between giving money to charity and happiness in almost every country, suggesting that charitable giving is associated with higher levels of happiness.

What was the speaker's recommendation for individuals to start spending money in a way that could increase their happiness?

The speaker recommended that individuals should consider giving some of their money to others, such as through donating to charities or supporting public school teachers through DonorsChoose.org.

How did the speaker address the criticism about the generalizability of the study's findings to public policy?

The speaker addressed the criticism by conducting a similar study with dodgeball teams, demonstrating that even in a competitive sports context, spending money on teammates led to better performance.

What was the key insight from the various experiments and studies mentioned in the script?

The key insight is that spending money on others, rather than on oneself, tends to increase happiness and can lead to positive outcomes in various contexts, including personal life, work, and even sports teams.

Outlines

00:00

💰 Rethinking Money and Happiness

The speaker challenges the common belief that money can't buy happiness, suggesting that it's not the money itself that's the issue, but rather how it's spent. They propose that spending money on others rather than oneself can lead to increased happiness. To test this theory, they conducted an experiment at the University of British Columbia where participants were given money and instructed to either spend it on themselves or on others by a certain deadline. The results showed that those who spent money on others reported feeling happier, while the amount spent didn't significantly impact the outcome. This finding was consistent across different cultures, as demonstrated by a similar study conducted in Uganda.

05:01

🌍 Cultural Differences in Spending for Happiness

This paragraph explores the cultural universals and differences in how spending money on others affects happiness. The speaker presents anecdotes from both Uganda and Canada, highlighting that while the specific acts of spending varied greatly, the underlying theme of spending on others for happiness was consistent. For example, a Canadian might buy a gift for a loved one, while a Ugandan might provide medical assistance to a friend's sick child. Despite these differences, the act of spending on others was universally linked to increased happiness. The speaker also discusses a global study using data from the Gallup Organization, which showed a positive correlation between charitable giving and life satisfaction across most countries, with the exception of the Central African Republic.

10:03

💼 Applying Pro-social Spending in Work and Life

The speaker extends the concept of pro-social spending to work environments, using the example of sales teams in Belgium. They conducted an experiment where some teams were given money to spend on themselves, while others were instructed to spend it on their teammates. The teams that engaged in pro-social spending saw improved performance and bonding. The speaker also humorously addresses a criticism by applying the concept to dodgeball teams, showing that even in this recreational context, teams that spent money on each other outperformed those that did not. The speaker concludes by suggesting that the key to happiness through spending is not in purchasing products for oneself, but in giving to others, and encourages the audience to consider how they can shift their spending habits to benefit others, using DonorsChoose.org as an example of how small contributions can make a big difference.

Keywords

💡Money

Money is a medium of exchange that is widely accepted in transactions for goods and services. In the video, it is discussed as a common pursuit that can influence happiness. The speaker challenges the notion that 'money can't buy happiness,' suggesting that it's not about the amount but how it's spent. For instance, the video contrasts the negative outcomes of lottery winners who spend excessively on themselves with the positive effects of spending money on others.

💡Happiness

Happiness, in the context of the video, refers to a state of well-being and contentment. The speaker explores the relationship between money and happiness, arguing that happiness can be increased by spending money on others rather than oneself. The video uses various experiments to demonstrate that pro-social spending leads to increased happiness, such as the example of students in Canada and Uganda who felt happier after spending money on others.

💡Lottery

The lottery is a form of gambling where participants buy tickets with the chance to win large sums of money. In the video, the lottery is used as a natural experiment to illustrate how sudden wealth can negatively impact a person's life, often leading to increased debt and strained social relationships. This example is used to highlight the idea that money, when not spent wisely, does not equate to happiness.

💡Pro-social spending

Pro-social spending refers to the act of using one's resources to benefit others within a community or society. The video emphasizes that spending money in a pro-social manner, such as giving to charity or buying gifts for others, can lead to greater happiness than spending on oneself. This concept is supported by the experiments conducted with students and sales teams, where those who spent money on others reported higher levels of happiness.

💡Selfishness

Selfishness is the quality of being concerned excessively or exclusively with oneself. The video suggests that money can often lead to selfish behavior, as people may use their wealth for personal gain without considering the needs of others. This is contrasted with pro-social spending, where the act of giving to others is shown to increase happiness, indicating a more altruistic approach to wealth.

💡Experiment

In the video, an experiment refers to a controlled procedure undertaken to test a hypothesis or investigate a phenomenon. The speaker describes various experiments conducted to study the effects of money on happiness, such as giving students in Canada and Uganda money to spend on themselves or others and observing the resulting changes in their happiness levels.

💡Charity

Charity involves the voluntary giving of help, typically in the form of money or resources, to those in need. The video discusses the positive impact of donating to charity on happiness, using data from the Gallup Organization to show that people who give to charity tend to be happier than those who do not. The video encourages viewers to consider charity as a way to spend money for increased happiness.

💡Sales teams

Sales teams are groups of individuals who work together to sell products or services. In the video, the speaker describes an experiment with sales teams in Belgium, where some team members were given money to spend on themselves, while others were encouraged to spend on their teammates. The teams that engaged in pro-social spending saw improved performance, illustrating the benefits of spending money on others in a work context.

💡Dodgeball teams

Dodgeball teams are groups that participate in the sport of dodgeball, which involves throwing balls at opponents to eliminate them from the game. The video humorously addresses a criticism by infiltrating dodgeball teams and conducting an experiment similar to the ones with sales teams. The results showed that teams that spent money on each other had better performance outcomes, further supporting the video's theme of the benefits of pro-social spending.

💡DonorsChoose.org

DonorsChoose.org is a nonprofit organization that allows individuals to donate directly to public school classroom projects, often in low-income areas. The video highlights this organization as an example of how individuals can spend money on others by funding educational resources for teachers and students. The speaker encourages viewers to consider this platform as a way to shift their focus from personal spending to benefiting others.

Highlights

The common belief that money can't buy happiness is challenged, suggesting that it's a matter of how you spend it.

Lottery winners often experience ruined lives due to poor spending habits and damaged social relationships.

People's fantasies about how they would spend lottery winnings often involve antisocial and selfish behavior.

Spending money on others rather than oneself can lead to increased happiness.

An experiment at the University of British Columbia showed that spending money on others increased happiness.

The amount of money spent is less important than the act of spending it on others.

A similar experiment in Uganda confirmed the global relevance of the findings on spending and happiness.

Cultural differences influence how spending on others is perceived and executed.

Small, everyday acts of spending on others can have a significant impact on happiness.

Data from the Gallup Organization supports the positive correlation between charitable giving and happiness worldwide.

In a Belgian sales team experiment, spending money on teammates improved team performance.

The concept of pro-social spending can be applied to various contexts, including work and sports teams.

Dodgeball teams that spent money on each other showed improved performance and team dynamics.

The speaker suggests that rethinking how we spend money can lead to greater personal happiness.

DonorsChoose.org is presented as a platform to practice pro-social spending and benefit others.

The talk concludes with a call to action to consider the happiness benefits of spending money on others.

Transcripts

Translator: Jenny Zurawell

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.

(Laughter)

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."

(Laughter)

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."

(Laughter)

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.

(Laughter)

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.

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 just people in Canada, we say,

"Name the last time you spent money on yourself or others.

Describe it. How happy did it make you?"

Or in Uganda, "Name the last time you spent money on yourself or others

and describe that."

Then we asked them how happy they are, again.

And what we see is sort of amazing,

because there's human universals on what you do with your money,

and real cultural differences on what you do as well.

So for example, one guy from Uganda says this:

"I called a girl I wished to love."

They basically went out on a date,

and he says at the end that he didn't "achieve" her up till now.

(Laughter)

Here's a guy from Canada.

Very similar thing.

"I took my girlfriend out for dinner.

We went to a movie, we left early,

and then went back to her room for ... cake," just cake.

(Laughter)

Human universal:

you spend money on others, you're being nice.

Maybe you have something in mind, maybe not.

But then we see extraordinary differences.

So look at these two.

This is a woman from Canada.

We say, "Name a time you spent money on somebody else."

She says, "I bought a present for my mom.

I drove to the mall, bought a present, gave it to my mom."

Perfectly nice thing to do.

It's good to get gifts for people you know.

Compare that to this woman from Uganda:

"I was walking and met a longtime friend whose son was sick with malaria.

They had no money, they went to a clinic and I gave her this money."

This isn't $10,000, it's the local currency.

So it's a very small amount of money, in fact.

But enormously different motivations here.

This is a real medical need, literally a lifesaving donation.

Above, it's just kind of, I bought a gift for my mother.

What we see again, though,

is that the specific way you spend on other people isn't nearly as important

as the fact that you spend on other people in order to make yourself happy,

which is really quite important.

So you don't have to do amazing things with your money

to make yourself happy.

You can do small, trivial things and still get the benefits from doing this.

These are only two countries.

We wanted to look at every country in the world if we could,

to see what the relationship is between money and happiness.

We got data from the Gallup Organization,

which you know from all the political polls happening lately.

They asked people, "Did you donate money to charity recently?"

and, "How happy are you with life in general?"

We can see what the relationship is between those two things.

Are they positively correlated, giving money makes you happy?

Or are they negatively correlated?

On this map, green will mean they're positively correlated,

red means they're negatively correlated.

And you can see, the world is crazily green.

So in almost every country in the world where we have this data,

people who give money to charity are happier people

than people who don't give money to charity.

I know you're looking at the red country in the middle.

I would be a jerk and not tell you what it is,

but it's Central African Republic.

You can make up stories.

Maybe it's different there for some reason.

Just below that to the right is Rwanda, though,

which is amazingly green.

So almost everywhere we look,

we see that giving money away makes you happier

than keeping it for yourself.

What about work, which is where we spend the rest of our time,

when we're not with the people we know.

We decided to infiltrate some companies and do a very similar thing.

These are sales teams in Belgium.

They work in teams, go out and sell to doctors

and try to get them to buy drugs.

We can look and see how well they sell things

as a function of being a member of a team.

We give people on some teams some money

"Spend it however you want on yourself,"

just like we did with the undergrads in Canada.

To other teams we say, "Here's 15 euro. Spend it on one of your teammates.

Buy them something as a gift and give it to them.

Then we can see, we've got teams that spend on themselves

and these pro-social teams who we give money to make the team better.

The reason I have a ridiculous pinata there

is one team pooled their money and bought a pinata,

they smashed the pinata, the candy fell out and things like that.

A silly, trivial thing to do,

but think of the difference on a team that didn't do that at all,

that got 15 euro, put it in their pocket, maybe bought themselves a coffee,

or teams that had this pro-social experience

where they bonded together to buy something and do a group activity.

What we see is that the teams that are pro-social sell more stuff

than the teams that only got money for themselves.

One way to think of it is: for every 15 euro you give people for themselves,

they put it in their pocket and don't do anything different than before.

You don't get money from that;

you lose money, since it doesn't motivate them to perform better.

But when you give them 15 euro to spend on their teammates,

they do so much better on their teams

that you actually get a huge win on investing this kind of money.

You're probably thinking to yourselves, this is all fine,

but there's a context that's incredibly important for public policy,

and I can't imagine it would work there.

And if he doesn't show me that it works here,

I don't believe anything he said.

I know what you're all thinking about are dodgeball teams.

(Laughter)

This was a huge criticism that we got,

that if you can't show it with dodgeball teams, this is all stupid.

So we went and found these dodgeball teams and infiltrated them,

and did the exact same thing as before.

So we give people on some teams money to spend on themselves.

Other teams, we give them money to spend on their dodgeball teammates.

The teams that spend money on themselves

have the same winning percentages as before.

The teams we give the money to spend on each other

become different teams;

they dominate the league by the time they're done.

Across all of these different contexts --

your personal life, you work life, even things like intramural sports --

we see spending on other people has a bigger return for you

than spending on yourself.

So if you think money can't buy happiness, you're not spending it right.

The implication isn't you should buy this product instead of that product,

and that's the way to make yourself happier.

It's that you should stop thinking about which product to buy for yourself,

and try giving some of it to other people instead.

And we luckily have an opportunity for you.

DonorsChoose.org is a nonprofit for mainly public school teachers

in low-income schools.

They post projects like,

"I want to teach Huckleberry Finn and we don't have the books,"

or, "I want a microscope to teach my students science

and we don't have a microscope."

You and I can go on and buy it for them.

The teacher and the kids write you thank-you notes,

sometimes they send pictures of them using the microscope.

It's an extraordinary thing.

Go to the website and start yourself on the process of thinking

less about "How can I spend money on myself?"

and more about "If I've got five dollars or 15 dollars,

what can I do to benefit other people?"

Ultimately, when you do that, you'll find you benefit yourself much more.

Thank you.

(Applause)