Apparently, Money CAN Buy Happiness…?

Conventional wisdom says that money can’t buy happiness.

Indeed, happiness studies suggest that there is some truth to this. Case in point, the Princeton study on the $75,000 threshold (and while you’re at it, check out the WSJ bit on how much money you need to make to be happy in your city – which might explain why there seem to be a lot of cranky folks in NYC).

Of course, the reality is a little more nuanced.

Research in the last couple years suggests that money actually can buy happiness – and even improve performance.

But only if you spend it on the right things!

Personal vs. prosocial spending

A team of researchers from the University of British Columbia and Harvard Business School examined the happiness level of 16 employees one month before receiving a bonus from their company – and then again 6-8 weeks afterwards.

The researchers also collected data on what the participants spent their money on. Bills, expenses, rent, and purchases for themselves were categorized as “personal” spending, while buying things for others and donations to charity were considered “prosocial” spending.

So what do you suppose was the best predictor of happiness 6-8 weeks after receiving the bonus? Was it the dollar amount of the bonus (the average bonus was ~$5000)? Or what they spent their money on?

The latter, as it turns out. Indeed, the employees who spent more of their bonus on prosocial spending were happier than those who spent more of their bonus on themselves (full paper here).

Sport performance

Where this literature starts to get even more interesting, is when we take a look at how personal vs. prosocial spending impacts team performance.

The same researchers studied 62 students in an 11-team recreational dodge ball league.

Teams were randomly assigned to either a prosocial spending condition or personal spending condition.

Within each team, one-third of the team members were randomly selected to receive $20 to spend over the following week.

Those in the personal spending condition were told to spend the money on themselves, while the participants in the prosocial condition were told to spend the money on a teammate (selected at random by the researchers).

Two weeks later, the researchers calculated the teams’ winning percentage over the course of the study.

Interestingly, the teams with players who spent money on each other performed better than the teams which spent money on themselves. Put in terms of dollar figures and wins, the researchers found that…

“…every $10 people people spent on themselves led to a two percent decrease in winning percentage, whereas every $10 spent prosocially led to an 11% increase in winning percentage.”

Sales performance

The researchers also conducted a similar study with 88 sales professionals at a Belgian pharmaceutical company.

Once again, the data suggested that spending money on fellow team members improves performance of the group, while spending money on oneself does not.

In terms of dollars in and out,

“…for every $10 USD given to a team member to spend on herself, the firm gets just $3 USD back — a net loss; because sales do not increase with personal bonuses, personal bonuses are wasted money. In sharp contrast, for every $10 USD given to a team member to spend prosocially, the firm reaps $52 USD.”


How exactly does spending money on others lead to improved performance?

It’s not entirely clear, but imagine what an unexpected coffee, bouquet of flowers, or piñata (seriously, that’s what one of the dodgeball team members gifted to another) might do to improve chemistry within a team or group. How might teamwork, cooperation, engagement, and the willingness to have each others’ backs change?

We’ve all been in ensembles large and small where we felt connected and engaged with each other – and others in which we felt like a random collection of pieces that didn’t fit quite right, even if it made sense on paper. I think there’s a lot to be said for such chemistry, and it’s certainly something we feel, even if it’s difficult to quantify at times.

How might you surprise a colleague or “teammate” this week in your own life?

Take action

Check out Michael Norton’s entertaining TED talk on why we’re spending money on the wrong things.

And his interview on how to use our money to get more happiness per dollar.

photo credit: thefuturistics via photopin cc

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4 Responses

  1. I’m a big fan of being charitable and spending money on others when you are able. My workplace has a very easy method of payroll deductions that we develop a bit of competition between departments. I also take it upon myself to act as the morale officer of our group at work, and you wouldn’t believe how much joy you can spread by a few dollars of goodies or simple little toys. So I can really can understand how a few dollars spent on others can really help your own happiness.

    In a personal interest aside, I just launched an IndieGoGo campaign to become the world’s foremost 35-year old beginning cellist. If you’re looking for a bit of happiness. 🙂

  2. Very interesting ideas here. I am a 70 year old cello student. So far I have tried 2 amateur orchestras. The first was not so comfortable. The other cellists, most of them, were not happy to welcome me. And no one wanted a new player to sit near them. The second orchestra welcomed me immediately. And my playing there has improved dramatically. What a difference!

  3. It’s because buying something makes us present the truth about ourselves through language while buying something for someone else will more often result in a story to be told (last week, I offered this to that person). We can remember it or forget it. Period. It goes in the same movement of life.
    Trying to state the truth (it goes from comparing with others, or trying to get something that is true about oneself out of practicing, or trying to guess what my life should look like) is something that changes a lot every day, all the time. This is not sustainable.
    Does “There are no truth, there are only stories”goes with “paralysis by analysis” ?

  4. The Tale of the fisherman and the Tourist
    A tourist looks on a most idyllic picture: a fisherman dozing in the sun in his rowing boat that he has pulled out of the waves which come rolling up the sandy beach. The tourist’s camera clicks and the fisherman wakes. The tourist asks: “The weather is great and there’s plenty of fish, so why are you lying around instead of going out and catching more?”
    The fisherman replies: “Because I caught enough this morning.”
    “But just imagine,” the tourist says, “you could go out there three or four times a day and bring home three or four times as much fish! And then you know what could happen?” The fisherman shakes his head. “After a year you could buy yourself a motorboat,” says the tourist. “After two years you could buy a second one, and after three years you could have a cutter or two. And just think! One day you might be able to build a freezing plant or a smoke house. You might eventually even get your own helicopter for tracing shoals of fish and guiding your fleet of cutters, or you could buy your own trucks to ship your fish to the capital, and then . . .”
    “And then?” asks the fisherman.
    “And then”, the tourist continues triumphantly, “you’d could spend time sitting at the beachside, dozing in the sun and looking at the beautiful ocean!” The fisherman looks at the tourist: “But that is exactly what I was doing before you came along!”

    (slightly abridged from an original story by Heinrich Böll)

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