The Secret to Feeling Rich

[00:00:00]Think about the last time you were on a plane. Have you noticed what it feels like as you walk through the first class cabin on your way to your seat at the back of the plane? First, you notice that the first class seats are wider with extra leg room. The passengers have already settled into their seats because they were allowed to board the plane first. Many of them are holding drinks presented to them by an attentive flight steward. They're smiling, pleased with themselves. Or at least that's how it seems to you. You shuffle past them, wondering where they made all that money. You drag your bags through the narrow aisle, bumping into people and armrests. You glance at your ticket. It reads 48J.

[00:00:41]The middle seat in the back row right next to the stinking backed up toilets.

[00:00:46]In today's video, I want to talk about one of the most powerful forces in our lives. The comparisons we make between ourselves and others. These comparisons don't just shape our perceptions of ourselves. They shape the way we see the world. They shape our health, perhaps even how long we live. Let me explain.

[00:01:05]In 2016, the researchers Katherine Dels and Michael Norton published a study analyzing data from lots and lots of flights. They found something striking.

[00:01:15]On planes with a first class cabin, incidents of air rage were nearly four times more likely than on flights without a first class section.

[00:01:25]Passengers were also more likely to be disruptive or violent if they had to walk past the firstass cabin to get to their seats and coach. If they boarded from the back or the middle of the plane, they were less likely to melt down. Why? The researchers thought it might be because they didn't have to see what life was like on the other side of the first class curtain. Keith Payne is a psychologist [music] at the University of North Carolina at Chapel Hill. For years now, [music] Keith has studied what happens when we encounter people who are financially better off than we are or financially worse off than we are. And he and other social scientists have discovered a paradox. Objectively, what you should care about is how much money you make and how much wealth you have. that determines what you can buy, your standard of living. In theory, it shouldn't matter whether other people are making more or less than you. But it turns out our feelings about our income and our wealth are greatly shaped by the comparisons we make with other people.

[00:02:25]Let's run a little experiment. I want to show you what I mean. I'm going to give you two scenarios. I'll describe your situation in two different cities. You get to decide which city you live in.

[00:02:35][music] Ready? In city number one, you make $50,000 a year. Everyone else makes $10,000 a year. Think about how that makes you feel. Here's city number two.

[00:02:49]You make $100,000 a year, but everyone else makes $500,000.

[00:02:55]Which city would you prefer to live in?

[00:02:57]An economist would tell you that this is a no-brainer. You make 50K in the first city and 100K in the second. Obviously, you picked the second. Is that what you picked? Many people given the choice choose city number one. You may be poorer in absolute terms, but relative to everyone around you, you feel rich.

[00:03:19]Because there are so many poor people in the city, things are less expensive and you can afford to buy nearly anything you want. In the second city, you may be richer in absolute terms, but everywhere you look, you see people who are richer than you, eating at the fanciest restaurants and going on expensive vacations. [music] And because there are so many rich people around, shops and businesses spring up to cater to those wealthy people, things get super expensive. You might be richer in the second city compared to the first city, but you feel poorer. Isn't this strange?

[00:03:52]Keith Payne has studied this. He's noticed that we invariably compare ourselves to people who are better off than we are, not people who are worse off.

[00:04:00]>> There's a pronounced tendency we have to make upward comparisons in all areas of life. And the the reasons for that upward bias are not fully understood, but it seems to have something to do with the fact that upward comparisons on the one hand feel painful because you're comparing to somebody who has something that you don't, but on the other hand, they're also uh potentially inspiring, potentially motivating, and so they get you moving to to work harder in some cases as well. In 2008, the Sacramento B newspaper published the salaries of every California state employee.

[00:04:34]Overnight, people could look up exactly what their co-workers earned.

[00:04:38]Researchers studied what happened next.

[00:04:40]Their findings revealed a telling [music] asymmetry. The effects of learning um what you made in comparison to what other people made depended on whether you were a high earner or a low earner to begin with. So, uh, people who were, uh, below average when they learned that other people were making much more than them, they felt very dissatisfied.

[00:05:00]People who were higher up, uh, when they found out how well they were doing compared to other people, ironically, it didn't have the same effect. They didn't feel overjoyed at the fact that they were doing so well, their reaction was just sort of neutral. So, they weren't any happier, but the people at the bottom were made more unhappy. Even more evidence comes from research involving our primate cousins on the evolutionary tree. Many years ago, France Deval and his colleagues put two capuchin monkeys in cages next to one another. The one on the left is the monkey who gets cucumber. The one on the right is the one who gets grapes. So, she gives a rock to us. That's the task. And we give her a piece of cucumber and she eats it.

[00:05:41]The other one needs to give a rock to us.

[00:05:44]And that's what she does.

[00:05:47]And she gets a grape and she eats it. The other one sees that. She gives a rock to us. Now gets again cucumber.

[00:06:08][laughter] Notice that the monkey had been perfectly happy to perform the task in exchange for a cucumber. [music] What changed? The monkey saw another monkey getting a better reward. Notice also that this monkey seems to care more about fairness than about its treat. You could argue, "Hey, a cucumber is not as good as a grape, but it's better than nothing." Nope. If I can't have what you have, the monkey is saying, I'm willing to throw away what I have in order to protest. What is striking about this is that capuchin monkeys and humans shared a common ancestor some 40 million years ago. It shows you how deeply these algorithms are wired into our brains.

[00:06:53]The economist Daniel Zizo once designed a study to test how far our social comparisons can push us in the modern world. He gave money to volunteers. Some were given more than others. Then the researcher offered people who got less a choice. Were they willing to spend some of their own money to reduce the amount that the richer people had received? The study found that a number of people would do just that. They burned their own money in order to close the gap. And from an economic point of view, that's just crazy behavior, right? But from a psychological point of view, it makes perfect sense because we're not judging these things the way an accountant or an economist would. We're thinking, what do I have compared to what that other guy has? And that relative sense of entitlement and having enough compared to what other people have is so powerful.

[00:07:44]>> What makes all of this especially fascinating is that no matter where we are on the income ladder, we compare ourselves to people who are on higher rungs. If you make $50,000 a year in the United States, you are in the top 1% of incomes globally. Do you think of yourself as a 1enter?

[00:08:03]No, of course not. You compare yourself to people who make a h 100,000. When we see people on the rungs above us complain about the people who are on the rungs above them, it can make us very angry. Of course, we forget there are people below us on the income ladder.

[00:08:20]They are just as exasperated with us because we spend all our time railing against the people who have more than us. Think about how you feel about someone living on the Upper East Side of Manhattan. Maybe they earn a million dollars a year and they say, you know, it doesn't go as far as you think.

[00:08:38]>> It's incredibly frustrating for ordinary people to read those kind of comments, but you can kind of see the psychology at work, right? Because if you're a middle- class person being frustrated at that uh New Yorker saying that, just think about how you're viewed by other people who are not middle class Americans. Either they're people who live in poorer countries around the world or there are people who are struggling to make ends meet in the United States. That same dynamic happens all up and down this income ladder.

[00:09:06]>> Keith has found that the feeling of inequality has major consequences. It doesn't just affect our mental well-being. It can affect our health.

[00:09:15]And this has been exacerbated by the fact that in recent years, we've seen a phenomenon around the world that is sometimes called winner take all.

[00:09:23]Basically, the rich are getting much richer, and they're doing so so much faster than everyone else that their lifestyles are no longer aspirational.

[00:09:32]They're simply out of reach. Keith has a name for this. He calls it the broken ladder. This may be one reason we've seen a sharp rise in radical politics around the world. When people see the rich have gotten so much richer that it's no longer possible to keep up with them, the idea of burning everything down starts to sound appealing. If you look at the actual income data from the last 50 years in the United States, the middle class hasn't gotten poorer.

[00:09:59]Incomes for middle earners have actually stayed roughly flat since the 1960s and '7s. But during that same period, incomes at the top have pulled dramatically ahead. Unsurprisingly, given that we all make upward comparisons, most people feel like they're falling behind. The poor and the middle class may not be poorer in absolute terms, but in relative terms, compared to the wealthiest people, the poor and the middle class have gotten poorer. That stagnation feels like people are falling behind by comparison to the top 20%, the top 10% than the top 1% who have made so much more money over the last several decades. So staying in place feels like falling behind if other people are getting so much further ahead.

[00:10:46]>> All this doesn't just stay in our heads, it reaches into our bodies as well.

[00:10:50]>> Inequality does a few different things to the way that uh both our minds and our bodies respond. One is that it makes us focused on the short term. It makes us impulsive, focused on the here and now. Uh and it makes us uh more willing to seek out risks and engage in high-risk, highreward sort of gambling behaviors. It also affects our bodies in ways that are similar to physical threats. So the social threat of feeling lower on the status ladder than somebody else provokes very similar reactions physiologically to a physical stressor.

[00:11:31]So we react as if we were about to be physically attacked. We react with stress responses as if we were about to face a literal physical challenge. And the total of all of those effects uh adds up to feeling that we're constantly in crisis. Several decades ago, researchers conducted a study that gave volunteers in the United States a choice. They presented two pie charts showing how wealth is divided in a country. In the first, the wealthiest 20% own about a third of the total wealth and the poorest 20% own about 10%. In the second, the top 20% own 84% of the wealth and the bottom 20% own 0.1% of the wealth. The charts were not labeled, no country names. Which country did the volunteers say they wanted to live in? 92% of Americans chose the first option. That chart described Sweden. The second described the United States. The survey found this preference held up across political lines. Of those who had voted in the last presidential election, 90% of the people who voted Republican and 94% of those who voted Democrat chose the more equal distribution. So, if nearly everyone agrees on what kind of society they'd prefer to live in, why doesn't that preference show up in reality? Keat says it has to do with labels.

[00:12:56]>> Well, the important thing in that study was that the charts demonstrating those different levels of inequality were not labeled, right? And so, if you were to add the labels that this is the United States and that Sweden, now people would start sorting themselves out um and choosing the United States or Sweden based on their beliefs. This finding speaks to a famous thought experiment by the philosopher John Ross. If you don't know where you're going to be born, whether you're going to be born in a rich country or a poor country, male or female, white or brown or black, would you prefer a world that was more equal than the one we have now? Nearly everyone says yes. You would prefer to be born into an equal world so you don't end up being one of the hundreds of millions living in terrible poverty. So if everyone would choose such a world, why don't we live in such a world? Well, you're not operating under what John Braws would call a veil of ignorance.

[00:13:55]You know how much you have and you preferentially reserve your anger for folks who are better off than you are.

[00:14:02]>> [music] >> Keith says, "There is another reason we might want to challenge the growing inequality in our societies. It doesn't have to do with justice or fairness. It has to do with outcomes."

[00:14:13]>> Well, if you look at teams, whether it's uh baseball or basketball, that have extreme levels of inequality, which are driven by paying superstars astronomical salaries, they don't outperform other teams that have more equality. And that's counterintuitive. If you think that paying the superstars huge salaries means that they're going to, you know, work harder and perform better, you would expect uh better scores and more wins. But in fact, in team sports like that, higher levels of inequality and extreme pay for the superstars is associated with poorer performance in subsequent seasons.

[00:14:54]>> In team sports where coordination matters, extreme pay gaps hurt performance. The resentment and erosion of trust that other players experience come at a cost to the whole team. Keith points out an important wrinkle though.

[00:15:10]That's >> right. The team coordination seems to be a critical factor here. So extreme disparities like that overall tend to be destructive to teamwork and cooperation.

[00:15:19]So in team sports that interferes with overall performance. Although in other kinds of sports like golf or NASCAR racing where it's just the individual performing their best there higher stakes, larger pay uh do seem to uh incentivize better performance for the individual.

[00:15:37]>> When you're competing alone, higher rewards can push you to perform better.

[00:15:41]When you depend on other people, unequal rewards can tear your group apart. One of the lessons of this research is that we can all stand to be more deliberate in where we choose to direct our gaze.

[00:15:53]Yes, by all means compare yourself to people who are better off than you are and raise questions about fairness, but also spare a moment to the people who are worse off than you are and think about fairness then too.

[00:16:06]>> We can be more strategic in making upward versus downward social comparisons. We talked earlier about how people tend to by default make upward social comparisons to those who have more than them. But we can strategically make downward social comparisons also.

[00:16:22]Right? So instead of just thinking about what other people have who have more than us, we can remind ourselves that uh there are a lot of people around who have less than us. From a purely individual perspective, [music] Keith says that upward and downward comparisons have different psychological effects on us. We can mindfully choose which effects we need in particular situations.

[00:16:44]>> And upward and downward social comparisons have opposite consequences.

[00:16:48]Upward social comparisons, as I mentioned before, feel terrible, but they can be motivating. Downward social comparisons uh feel great and [music] yet they can be demotivating. So, it depends on what your goal is. Do you want to feel take a break from feeling stressed? Well, then uh do some downward social comparison. Do you want to feel motivated and energized to go out [music] and and do more? Do some upward social comparisons. So, neither one is is good in itself. It's just that we can be more mindful about the kinds of comparisons we're making on a daily basis. You may not like where you are on the ladder. You may not like how the ladder is constructed. But now you have a better sense of how your [music] place on the ladder affects your motivation, your view of others, even how you vote.

[00:17:39]If you want to learn more about how your mind works, check out the Hidden Brain audio podcast. Every week, we bring you new updates about the science of the mind. The experts we feature are scholars at the top universities in the world. Please tune in and tell your friends about it. You can find us on Apple, Spotify, [music] or at hiddenbrain.org.

[00:18:01]I'm Shankar Vantam. See you soon.