Brian Portnoy: Matching money with meaning
For me, the big challenge for financial planners is to match money with meaning. Building financial wealth is a means to an end; not an end in itself. The end is to live a life of contentment and fulfilment.
There’ve been a number of books written addressing this issue. Wealth with Purpose, by the Australian financial planner David Andrew, is a good example. Now there’s a new book on money and meaning which will be of interest to investors and financial professionals alike. It’s called The Geometry of Wealth, and it’s written by the behavioural finance expert Brian Portnoy.
Ultimately, the book recognises the tension between “more” and “enough” — between wanting the best and being satisfied with what we already have. They’re both deep-seated, evolutionary instincts, and, the author suggests, striking the right balance between the two is crucial to living a successful life.
In this interview, Brian discusses his motivations in writing the book, the connection between money and happiness, and how to find the right balance between striving for more and being content with enough.
Brian, how did you come to write this book, and what were you looking to achieve?
A combination of work and personal issues drove me to dig deeper on some questions related to money, happiness, and financial planning. Professionally, I speak with many financial advisers and their clients (people like you and me) about the psychology of money-related decisions. In many cases, I see the cart put before the horse – many technical, detailed, “in-the-weeds” conversations about markets and investing with at best a vague connection to the more important questions about what it means to lead a life well-lived. Most people don’t care much about which mutual fund they own, but they care deeply about answering the question, “Am I going to be okay?” Ironically, it’s often easier to talk about the former over the latter. On the home front, my kids are growing older. I look out at a world going through some big changes and I worry about whether they’ll be able to afford the life they want to live. I wanted to sort out some of these issues in my own mind so that I might be a better dad, to help them tackle the questions I know they (like everyone else) will struggle with.
In a nutshell, how does money play a part in a happy life?
To answer this, we have to start with a critical distinction: Rich versus wealthy. Rich is the accumulation of more money and psychology has firmly concluded that this quest for more is unsatisfying. Wealthy is the ability to underwrite a meaningful life, however you would define that (which is not easy). Wealthy is funded contentment. In The Geometry of Wealth, I elaborate on the core sources of meaning, what I call the “Four Cs”: Connection (social engagement), control (self-direction and definition), competence (being good at something you value), and context (attachment to something outside yourself). When our money lives – not just investing, but earning, saving, and spending – are thoughtfully attached to the Four Cs, then growing and staying wealthy is a real possibility.
How is the human brain wired for two distinct experiences of happiness? And why can money “buy” one but not the other?
A quick glance at a thesaurus suggests more than 20 words that are supposedly synonyms for “happiness”. It’s a semantic mess and philosophers have toiled for millennia parsing its various meanings. Boiled down, I believe there are just two major poles, what I refer to as experienced and reflective happiness. The first is the here-and-now, the good or bad moods, the short-lived pleasure or pain. The second is the step-back consideration of whether one is finding contentment or fulfilment in life, broadly defined. From a neural perspective, these are quite different experiences. The current research suggests that beyond a middle-class income, money does not buy more experienced happiness. Many of the external factors we often associate with happiness – riches, beauty, fame, success, popularity, possessions – are actually ephemeral. However, and somewhat controversially, the same research provides evidence that more money can buy more reflective happiness. Not only is more money associated with less sadness (which is not the same as more happiness, but is arguably more important), it can underwrite our pursuit of connection, control, competence, and context. Money does buy more happiness when spent wisely, especially when directed toward experiences, others, and time.
Can everyone actually afford to have a purposeful life?
Yes. It’s considerably harder for those who can’t make daily ends meet. But for those who can, there are numerous and wonderful opportunities to live our purpose. The hard part is mapping mindset to action, or purpose to practice. It’s one thing to come to grips with what is most meaningful, especially as we grow and adapt to a changing world. It’s a second thing to have a sound financial plan not only now but one that can adapt to change. But then the hard part – and what I map out in the book – is connecting both. Doing so is the flow of the “shapes” in the book: I try to articulate the path from purpose (circle) to priorities (triangle) to decisions (square).
When is enough money enough?
For some, unfortunately, never. Money, by choice or default, has become the measuring stick for their sense of self-worth. This in unhealthy. However, for those who have given some thought to what’s meaningful – and everyone is responsible for coming up with their own definition — enough becomes a comfortable state of being, both knowing and feeling that you’ve calibrated purpose with practice.
How does one strike a balance between striving for more while being content with enough?
Finding this balance speaks to the deeper tension in The Geometry of Wealth. As humans seeking fulfilment, we need to grow. Without growth, sadness and frustration are more likely. At the exact same time, being grounded in the moment – being present with a sense of contentment – is profoundly important. I believe that in today’s noisy world, presence is hard to find. You can see that moving forward and remaining still are awkwardly counterposed, maybe even incompatible. I think the best we can do is understand both modes, their importance as well as challenges, and ultimately find a rhythm in the back and forth between them.
About Brian Portnoy
Based in Chicago, Brian is currently the Director of Investment Education at Virtus Investment Partners, and he works with financial advisers and with individual investors. He was previously at Morningstar and Mesirow Financial. The Geometry of Wealth is his second book.