I certainly acknowledge that money contributes to happiness, but I think it carries far less weight than most think. We’ve previously discussed the landmark 2010 study that found a pattern which has since been supported by other papers. This pattern is of money being closely tied to happiness up until somewhere between $75k and $100k in household income. Beyond that, an increase in income produces little to no increase in happiness (Figure 1).
Figure 1: Sentiments relating to happiness and quality of life seem to plateau around an annual income of $75,000 (Kahneman and Deaton, 2010).
There are plenty of anecdotes supporting this. I recently heard a podcast with Max Levchin, the founder of PayPal, where he told the story of his life as an entrepreneur. A Ukrainian immigrant to the United States, Levchin graduated from college and immediately dedicated himself to various business ventures. He was far from wealthy at the time, and worked around the clock on his companies. Nevertheless, he described this time as one of the happiest of his life.
Contrast this with a few years later, when PayPal was sold to eBay and his share became worth 34 million dollars. On paper, things only improved. However, the reality was that his life got much worse. Despite being able to afford anything he wanted, he explained that he felt aimless without a project to work on. This made him so miserable that his longtime girlfriend and now wife insisted on a temporary break-up until he found a new company to build.
Max Levchin’s story is just one of many illustrating the link between purpose and happiness. It’s quite common for someone’s quality of life to decline after retiring. This isn’t to say that being a workaholic is the key to happiness, but I do feel that it’s nearly impossible to be content without having some greater goal that you’re striving for. This doesn’t have to be work — it can be family or community-based, or even just a personal passion project.
Just as wealthy people can lose happiness when they lose their purpose, people with far less wealth can have a high quality of life if they’re able to pursue something they’re passionate about. I’ve met people living below the poverty line who love waking up each day and contributing to a community garden or reading to their grandchildren. This isn’t to say that money wouldn’t help their situation, but these anecdotes (in both directions) sure make it seem as though having purpose is more important than wealth.
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