This week I am posting a guest blog by Dr. Daniel Crosby
Consider something you’ve always wanted to do but that you’ve put off doing because it scares you. In fact, just think of something you’d eventually like to do but haven’t yet, since you may not even be aware of all of your reasons for not having embarked on that journey just yet. Maybe that something is having a child. Maybe it’s starting a business. Or perhaps it’s writing a book, getting serious with a romantic partner, or any number of other aspirations you’ve yet to reach. Let’s say for discussion’s sake that the thing you are considering is starting a business. You ask yourself…
“Should I or shouldn’t I start a business?”
Easy enough, right? You make a t-chart, list the pros and cons and then make a decision! Well, let’s examine how you go about dissecting this question. You do your best to dispassionately weigh the pros and perils, but if you’re like most folks (you are, no matter how great your Mom thinks you are) there is a flaw in the system.
Drawing on his background in evolutionary psychology, James Friedrich has come to the conclusion that as we evaluate important decision in our life, our primary aim is to avoid the most costly errors. That is, we make decisions that make us “not unhappy” rather than “blissful.” We want to be “not broke” more than we want to live abundantly. To use some familiar colloquialisms, we choose a sure “meh” over a possible “woohoo!” In life as in financial markets, we are far more likely to focus on the potential perils of failing than we are the happiness and financial freedom that might accrue to us.
The evolutionary roots of this system of self-preservation make sense. It was not all that long ago (in terms of evolutionary time) that our forebears were called upon daily to make life and death decisions. For people living on the savannahs of Africa, choosing to zig when you should have zagged could spell the end. Historically, decision-making has been very wrapped up in preserving physical safety and ensuring that physical needs were met. In a life-and-death scenario, minimizing risk at the expense of self-actualization is only logical. However, in the intervening millennia, things have changed and our thought patterns have not kept pace. In the U.S., we live in a service economy that produces more ideas than “things.” We have moved from an agrarian to an industrial to a knowledge-based economy and our ability to make appropriate decisions has not kept pace.
In the U.S. and Western Europe, most people have the base of Maslow’s pyramid met – they have adequate food, water, sleep, and safety. Having now met these basic needs, they are left to wrangle with more metaphysical concerns such as belonging and self-actualization. No writer has expressed this existential struggle more succinctly and beautifully than Chuck Palahniuk, who said, through his character Tyler Durden,
“We’re the middle children of history, man. No purpose or place. We have no Great War. No Great Depression. Our great war is a spiritual war. Our great depression is our lives. (Fight Club. [Motion Picture]. United States, 20th Century Fox.)”
What we are left with is a brain and a decision-making modality that is ill-suited for our modern milieu. We are programmed to choose safety, even at the expense of joy, in an environment where safety abounds and joy is hard to find. Numerous studies have shown that people are twice as upset about a loss as they are pleased about a gain (just ask my Dad the stockbroker if he gets as many calls when the market is up as he does when it’s down). Unless we learn to train our brains to evaluate risk and reward on a more even keel, we will remain trapped in a life of risk-aversion that keeps us from taking the very risks that might make us happy, not to mention wealthy.
Beyond The Purchase is a website dedicated to understanding the psychology behind spending decisions and the relationship between money and happiness. We study how factors like your values and personality interact with spending decisions to affect your happiness. At Beyond The Purchase you can take quizzes that help you understand what motivates your spending decisions, and you’ll get personalized feedback and tips. For example:
How do you score on the five fundamental dimensions of personality? Take our Big Five personality test and find out.
How do you feel about your past, present, and future? Take the Time Attitudes Survey and learn about your relation with time.
How happy are your Facebook updates? We can analyze your last 25 Facebook status updates and determine how happy you have been.
How happy is your subconscious? Take our Happiness IAT and find out.
With these insights, you can better understand the ways in which your financial decisions affect your happiness. To read more about the connection between money and happiness, go to the Beyond the Purchase blog.