Impact Investing: Altruism in business

Wealth won’t make you happy: giving it away might

If you identify money as one of the main happiness factors in your life, you’re not alone – and you’re not wrong. It does lead to satisfaction, but this cycle (un)fortunately has a pretty specific ending. One study for all: psychologists from Purdue University and the University of Virginia looked at data from 1.7 million people in 164 countries. The estimate for an ideal income for an individual was $95,000 a year for life satisfaction and $60,000 to $75,000 a year for emotional well-being. 

That means that after you satisfy your optimal needs and live a comfortable life, bigger paychecks no longer correlate with an increase in your well-being. Researchers suggest it might be the opposite – especially if you’ve become accustomed to the “high” that comes with money and you still crave it, or your goals just become much higher.

When we plan the future, setting a fiscal goal may not lead to the happiness we envision. Real talk: while we have never been wealthier, happiness levels have remained steady, especially in developed countries. If amassing wealth can’t bring that serotonin boost, how should you treat your money?

When money can buy happiness

There is a way to spend money and see your happiness grow as a direct – yet short-term – result. Professor of psychology Elizabeth Dunn and Chris Courtney, VP of Science at Happy Money, conducted several surveys about spending habits and satisfaction. Their findings show that three areas are worth the money.

  1. Experiences: their research suggested that trips, concerts, or special meals contribute to happiness much more than material things
  2. Time: Investing in a cleaning service or grocery delivery costs a little extra, but it seems that it’s well worth it if it gives us more time. This was true even for those respondents who make less than $40,000 per year.
  3. Investing in others: Even those struggling with money feel better when they spend on others – it could cost you as little as $5 to be happier, as one of the studies demonstrates.

Treat someone else: prosocial spending

“There’s lots of research showing that spending our time and money on other people can often make us happier than spending that same time or money on ourselves. Taking time to do something nice for someone else is a powerful strategy for improving our well-being,” said Laurie Santos, a psychology professor at Yale University for NBC.

A comprehensive World Happiness Report mentions several smaller studies that point to the same result: the little generosity acts make a huge difference. 46 Canadian students were randomly assigned to spend a five or twenty-dollar windfall on themselves or others by the end of the day. In the evening, all students were called on the phone to report their happiness levels. Individuals randomly assigned to spend money on others reported significantly higher levels of happiness. A more extensive study followed to confirm the results, and another research showed that the same applies even in societies that are not touched by Western culture. 

An experiment took place in Vanuatu, “where villagers live in huts made from local materials, survive on subsistence farming, and have no running water or electricity.” The World Happiness Report states that the study allowed villagers to earn money they could use to buy precious packaged candy. No matter how rare this opportunity was for them, they still reported greater happiness when purchasing goodies for others rather than themselves.

For this effect to occur, the good deed mustn’t be forced – it has to happen voluntarily, in a manner that any given person wants. It’s also important to see how our help makes a difference, and feeling connected to the person we’re helping is also an essential factor. 

Altruism in business: impact investing

Investors think in terms of profit, but sometimes, the only priority isn’t necessarily monetary success. The target can be a measurable, positive social or environmental impact. World’s richest are heavily involved in the efforts to direct money where it can make a difference – back in 2018, Forbes rounded up the 24 world’s billionaires leading the way. Bill & Melinda Gates Foundation takes the top spot, one of the recent initiatives being $250 million committed to COVID-19 vaccine development and distribution. 

While the charitable distribution of wealth isn’t a new concept by far, the ideas around impact investing are surely making waves. Investment funds and venture philanthropists help build a more responsible, better future – according to Investopedia, impact investing is experiencing explosive growth, with assets in the sector predicted to hit as high as $3 trillion.

“As a venture philanthropist, you are selecting not-for-profit organizations with similar rigor, the impact, or potential impact that an organization has as a metric of its performance,” explains Julia Reed, Managing Director, Relationship Management with Schwab Charitable, for Stanford Social Innovation Review

How does this tie to individual happiness? According to Warren Buffett, quite significantly. “Were we to use more than 1% of my claim checks (Berkshire Hathaway stock certificates) on ourselves, neither our happiness nor our well-being would be enhanced. In contrast, that remaining 99% can have a huge effect on the health and welfare of others,” he concluded. With Melinda and Bill Gates, he founded The Giving Pledge, a commitment by the world’s wealthiest individuals and families to dedicate the majority of their wealth to giving back. 

When charity becomes hard work

Ironically, many of them are making money so fast that it’s becoming impossible to give it away as promised. Sounds like “rich people problems”? Well, that’s because they really are. As Avery Fontaine, head of Strategic Philanthropy for BNY Mellon Wealth Management, explained for MarketWatch, giving away money well is hard work, and many high-profile people try to remain as anonymous as possible when choosing where to contribute. “It’s not that they’re up to anything; they just want the opportunity to fail and learn and grow without a lot of scrutiny,” she said. 

Remember? More money certainly doesn’t equal fewer problems and doesn’t automatically result in happiness. Enjoy giving it away: especially if it’s as simple as giving someone a small gift or supporting a charitable cause with your ten bucks. 

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