Don’t be surprised that some multimillionaires in Silicon Valley don’t feel rich. That’s exactly what a bunch of psychological and behavioral economics research predicts. We care more about relative wealth than absolute.
The research says this: while absolute income matters, relative income matters more, once you’ve reached a certain standard of living. That’s because human beings are fundamentally status-oriented creatures. Most people would rather make $50,000 a year in a world where the average annual salary is $20K versus making $100,000 where everyone else makes twice that.
So what’s the answer to being relatively poor? Mine was to leave Silicon Valley. It is very hard to feel successful there, surrounded as you are by the ultra-rich and the ultra-ultra-rich and the ultra-ultra-ultra-rich. My solution was to choose a more comfortable pond. I moved to Denver.
You can call this whining if you want, but even if you wouldn’t say it out loud, you’d probably feel the same. What’s the point in pretending that people aren’t subject to status effects? It’s better to be honest about this, because that way you might discover a way to be happier.
Beyond arranging your life so you doesn’t have to confront super-wealthy people, an even better strategy is to recognize that while new stuff initially brings joy, the joy wears off after a while. That’s the hedonic treadmill. You get used to having a bunch of nice stuff and so you want even nicer stuff. Then you get used to that, and you want more and better and nicer.
So instead of spending a lot of money on a Porsche Cayenne or a diamond-encrusted rose gold Omega watch or a Louis Vuitton handbag, spend your money on experiences. Focus on doing things rather than having things. Psychologist Leaf Van Boven of the University of Colorado at Boulder says that “experiences bring more joy than material goods because they are more open to positive reinterpretations, are a more meaningful part of one’s identity and contribute more to successful social relationships.”
It’s not quite that easy, is it, though? Because more money can buy better experiences too. That’s why the super-rich buy vacation homes or membership in luxury vacation clubs like Exclusive Resorts.
Still, these two principles can help you feel happier no matter what your income: choose a comfortable pond to live in and seek experiences rather than stuff. I’ll add my own third principle discovered through years of hopping from place to place, far from my friends and family: live close to the people you care about and spend a lot of time with them. That’s the best way of all to feel rich beyond imagining.
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You can take this to the extreme and move somewhere with a much lower cost of living. I lived in Taiwan, and my income in U.S. dollars was very little, but gave me a very comfortable living while there. It had the added benefit of providing lots of great experiences, but also the major drawback of being far away from some of the people I care about.
By the way, check out the book The Happiness Myth for an alternative interpretation of the hedonic treadmill (i.e., maybe some things aren’t meant to provide long term happiness).
“Most people would rather make $50,000 a year in a world where the average annual salary is $20K versus making $100,000 where everyone else makes twice that.”
I really hope that isn’t true.
Moreover, the empirical evidence does not support that claim. If it were true, why would people constantly be trying to move into better, more expensive neighborhoods? Wouldn’t we expect see a mass exodus of the wealthy to poor coutries?
Good advice Anne. Your blog is fast becoming a key source of zen-like common sense.
Why do you think I live in the mountains of Andalucia? Richness comes form the life you lead with the people around whom you choose to surround yourself. Not the money you have. In my experience.
They can always play with Global Rich List if they want to feel a bit better…
http://globalrichlist.com/
A.
Nice post Anne. Can totally relate to “the moving from the ultra expensive” to the “get more bang for you buck” thing…my move from London to Utah, via Seattle!
perhaps I’ll just point people to your post, specifically ‘the comfortable pond’ when they ask me the inevitable, “why do I live in the woods of maine when I could make bundles of $ in a major city?” thanks for the post! -brenda
The way to really feel rich is to suspend value judgments. Overcome the ego-driven mind. And then there wouldn’t be any rich, in a relative sense, at all. Everything else is just self-deceipt. It’s never about the money, and that’s why there’s never enough.
quadzilla, when talking about empirical evidence, you need to be careful to isolate an individual variable. So we could say, *all other things held constant*, “most people would rather make 50,000….” There are plenty of reasons why people would not want to move to poorer countries, even if it would make them happier with respect to their relative income levels: fear of the unknown, ignorance, immigration laws, wanting to stay close to friends and family, etc.
My company has a lot of very affluent clients, and it’s so easy to get into a warped mindset that being a multimillionaire is “normal.” One of the better antidotes I found was to work on a project with a great local charity called Family Homestead, which provides housing and other assistance to homeless families with kids. My company set up an event where a bunch of us could clean and paint one of the transitional apartments that would soon house a homeless single mother and her two children.
About 12 of us participated, and we all agreed that it was an excellent way to feel good about the material fortune we do enjoy, and to provide some concrete help in the bargain.
It is pretty dang easy to feel rich while living in Colorado. There is lots to do, and if you ever feel poor, just look at the view.
I’m in CO Springs, and love the beauty.
Reaching that conclusion - about the emptiness of ’stuff’ - is a sign of maturity. Some get there faster than others. Others never get there at all.
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