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Choiceology: Season 2 Episode 4

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Giving: It’s one simple behavior that’s been shown to increase happiness.

In this episode of Choiceology with Katy Milkman, we examine an old insight about happiness and giving. It’s an insight that is now backed up by behavioral science.

  • The episode begins with a scene from the Charles Dickens classic A Christmas Carol. From there we hear from the founder and CEO of Charity: Water, Scott Harrison. When Scott turned 18, he moved to New York City and got a job as a nightclub promoter. He lived a hedonistic lifestyle that included private jets and exotic parties. He should have been on top of the world, but he was miserable. It wasn’t until Scott moved to one of the poorest countries in the world that he started to find fulfillment. You can learn more about Scott’s story and his incredible transformation in his new book Thirst.
  • Next Harvard Business School professor Michael Norton explores the topic of happiness and spending. He’s the co-author of a study on the subject of happiness and spending, and the book Happy Money: The New Science of Smarter Spending.
  • Finally, we hit the streets to conduct an experiment. We gave out five dollar bills to random people and asked them to spend it on themselves or give it away. Which group do you think will experience a greater level of happiness?

Choiceology is an original podcast from Charles Schwab.

If you enjoy the show, please leave a rating or review on Apple Podcasts.

Click to show the transcript

Scrooge: Cratchit! You’re late.

Cratchit: Sir …

Scrooge: What do you mean coming in at this time of day, hm?

Cratchit: I’m very sorry, sir. I am behind my time, sir.

Scrooge: Hmpf! You are indeed! Step this way, Mr. Cratchit, please.

Cratchit: It’s only once a year, sir. It won’t be repeated. I was making rather merry yesterday, sir.

Scrooge: I’m sure you were. Well, we won’t beat about the bush, my friend. I’m not going to stand this sort of thing any longer. Which leaves me no alternative … but to raise your salary.

I haven’t taken leave of my senses, Bob. I’ve come to them. From now on, I want to try to help you raise that family of yours. If you’ll let me.  We’ll talk it over later, Bob, over a bowl of hot punch.

Katy Milkman: I love that classic scene from Charles Dickens’ A Christmas Carol, shortly after the character of Ebenezer Scrooge has transformed from a miserly grouch to a happy, kind and generous man.  Sure, it took three ghosts and a terrifying glimpse of his own death to change his outlook, but there’s something about this old story that still rings true. In fact, the insights on happiness that Charles Dickens explored in A Christmas Carol are being confirmed by the latest research in behavioral science. And that’s what we’re looking at today.

I’m Katy Milkman, and this is Choiceology, an original podcast from Charles Schwab. It’s a show about decisionseveryday choices and life-altering ones—along with the psychological forces that influence them. We highlight some of the sub-optimal behaviors we humans exhibit when we’re trying to make good choices. And we explore stories of make-or-break moments that hinge on a key decision. We do it all to help you avoid costly mistakes.

This time of year is often when calendars start to fill up with office parties and family gatherings. The holiday season is also a time when thoughts turn to those less fortunate. And that’s why this episode is a little different than normal. We’re telling the story of one man’s life-changing decision for the better, not as an example of an irrational mistake.  

Scott Harrison: My name is Scott Harrison

Katy Milkman: Scott came from a happy, middle class family.

Scott Harrison: When I was 4 years old, we had moved into an energy-efficient house in South Jersey. We’d moved from Philadelphia to get closer to my dad’s new job.

Katy Milkman: His father was a businessman. His mother was a writer. Life was good. But then, on New Year’s Day in 1980 when Scott was about five years old, his mother walked across …

Scott Harrison: … across my parents’ bedroom in this new house, and she collapses unconscious on the floor. And we’d all been having these health symptoms, and after taking her to the doctor and a long series of blood tests, we identified that there were massive amounts of carbon monoxide in her bloodstream. Our house had a gas leak that had gone undetected for a period of months and thankfully didn’t kill Mom, but her immune system was irreparably destroyed from that moment on.

Katy Milkman: Scott’s life changed in an instant. As he got older, he started helping to care for his ailing mother. The household chores he was responsible for expanded dramatically, and included some odd tasks.

Scott Harrison: My responsibilities included baking Mom’s books because the ink would make her sick, and I would bake her books in the oven sometimes to try to get that smell of print out or I would put them in the backyard under the sun to out-gas. So it was a really weird childhood, but I played by the rules, and I didn’t smoke, I didn’t drink, I didn’t curse, I didn’t sleep around.

Katy Milkman: But then, Scott turned 18. After years of responsibility and obligation, he decided it was time for a change

Scott Harrison: I woke up one day and said, “Now it’s my turn. Now it’s time to look out for number one. Enough with the rules. I moved to New York City, and I realized that if one was interested in rebelling, you could rebel in style by becoming a nightclub promoter, meaning there was actually a job where you could get paid to professionally drink alcohol, and if you get the right people inside the right nightclubs, they would pay astronomic amounts for liquor. You could charge $20 for a vodka soda or $500 for a bottle of champagne that cost you only 40.

Katy Milkman: Scott took to this job in a big way.

Scott Harrison: Over that decade, I work at 40 different nightclubs. I’m making good money but we’re living like millionaires because of the perks. We’re flying on other people’s private planes. Someone else is always paying for the dinner or the fashion show or whatever we were involved in. We were getting paid $4,000 by beer companies just to be seen in public drinking their specific brand of beer, and liquor companies would pay us $4,000 a month, every month, just to be seen drinking their product out at our clubs.

Katy Milkman: From the outside, Scott’s life looks amazing.

Scott Harrison: And I had been collecting all of these superficial markers of success over that time: the model girlfriend, the Rolex watch, the BMW, the grand piano in my New York City apartment. My entire status during this period of time came through the things that I was collecting.

Katy Milkman: It seemed like the party would never end.

Scott Harrison: Every year, to celebrate New Year’s Eve, we would celebrate by leaving New York City. And we would always rent a house, group of friends, sometimes in Brazil, sometimes in Argentina, sometimes in Uruguay, as was this year. And I remember this year, we’d rented a compound. There were servants waiting on us. There were horses in the backyard. It was a beautiful place. And we had just gone to the fireworks store and spent $1,000 on fireworks. We blew up the fireworks at midnight, and this party started, and I probably partied till 6:00 or 7:00 in the morning. I remember crashing for a couple hours, waking up the next day, and the party was still going on, and now it’s around noon.

Katy Milkman: This was the moment when Scott Harrison decided he’d had enough.

Scott Harrison: I remember just wanting the party to stop. I remember wanting everybody to leave. It felt like we were ruining this idyllic, tranquil setting. And I was running around with a video camera. I was the self-appointed documentarian of this trip for our friends, and I remember just looking at people through the lens and getting perspective. It was almost like seeing with new eyes that, “Wow, this is it. This is as good as it gets,” and there’s never going to be enough. There was just this realization that there would never be enough money, there would never be enough watches or cars or status. Somebody would always have more. It left me pretty empty inside because I had really betrayed the morality, the spirituality, the virtue. Betrayed everything I’d been taught.

Katy Milkman: Scott realized that he had to make a change. But what should he do? How was he going to find meaning?

Scott Harrison: It was really six months of struggling until later that summer. I wound up in Moosehead Lake, little internet café in Greenville, Maine. So I had been asking myself this question: What might the exact opposite of my life look like? And the only thing I could think of that would be that opposite picture would be to go and join a humanitarian mission.

From this dial-up internet café on these old, gray computers, I began to put in applications for the famous humanitarian organizations that I’d heard of over the years. I put in applications to volunteer at the Red Cross and Doctors Without Borders and World Vision and Samaritan’s Purse and UNICEF and the Peace Corps. And maybe no shocker, but I’m denied by all these credible humanitarian organizations because I’m a nightclub rat. Fortunately, for me, one organization says, “Hey, look, Scott, if you pay us $500 a month, and you’re willing to go live in post-war Liberia, then you can join our mission.” I’m like, “This is perfect. I mean, what could be more opposite? Not only am I going to the poorest country in the world, I’m actually going to have to pay 500 bucks a month for the pleasure of doing this.” I say, “When does the mission start?” They say, “Three weeks.” I’m like, “Great. I’ll be there.”

Katy Milkman: Scott had signed up to be a volunteer photojournalist. He would take photos and tell stories about the doctors and surgeons working for free to provide medical services to people who otherwise had no access to care. The change of lifestyle could not have been more dramatic.

Scott Harrison: So I go from a nice apartment with a killer speaker system and a private roof to about 110-square-feet cabin that I’m sharing with two roommates that I’ve never met. I’m living on a 522-foot ocean liner. Our job was to bring thousands of sick people onboard the ship, transform their lives through medical intervention, and then release them down the gangway back into their communities and their villages with health.

Katy Milkman: It would be an understatement to say that this was an eye-opening experience.

Scott Harrison: My third day on this mission is what we call the patients screening. We would effectively do a casting call for people who were deformed, people who had tumors, people who might have been burned by the rebels during the war. We were given a football stadium, an arena at the center of the city to triage these patients. I’ll never forget it was my third day in Africa, my third day on this mission. I get up at five in the morning. I put on hospital scrubs, I grab my two Nikon cameras, and I jump in a convoy of Land Rovers, and we start snaking through the city towards the stadium. I learn on the way that we have 1,500 available surgery slots to fill. So we’re going to be able to bring 1500 people up on the ship and operate on them and then release them hopefully with healing and success.

We turn the corner, and there are over 5,000 people standing outside the stadium. It hits me like a wave. We’re going to send thousands home.

Katy Milkman: Scott was overwhelmed by the magnitude of the challenge. But he began to connect with the people they were helping.

Scott Harrison: The first child that I met, the first child that I photographed, a little boy named Alfred who is suffocating to death with a giant tumor that’s the size of a volleyball on his face. They removed his tumor. A couple weeks later, I take him home to his village, and witness this marvelous celebration, witness him welcomed back into a community, into a family who had written him off for dead. This was an outcast. This was a boy who was going to choke to death, and now had a brand new face, had a smile that wasn’t taken over. It was amazing. I got to witness and document more than 1,500 transformations during that first tour.

Katy Milkman: The experience left Scott energized. He began to think about other ways he might be able to help people in need.

Scott Harrison: So the second year, I also spent more and more time off the ship in the rural areas, and it’s there that I discovered dirty water as an issue for the first time. As I traveled up country, as I traveled into the bush, into these very remote areas, I saw the water that people were drinking, and I saw human beings drinking from brown viscous swamps, from green ponds, from dirty rivers. I couldn’t believe it. I was a guy that was selling Voss water in nightclubs for $10 a bottle to people who wouldn’t even open the water because they were drinking booze instead. I just started learning more about water’s impact on health. In fact, learned that 50% of Liberia, 50% of the country, was drinking diseased, dirty, contaminated water. So I just put these two very basic things together. The thousands of people that were turning up sick and half the country lacking the most basic need for health.

Katy Milkman: This was a defining moment for Scott. Water became his issue. Clean drinking water was such a fundamental necessity, that it seemed to be the most important problem to solve.

Scott Harrison: It was a huge epiphany for me. So I come back to New York City. I was really on a mission, but I had no experience in philanthropy.

Katy Milkman: He was completely green when it came to raising money to support humanitarian causes. But his outsider status gave him a unique perspective on the world of philanthropy. 

Scott Harrison: I saw so much guilt and shame in the sector. Even down to the language that people used. I mean, people know these words: “giving back.” We hear about companies giving back or rich individuals giving back. I mean, even this language implies giving because it’s a debt or it’s an obligation—that, “Oh, we should finally throw a few scraps back to the poor.” And I hated that language. I thought the language should be framed in the positive. Drop the back. Let’s just encourage cultures of giving. Let’s encourage generosity in our companies, in our families. Giving with our time and our talent and our money because it’s a joy and it’s a blessing and because we want to, not because we have to.

Katy Milkman: Giving because we want to, not because we have to. This simple reframing of the mission made all the difference. Now Scott got to work convincing other people to see things the way he did.

Scott Harrison: So I was just talking to everyday people who I knew from nightclubs. They worked in fashion. They worked in finance. They worked at MTV and entertainment.

We just launched in a nightclub with a party for my 31st birthday. I got 700 people to come because I lured them with open bar, and I asked them all to give $20 on the way in and promised that 100% of the money we receive would go directly to a refugee camp in Northern Uganda where 31,000 people were living, and we would give as much clean water as we could with the money. And that night, we raised $15,000 and we were able to rehabilitate six wells in this refugee camp. Then, we sent the photos and the GPS coordinates and pictures and video of clean water flowing from this camp in Uganda back to the 700 people that came to the nightclub party in New York for my birthday and said, “You did this. Here is exactly where your money went. This is the impact you had.”

Katy Milkman: Scott’s new project Charity: Water was born.

Scott Harrison: Charity: Water is bringing clean and safe drinking water to people in need around the world. We’re working in 26 different countries. We’re solution agnostic, so sometimes we’re drilling wells. Other times, we’re building rainwater harvesting systems or biosand filters or spring protections all in the service of clean and safe drinking water in a sustainable way. Over the last 12 years, thanks to now more than a million supporters across 100 countries, we’ve been able to raise over $330 million to help 29,000 villages in 26 countries get clean water, which all adds upto  8.4 million people getting clean water for the first time.

Katy Milkman: 8.4 million people! A staggering achievement. And the project hasn’t just changed the lives of the people it serves. It’s changed Scott’s life as well.

Scott Harrison: I found my life transformed through, you know, not giving back, but through giving. I’ve now been on this journey for 15 years. For me, I found a freedom the minute I could move the intention of my life from this hedonism, from this selfishness. When I was able to focus on others, on how I could use my time and my talent, just my position of privilege to end needless suffering around the world. I found my life was transformed. I found freedom. I found fulfillment. I found purpose.

I believe the more you give, the more you give. I love the idea of getting people addicted to generosity.

Katy Milkman: Scott Harrison is the founder and CEO of Charity: Water. He’s also the author of the new book Thirst. All proceeds for the book go back into the charity. I’ve got links in the show notes and at schwab.com/podcast.

I’m Katy Milkman, and this is Choiceology, an original podcast from Charles Schwab. Be sure to check out our sister podcast, Financial Decoder. It’s a show designed for folks who want to make better decisions with their money. Whether that means investing, savingor donating. You can find it at schwab.com/financialdecoder, or wherever you listen to podcasts.

For Scott Harrison, becoming a giver helped him find happiness. The same is true for Ebenezer Scrooge. But what about for the rest of us? And can giving in small ways in our everyday lives have the same kinds of benefits?

Let’s talk to an expert on the topic of happiness and spending, Mike Norton. He is a professor at Harvard Business School and co-author of the book Happy Money: The New Science of Smarter Spending

So Mike, how did you and your collaborators study the relationship between spending decisions and happiness?

Mike Norton: One of the initial intuitions that we had about money and happiness, and this is research with Liz Dunn and Lara Aknin, we wondered how much people spend on different things, and it turns out that basically people spend most of their money on stuff for themselves. And I’m not criticizing. Of course we do because we’ve got to pay rent and have shoes and stuff like that, so it’s not surprising. But we wondered, does that make people happy spending on stuff, and if not, is there anything else people can do?

Turns out that the amount or the percent of your income you spend on stuff, it doesn’t make you unhappy. It’s just not related to happiness. So all we needed was anything that beat nothing, and Liz had the brilliant idea to say, well, if stuff for yourself doesn’t work out very well for happiness, what about the opposite? And the opposite of course is, instead of yourself,  give it away. So in a series of surveys and experiments, that’s exactly what we tried to do is to show that for most people, most of the time, giving makes you happier than spending on yourself.

Katy Milkman: I really like that study you did where you gave people instructions about how to spend their money and then you measured their happiness. Do you mind describing it to our listeners?

Mike Norton: We wanted to show that not only does your habitual spending correlate with how happy you are, but also that we could cause you to become happier if you spent on other people. In one of the studies that we did mainly with college students, we went out on a college campus in the morning, gave people an envelope with cash in it. Some people had a slip of paper that said, “By 5:00, spend this money on somebody else.” Like a gift or a charitable donation. Other people had one that said, “spend it on yourself.” Only difference between the two groups is just that instruction. Then we send them out in the world. Then we called them that night and we said, “How happy are you?”

And what we find is that like in the other research, spending on yourself isn’t bad for you. It just doesn’t make you any happier. So people who spent on themselves basically had a regular day. And it’s not that surprising because we spend on ourselves all the time. So if I gave you money to get a free coffee, it will be awesome to get a free coffee. But imagine instead going to Starbucks, getting a coffee and then giving it to somebody else. It’s a really different experience. The person’s going to smile and thank you. You didn’t get a coffee for yourself, but you know, you didn’t really need that coffee. It’s not that surprising actually that the act of giving could make you happier than just same old spending on yourself.

Katy Milkman:  OK. So that’s a great segue to what I was going to ask you next which is, maybe this isn’t that surprising, but it doesn’t seem like people know this innately and spend efficiently to maximize their happiness. Is that accurate? Do you think people have a bias when it comes to this kind of spending and the way it affects them?

Mike Norton: Everybody knows that giving is good, right? It’s not one of these hidden things that you’ve never thought of. And of course most people have given gifts to other people and donated to charity and all those things. I kind of see it a little bit like exercise, where I know that I should go for a run and not eat pizza, but at any given moment I totally want to eat pizza and not go for a run. And giving is a little bit the same way. It’s not an unknown quantity; it’s just we have to make it a habit rather than make those decisions in the moment where we’re not usually our best selves, but planning out how we’re going to give and how much we’re going to give is a better way to go about it.

Katy Milkman: That’s really interesting. So you talked a little bit about this, but I want to dive in deeper. Why do you think it makes people happier to give than to buy something?

Mike Norton: I think there are a few reasons why it makes us happier. So one is a very simple one, which is, it’s different than what we typically do. So there’s research by Tom Gilovich and his colleagues that shows that spending on experiences makes us happier than buying stuff. So you can think about, again, experiences are more emotionally rich, just like giving to others is more emotionally rich.

So one part is literally just do something different. But I think the other part is that you feel good because other people tell you that you did a good thing. So we ran a study where we asked what makes you happier, giving where no one knows that you gave or giving where the recipient knows and everybody knows.

The purest, most moral form of giving is if nobody ever knows, right? Many religions have that as like the highest form of giving. And that does make you happier than spending on yourself, but not nearly as happy as if everybody knows. So it’s a little disappointing that the purest form doesn’t make us the happiest, but it turns out that it’s still good that we give no matter what. But we really like people to smile and say thanks and give us a hug and all sorts of other nice things. That’s why there are very few buildings on all of our college campuses that are called the anonymous building, because everybody totally wants the credit for being a nice person.

Katy Milkman: So does the happiness that we get from giving accumulate over time? Or does it eventually sort of wear off? 

Mike Norton: With giving and happiness, we know two things: So one is we know, I think pretty confidently, that on a given day, giving to somebody else makes most people happier than spending on themselves. We also know, I think very confidently, that how much of your income you spend on yourself and other people and things like that, that the percent of your income that you spend on others is correlated with being a happier person. So it feels like those days of happiness from giving are adding up, you know, over the course of your yearly income to being a happier person.

But we don’t know that for sure. It’s a really important question in this domain, but I think also in behavioral science generally.

Katy Milkman: Mike, thank you so much. I really appreciate you joining me.

Mike Norton: Thanks so much, Katie, for asking me.

Mike Norton is a professor of marketing at Harvard Business School, and the co-author, with Elizabeth Dunn and Lara Aknin, of the paper “Spending Money on Others Promotes Happiness.” Mike and Liz also have a book called Happy Money that you might want to check out. I’ve got a link to their research and the book in the show notes and at Schwab.com/podcast.

We liked the idea behind Mike Norton’s research so much that we went out and ran a little replication of it ourselves to hear just how spending in different ways made a few people feel.

David: So I’m giving away five bucks, and I’m asking people to either spend that on themselves or give it away to somebody else and then rate their …

Katy Milkman: First, here are some of the people we asked to spend it on themselves. The catch was that they had to let us tag along while they the spent the money

David: What are we going to go buy?

Man 1: Just going to head to the coffee shop and get a cup of coffee. Hi, tall dark in a grande cup, please.

David: What is your level of happiness right now, on a scale of one to ten, one being the lowest and ten being the happiest?

Man 1: Uh, about a five.

David: So what are you going to buy with that five dollars?

Woman 1: A hot dog?

Vendor: Some fried onions, no extra charge?

Woman 1: Yes, please. Thank you. I’d say my level of happiness is a six.

Katy Milkman: So this was pretty typical of the scenarios where people were given money to spend on themselves.

Woman 2: Uh, six point five.

They were pleasantly surprised at the offer, but not exactly excited by the experience of spending a few bucks on a small treat. But listen to the people who spent the money on someone else.

Man 2: I might as well give it to this guy. Excuse me, can I give you five bucks?

Man 3: Thank you so much!

David: How’re you feeling right now?

Man 2: I don’t know, probably eight or a nine.

Woman 3: This person’s doing an experiment, so here’s 5 dollars.

Woman 4: Thank you!

David: So now I’m going to get you to rate your level of happiness after giving away the money.

Woman 3: I feel like an 8.

David: I’m going to get you to rate your level of happiness on a scale of one to 10, one being the lowest, 10 being the happiest.

Woman 5: 10!

Katy Milkman: And that’s how it played out most of the time. The people who spent money on someone else typically rated their levels of happiness higher than the folks who kept the money for themselves, just like in Mike’s study. The novelty of giving and the smiles of strangers were generally just more satisfying to them than an unexpected snack or boost of caffeine was to their counterparts.  

So we didn’t identify some behavioral bias in this episode, though maybe selfishness should be classified as a decision-making error. Instead, we shared a super simple recipe for increasing happiness. Giving. And it doesn’t have to be money. Giving your time and energy to help someone else can go a long way to boosting your numbers on the happiness scale, too.

Some of this may seem obvious, but it’s easy to lose sight of the simpler joys. We live in a world that endlessly promotes all the things you can buy for yourself. And spending on yourself can deliver satisfaction. As Mike mentioned, there is some great research about this by Tom Gilovich at Cornell. Tom and his co-authors have shown that if you’re going to spend on yourself, when it comes to creating happiness, you’re better off buying experiential rather than material goods. So a vacation, not a new watch.

But the big lesson from today is that scientists have literally proven that it’s better to give than to receive.

Back in November I went to a conference about judgment and decision making and saw some great new research presented about why people don’t give more to others when it’s such a clear happiness booster.  Two researchers from NYU and one from Berkeley—Emily Powell, Minah Jung and Leif Nelson—showed part of the problem is that we underestimate how much happiness we can bring to others with small acts of generosity. This means that we underestimate how happy giving will make us, since much of the fun of giving comes from seeing how people react to our acts of kindness.

So get out there and give. And make it a habit. You’ll be happier for it. Really. Even happier than you think!

You’ve been listening to Choiceology—an original podcast from Charles Schwab.

If you’ve enjoyed the show, leave us a review on Apple Podcasts. It helps other people find the show. And while you’re there, you can subscribe for free. Same goes for other podcasting apps. Subscribe, and you won’t miss an episode.

Our next episode arrives on January 7, and with the new year, we’ll look at ways a behavioral bias can help motivate you to pursue ambitious goals but can also lead you to make peculiar choices about how you categorize your time and money.

I’m Katy Milkman. Talk to you next time.

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