Happiness = Reality - Expectations
From love to money, the secret to happiness and good decision-making could have to do with how much success you feel entitled to.
What is the secret of successful marriage? It is not the looks, the money, the intelligence, or anything else. The secret to marriage is low expectations.
- Charlie Munger
For a crass but funny version of this secret, Bo Burnham has a song with the same title as this post. Buyer/clicker beware: it contains "mature" lyrics (by which I mean "immature"). Tim Urban's formula is that happiness = reality - expectations. Let's go with that. I think that it is about right and that it works for love and money.
In the US, the national median age is currently about 38 years old, which was the same age as the life expectancy from birth in 1850. So if you are middle aged by today's standards, for most of human history, you would have already been dead. From the perspective of evolutionary biology, you have already served your task of passing on DNA. With your task complete, you are no longer of any particular biological concern to the species. I am 39 years old - from here on out, it is all upside.
The world per capital GDP is around $13,000. If you earn an average American wage, you make over 3.3x this amount - as much as six Thai cleaners or thirteen Ethiopian teachers. You may have little or no interaction with such people, but it is likely that you are having a much better year than they are, even if you complain about your bonus at the end of it.
In terms of bettering your wealth, the best prospects come from saving and investing over time. However, based on the current market cap compared to the US GDP, prior returns indicate that your prospective return will probably be around +1% per year (and that includes dividends). Based on the market's Shiller P/E ratio, it would be somewhat lower. The likelihood that the 21st century US equity market will match or exceed the 20th century's is approximately zero. If your life happiness is based on a repeat, there are overwhelming odds that you will be disappointed.
Expectations: Modern High-Def Celebrity Worship
While life in the developed world is objectively far better than any other time in history, people are not far happier. One problem is that modern technology combined with modern culture allows regular people to live voyeuristic lives in which every detail of celebrity elites get live streamed in high definition.
Comparing one's life to celebrities with the most Twitter (NYSE:TWTR) followers such as Rihanna (57 million followers) and Taylor Swift (72 million followers) is unlikely to make you feel happy. It is likely to make you feel some combination of old, fat, poor, ugly, alone, and without much romantic appeal. Based on this standard, you would be right. For much of history, you would not have nearly as much idea of how elites live. Now you can live vicariously through them and it will make your non-virtual reality suffer in comparison.
What good is envy? It's the one sin you can't have any fun at.
- Charlie Munger
Envy is everywhere. Envy is the core to socialism - socialist campaigns are designed to make people feel terrible because they don't have other people's stuff (with the implication that they should organize in order to take it). Exacerbating this envy is the key to socialist political efforts.
But envy is also a big part of capitalism (in its ugly, modern consumerist iteration). The advertising industry is so effective at manipulating people to feel bad about not having stuff that it is virtually impossible to be inundated by it without being infected. My only solution has been to opt out of exposing myself and my family to it as much as possible.
This destructive and miserable envy comes from constantly comparing and from worrying about one's inequality. If I fixated on relative performance, I would feel the same way. Free stuff that I want and other people have? My list would be endless - filled with islands and airplanes that other people have. I want them and they are better than mine. But once someone turns four or five years old, they should simply set aside the topic of inequality. Invest - and live your life - based on absolute returns regardless of what others have. Do what makes the most sense in absolute terms regardless of what others do.
The inverse of expectation is gratitude. If you have historically realistic expectations for what life should be like, your life will be filled with joy and mirth whenever you outperform. Whenever fellow podcaster Dave Ramsey is asked how he is doing, he answers that he is "better than I deserve". I try to remind myself that every day I am alive is better than I deserve. I try to raise my kids that way, too.
Oh, and as for the reality of a McDonald's (NYSE:MCD) Big Mac, it looks like crap… compared to what you are told to expect. But it would be the best looking thing that any of the world's 795 million malnourished people have ever seen.