Mind Over Money summary

We start learning about money at a very young age as we study the behaviors and responses of our parents. But just how young?

Well, in one experiment at a Finnish kindergarten, a group of six-year-olds were asked to create a theater play of their own design. All the decisions – from the story to the set to the casting – were theirs to make. Researcher Marleena Stolp observed them for six weeks, and she found that money dominated the kindergarteners’ conversations. They talked at length about what to charge for tickets and which merchandise they could sell to bring in extra income. This was despite the fact that financial considerations weren’t an explicit part of the task. Already, at the age of six, they held sophisticated insights about the need to generate money – and how to do so effectively. 

Do you remember when you first became aware of money? Perhaps a grandparent slipped you a crisp bill for your birthday. Or you started accumulating all the change you could find in a piggy bank.

Small children value money as an object in itself. It’s shiny, decorated with heads and animals, and has a satisfying weight in the palm. Paper notes crinkle satisfyingly, sport exotic colors, and can be nestled in a wallet. 

Since the day we were given piggy banks as kids, all of us have been aware of the importance of saving money. As we grow older, those messages are amplified into dire warnings about what will happen to us if we don’t start saving for retirement today! If that’s the case, how is it that so many of us find it difficult to save money – despite our best intentions?

The key message here is: Our savings are drying up as we become increasingly irrational with money. 

You’re in the supermarket stocking up on supplies. A good bottle of gin catches your eye, but you flinch at the price tag: it costs 20 dollars, which feels way too expensive! A week later you’re on holiday, about to order a gin and tonic on a sunny terrace. It costs 10 dollars, but you barely notice the price. In fact, it’s about time for a refill!

Most of us make similarly inconsistent decisions about how we spend our money. The concept of monetary exchange is based on the idea that a dollar is worth the same amount in all circumstances, but that doesn’t take into account the inner workings of human psychology. 

Rudy Kurniawan was making a fortune selling rare vintage wines, with sales topping 36 million dollars a year. Wearing his trademark white leather coat and forever carrying a fluffy French poodle, he cut an eccentric and striking figure. Influential people and millionaires relied on him to guide them toward the rarest and most delectable wines. 

But it turned out Kurniawan’s operation was a sham; in fact, he was selling cheap red wine with fancy-looking labels. What’s surprising is how long he was able to get away with it. Wine connoisseurs were completely fooled by his bluff despite having supposedly refined taste buds. 

Common wisdom dictates that money can motivate people to do just about anything. After all, would we get up and go to work every day if there were no pay involved? Probably not. Researchers have spent decades analyzing how money can incentivize different behaviors, and the results have been anything but straightforward.

For example, more money doesn’t always get people to work harder. In fact, with repetitive, manual jobs like berry picking, it can be beneficial to pay people by the basket rather than by the hour. Workers are motivated to work harder and faster when their productivity is directly correlated to their paycheck.

Work performance isn’t the only arena where money has been proposed as a potential motivator. It’s also been thrown at some of our thorniest social problems, such as addictive behavior – and even test scores in schools!

But can money really solve problems like a flailing public education system? In 2007, a controversial experiment distributed 9.4 million dollars among 36,000 school children across the United States. The condition? Passing a test or completing homework. While there were small improvements in test results, the money didn’t have a huge effect overall. The experiment worked best when rewarding effort rather than specific achievements.

When William “Bud” Post III won 16 million dollars through the lottery in 1998, he seemed to be living everybody’s wildest dreams. Who hasn’t fantasized about the life-transforming effects of such a huge win?

Unfortunately for Post, the win turned out to be a curse. Within five years, he’d declared bankruptcy, had served a jail sentence, and had been married – and divorced – six times! Clearly, the money didn’t make his life better.