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Dear Dan,

I have worked very hard for most of my life, and I am getting to feel more secure and comfortable. But I don’t feel as happy as I expected, given all my achievements and financial success. I am not one of those hippies who think that money is not important, but it feels like something is missing. What am I doing wrong?

—Matt

Don’t worry. The fact that your financial achievements have not brought you contentment does not mean that you’re a hippie. Social scientists have long been troubled by the finding that people basically think money will bring them happiness but it does so less than they expect.

There are two possibilities: First, that money cannot buy happiness. Second, that money can buy some happiness, but people just don’t know how to use it that way. The good news is that this seems to be the correct answer.

In their fascinating book “Happy Money: The Science of Smarter Spending,” Elizabeth Dunn and Michael Norton say there are two ways to get more happiness out of our money. The first is to buy less stuff and more experiences. We buy a sofa instead of a ski trip, not taking into account that we will get used to the sofa very quickly and that it will stop being a source of happiness, while the vacation will likely stay in our minds for a long time.

Second, and more interesting, Drs. Dunn and Norton demonstrate that we just don’t give enough money away. Which of these would make you happier: buying a cup of fancy coffee for yourself, buying one for a stranger, or buying one for a good friend? Buying a cup of coffee for yourself is the worst. Buying for a stranger will linger in your mind and make you happier for a longer time, and buying for a friend is the best—it would also increase your social connection, friendship and long-run happiness.

So money can buy happiness—if we use it right.

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Dear Dan,

I’m going to an out-of-town concert next month with friends and, as usual, I ended up organizing everything, booking a hotel room and fronting the money. When I’ve done this with groups in the past, I always end up spending the most on shared expenses, because they are never divided up evenly.

Perhaps I’m afraid to ask for large amounts of money, even though these are the true expenses that should be shared by everybody. What can I do to make sure that the bill for this upcoming show is split fairly?

—Scott

This is a question, in part, of how much you care about splitting the expenses evenly and how much responsibility you’re willing to take to improve the situation. I assume you’re willing to take this responsibility, so I suggest that you collect money from everyone in advance and pay all bills from this pool of money (and add 20% just in case, because we often don’t take all contingencies into account).

This way, everyone will pay the same amount, and bill-splitting will never come up. If there’s extra money, keep it for next year, or buy everyone a small gift to better remember the vacation.

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Dear Dan,

I have sometimes found myself walking behind a woman at night in an unsafe place and going in the same direction. Even though there is some distance between us, I can feel the doubt and worry in her mind. How do I handle this situation? Should I stop or say something? I have places to be, too, but clearly I don’t want the woman to feel unsafe.

—Steve

Simply pick up your cell phone and call your mother. In the world of suspicion, nobody who calls his mother at night could be considered a negative individual.

See the original article in the Wall Street Journal here.

In the mean time, here’s an Arming the Donkeys interview I had with Mike on this very topic.

Enjoy, and Happy Reading!

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Dear Dan,

My parents are about to put their house on the market in Scotland, where there’s a system of setting an asking price and having interested parties make sealed bids. Any advice on how to get the highest sale price?

—Moses 

In auctions there are usually two forces: what people think the starting price of a house should be and how intense the competition gets between the bidders over time. Establishing a starting price for the bidding, it turns out, has an opposite effect on these forces.

If you set a high starting price, there’s a good chance that people will start thinking about the house from that point and offer a higher bid. On the other hand, if you set a low starting price, more people will get into the auction, the competition will be fiercer—and the outcome is likely to be a higher final price. (By the way, have you noticed that in auctions—on eBay, for example—the person who pays for the item at the end of the auction is called “the winner”? This suggests that competition is indeed a very strong driver.)

So if you have a sealed-bid auction in which people can submit a bid only once, go with a high starting price. But if there are multiple rounds of bidding, think of the starting price as a lure for getting many bidders involved at the get-go.

Last week I met with a friend in San Francisco (let’s call him JC) who is house-hunting. He said that the houses he has bid for sold for about 30% to 40% more than the asking prices. The competition has been intense, the process very frustrating, which brings me to a final point: A bidding frenzy might be good for a seller, but since we are all going to be buyers and sellers at some point, it’s not clear that the overall market for housing is better off with this procedure.

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Dear Dan,

I am a longtime Netflix customer. Recently, Netflix removed about 1,800 movies from its service, while adding a few very good ones. I know I probably never would have watched those 1,800 movies, but I am upset and am seriously considering leaving Netflix. Why do I feel this way?

—Kristine

As a movie man myself, I appreciate your perspective. The basic principle at work here is loss aversion: the idea that losing something has a stronger emotional impact than gaining something of the same value. Even though the deleted movies were probably not that great and the current library of Netflix may be, objectively, much better, having movies taken away from you feels like a painful loss.

One way to think about this is to contrast new and old Netflix users. A new one would just look at the overall quality of the movie collection, which may be better than it used to be. For the old user, however, the current collection is just one part of the experience, while the loss of all those movies is another. As a result, the longtime member may be much less happy.

My suggestion is for you to try thinking about Netflix as a service that provides you not with particular movies but with an optimal, curated variety of films. Compare it to a museum: We don’t think of ourselves as owning any of the art, so we aren’t upset when it changes what’s on view from its collection. If you can reframe your perspective this way, my guess is that you will enjoy Netflix more.

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Dear Dan,

A friend once chided me for laughing at my own joke. Is it wrong to laugh at your own jokes? After all, would I tell a joke that I didn’t think was funny?

—Norma 

Jokes often hinge on a surprise ending, so laughing at a joke though you know the end seems to be a great endorsement for it (please send me the joke!). The only negative connotation I can imagine is that maybe your friend assumed the laughter was not genuine and you were trying to manipulate her into a higher level of enjoyment. In that case, you might want to look for a different friend.

See the original article in the Wall Street Journal here.

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Dear Dan,

My partner and I live in a pretty 250-townhouse condo development, but we have a problem with people who don’t clean up after their dogs. Some are residents of our condo, but others are just passing through. Our condo fees pay someone big bucks to clean up after the dogs, and there’s a $50 fine when owners fail to clean up after their dogs. But you have to know who the dog owner is, catch him in the act, and report him to the condo corporation. This policy is not working. What can we do? 

—Rachelle

We need to consider two forces in this situation: the positive force of social norms and the negative force of deterrence.

In terms of social norms, a great deal of research shows that what people do is less a function of what’s legal than of what they find socially acceptable. So if dog owners see a lot of droppings around the condo area, they will find it perfectly acceptable to continue in this tradition, but they would feel guilty leaving some doggy souvenirs behind if the grounds were pristine. So what is the lesson from social norms? For one, it means that violators are not only acting selfishly but are also making it more likely that others will follow. It also means that you should work extra hard to establish a better social norm—because once the social norm is set to clean up after the dogs, the good behavior will maintain itself.

In terms of deterrence, you can’t do much about outsiders, but I think you should try something more exotic with your condo neighbors. The way I see it, in the current “game” the dog owners try to hide the droppings, and the managers try to catch and punish the owners. I would try to alter the game so that it’s among the condo dog owners.

What if the condo management put money in a community fund to pay for a droppings-cleaner, as needed, and used whatever was left at the end of the month for a get-together for all dog owners and their dogs? If lots of money remained each month, the party would include food, drinks and doggy treats; if there was no money, it would just be water. This way, failing to clean up after the dogs would damage the community—the personal and social cost of these actions would increase—and people would be more careful.

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Dear Dan,

My friend recently started working at a consultancy. We’d both heard about the brutally long working hours, but what surprised us was how people prized the number of hours they clocked, even when this went up to a ridiculous 16 hours a day. In this age when people are almost forced to have varied interests to define themselves, why would the consultants be shouting their boring lifestyles from the rooftops?

—Tushna

This kind of behavior might seem odd, but there are a few ways to reason about it. First, I suspect that in the world of consulting it is hard to estimate directly how good any particular individual is. If you worked in such a place, you would want your managers to know how good you are—but if they couldn’t directly see your quality, what would you do? Working many hours and telling everyone about it might be the best way to give your employer a sense of your commitment—which they might even confuse with your quality.

This is a general tendency. Every time we can’t evaluate the real thing we are interested in, we find something easy to evaluate and make an inference based on it. I often hear people complain, for example, about the cleanliness of airplane bathrooms. The reality is that we don’t really care about the bathrooms—what we should all care about is the functioning of the engines. But engines are hard to evaluate, so we focus on the bathrooms. Maybe people reason that if the airline is taking care of the bathrooms, it is probably taking care of the engines a well.

Another possibility: Your friend could be using the long working ours to keep score in some competition with his friends at work. This may not be the smartest contest, but people are highly motivated to win in almost every aspect of life—just look at the range of dares and ridiculous competitions on TV. From this perspective, maybe this is not the worst sort of competition for your friend to get into.

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Dear Dan,

In your last column you gave advice about the need to experience other people’s kids in order to decide if you should or should not have kids of your own. Does that advice hold for deciding if I should or should not marry my current girlfriend? 

—Nick

In general, it is advisable to carry out experiments in a way that matches as much as possible the circumstances that you want to understand (in this case, how it would feel to be with this person for decades to come), so I would recommend spending two weeks with your girlfriend’s mother.

See the original article in the Wall Street Journal here.

We spoke with Dan Ariely, professor of psychology and behavioral economics at Duke University in Durham, North Carolina. He says that many people have difficulty saving their income because our minds and our environments are not naturally suited to thinking about money in the long term. In fact, our minds are not very good at thinking about the concept of money at all. To make it easier, he says, we need to change our environments in such a way that saving money happens automatically and we never even have to think about it.

¹“According to Deloitte’s Retirement Survey, a majority of Americans — 58 percent — do not have a formal retirement savings and income plan in place.”

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Dear Dan,

I don’t care about cars, never have. But I’m a sales executive, and people tell me I should own a nice car (BMW, Mercedes, etc.) to enhance my credibility to both my customers and sales team. I can afford either but would rather save the cash and buy a Honda. Does it matter? 

—Cody 

The topic here is signaling. The large and colorful tail of the male peacock tells the female peacock about his strength and virility (if I can run around carrying this large and difficult tail, just imagine how strong I am). In the same way, we humans are concerned with the signals we send the people around us about who we are. Signaling is part of the reason we buy large homes, dress up in designer clothes and buy particular cars. So the answer to your question is yes. The car that you drive communicates something about you to the world. Does it matter? Yes again, because we are constantly reading these signals and making inferences about the senders.

But some questions remain. What kind of signal do you want to send? The BMW signal or the Prius signal? Maybe the signal that you buy American-made? Maybe you want to get a really old car and show people that you take really good care of it (a more subtle signal, but an interesting one). Another question is whether the cost of the signal (the cost of the car) is worth its signaling value. This depends on the nature of the people you deal with, how well they know you, how often you make first impressions, etc.

In the interest of full disclosure, I should say that I drive a minivan—but now that I am thinking about it, maybe I should go and stick a Porsche logo on it.

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Dear Dan,

My wife and I are in our late 30s, and we are debating whether or not to have kids. Any advice?

—Henry

The decision on whether or not to have kids is very complex. It depends on many factors, including your financial situation, your preferences and your relationship with your significant other. So, sadly, I can’t provide any direct answer to your question. Obviously, though, this is one of the most important decisions you will ever make—and given its magnitude, you should spend a substantial amount of time trying to get to the bottom of it.

The question about having kids, like many other questions, is all about what you might get from this experience and what you might have to give up. The problem is that before you have kids, it is hard to estimate both the benefits and the costs. So what should you do? You need to try to simulate the kid-experience in order to have a better understanding of what it means and how it would fit you.

For example, why don’t you move in for a week with some of your friends who have kids and observe them up close? Next, why don’t you offer to take care of some other friends’ kids for a week? Then try to expand this exercise and take care of kids of different age groups (don’t skip very young kids and teenagers). After 10 weeks of this experiment, you should be in a much better position to figure out if this is for you or not.

If this exercise seems too daunting for you, you probably fall into one of two categories: 1) You’re not really interested in an empirical answer to this question. Perhaps you’ve already made up your mind, and you’re not yet ready to admit it. 2) You’re too lazy to put the effort into figuring this out. And if that is the case, you probably should not have kids.

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Dear Dan,

I hate tax day. Is there any way to make it more pleasant?

—James

When I first starting filling out the 1040EZ form, I loved tax day. It was a day when I got to think about how much money I made, how much I gave the government (another way to think about it is to think about how much the government takes, but I prefer my framing), and what benefits I got in return from the federal and state governments.

Over the years my taxes have become more complex, and my annoyance with the complexity and ambiguity makes it harder for me to focus on taxes as part of my role and duty as a citizen of this amazing country.

So what can we do to make tax day better? The word mitzva in Hebrew means both a duty and a privilege, and one thing I try to do (not always successfully) is to think about taxes as a mitzva.

I also think that the tax code has to change if we are to experience this day as a day of citizenship and not just annoyance. The tax code needs to be much simpler, and taxes need to be more equitable. Finally, there are some nice experimental results showing that if you ask people to take an active role and vote on where a small part of their taxes goes (education, infrastructure, military, health, etc.), this improves their attitude toward taxes.

Happy mitzva day.

See the original article in the Wall Street Journal here.

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Dear Dan,

I am writing to you from a train in Germany, sitting on the floor. The train is crowded, and all the seats are taken. However, there is a special class of “comfort customers” who can make those already seated give up their seats. This status is given to those (like me) who travel a lot on the train. It would be nice to get a seat and, according to the rules, I deserve one. But I can’t see myself asking one of the “non-comfort customers” to give up his seat. Why is this so difficult for me?

—Frederick

Your question has to do with what we call the “identifiable victim effect.” The basic idea is that when we see one person in need, our hearts go out to them—we care and we help. But when the problem is very large or far away, or we don’t see the person who is suffering, we don’t care to the same degree—and we don’t help.

In your case, I suspect that if the train conductor were the one picking a random passenger to clear a seat for you—and especially if the conductor did it before you boarded the train—you would have been able to enjoy the seat. Taking this a step further, if you knew who that person was (for example, if the conductor pointed him or her out), you would have felt worse. Picking the person yourself is most likely the most difficult, because you would have no choice but to see the effect of your actions on the other person, as well as his or her reaction.

What’s the lesson here? It’s that direct contact with other people makes us care and act accordingly. And when the distance is great, or the actions are taken without our knowledge, we care much less. Now the question is how to get politicians, bankers, CEOs and everyone else to feel more directly the consequences of our actions on the well-being of others.

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Dear Dan,

I work for a government agency that is in the early stages of making telecommuting an option for its workforce. The idea is generating a lot of distrust among managers, and Yahoo, of course, just cracked down in this area. I know that managers are supposed to trust their workers, but it seems obvious that employees will work less from home. What is your take on working from home?

—Julisa

There are lots of possible reasons for the recent decision at Yahoo—some benevolent and some malevolent. Let me focus here on just two of them: work and attention. In terms of expected hours, those who work in an office are exposed to two different standards: the 40-hours-a-week official standard and the standard that is set by the people around them. We all know, for instance, that the social standard in the high-tech industry is much higher than the official 40 hours a week. In such cases, people who work in the office will conform to the social standard and work many more hours. For those who work from home, the 40-hour workweek is going to be a highly salient reference, and accordingly they are likely to adopt this as a reasonable commitment to work.

In terms of attention to the work, my own experience tells me that when people are together in the same room, they pay attention and focus on the task at hand with much of their cognitive capacity. But when people are at a remote site, participating via phone or video conferencing, they are not fully engaged and in many cases they even try (unsuccessfully) to multitask during important meetings.

My mother, by the way, always knows when I try to multitask while talking to her, so maybe Yahoo should hire her to monitor their online conferences and to reprimand those who aren’t focusing sufficiently.

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Dear Dan,

What is the best way to make sure Americans have sufficient funds for retirement?

—Ben

There are basically two ways to help people have enough money for retirement: getting them to save more and getting them to die younger. The easier one by far is getting people to die younger. How might you achieve this? By allowing the citizens to smoke, subsidizing sugary and fatty foods, and making it hard for them to get access to preventative health care. But, when you think about this, it seems like we’re already doing most of what we can on this front.

See the original article in the Wall Street Journal here.

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Irrationally Yours,

Dan

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