February 14, 2014

Is money addictive? Credit: Jackson-Hall / Flickr Creative Commons

Guest:

  • Jeffrey Pfeffer, Stanford professor and author of "Power: Why Some People Have It -- And Others Don't"

How much do CEOs think about their money? Here's what Daniel Vasella, former head of the drug company Novartis, once told an interviewer: “The strange part was the more I made, the more I got preoccupied with money. When suddenly I didn’t have to think about money as much, I found myself starting to think increasingly about it. Money corrupts the mind.”

Did Vasella have a point? Stanford professor Jeffrey Pfeffer and his colleagues decided to find out. What they discovered was a new way to look at money: that is, money has an addictive quality. It can become something detached from the actual power of what cash can buy, and instead starts to reflect how important you are as a person.

Surprisingly, this turns out not to be true of all forms of money. Money that just "appears" - like a lottery pay-out or an inheritance - actually makes people think less about money. But when money is the product of the work you do, it becomes an integral part of a person's self-worth and self-esteem. “When money signals worth and when money signals competence, the more you get, the more you want,” Pfeffer explains.

That was especially true for workers who were paid by the hour, rather than by a yearly salary. When you know the value of your time, Pfeffer explains, an interesting phenomenon happens. First, workers are almost always willing to put in more time and, by extension, make more money. 

The downside? If you constantly think of your time in terms of money, it's harder to truly enjoy your downtime without feeling guilty about not working. As a result, pleasurable leisure activities - reading, surfing the Internet, going for a walk - become less enjoyable. 

Still curious?

Body and Mind, finance, social science, Culture, money

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