My last post dealt with the richest man in the World, and the fact that to qualify as being ultra-rich one would “only” need a net worth of $30 million: a tiny fraction of Jeff Bezos’ $200 billion fortune. We live in a World where millions of people still live in extreme poverty, with limited access to the very basics of existence. In the UK, one of the wealthiest countries on Earth, an increasing number of families rely on food banks. Even those who have work in this country often have no savings and, as the current pandemic has shown, are one pay cheque away from financial disaster. At the other end of the scale, globally there is an increasing number of millionaires, billionaires, and indeed centibillionaires! What must it be like to go through life never having to worry about how to put food on the table, how the bills are going to be paid, and how you are going to set aside enough money for your retirement (if you live that long)?
Psychological Characteristics of the Ultra-rich
In 2015 a psychologist called Bradley Klontz conducted a survey of 1,096 Americans who earned at least $370,000 per year and/or had a net worth of at least $2.5 million. These people would almost certainly not qualify as ultra-rich by the definition above, but Klontz described them as ultra-wealthy. He found that they shared several psychological characteristics that separated them from what he described as the “mass affluent”. The study had its limitations, but the main findings in the ultra-wealthy were as follows:
(1) they were less likely to believe that money is a corrupting influence, that rich people are greedy or get rich by taking advantage of others, or that they do not deserve money.
(2) they have a higher “internal locus on control” IE they are less likely to feel helpless in dealing with life’s challenges, and have stronger beliefs in their abilities to solve problems and achieve goals.
(3) they were more likely to attribute their success to both a fundamental drive to increase their wealth and follow their passions.
(4) they were more likely to believe that net worth and self-worth were intertwined, that money follows good works and gives life meaning.
(5) they were less likely to sabotage their own success IE they were less likely to overspend or gamble compulsively, less likely to hoard possessions, or to have difficulty sticking to a budget.
(6) they were more likely to have confidence in their investing abilities but, interestingly, they were more likely to report making one or more major investing mistakes!
(7) they scored higher on the belief that money should be saved and not spent, and they were more likely to be anxious about not having enough money!
More on the Ultra-rich, and their problems (Yes, they do have some)…
Bradley Klontz also wrote an article on the New York Times website in 2017 about what it was like to treat the ultra-wealthy. He was asked what he thought the main difference was from the “mass affluent”. He replied that these people have the belief that the rules don’t apply to them. If they are told something cannot be done a certain way, they will find a way round it. This innovative thinking was key to their success.
When asked what motivates them to keep working, Klontz replied that status was a big part of it. They are intensely competitive, and want to win. The money was a side effect of winning, not their main motivator. I suppose in the case of Bezos, having the title The Richest Man in the World must be a massive ego boost!
Klontz claims that the biggest misconception that people have about the ultra-wealthy is that they are greedy and corrupted by their wealth. He says that most of them want to do something constructive with their money. Apparently, “billionaires, like everyone else, want to be loved, find purpose and feel safe.”.
The psychologist was asked “When billionaires come to you, what are they concerned about?”. Apparently, their problems include:
(1) They don’t want their children to be adversely psychologically affected by their money, either by becoming financially dependent or financially irresponsible.
(2) If the rich individual is “first generation ultra-wealthy”, the success may have come from working long hours and neglecting family duties in the past. Guilt over this can lead to problems.
(3) If the rich person has inherited their money, they may struggle to have meaning and purpose in their life.
(4) The ultra-wealthy may question their self-worth over and above their wealth. They may wonder if people only appear to care about them for financial reasons.
So why are they not satisfied?
Finally, there is an interesting article from 2018 on The Atlantic website entitled “The Reason Many Ultrarich People Aren’t Satisfied With Their Wealth”. This piece includes evidence from several experts, one of whom is Michael Norton from Harvard Business School. He has studied the connections between happiness and wealth, and says that in determining whether they are satisfied with an aspect of their life people tend to ask two questions:
(1) Am I doing better than I was before?
(2) Am I doing better than other people?
As many attributes which one might consider are difficult to measure, there is a tendency to turn to factors that are easy to measure, one of the best of which is money or things related it, like property, or possessions.
Unfortunately, this urge to compare with the past or others doesn’t go away as wealth increases. Norton studied 2,000 people with a net worth of at least $1 million (much more in many cases). He initially asked them how happy they were on a scale of 1-10. He then asked how much more money they would need to get to 10. No matter how much money these people had, they basically said they would need 2-3 times as much to be perfectly happy!
Another expert, Jeffrey Winters, found that really wealthy people are often motivated to acquire more money by the thrill that comes from multiplying one’s fortune by making investments, buying up businesses, etc. He found that every billionaire that he spoke to was extremely excited by the idea of making incremental increases to their wealth.
Brooke Harrington, from Copenhagen Business School, found that many ultra-rich people are constantly asking themselves “Do I have as much or more than these people I’m comparing myself with?”. They feel the urge to buy more and better things primarily to maintain their status.
The final section of the article recounts the experience of the novelist Gary Shteyngart, who conducted interviews with many of the ultra-rich as research for a book. He found them incredibly competitive in every aspect of their lives. This competitiveness even extended to charitable donations (see my next blog post on philanthropy). Despite their obscene wealth (which was envied by many), he found a lot of them were never content, and he was glad when his book research ended because he found it quite depressing!
There is an old saying that “Money can’t buy happiness”. However, for “ordinary people” this is almost certainly not true: after community and social relationships, the positive association between income and wellbeing is one of the most robust in the happiness literature. The ultra-rich, however, appear to be a breed apart. For many, no matter how rich they are it is not enough to make them truly happy. Perhaps we should pity rather than envy them?