Unfortunate Realities You Should Get Used To

I have bad news, folks.

1. You will spend your life chasing a net worth number you think you will make you happy, but never get there.

People talk about their "number," or the amount of money they think will make them happy and content. I'm convinced these numbers are what most people live for.

But they're dangerous. People are bad at forecasting almost everything, but trying to predict how you'll feel in the future is a whole different level of delusion.

Once you hit your number, you'll probably realize you're no more content than you were before, move the goalpost down the field, and resume chasing your tail. You'll do this your entire life.

Psychologists call this the hedonic treadmill, and it can make you miserable.

The best studies show that more money does in fact make people happier. But there's a difference between becoming happier and being satisfied with your happiness, which is what most people ultimately want. The paradox goes like this: More money leads to more happiness, but that leads to greater aspirations for more happiness, which will leave you discontent. Nobel Prize-winning psychologist Daniel Kahneman once wrote:

My wife Anne Treisman, was (and remains) convinced that people are happier in California (or at least Northern California) than in most other places. The evidence showed that Californians are not particularly satisfied with their life, but Anne was unimpressed. She argued that Californians are accustomed to a pleasant life and come to expect more pleasure than the unfortunate residents of other states. Because they have a high standard for what life should be, Californians are not more satisfied than others, although they are actually happier. This idea included a treadmill, but it was not hedonic -- it was an aspiration treadmill: happy people have high aspirations.

As the saying goes, the grass is always greener on the side that's fertilized with bullshit. Nowhere is understanding this more important than with money.

2. A lot of what you know is wrong, incomplete, distorted, and subject to revision

There's a bias called the "end of history illusion." It says that people think changes in taste, new ideas, and learning in general occurred in the past, but today we've got it all figured out.

The truth is we're always learning how wrong we were in the past. We think it's crazy that people used to think smoking wasn't harmful, but those people thought it was crazy that their ancestors had little concept of sanitation, and those people thought it was crazy that their own ancestors thought the world was flat. People need to believe they're doing things the right way, but the reality is that for every point in history -- including today -- someone in the future will look back and say, "Wow, what were those idiots thinking?"

In his book The Half-Life of Facts, Samuel Arbesman showed that in many fields, the majority of what we once considered to be fact is eventually disproved. He wrote:

Facts change all the time. Smoking has gone from doctor recommended to deadly. ... We used to think that the Earth was the center of the universe, and our planet has since been demoted. I have no idea any longer whether red wine is good for me. My father, a dermatologist, told me about a multiple-choice exam he took in medical school that included the same question two years in a row. The answer choices remained exactly the same, but one year the answer was one choice and the next year it was a different one. 

A few more examples:

Medical knowledge about cirrhosis or hepatitis takes about forty-five years for half of it to be disproven or become out-of-date. This is about twice the half-life of the actual radioisotope samarium-151. ...

More than a third of all mammals that allegedly were lost to time in the past five hundred years have since been rediscovered. ...

If, as a baby boomer, you learned high school chemistry in 1970 ... you would not realize that there are at least 12 new elements in the periodic table, bringing the total up to 118.

On a smaller level, monthly jobs numbers are revised seven times, companies are constantly restating earnings, and one of the most popular economic studies of the last decade was filled with Excel errors. Last year I asked AIG founder Hank Greenberg if, even in hindsight, investors could have known how much risk the company was on taking during the housing bubble by reading its annual reports. "I'm not sure the [annual reports] that they filed were complete," he said.

The odds are close to 100% that you're doing something today you'll later regret. And not because you're making a bad decision, but because you're relying on facts that just aren't true.

3. People are less impressed by your success than you think

Most people in the developed world are about as comfortable and safe as they're going to get in their lives. Their incentive to get richer is to impress other people.

But while people spend their lives trying to impress their friends, a trait they find most attractive in those friends is humility. Few of us ever connect these dots.

Psychologist Coreen Farris of Indiana University did a study showing that men are terrible at picking up social cues from women. "Young men just find it difficult to tell the difference between women who are being friendly and women who are interested in something more," she said.

People do something similar with money. They find it difficult to tell the difference between people who are impressed by your success and those who think your bragging is insufferable.

You'd be shocked at how little people care about your car, boat, house, purse, or vacation. "People care about your profits almost as much as they care about your fantasy football roster," investor Michael Batnick wrote this week. Good lesson to remember.

Check back every Tuesday and Friday for Morgan Housel's columns on finance and economics. 

Free 30-day trial: The Motley Fool's flagship service
Tom and David Gardner founded The Motley Fool over 20 years ago with the goal of helping the world invest...better. Their flagship service, Stock Advisor, has helped thousands of investors take control of their financial lives and beat the market. Click here to sign up today.

Read/Post Comments (13) | Recommend This Article (92)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 27, 2014, at 3:40 PM, TMFBreakerRob wrote:

    Well done, Morgan.

    It seems few have figured out that money, fame and power are just vanity, things that have fading value. And, if so…. it is worth considering what has lasting value. :)

  • Report this Comment On June 27, 2014, at 3:53 PM, benthalus wrote:

    Thanks for a great article!

    I agree with all your points, but am not sure that Coreen Farris's research necessarily applies to your point of success. Using income as a marker of success, multiple studies of dating website participants (see OkCupid, Match) have demonstrated significantly more messages and actual encounters for men who list higher incomes. My recall of the numbers may be off here, but every $20,000 per year increase is equivalent to an extra inch in height when women determine male attractiveness. Of course, based on point #2, that may be entirely wrong, and only applies to what a potential partner thinks, not the rest of the world in general.

    Interestingly, Farris's conclusion itself has been theorized by Steven Pinker to be a reproductive fitness advantage for men. If you mistake friendliness for sexual attraction, make a move, and get shut down, you lose nothing. But if you mistake sexual attraction for platonic interest, you potentially lose offspring. Thus, male behavior has evolved to assume more sexual interest than is present so that mating opportunities are less frequently missed. Those who miss sexual opportunities are quite literally bred out of the population.

  • Report this Comment On June 27, 2014, at 4:02 PM, TMFHousel wrote:

    Good point benthlus, although having a high income and having a high desire to show it off are two different things. Look at how much people love Mark Zuckerberg and hate Donald Trump.


  • Report this Comment On June 27, 2014, at 5:02 PM, hbofbyu wrote:

    "...Most people in the developed world are about as comfortable and safe as they're going to get in their lives. Their incentive to get richer is to impress other people."

    I see this a lot but I don't think the majority are out to impress more than they want money to buy them freedom (and very often it does the opposite). However, I want enough money, not only to be able to stop working, but to "buy me access".

  • Report this Comment On June 27, 2014, at 5:18 PM, CMFN8larson wrote:

    Good stuff as usual, MoHo.

    The part of #3 that says that the incentive of most people in the developed world "to get richer is to impress other people" doesn't seem quite right, and appears on the surface to conflict with point #1. It's only when we include "the degree to which we impress others" in the definition of happiness that the aforementioned conflict is resolved. The treadmill seems to me to be more about 'the nicer the things you acquire with your money, the pickier are the people you're trying to impress.'

    Although I have a number in mind, I consider it to be more of something to aim at than a point I must reach before retiring. More importantly, I myself (at least consciously) consider many things to be MUCH more important than impressing others. Some include the ability to (1) not starve to death or burden my kids, (2) see nice places (3) have reasonable conveniences, (4) take a nap whenever I want, and (5) afford healthcare in old age. I drive older cars, thrift-shop for most of my family's clothes, and aim my kids at community college despite having the financial means to do much more 'impressive' things in those areas. While it's true that my definitions of "nice" and "useful" will probably inflate a bit as (or if) my number hears, those are things on which I'll be judging my 'arrival' at retirement, not the impressiveness of my achievements or possessions.

  • Report this Comment On June 27, 2014, at 5:28 PM, TMFHousel wrote:

    Thanks for the comments, all.

    #3 may be poorly worded. I think the best reason to want to become rich is to have control over your time, which I wrote about here:

    However, I'm not convinced that's most people's desire to become rich. If it were, people wouldn't work 50+ hours a week. Instead, they're working 50 hours a week to pay for stuff they bought to impress people.


  • Report this Comment On June 28, 2014, at 1:03 AM, CoreAndExplore wrote:

    Shhhh Morgan, don't you know that "conspicuous consumption" is what's kept our economy running for over a century. That hedonic treadmill is what a service economy like ours depends on for its lifeblood.

    Sadly, I'm only half joking.

  • Report this Comment On June 28, 2014, at 5:16 AM, LazyCapitalist wrote:

    Another great article.

    Oh, and congratulations, Mr. Wallstreet Journal.

  • Report this Comment On June 28, 2014, at 5:06 PM, SkepikI wrote:

    Morgan- These all have the same basic root in my experience- our persistent ability to imagine we exert more control over life events than we actually do, compounded by the notion that somehow more (insert goal here) will give us more control.

    If one is fortunate, you come square up against the reality that serendipity or divine providence take your pick, exerts as much or more influence as directed and planned fortune, fame, and "knowledge" While having NO PLAN is disastrous mostly, occasional forays down the unplanned opportunistic path that does not appear to get more money, fame, or knowledge is fraught with interesting and often joyous discoveries. I always liked the advice "when you come to a fork in the road, TAKE IT!"

  • Report this Comment On June 29, 2014, at 11:26 AM, tedwarrenlives wrote:

    The Yahoo "DIA" finance message board has an interesting response to your article.

    The Fool should be doing a better job in outing the corruption of our financial sector.

    Barclay's got caught again, there is corruption and the playing field is far from even.

    We need to be truthful to ourselves and others of the systematic corruption that plagues this industry with little consequences.

  • Report this Comment On June 29, 2014, at 5:21 PM, Rqtguru wrote:

    Excellent article. I believe that what I am reading is to the question "when is enough enough?" For many it never is. It is like trying to fill a black hole of need rather than being comfortable and having the ability to make difference within. After all we are all to expect the same fate. It is the journey of getting there how we and our legacy will be judged.

  • Report this Comment On June 30, 2014, at 2:32 AM, hbofbyu wrote:

    The incentive for riches to impress others may even be more insidious than we realize, and is likely weighted more in our subconscious; why do we feel the need to upgrade all our toys?

    "To suppose, as we all suppose, that we could be rich and not behave the way the rich behave, is like supposing that we could drink all day and stay sober." L.P. Smith

    We are trapped in a world of relativity. Maybe nobody really wants to be rich, just richer than their neighbor.

  • Report this Comment On July 01, 2014, at 2:13 PM, Darwood60189 wrote:

    I agree and disagree.

    "Chasing a net worth number" is indeed a fools errand. More important is determining who we are on the planet, how we intend to live our lives, and then putting into place the financial structure to do that. "Getting rich" for most of us is about achieving financial security. For many of us, there will never, ever "be enough." That provides a life consistent to that of a gerbil in a cage, with reaching the end of the cage as the "prize."

    The only constant is change. So assuming that most of what I know and have learned is sufficient is simply wrong. For recent college graduates, who think that $tens of thousands in debt to get that education is worth it because "I'll get the perfect job" this is really bad news. Preparing for a life of constant change and continuing education is far, far more prudent. So it could be argued that for many college graduates, that four year degree was a complete waste of time and money. More important is to prepare for life and to do only that which is necessary to get one's foot in the door. Anything else for employment is a waste of personal capital.

    "People are less impressed by your success..." Yes, and who thinks they are really interested in reading about it? I am very clear that people really aren't too interested in anything but themselves. "It's all about me" is the current mantra of the FB, blogging and tweeting generation.

    I suggest we do those things that are consistent with our purpose in life, as once determined design such a life. Of course, tweeting might be the highest achievement for us. Most people could care less about anything I or you do. I fully understand.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3010765, ~/Articles/ArticleHandler.aspx, 8/28/2015 8:30:13 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Morgan Housel

Economics and finance columnist for Analyst, Motley Fool One.

Today's Market

updated Moments ago Sponsored by:
DOW 16,643.01 -11.76 -0.07%
S&P 500 1,988.87 1.21 0.06%
NASD 4,828.33 15.62 0.32%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes