OSU professor Grant Donnelly surveyed 4,000 millionaires and found that money can buy happiness. But it takes a whole lot.
You've likely heard of the “happiness threshold” identified in a 2010 study by two Nobel Prize-winning scholars who found that while happiness increases with income, the effect wears off above $75,000 a year. But if you look a little deeper, the study's authors at Princeton University differentiated between day-to-day feelings of well-being and overall life satisfaction. It's a person's daily mood that flattens out at about $75,000 (or $87,000 in 2018 dollars).
Life satisfaction, as it turns out, continues to rise with added income.
How much can it rise? Grant Donnelly, now an assistant professor of marketing at OSU, set out to conduct his doctoral research on the wealthy while at Harvard Business School. Working with a team of researchers, Donnelly surveyed 4,000 high-net-worth individuals—those whose assets total $1 million or more. Their work was published in December 2017.
The report, “The Happiness of Millionaires,” uncovered a new life-satisfaction threshold: $8 million to $10 million. Looking at assets, rather than income, Donnelly and his colleagues found little change in life satisfaction between those with $1 million (the poorest included in the study) and those with $8 million or $10 million (the two numbers come from two sample groups). Above that level, the curve rose.
“Having more than $10 million makes you happier,” Donnelly concludes. His research did not turn up reasons for the flatness between $1 million and $10 million, but he thinks that social comparison plays a role.
“Once you get to the higher end of wealth your references start to change,” he says. “You're always looking at the person ahead of you rather than looking back at those below you.”
Above $10 million, perhaps, fewer comparisons are available.
Also intriguing was millionaires' perception of what it would take to make them happier. When those who rated their happiness at less than 10 on a 10-point scale were asked how much more money they would need to achieve a “perfect 10,” the most common answer was “1,000 percent more.”
That means if a person has $10 million, they would be happiest if they could get to $100 million. In other words, millionaires felt that to achieve perfect happiness they would have to increase their wealth tenfold.
Another significant finding, says Donnelly, was that millionaires are happier when their wealth is earned rather than attained through marriage or inheritance. It's an idea that is central to a campaign created by gazillionaires Bill Gates and Warren Buffett called The Giving Pledge: “a commitment by the world's wealthiest individuals and families to dedicate the majority of their wealth to giving back.” Nearly 200 have signed, including Mark Zuckerberg and Richard Branson.
Giving their billions to charity rather than to their offspring may be good for the world, says Donnelly, but it's also good for their kids. The signers “are probably making a smart choice for their families,” he says. “Everyone should have the opportunity to make their own wealth.”
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