Deeply thoughtful humans,

This week I'm (re)reading: Daniel Kahneman’s Thinking, Fast and Slow (2011)

I didn’t think I’d be writing a newsletter this week as I thought I might perish in the 39 degree heat in London on Tuesday. But here are we.

I recently saw a reference to a famous and often misinterpreted study of Daniel Kahneman's: “they found happiness does increase with wealth. But there is a peak, and that magical number is $75,000 per year.”

That doesn’t really tell us much. You might first ask – what currency is this in? (The above was targeted an Australian audience and failed to specify whether USD or AUD). Does this refer to household income and what’s the assumption around dependents? The cost of living varies massively depending on where you live… so is this figure relevant for my city? Also, when was this published? What about inflation since whenever this was published? Hasn’t the cost of living increased since then?

All great questions. I picked up Thinking, Fast and Slow to remind myself of the details of the study that produced this "magical" number.

First though what’s the story with this book and who is Daniel Kahneman?

Kahneman is an Israeli-American professor of Psychology and Public Affairs at Princeton University. He won the Nobel Prize in Economics in 2002 for his work on decision-making. He’s a big dog. And he’s about 90.

And wowwww there are so many ideas to share from this book. But because I don’t want to feed you oversimplified nonsense, today I’m going to stick to a couple of findings at the very end of the book on “experienced well-being” and “thinking about life” (a favourite pastime of mine). I will get to the $75k number. But the journey I take you on is going to stop by the French mothers, so strap in.

When Kahneman became interested in the study of well-being, he was quickly suspicious of the existing work which used ‘global satisfaction with life’ as a valid measure of well-being. He instead proposed that “Helen was happy in the month of March” if:

She spent most of her time engaged in activities that she would rather continue than stop, little time in situations she wished to escape, and… not too much time in a neutral state in which she would not care either way.

He and his team then set out to develop a measure of the well-being of the ‘experiencing self’ (rather than the ‘remembering self’ i.e., looking back on your life). They collected a tonne of data (all from women initially) which details intensity of feelings during different activities throughout a day. They classified feelings as positive or negative and from there derived the “U-index”, which measures the proportion of time an individual spends in an unpleasant state. The U-index can be computed for activities, for example the proportion of time people spend in a negative emotional state while commuting is 29% for American women in a Midwestern city (based on 1,000 participants).

Here's my French mothers’ bit:

Okay now let me get to the peak salary thing which is what you’re all here for.

Takeaway here – forget about the exact figure. The point is that beyond a certain point you’re not necessarily going to experience more positive emotions day to day. Bernard Arnault doesn’t get any more enjoyment out of his lunch everyday than you do, even though he has unlimited supplies of Moet to go with it. (Interestingly though, if you're American, he probably does enjoy his lunch more than you do… “To get pleasure from eating you must notice that you are doing it…the Americans were far more prone to combine eating with other activities, and their pleasure from eating was correspondingly diluted [compared to the French].”)

But what about the life satisfaction point? You said if I’m rich, I’ll have more life satisfaction? Is Warren Buffet more satisfied with his life than me? Well maybe. But maybe not. First, there are issues even gauging valid responses for this question, for example, one experiment showed if participants find a coin on a photocopier immediately before answering how satisfied they are with their lives they’ll answer more satisfied than the other group who photocopied something without finding 10 cents (lots more in the book on these types of experiments… the whole idea of the book is explaining how the two systems in our brains responsible for our behaviour and decision making often result in errors in memory and judgment). Second, I said MAY increase life satisfaction.

Kahneman explains:

And then he shares an interesting study:

Here's Kahneman’s conclusion on the whole day to day well-being versus long term satisfaction:

This week I’m asking: what do you make of all this?

Are you still convinced that more £££ (in excess of the ‘peak’) will make you emotionally better off day to day?

Is life satisfaction something you are chasing? (Like this Vox writer who I don’t think understood the research findings (or read them) and is convinced that Elon Musk has a “way better” life than him and concludes his article with “money always makes you happier”.

Or have you experienced first-hand that you can be doing fine financially but absolutely miserable due to the circumstances of your life (unhappy relationship, job etc)? Or due to some unknown force when on the outside your life is great?

Kahneman explains “People who appear equally fortunate vary greatly in how happy they are”.

My immediate reaction is, yeah I know! Money can be not an issue and you can still be f***ing depressed. My own story of working in a highly paid finance job and becoming mentally not okay is so common it’s almost cliché. And then losing my brother to depression, a young person who became desperately unhappy whilst studying to be a doctor, presumably not worrying about his future income. Maybe you’ve experienced something similar. If not, you’ve surely noticed countless “successful” and “wealthy” people end their lives and know there must be more to the story than money guaranteeing future happiness and life satisfaction…

OR maybe the idea of regularly experiencing negative emotions is totally foreign to you and you feel EXTREMELY uncomfortable when I write about depression and suicide. The data implies that could make sense:

This makes it even more obvious to me why there is a self-help industry… if half the population is getting around feeling great most of the time, the rest of us are begging TELL US YOUR SECRETS.

If only it were that simple. Of course, there’s also the genetic aspect to temperament (which Kahneman briefly mentions)... lots more reading for me on these topics...

Last week you said: do you know the whole story with Sri Lanka?

In the case of Sri Lanka, have you heard of one of the most important underlying factors, which is probably the biggest agricultural economics policy failure since the Great Leap Forward? – P.S.

No, I hadn’t… so I did a quick google and read about Sri Lanka’s disastrous policy to ban fertiliser:

Read the Time magazine article on Sri Lanka's organic farming crisis here.

And what’s the Great Leap Forward again?

The Chinese Communist Party’s economic campaign of 1958-1962 that resulted in “the worst man-made famine in recorded history”… somewhere between 15 and 55 million people died. (Why don’t we talk about this more…?)

FT article here on "The man who exposed Mao’s secret famine"

This week I'm grateful for: the story of the fisherman and the businessman

You may have heard this one before… I thought it went well with the life satisfaction theme.

It goes something like this…

A businessman was on holiday in a small coastal village when a small fishing boat docked nearby him on the pier. The businessman complimented the fisherman on the quality of his fish and asked how long it took to catch them.

The fisherman explained “Every morning, I go out in my boat for 30 minutes to fish, and I catch everything I need. I’m the best fisherman in the village”.

“If you’re the best, why don’t you stay out longer and catch more fish? What do you do the rest of the day?”

The fisherman replied “I catch enough fish to feed my whole family, so I don’t need to fish more. Instead, I sleep late, play with my children, spend quality time with my wife, and every evening we stroll into the village to drink wine and play guitar with our friends.”

The businessman scoffed, “I am successful CEO, and you are missing a massive opportunity here. I can help you be more successful. You should spend more time fishing and with the proceeds, buy a bigger boat. From there, you could buy several boats, and eventually you would have a fleet of fishing boats with many fishermen. You can scale and sell your fish to thousands. You could leave this small coastal fishing village and move to the big city, where you can oversee your growing empire.”

The fisherman asked, “How long will this all take?”

The businessman replied, “15 – 20 years.”

“And what then?”

“When the time is right you would announce an IPO and sell your company stock to the public and become very rich, you could make millions!”

“Millions – then what?”

“Then you would retire, move to a small coastal fishing village where you would sleep late, play with your kids, spend time with your wife, and stroll to the village in the evenings where you could sip wine and play your guitar with your friends.”

And finally, for those of us who are determined to build our fishing empires nonetheless:

We fear that we’ll be socially shunned if we fail. But this is to miss how profoundly reassuring and endearing failure tends to be to onlookers.

xx Delia

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