Happiness and wealth: why you can't have one without the other

I recently returned from a trip to Mount Kilimanjaro, Tanzania, with my 12-year-old son.

It was designed to make memories in the precious little time before he starts boarding school, but things rapidly went wrong.

Altitude sickness forced us down early, so we decided to rethink and spend the rest of the week on safari.

The initial plan evolved quickly to become one of the most fun experiences of our lives.

Happiness and prosperity are central to conversations I have with clients.

What was the happiest day of your life?

The documentary How to Live Forever asks that question to a centenarian who gave a fantastic response.

“Armistice Day,” she said, referring to the 1918 agreement that ended World War I.

“Why?” the producer asks. “Because we knew there would be no more wars ever again,” she says.

World War II began 21 years later.

One of the most dangerous mental traps is the “appealing fiction”.

An appealing fiction is something you want to be true, and which is backed up by data, observation or reasonable common sense.

But that data only goes one level deep on a topic with many layers of complexity.

In other words, it’s something that’s false or uncertain but you want it to be true so desperately that you believe it as fact.

Appealing fictions happen when you don’t apply wisdom to intelligence.

You are intelligent and can calculate answers, but you stop considering other possibilities and draw conclusions as soon as you hit something you want to be true.

Let’s look at the infamous marketing blunder of “New Coke” from 1985 as an example.

In testing and focus groups, the new Coke formula was a hit. People said it tasted better. They liked it better than both “old Coke” and even Pepsi. Great result!

But the data only went one level deep. More was brewing beneath the surface, about to explode.

The new recipe failed spectacularly because of the complexity surrounding the power of a familiar brand.

Quality, or tasting better, didn’t matter to anyone. People wanted their familiar drink back.

Cue rejection en masse, which was baffling to Coke marketers who had the data to prove it tasted better.

But that quick conclusion was an appealing fiction.

I often think about this trap with long-term optimism — blindly believing things will be better in the future than they are today.

This can be dangerous — potentially an appealing fiction — because it’s easy to accept without asking further questions.

I consider myself an optimist. I want our clients to feel optimistic.

I know things will generally get better over time, even if the path to get there is full of setbacks, chaos, surprises and disappointment.

The possibility of things getting better will be driven by two elements.

The first is the power of human ingenuity. Most good things happened because of a reaction to a bad thing (like my safari). I know there will be problems that push people into fixing them. Evolution doesn’t teach by showing you what works, but by destroying what doesn’t.

The Great Depression, for example, led to a significant increase in productivity, while World War II gave rise to an astonishing array of technological advancements, ranging from nuclear energy to jets and penicillin.

Essayist and statistician Nassim Taleb says: “The excess energy released from overreaction to setbacks is what innovates!”

The biggest innovations don’t occur when everyone is content. Rather, they happen when individuals are under significant stress, prompting them to take action and engage in creative problem-solving.

The second element is the constant human desire to one-up past successes. If you want to qualify for the Boston Marathon today, you need a time that, a century ago, would put you within nine minutes of a world record.

Today, a first-year medical student probably has more medical knowledge than an experienced senior doctor did 50 years ago.

My son knows things about technology that a computer science professor 30 years ago would find bewildering.

Innovation and advancement usually compound.

Charlie Munger, the billionaire investor and vice chairman of Berkshire Hathaway, says: “The world is not driven by greed; it’s driven by envy.”

You see someone accomplish a new feat and think: “I should be able to do that, too — and even better.”

There is always something to be pessimistic about. Maybe it’s a bank collapsing, erratic inflation, or short-term market volatility.

But they will never go away. If you stay in your seat and remain an optimist, you’ll get to your destination.

Sam Instone is co-chief executive of wealth management company AES