At the turn of the 20th century, the Vanderbilts were among the richest families in America.
They lived in lavish homes.
They owned the greatest yachts.
A few years later, they roared around in flashy cars.
Anderson Cooper and Katherine Howe describe how this famous family lived in Vanderbilt: The Rise and Fall of an American Dynasty.
They could, and did, buy whatever they wanted.
Yet the book reveals the miserable lives they led.
Most of us don’t have Vanderbilt-like money.
But at least, in part, we share the same hard-wired conviction.
It has two parts:
- We believe that if we buy a bigger or better [fill in the blank here] we’ll boost our life satisfaction.
- We believe the expensive things we already own make us happier.
Unfortunately, when it relates to “stuff” our brains do a poor job of assessing future and current happiness.
That’s according to Nobel Prize-winning behavioural economist, Daniel Kahneman, author of Thinking Fast and Slow.
For example, Alice Vanderbilt built a 70-room mansion in Newport County, which she called, The Breakers.
If, before she moved in, we had asked her, “Alice, will you be happier in this home?” she would have almost certainly said, “Yes.”
Upon its completion, she would have been elated.
But behavioural psychologists say we quickly get used to what we own.
This is called hedonic adaptability.
Like a dose of sugar, the high soon wears off.
In other words, that massive home wouldn’t have made Alice’s life any better.
But here’s the weird part.
If, after Alice lived in that home for a year, we had asked, “Alice, are you happier in this new home than you were in your old one?” she would have likely said, “Oh yes, I love it.”
In most cases, whether you bought a new car, upgraded your kitchen, bought a boat or a private jet, you would say the same thing.
For example, a Michigan State University research team asked people who drove expensive cars how much they liked them.
The respondents basically said, “We enjoy our driving experiences much more with these cars than we would with lower priced models.”
The researchers wanted to know if this were true, or whether this was a false belief.
They conducted surveys, asking people to regularly rate their most recent driving experience.
It turns out that people who owned expensive cars, much as the Vanderbilts did, didn’t enjoy driving them any more than people who owned lower priced models.
They simply got used to what they owned.
The head researcher, Norbert Schwarz says:
“During the test drive of a new car, our attention is focused on the car, and the more luxurious it is, the better we feel while driving it. This experience is real, visceral and compelling. What we miss, however, is one simple thing. Once we have owned the car for a few weeks, it no longer captures all of our attention and other things will be on our minds while driving. As soon as that happens, we would feel just as well driving a cheaper alternative.”
Conventional wisdom says we should “defer gratification” in order to build wealth.
In other words, we should avoid buying better or more luxurious things until a later date; we suffer a bit today, so we can feel happier tomorrow.
But behavioural science suggests that isn’t true.
If “stuff” almost never enhances our life satisfaction, then not buying a fancy car, a new boat, or redesigning our bathrooms, doesn’t deny us pleasure.
This concept, however, is a really tough sell.
Almost everyone will say, “But I’m different. That wouldn’t apply to me and my [fill in the blank here]”
Alice Vanderbilt would have said the same thing.
However, if we can recognise our misled bias, we can build wealth faster by saying “No,” to “better things.”
This can free up more money to invest.
Such wealth building, itself, doesn’t enhance life satisfaction.
But how we spend it can.
Behavioural research says donating money to charities boosts our health and our life satisfaction.
Spending money on experiences, especially with people we love, does much the same.
As I mentioned in my book, Balance, a “thing” is only likely to boost life satisfaction if it can uniquely bring your friends and loved ones together… on a regular basis.
Otherwise, it’s just a thing.
And we don’t really own things.
Instead, our things own us.
Andrew Hallam is the best-selling author of Millionaire Expat (3rd edition), Balance, and Millionaire Teacher.
