The Economics of Happiness. What's Your Strategy? Life Needs to Have a Triple Bottom Line. B-School Is the Perfect Place for That Experiment

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by: Idris Mootee

I turn 50 today so it is a good time to think about important things. How about happiness? My office is full of happy (also creative and smart) people and sometimes I don’t know why they are happy. Whether it is natural or some medical reaction, happiness spreads quickly. Happiness is a culture. Purpose drives happiness. Purpose brings people together. When a group people collectively sees the same thing that they hate to see happening, that creates a purpose. My happiness also comes from seeing them exciting about their work.

My extensive grad education didn’t quite really equipped me to deal with this subject. Honestly I don’t think about this at all. I can’t think of any school (not just b-school or d-school) teaches anything that is close. Happiness doesn’t have a place in capital asset pricing models or organizational theories in B-school. But at business schools on both sides of the Atlantic, professors are now increasingly studying and teaching about an intangible they say is nonetheless a key part of the modern bottom line — happiness. May be in a few years, you can have an elective called ‘sustaining happiness’ in your second year MBA course.

Economists, psychologists, sociologists, philosophers (and monks) all others have been trying to figure out the relationship between wealth and emotional wellbeing have now found a home in business schools in the US. and UK. They say the schools, more interdisciplinary and open-minded than many other parts of academe, are the perfect place to examine that connection. B-schools is the place to test the relationships between money and happiness, better than in Louis Vuitton stores I supposed.

Michael Norton, a psychologist and marketing prof at Harvard Business School thinks there are good economic reasons to try to understand what causes happiness. "It’s not just pie in the sky, [that] it’s nice for people to be happy," he says. "It trickles down into their actual behavior within an economy," having an impact on consumer confidence and even decisions like whether to vote. "It’s not separate from the other things people have cared about in trying to say whether a country is doing well or poorly."

His experience with Elizabeth Dunn and Lara Aknin of the University of British Columbia that people given money and told to use it for someone else’s benefit were happier when contacted later the same day than subjects who bought something for themselves. Those who splurged on a friend felt even better than those who gave the money to charity, probably because generosity within a relationship strengthens a social bond. Mr. Norton says that because business schools bring together economists, sociologists, psychologists and others, they are a natural place to do happiness research.

At Ashridge Business School outside London, Stefan Wills, director of the advanced management program, believes happy people make more effective leaders and says they must bring those positive emotions to the workplace if they are to succeed as managers. But this is a no brainer.

What’s the definition of wealth? If one needs are modest and his habits frugal, then so long as his resources provide enough to meet both, he is rich. But the man is poor who, despite owning millions, restlessly yearns for more because he feels he cannot have enough, and in particular who lacks the things money cannot buy (this is the truck) – ah yes, those unpurchasable treasures contribute more to happiness to those purchasesable. Sometimes they are connected. But love and friendship and purposes are really the core foundation of any true happiness.

Most researchers’ work on happiness focuses on the Easterlin Paradox, set out by economist Richard Easterlin in 1974. What is this paradox? It is the juxtaposition of three observations: 1) Within a society, rich people tend to be much happier than poor people. 2) But, rich societies tend not to be happier than poor societies (or not by much). 3) As countries get richer, they do not get happier. Easterlin offered an appealing resolution to his paradox, arguing that only relative income matters to happiness. Other explanations suggest a “hedonic treadmill,” in which we must keep consuming more just to stay at the same level of happiness. That’s what America is like today, the need to consume more becomes the purpose for many.

His ideas are often challenged and should be so. Two economists from the Wharton School, Stevenson and Wolfers, argued in that the more voluminous international happiness data now available contradict Easterlin’s conclusions, showing countries do in fact get happier as they get richer. I guess the answer is simple “it depends”.

I guess the question we should be asking is ‘Does quality increase with quantity?” Once our physiological needs are met, can more money bring more happiness? If we are already "satisfied," why do we consume more? Can we possibly become "more satisfied?" It is an easy question to ask if someone can only be happy to some extend if he or she works 2 jobs to provide for the family. They can be happy but can be happier if they have the means to provide a high quality living. While individual consumers may not have an economic measure of satisfaction, Economists do have one for consumers: We called it utility. In economics, total utility is essentially the "sum of satisfaction or benefit that an individual gains from consuming a given amount of goods or services…" 

There is, of course, a certain level of consumption at which we become "satisfied" and our desire to consume more begins to diminish. When you have a dozen of Louis Vuitton bags, does buying a new one gives you the thrill? I guess the happiness is marginal. But if you have saved up for 6 months for that bag, that is probably a lot of joy.

Accordingly, the price you are willing to pay for more of the product or service also diminishes. This summarizes the Law of Diminishing Marginal Utility. I can talk on and on this from a luxury brand marketing context non stop for days. In my luxury brand marketing seminar, I talked about how the function of symbolic meanings of luxury products operate in two directions, outward in constructing the social world–social-symbolism–and inward towards constructing our self-identity: self-symbolism. In other words, using products to help us become our “possible selves”. 

Advertising often provides gratification and recodes a commodity as a desirable psycho-ideological sign. In fact, it feeds the desire to sometimes the unobtainable. Advertising feeds the desire to achieve the often unobtainable unity of the self with destabilized meanings, images that separate commodities from their original intended use and offer the opportunity to reconstruct a self by purchasing meanings in a Do-it-yourself fashion. Desire exists in the gap between visual / languages and the unconscious. Desire does not desire satisfaction. To the contrary desire desires desire. As you would imagine, the law of diminishing marginal utility also translates to our inability to predict our happiness, especially when it comes to money.

Matthieu Ricard (renowned Buddhist monk, author, and scientist Ph.D. Biochemistry) believes happiness is a skill. Most people exist like beggars, "unaware of the treasure buried beneath their shack". We can develop our potential as if "polishing a nugget" and eventually achieve happiness, "like a bird soaring into the sky when his cage is opened". What he was describing is a lull; a calm in the storm. You have to identify what it is in that situation that makes you happy. It’s as though you’re making a journey, and you look in your rucksack to find it half filled with provisions, half with stones. You need to take out the stones and put in more provisions. Read his book “Happiness’. A good read.

Pls share your thoughts. And thanks for all your birthday greetings that comes in as email or in facebook. Happy weekend!

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