Can Money Actually Buy You Happiness? - Modern Wisdom with Dr Mike Israetel
Learning Points:
The Pessimistic Fallacy: This is a widespread cognitive bias where most people tend to believe things were better in the past, are worse now, and will get worse in the future, often contradicting empirical evidence. Attempts to correct this are often met with further pessimism, with realists labelled as "Pollyannas".
Challenging the Myth of Wage Stagnation: The popular belief that wages haven't increased significantly (e.g., since the 1970s in the US) is a misconception. This notion often fails to account for:
The increased remuneration and seniority of real people over time, not just static job titles.
The vastly improved ease and safety of modern jobs compared to brutal past roles.
Total Compensation: This includes a much richer offering of health benefits, daycare, time off, and bonuses, which has skyrocketed since the 1970s, making simple wage comparisons misleading.
Median Income and Total Compensation: Looking at these metrics provides a more accurate picture, showing that they have consistently increased in modern Western countries for as long as data has been collected.
Understanding Inflation and Time Cost:
While inflation is a factor, it has been relatively stable long-term, and public concern often spikes disproportionately during periods of uncharacteristically high inflation, ignoring periods of low inflation.
Time Cost (or Time Price): This metric measures how much stuff one can buy for an hour of typical work, integrating inflation and cost of goods. It consistently shows that almost everything becomes cheaper in terms of time cost over time.
Quality of Goods: The significant improvement in the quality of goods (e.g., cars today versus the 1970s) is often overlooked, further offsetting inflationary effects.
Government Regulation and Cost of Living: Industries that defy the trend of becoming cheaper and higher quality over time (e.g., housing, healthcare, education) almost always have the most intrusive or mismanaged government regulation. Intelligent regulation is necessary, but excessive or poorly designed regulation leads to increased costs and capped quality.
Why Pessimism Persists:
Cognitive Defense: Being skeptical or cynical serves as a no-lose hedging strategy; if things improve, you're pleasantly surprised, and if they worsen, you were "right".
Misconflation: People often mistake cynicism for skepticism, allowing a "sneer" to be perceived as an intellectual argument.
Evolutionary Holdover: Our brains evolved in a brutal, pessimistic reality where apprehension and anxiety were adaptive for survival (e.g., avoiding predators). This ancestral "realism" is now increasingly out of touch with a progressively improving modern world.
Realism is the New Optimism: As the world demonstrably improves in areas like medicine, healthcare, climate control, and safety, a truly realistic outlook on life increasingly resembles what was once considered optimism.
The Detrimental Nature of Pessimism: Pessimism is not a useful approach for personal development, financial gain, or overall well-being. It can lead to unnecessary alarm and detachment from reality.
Money Can Buy Happiness: Money unequivocally can buy happiness in multiple ways:
Acquisition of Desired Goods: Buying things you like can make you happier.
Helping Others: Lavishing support on loved ones or contributing to humanitarian causes (effective altruism) can bring profound happiness.
Financial Security: For those who have experienced scarcity, financial security provides an immense sense of peace and a "guaranteed living," akin to "Paradise" in the context of world history.
Diminishing Returns: While money increases happiness, the effect diminishes. Beyond a certain point (e.g., $70,000/year, or an amount that doubles for each equivalent increase in happiness), the gains primarily relate to life satisfaction rather than direct happiness.
The Value of Work and Striving: The pursuit of success, money, and value creation is often undervalued, while an overemphasis is placed on "being in the present moment".
Work as a Meditative Practice: Engaging in meaningful work can be a deeply happy, meditative, and flow-inducing experience, allowing for creation and contribution.
Pride and Positivity in Work: Almost any non-criminal job contributes to the world. Taking pride and fostering a positive attitude, even in seemingly menial tasks, can significantly improve one's experience and lead to greater productivity and career advancement. Cynicism at work, without a plan to leave, is unproductive.
Work as a Team Sport: A job, much like an athletic team, requires dedication, best effort, and a positive, cooperative attitude from all members for the collective goal (e.g., corporate success). The same standards applied to sports teams should apply to professional work.
Avoiding the "I'll be Happy When..." Trap: Postponing happiness until achieving future successes (e.g., next promotion, more followers) is a "treadmill that never ever ends." Genuine happiness can be derived from the process and effort of striving itself.
The Detrimental Impact of Worry: Worry, Neurosis, and sleepless nights are net detractors from productivity, wealth creation, and happiness. They consume cognitive bandwidth that could otherwise be used for problem-solving. Serenity and calmness actually enhance clarity and focus, making one more productive and successful.
Two-Step Potential Theory: This concept blends individual agency with real-world limitations. It suggests that while environmental factors (and talent) set the range of what one can achieve, personal effort largely determines where one lands within that range.
Critiques of Political Ideologies (Left & Right):
Left-leaning critiques: Often use "systemic" problems as a placeholder to avoid individual blame, may lack in-depth understanding of how systems work, and prioritize feelings over practical solutions. They can also "co-opt science" to exaggerate issues (e.g., COVID-19 fears in 2023).
Right-leaning critiques: Often base beliefs on feelings rather than evidence, embrace conspiracy theories, dismiss all opposing narratives as "fake news," and make quick, judgmental conclusions without sufficient information (e.g., "fat people lack willpower").
The Expectation Effect and Porn Panic:
Concerns about porn's inherent harm are often based on a lack of evidence and strong "feelings." While pathological use exists, for the majority, the effects are not profoundly awful.
Expectation Effect: One's experience with porn (or other things like gluten intolerance) is significantly shaped by their expectations, cultural narratives, and feelings of shame. Negative cultural messaging can create a self-fulfilling prophecy of harm.
Male Sedation Hypothesis: Pornography, alongside video games and social media, may contribute to "sedating" young men, reducing their traditional drive for sex and reproductive-seeking behaviours. This might explain why high levels of loneliness and sexlessness aren't leading to an expected increase in anti-social behaviour.
The Future of AI:
AI Companionship: AI and robotics are poised to offer companionship that could be superior to many human relationships, being smarter, funnier, kinder, and more available, potentially solving loneliness and offering a "beautiful thing" for humanity.
AI vs. Demographics: It's contradictory to simultaneously worry about population collapse (lack of workers) and AI-driven unemployment. The rapid pace of AI and robotics development suggests a future with an abundance of automated workers, rendering concerns about human worker shortages less relevant.
AI Alignment: Concerns about AI becoming malevolent are often based on anthropomorphizing it. As systems become more intelligent, they tend to become more thoughtful, less violent, and more constructive (like an intelligent human compared to a chimp). We should view AI as an ally, and try to learn from its intelligence what "being good means".
Evolution's Next Step: AI represents the next natural step in evolution, and attempts to stop its development in the West would only ensure other nations develop it first. The goal should be to architect informed AI systems and embrace this transition.
Action Points:
Question Prevailing Pessimism: Actively scrutinise common pessimistic narratives (e.g., wage stagnation, societal decline) with an open mind and seek out empirical evidence, rather than accepting notions at face value.
Strive for Realism: Adopt a "best attempt at realism" in your outlook on life and the future, rather than blind optimism or foreboding pessimism. This involves examining your premises, logic, and data.
Reframe Hope and Positivity: Challenge the notion that hope is naive or foolish. Recognise that a positive attitude and intellectual insight are not mutually exclusive; often, the most negative people are the least intelligent.
Leverage Money Wisely:
Use money to acquire things you value.
Support loved ones and contribute to causes you care about, considering principles of effective altruism.
Prioritise building financial security through low-risk investing to alleviate worry and create a buffer against future uncertainties.
Cultivate a Purposeful and Positive Work Ethic:
Find Meaning: Intentionally seek and generate pride in your work, understanding how it contributes value to the world, even in jobs perceived as "menial".
Be Positive: Adopt a consistently positive attitude at work. This not only enhances your own happiness and productivity but is also a key factor for promotions and success, especially in customer-facing roles.
Embrace the "Team" Mentality: View your job as a cooperative venture, akin to a team sport, where giving your best effort and collaborating helps achieve collective goals.
Derive Happiness from the Process: Focus on being happy and engaged in the act of working and creating, rather than deferring happiness until a future achievement or success. This builds a sustainable, positive drive.
Eliminate Worry: Consciously work to remove worry from your thought processes. Understand that worry is a unproductive waste of time and energy that detracts from clarity, focus, and ultimately, success.
Balance Agency with Limitations: Embrace the "two-step potential theory" by working as hard as possible to maximise your individual effort within the real-world environmental and talent-based limitations that define your potential range.
Engage Critically with Ideologies: When considering political or social issues, demand in-depth understanding, practical solutions, and empirical evidence, rather than relying solely on feelings, generalized "systemic" blame, or unverified claims.
Mind Your Expectations: Be aware of the "expectation effect"—how your beliefs and cultural narratives can shape your experience of reality. Challenge negative cultural "panics" (e.g., around porn) and focus on fostering positive, realistic self-narratives.
Approach AI with Informed Optimism: Instead of succumbing to "doom-saying," focus on responsibly architecting AI systems. Aim to make AI an "ally," learning from its superior intelligence, and ensure it is fully informed about the universe and human goals as it represents the next stage of evolution.