In the world of finance, people love to talk about the hedonic treadmill.
Reach a certain milestone – a level of income or wealth, a purchase you’ve had your heart set on – and you eventually fall back to your baseline level of happiness, and find the next thing to strive towards. It’s a treadmill.
(I’m a little sceptical of this, especially when you look at how some of the “happiness” research distinguishes between hedonic, day-to-day happiness, versus holistic life satisfaction (ie, asking people to step back and ask how satisfied they are with their lives). When it comes to day-to-day happiness, there appears to be diminishing returns to income, wealth, and material possessions. However, the higher people are on the socio-economic ladder, the greater their reported satisfaction. It’s not cut and dry. But let’s put these nuances to the side for now.)
The hedonic treadmill is definitely a thing. As humans, we seem to have something resembling a baseline (or baseline range) of happiness, and when things go well, we might find ourselves happier than usual for a while, before eventually reverting to where we were.
Here’s something interesting: it works the other way around, too.
As Dan Gilbert explained in Stumbling on Happiness, we all possess a “psychological immune system”. When things go wrong, we might feel bad for a while. But eventually, we adapt and revert to our baseline level of happiness.
(Again, there are some exceptions, and a narrow range of experiences can pull our baseline happiness down in an enduring way. But for most experiences, this psychological immune system phenomenon is pretty reliable. I suspect that this system is also responsible for why we tend to regret the things we DON’T do more than the things we DO do: one feature of our psychological immune system is that we are very good at rationalising, and creating stories or justifications to support what we do. It’s much harder to rationalise in relation to what-could-have-beens.)
To my mind, the hedonic treadmill and psychological immune system are two sides of the same coin. It’s the same mechanism.
Add to this, that we are terrible “affective forecasters” (Dan Gilbert again): we are awful at predicting what will make us happy or unhappy, to what extent, and for how long.
A call for boldness
If I take these things to be true (which I believe they are), I draw a few personal conclusions.
For one thing, barring REALLY bad stuff from happening, we’re going to revert to our baseline. That is the case whether good things happen, or bad things happen. This makes me feel much more sanguine about whatever outcomes I generate in life.
Here, I’m going to add some beliefs that I hold strongly, but are either more ambiguous or normative:
- I’m more likely to regret what I DON’T do rather than what I DO do.
- Objectively, I want to maximise my chance of having a significant positive impact on the world.
- Having a significant positive impact on the world might not increase my level of happiness, but will increase my level of satisfaction.
- Failing to have a significant positive impact might not reduce my level of happiness. It might mean my level of satisfaction is lower, but I suspect that I would feel more satisfied with the story of my life if I TRIED to have an impact, versus not trying.
Perhaps I’m rationalising, but this seems like a rational basis for being bold. I’m still going to manage risks, especially worst-case scenarios. But I think this needs to be married with pursuing bigger things.
Does this ring true for you? If you had a rational basis for being bold, how would this translate into your life?
The immediate example for me is that it has prompted me to substantially increase fees for the full planning service via Fairhaven Wealth (from $3,000 to $6,000).
Will this reduce demand? Of course it will. (Or at least, I hope it does.) Might it salt the earth and mean the end of that service? Possibly: but if it does, I’ll be fine and won’t regret the decision. I can always recalibrate.
But it will free up time – including high-focus time – to focus on other projects that might allow me to have a more significant positive impact on the world.