It’s always nice to get advice from someone with more experience than you; it’s especially awesome when that person is a professor at one of the most prestigious universities in the world. Meet Michael Norton — he’s an associate professor of business administration in the marketing unit at Harvard Business School. Additionally, he’s also the co-author of “Happy Money: The Science of Smarter Spending.”
We recently had the pleasure of catching up with Professor Norton to discuss whether money can buy happiness, the secret to building user-friendly products, and to get his advice for business-minded millennials. Here are five important points we compiled from our conversation:
Money doesn’t buy happiness.
“… certainly, money can solve some problems for you. So if you have no money then maybe you don’t have a roof over your head or maybe you can’t provide for your family. In fact, if people are quite poor and they make more money, and they enter the middle class, money does in fact make people happier. It does when you’re worried about these very basic problems like food to eat and a roof over your head. Absolutely money can solve those problems and absolutely it will make you happier. The trick is though that pretty soon after you meet your basic needs, money doesn’t seem to make you that much happier. Yes, it’s nice to fly first class instead of economy, but it doesn’t really change the quality of your life overall in terms of how well you’re doing compared to what you wanted to do with your life. We just feel like it will, but the data shows it doesn’t really seem to make that much of a difference … If you use money wisely, you can be just fine. A lot of people, when they get a lot of money, they use it very very badly and it turns out to be counter productive.”
Pick a career based on personal fulfillment, not money.
“… of course one of the things we’re trying to maximize in our life is our earnings potential and our total earnings. But most people are trying to have a life that is happy in one way or another and if you’re taking a job where you work eighty hours a week, it might be a lot of money, but are you really having a life that makes you happy? Are you ever going to see your partner and your kids? If you’re not, it might not be the job that will make you happiest even if it’s the one that makes you the most money.”
Don’t skip college.
“If you look at the data across all Americans, there’s been no change over the last decade or two decades in the value of having a college degree in terms of your future earnings potential. So people with a college degree make more money than people without a college degree. Now that doesn’t necessarily mean that it’s the college degree that caused people to make more money. Maybe they have different skills or different interests than people who didn’t get a college degree.
We do have, it seems like millions of cases of people who dropped out of high school or dropped out of college and became very very successful, but in fact if you think about it there’s very few cases; they just tend to stand out because it’s so unusual. Many of the people who dropped out of college and universities are people who had a network that could help them in one way or another, whether they had parents who had a stable income and they can go live with them or even parents that might even invest in their first company. So often, without a kind of social network behind you it’s not clear these people wouldn’t have been as successful. But I think the jury’s out on what the exact value of higher education is. The data seems to suggest there’s still a lot of value there at least for sort of the average person.”
Your company will most likely NOT become successful overnight.
“Often, when we teach case method here, we have a company in mind that students talk about and it seems as though the company was successful overnight. I think a lot of entrepreneurs have this belief that in design [you can] create an app and sell it six weeks later for $1.7 billion. If you look at enterprises overtime, most of them take a long time and a lot of work. It’s true that there are some quick hits that have been very successful for people, but entrepreneurship is not kind of bouncing around and having you know ninety companies succeed in a row. It’s very often a lot of sweat equity and I think it’s something that’s missed not just on younger people but on entrepreneurs in general; that there is often a huge investment of time and effort and money in order for things to be really successful.”
Giving money away will make you happier.
“A lot of our research shows that you can get much more happiness out of money by giving it away than spending it on yourself. I don’t mean you have to give away a billion dollars, I mean you can give away five dollars and make yourself happier over the course of a day. Think about instead of getting yourself another expensive coffee, take that five dollars and buy coffee for someone else, give it to a street performer, donate it to charity- you’d get more happiness out of it literally the minute you do it.”
Check out Professor Norton’s book “Happy Money: The Science of Smarter Spending.”
Full interview on the next page.