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What does it mean to be rich?

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What does it mean to be rich? There is no shortage of answers:

  • It's the freedom to travel the world constantly

  • It's about being able to buy whatever we want

  • It's never having to worry whether we will be able to pay for medical bills

  • It's to be able to quit when we want to, or what the author Nassim Taleb puts more crudely, "F*uck You Money"

  • It's about power and status

And the list goes on. It seems pretty obvious, more money is better. Who would reject more money?

 

Yet, there's the other side of the coin. We also hear of other hackneyed cliches, the likes of  "money cannot buy happiness" or "the best things in life are free". Both intuitively and empirically, we know examples of people who are wealthy and unhappy, while conversely 

 

And then we have this influential study led by Princeton's Daniel Kahneman - examining over 450,000 accounts, Kahneman's team found that:

 

  • Below USD$75,000, people are observed to be worse-off in general. Misfortunes like ill-health, divorce, loneliness, and unemployment occur at a higher frequency and cause more stress as people do not have as much resources to do deal with them. On average, the lower-income also find life's pleasures less enjoyable, such as weekends. 

    This seems to corroborate with the belief that wealth is important for well-being and happiness. 
     

  • But there is a signficant flipside. Above USD$75,000, higher-income no longer leads to an increase in happiness or relief from unhappiness or stress. There was no increase in measures of emotional well-being.
     

  • Finally, life evaluation increased with income. This is the personal evaluation of how well each person believed his/her life. However, it is very difficult to really draw any conclusions from this. Income is such a quick and convenient measure of life that is applicable to everyone, and hence it is natural that people would use income as a measure. Yet, this does not corroborate with the fact that higher income does not seem to gel with higher happiness. 

Image by Simon Migaj

So what it? What does it mean to be rich? How do we think about wealth?

I think that being rich fundamentally boils down to one thing. 

||   Being rich is about having more choices

Wealth means that you have a bigger pool of options to pick from. There is a greater probability that the option you want is included in this bigger pool. Being wealthy means you have more choices of what to buy, what treatments or services to seek, what careers to choose (or not choose), what functions to go to, and possibly whom you can meet and know. The availability of a bigger pool of choices brings with it side-benefits such as assurance and confidence. 

Conversely, as Kahneman's study finds, below a certain point, a lack of wealth means that the pool of options is uncomfortably small. People who do not have sufficient wealth might have limited options for health services or to buy gifts for or to celebrate with their loved ones, to travel, to have access to education, to meet certain groups of people. There are always options of the rich to meet the poor, but not vice versa. The lack of choices causes stress and anxiety. The comparative lack of choices could also cause a drop in confidence. 

 

However, it is important to consider that more options don't always mean that there are better options. For example, friendship: having good friends is more dependent on factos other than wealth . 

Sometimes, more options bring with it its own problems. In some areas, the wealthy have so many opinions they might simply pick the most obvious ones. When the wealthy are unhappy or need a pick-me-up, there is always the option of buying or trying something new. Yet one of the best things we can do when we're stressed is actually to talk to someone or to help someone

The wealthy might also be so comfortable with all the options and assurance that wealth provides, that they fight to keep this even at the expense of other areas. For example, wealth becomes so important that people might devote most of their waking hours to the job that ensures they stay wealthy, at the expense of relationships with spouse or family members. Having the option to buy any gift might not mean as much as being able to spend time or to really devote oneself to understanding and supporting one's spouse. While the absolute poor might struggle with having to work long and hard because they have no choice, the wealthy might feel like they have no choice but to continue a certain lifestyle.

Most crucially,

||    the number of options become less relevant if we are able to pick the right one. 

The real questions that we need to consider in life are: What is important to us. Why is it important? What are we willing to give up for these? How are we going to achieve what is important to us? In other words, the benefit of wealth - the increased number of choices, matter much less if we have thought through deeply which is the choice we want to make.
 

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