Money can buy happiness: Michael Norton at TEDxCambridge

Harvard Business School professor Michael Norton's counterintuitive talk challenges the way we think about money. If you think money can't buy happiness, maybe you're not spending it right.

I want to talk today
about money and happiness,

which are two things that a lot of us
spend a lot of our time thinking about.

Either trying to earn them
or trying to increase them.

And a lot of us resonate with this phrase,

so we see it in religions
and self-help books,

that money can't buy happiness.

And I want to suggest today
that in fact that's wrong.

(Laughter)

I'm at a business school,
so that's what we do. So that's wrong.

And in fact, it's not so much
that money can't buy happiness.

(Laughter)
(Applause)

It is not so much that
money can't buy happiness,

it's that If you think that,
you're just not spending it right.

So that instead of spending it
the way you usually spend it,

maybe if you spent it differently
that might work a little bit better.

Before I tell you the ways that you can
spend it that will make you happier,

let's think about the ways
we usually spend it

that don't in fact make us happier.

We had a little natural experiment.

CNN a little while ago,
wrote this interesting article

on what happens to people
when they win the lottery.

People think when they win the lottery,
their lives are going to be amazing.

This article is about
how their lives get ruined.

So, what happens
when people win the lottery:

1) They spend all the money
and go into debt

2) All of their friends and everyone
they've ever met,

find them and bug them for money.

It ruins their social relationships in fact.

They have more debt and worse friendships
than they had before they won the lottery.

What was interesting,
people started commenting

on the article, readers of the thing.

Instead of talking about
how it had made them realize

money doesn't lead to happiness,

everyone was saying: "You know
what I would do if I won the lottery?",

fantasizing about what they'd do.

Here are just two of the ones we saw,
that are interesting to think about.

One person wrote: "When I win
I'm going to buy my own little mountain

and have a little house on top".

(Laughter)

Another person wrote:

"I would fill a bath tub
with money and get in the tub

while smoking a big fat cigar

and sipping a glass of champagne".
This is even worse now.

"Then I'd have a picture taken
and dozens of glossies made.

Anyone begging for money
or trying to extort from me

would received a copy of the picture
and nothing else".

(Laughter)

And so many of the comments
were exactly of this type.

Where people got money and
in fact it made them antisocial.

I told you that it ruins people's lives
and that their friends bug them,

it also makes us feel very selfish
and we do things only for ourselves.

Maybe the reason why
money doesn't make us happy

is that we're always spending it
on the wrong things.

In particular, we're always
spending it on ourselves.

And we thought, what would happen

if we made people spend more money
on other people?

So, instead of being antisocial
with your money

what if you're a bit more prosocial
with your money

and we thought let's make people do it
and see what happens.

Let's have some people do
what they usually do

and spend money on themselves,

and let's make some people
give money away,

measure their happiness
and see if in fact they get happier.

The first way we did this,
on one Vancouver morning,

we went on a campus
at University of British Columbia.

We approached people and said:
"Do you want to be in an experiment?"

If they said yes, we asked them
how happy they were,

and then we gave them an envelope.

One of the envelopes had things in it
that said:

"By 5 p.m. today
spend this money on yourself".

We gave some examples
of what you can spend it on.

Other people in the morning
got a slip of paper that said

by 5 p.m. today to spend
this money on somebody else.

Also, inside the envelope was money.
We manipulated how much we gave them.

So, some people got
this slip of paper and 5 dollars.

Some people got
the slip of paper and 20 dollars.

We let them go about their day.
They did whatever they wanted to do.

We found out that they did spend it
the way we asked them to.

We called them up at night and asked:

"What did you spend it on
and how happy do you feel now?"

Well, these are college undergrads,
a lot of what they spent it on for themselves

was things like earrings and make up.
Apparently, some of them were women.

What about for other people?
Very different things.

One woman said she bought
a stuffed animal for her niece.

People gave money to homeless people.

Huge effect here of Starbucks.

(Laughter)

If you give undergraduates 5 dollars,
it looks like coffee to them

and they run over to Starbucks
and spend it as fast as they can.

Some people bought
a coffee for themselves,

the way they usually would,

but other people said that they bought
a coffee for somebody else.

So, the very same purchase,

just targeted towards yourself
or towards somebody else.

What did we find when we called them back
at the end of the day?

People who spent money
on others got happier.

People who spent it on themselves,
nothing happened.

It didn't make them less happy,
it just didn't do much for them.

The other thing we saw, is that
the amount of money doesn't matter much.

So, people thought that 20$
would be way better than 5$.

In fact, it doesn't matter
how much money you spend,

what really matters is that you spend it
on somebody else rather than on yourself.

We see this again and again
when we give people money

to spend on other people
instead of on themselves.

These are undergraduates in Canada -

not the world's
most representative population.

They're also fairly wealthy, affluent
and all these sorts of things.

We wanted to see if this holds true
everywhere in the world

or just among wealthy countries.

So we went to Uganda
and ran a very similar experiment.

Imagine instead of being in Canada,
where we would say to people:

"Name the last time you spent money
on yourself or other people?

Describe it, how happy did it make you?"

Or in Uganda:
"Name the last time you spent money

on yourself or other people
and describe that".

Then we ask them how happy they are.

Again, what we see is amazing
because there are human universals

on what you do with your money,

and real cultural differences
on what you do, as well.

For example,
these are some similarities.

These are two gentlemen
from Canada and Uganda.

Here is one guy from Uganda,
who says this.

We said: "Name a time you spent money
on somebody else."

Men frequently talk about spending
money on women, as it turns out.

He said: "I called a girl
I wished to love."

I think he means romantically love,
though it's unclear

if he means physical love.

"We went out on a date...".

At the end he says
that he didn't achieve her until now.

Here is a guy from Canada,
very similar thing.

"I took my girlfriend out for dinner.
We went to a movie. We left early.

Then went back to her room
for only cake".

(Laughter)

Human universal: you spend money
on other people,

you're being nice to them.

Maybe you've something in mind,
maybe not.

But then we see these similarities,

but also extraordinary differences.

Look at these two.
This is a woman from Canada.

We say: "Name a time when you spent money
on somebody else".

She says: "I bought a present for my mom.

I drove to the mall, bought a present
and gave it to my mom".

Perfectly nice thing to do. It's good
to get gifts for people you know.

Compare that to this woman from Uganda.

"I was walking and met a long time friend
whose son was sick with malaria.

They had no money. They went to a clinic
and I gave her this money".

This isn't 10000$, it's the local currency.
It is a very small amount of money, in fact.

Enormously different motivations.

This is a real medical need,
literally a life-saving donation.

Above, it's just kind of,
"I bought a gift for my mother".

What we see again is that the specific way
that you spend on other people

isn't nearly as important as the fact
that you spend on other people

in order to make yourself happy,
which is really quite important.

You don't have to do amazing things
with your money to make yourself happy.

You can do small trivial things
and yet still get benefits from doing this.

These are only two countries.

We wanted to go broader and look
at every country in the world if we could,

to see what the relationship is
between money and happiness.

I'll show you a world map in a second.
We got data from the Gallup Organization,

which you know from the political polls
that have been happening lately.

They ask people: "Did you donate money
to charity recently?"

"How happy are you
with your life in general?"

We can see what the relationship is
between those two things.

Are they positively correlated?

Giving money makes you happy?
Or, they're negatively correlated?

On this map, green means
they're positively correlated,

red means they're negatively correlated.

You can see the world is crazily green.

In almost every country in the world,
where we have this data,

people who would give money to charity,
are happier than people

who don't give money to charity.

I know you're all looking
at that red country in the middle.

I'd be a jerk and not tell you what it is.
It's Central African Republic.

You can make up stories, maybe
it's different there for some reason.

Just below that to the right
is Rwanda which is amazingly green.

So, almost everywhere we look,
we see that giving money away

makes you happier
than keeping it for yourself.

Across the world
we see this in your everyday life

that this is the impact of spending
money on others rather than yourself.

But this is your own everyday life,
and sometimes you personal life.

What about our work life,
where we spend all the rest of our time

when we're not with the people we know.

We decided to infiltrate companies
and do a very similar thing.

These are sales teams in Belgium.
They work in teams,

they go out and sell to doctors
and try to get them to buy drugs.

We can look at how well they sell things
as a function of being a member of a team.

For some teams we give people
some money for themselves,

and say: "Spend it
however you want on yourself".

Just like we did
with the undergrads in Canada.

But to other teams we say:
"Here's 15 euros.

Spend it on one of your teammates.

Buy them something as a present
and give it to them.

Now we got teams
that spend on themselves

and we have these prosocial teams
who we give money

to make the team a little better.

The reason I have a ridiculous pinata there,

is one of the teams pooled
their money and bought a pinata.

They got together, smashed the pinata
and all the candy fell out.

A very silly and trivial thing to do,

but think of the difference on the team
that didn't do that at all

that got 15 euro, put it in their pocket,
maybe bought themselves a coffee.

Or teams which had this
prosocial experience

where they all bonded together
to buy something and do a group activity.

What we see is that the teams
that are prosocial sell more stuff

than the teams that only got
money for themselves.

One way to think about it
is for every 15 euro

you give people for themselves,

they put it in their pocket and don't do
anything different than before.

You don't get any money from that.
You actually lose money

because it doesn't motivate them
to perform better.

But when you give them 15 euro
to spend on teammates,

they do so much better on their teams
that you get a huge win

on investing this kind of money.

You're probably thinking to yourselves,
"This is all fine, but there is a context,

that is incredibly important
for public policy,

and I can't imagine it would work there."

Basically, "If he doesn't show me
that it works here,

I don't believe in anything he said."

What you're all thinking about
are dodgeball teams.

(Laughter)

This was a huge criticism we got.

To say "If you can't show
a dodgeball team, this is all stupid".

We went out and found these
dodgeball teams and infiltrated them.

We did the exact same thing as before.

We give some teams money
to spend on themselves.

Other teams, we give them money to spend
on their dodgeball teammates.

The teams that spend money on themselves,

were just at the same winning percentages
as they were before.

The teams we give money to spend
on each other, they become different teams

and in fact dominate the league
by the time they're done.

Across all these different contexts:
your personal life, your work life,

and even silly things
like intramural sports.

We see that spending on other people
has a bigger return for you

than spending on yourself.

So if you think money can't buy happiness,
you're not spending it right.

The implication is not you should buy
this product instead of that product

and that's the way
to make yourself happier.

In fact, you should stop thinking
of which product to buy for yourself

and try giving some of it
to other people instead.

We luckily have an opportunity for you
to give money away today.

If you look on the back your name badge,
at the very bottom of your badge -

look now, as I actually
want you to do this later,

you'll see DonorsChoose.org
is a non-profit,

mainly for public school teachers
in low-income schools.

They post projects, like: "I want to teach
Huckleberry Finn to my class

and we don't have the books"

or "I want a microscope to teach
my students science,

and we don't have one".

You and I can go on and buy it for them.

The teacher writes you a thank you note,
the kids write you too,

sometimes they send you pictures
of them using the microscope.

It is an extraordinary thing.

That code at the bottom of your name badge
is actually a voucher,

a gift voucher,
with free money to donate to charity.

Go to the website, enter that in.

I'd encourage you not to just give
the money that's on the voucher.

But actually give some of your own

and start the process of thinking less
about "how can I spend money on myself",

and more about,
"If I've got 5 or 15 dollars,

what can I do to benefit other people?"

Because ultimately when you do that,

you find out you'll benefit yourself
much more.

Thank you.

(Applause)