At the dawn of the 20th century, the Astors were among America’s wealthiest families.
Their lives were filled with opulent homes, luxurious yachts, and eventually, the most extravagant cars. In his book “When the Astors Owned New York,” Justin Kaplan delves into the lives of this illustrious family.
Despite their incredible wealth and the ability to buy anything they wanted, the book reveals the profound unhappiness that often accompanied their riches. While most of us don’t possess Astor-level fortunes, we share a similar deep-seated belief. This belief has two facets:
First, we think that acquiring a larger or better [insert item here] will enhance our life satisfaction.
Second, we believe that the expensive possessions we already own bring us happiness.
However, regarding material possessions, our brains are notoriously bad at evaluating future and current happiness.
This insight comes from Nobel Prize-winning behavioural economist Daniel Kahneman, author of “Thinking, Fast and Slow.” Take, for example, John Jacob Astor IV, who built a luxurious mansion in New York City, known as the Astor Mansion. If asked before moving in if the new home would make him happier, he would undoubtedly have said, “Yes.” Upon completion, he would have been thrilled.
But behavioural psychologists tell us that we quickly adapt to what we own, a phenomenon known as hedonic adaptability.
Like a sugar rush, the initial high fades. In other words, that enormous mansion wouldn’t have significantly improved John Jacob Astor IV’s life.
Here’s the intriguing part: if asked a year later if he was happier in his new home compared to the old one, John Jacob Astor IV would likely respond, “Oh yes, I love it.” This response is typical, whether you’ve bought a new car, upgraded your kitchen, or acquired a boat or private jet.
For example, a study by the University of California, Los Angeles (UCLA) explored the happiness levels of individuals who upgraded to larger homes.
Participants initially reported high satisfaction with their new, spacious residences. However, surveys conducted a year later revealed that their happiness levels had returned to baseline, no different from those who hadn’t upgraded. This phenomenon demonstrated the fleeting nature of happiness derived from material upgrades.
Lead researcher Sonja Lyubomirsky explains:
“During the initial period after moving into a larger home, our attention is focused on the new space, and the novelty makes us feel better. This experience is real, visceral, and compelling. However, we miss one simple thing. Once we have lived in the home for a while, it no longer captures all of our attention, and other thoughts occupy our minds. When that happens, we would feel just as well living in our previous, smaller home.”
Traditional wisdom advises us to “defer gratification” to build wealth, suggesting we should avoid purchasing luxury items now to achieve greater happiness later. However, behavioural science indicates this may not be true. If material possessions rarely enhance our life satisfaction, then refraining from buying a fancy car, new boat, or remodelled bathroom doesn’t deprive us of pleasure.
Yet, this concept is a hard sell. Most people believe, “But I’m different. That doesn’t apply to me and my [insert item here].” John Jacob Astor IV likely thought the same. However, recognising this misguided bias can help us build wealth faster by saying “No” to “better things,” freeing up more money for investment.
While wealth accumulation itself doesn’t enhance life satisfaction, how we spend it can.
Behavioural research shows that donating to charities improves our health and happiness. Spending money on experiences, especially with loved ones, has a similar effect. As our Founder David mentions in his book “Wealth With Purpose,” a material item is likely to boost life satisfaction only if it regularly brings together friends and loved ones. Otherwise, it’s just a possession.
And in reality, we don’t own things; our things own us.
