Memory and Happiness

Posted by DJL on Jun 13, 2012 in Money | 0 comments

Daniel Kahneman is one of the world’s most celebrated psychologists. Author of numerous books including Thinking, Fast and Slow, he was awarded the Nobel Prize in Economics for transforming our understanding of our habits and decisions, including our economic and consumer habits and decisions.

In this TEDTalk, Kahneman sheds some light on the question I asked yesterday: if we know that money doesn’t make us happy, why do we act as if it does? Part of the answer, Kahneman suggests, is that we each actually have two selves inside of us: 1) an “experiential” self, one who is actually experiencing pain or pleasure, happiness or sadness, in the moment; and 2) a “remembered” self, the self that is reflecting up and remember our experience so as to present it back to ourselves. Of these two, the remembered self is far more influential because it bears the weight of our collected experience – whether or not it is a true account of our experiences or not. (That is, we often remember things quite differently than we originally experienced them.)

In this presentation, Kahneman uncovers what he calls several “cognitive traps,” or ways we fool ourselves. At the heart of these is the difference between how we actually experience life in the moment and how we remember or feel about our life. Along the way he explores how the experiential and remembered selves influence every element of our lives, including our beliefs and expectations about what will make us happy and how those expectations shape our decisions.

It’s only at the end of the presentation that he explore directly the issue of money, citing a huge Gallup poll that indicates that in the  United States once you have a household income of $60,000/yr. (I incorrectly put it at $40,000 yesterday), any additional income will not make you more happy (although the further you go below that number the more you can expect to be unhappy).

What I found particularly interesting is that if our expectations are set by inaccurate memories and persuasive stories about the importance of money, then it makes sense that we will often act in ways contrary to what we “know” because memory and story often operate at a level below conscious cognitive thought.

All in all, I found his presentation fascinating on several levels and hope you do, too.

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