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    Money 2.0: The Rich and the Rest of Us

    Comparing ourselves to others is a natural tendency, but it can have positive and negative effects. Be aware of the types of comparisons you make and the impact of inequality on society and individuals.

    enMay 23, 2022

    About this Episode

    Where do you stand on the income ladder? Do you think of yourself as rich, as poor, or as somewhere in between? Our perceptions of wealth — our own, and other people's — can affect us more profoundly than we realize. This week in our Money 2.0 series, we revisit two of our favorite conversations about wealth and inequality. Sociologist Brook Harrington takes us inside the lives of the über wealthy and the people who manage their fortunes. Then, psychologist Keith Payne shares surprising research about income inequality and how it shapes our minds. 

    If you like this show, be sure to listen to the other episodes in this series, including our conversation about the mental scripts that shape our choices around money.

    Also, check out our new podcast, My Unsung Hero! And if you'd like to support our work, you can do so at support.hiddenbrain.org. 

     

    🔑 Key Takeaways

    • The ultra-wealthy lead drastically different lives and have access to different rules and lifestyles. Wealth managers help them hide assets and avoid taxes, widening the gap between the rich and everyone else.
    • Successful wealth management requires a balance of financial and legal knowledge with empathy and a willingness to go above and beyond for clients. Wealth managers facilitate private markets and maintain client privacy.
    • Wealth managers work to solve the complex family and privacy issues of the ultra-rich, even if it means breaking the law. They enjoy privileged lifestyles and socialize with powerful people, which showcases the growing gap between the rich and the rest of society.
    • Some wealthy individuals and their tax managers view taxes as theft and believe protecting wealth from taxation is just. However, conscious-stricken wealth managers have employed strategies to address inequality, although risking their replacement by challenging their clients.
    • Wealth can breed suspicion and impact relationships. Understanding how perceptions affect our happiness is key, whether we are rich or not.
    • Exposure to inequality can lead to disruptive behavior, such as air rage on planes, particularly if passengers are required to walk through first class. Boarding from the back can minimize hierarchical exposure and promote equality.
    • Comparing ourselves to those above us can inspire us to work harder, but it can also leave us feeling inadequate. Inequality in society can make it difficult to climb the social ladder and affects us in every aspect of our lives.
    • Financial inequality has measurable effects on society such as a stronger predictor of crime and political polarization after basic physical needs are met. It is a pervasive issue that should be addressed for the well-being of individuals and society at large.
    • People prioritize equality over personal wealth, but defining and achieving it remains subjective and challenging. This desire for fairness also affects decision-making in sports and can override economic logic.
    • Pay based on contributions is better than absolute equality. Transparency about pay can reveal hidden biases. Dissatisfaction with pay inequality is higher for lower earners. Negative feelings about discussing pay can have negative consequences.
    • Comparing ourselves to others is a natural tendency, but it can have positive and negative effects. Be aware of the types of comparisons you make and the impact of inequality on society and individuals.

    📝 Podcast Summary

    The Ultra-Wealthy: A Different World Amidst COVID-19

    The lives and mindsets of the ultra-wealthy are drastically different from the rest of us, and this gap is only widening due to the COVID-19 pandemic. Inequality shapes how we think about ourselves and others, and the ultra-rich have access to a completely different set of rules and lifestyles. Sociologist Brooke Harrington became a wealth manager and discovered that these professionals learn intimate details about their clients' private lives, including their secrets and illegal activities. This allows the ultra-wealthy to hide assets and avoid taxes. The gap between the rich and the rest of us will continue to grow unless substantive action is taken to address inequality.

    The Importance of Empathy and Client Loyalty in Wealth Management

    To become a successful wealth manager, empathy and a high tolerance for privileged clients is as important as finance and legal knowledge. Managers often go to extreme lengths to please their clients, such as finding a lost bracelet or procuring a large quantity of smoked salmon. These requests may seem childish or unreasonable but are often tests of the manager's loyalty and ability to fulfill outlandish requests. Wealth managers also play a key role in setting up private markets for high-value assets, such as real estate and art collections, and maintaining client privacy. While the very rich may have unique needs, their behavior often mirrors that of the rest of us.

    The World of Wealth Managers: Navigating the Privileged and Risky Lives of the Ultra-Rich

    The lives of the richest people in the world are vastly different from those of regular citizens. Wealth managers are tasked with dealing with complex family issues and maintaining their clients' privacy, even if it means breaking the law. For the ultra-rich, national borders and laws are insignificant. This reality carries risky consequences, including potential lawsuits, as well as a lack of accountability. Wealth managers often socialize with powerful people and obtain sensitive information firsthand, which underscores the lack of transparency for the wealthy. This level of privilege and immunity highlights the growing gap between the rich and the rest of society.

    The Ideological Divide in Wealth Management

    Many of the wealthy and their tax managers see taxes as theft and believe that their wealth creation initiative should be protected against the government. They view redistribution of collected tax as immoral, as it creates dependency on the part of the poor. A strong component of ideology exists in wealth management, where about a quarter of people interviewed really believe in the justice of protecting the wealth of their clients from taxation. However, there are those who are conscious-stricken about the larger impacts of their work, and have employed strategies such as encouraging clients to donate to charity or educating clients on the theory and practice of inequality. Most wealth managers are replaceable, which makes this a risky strategy to pursue with wealthy clients who are used to having people fawn over them and not challenge them.

    The Hidden Challenges of Wealth: Trust Issues and Perceptions

    Being wealthy may seem like a luxurious lifestyle, but it comes with its own set of challenges, such as constantly being suspicious of others. Wealthy people often feel that others are trying to take advantage of them and can only trust their employees because of the clear transactional nature of their relationship. Inequality not only affects our financial well-being but also significantly impacts our relationships, perceptions, and physical well-being. It's essential to understand how our perception of others' lifestyles can influence our own happiness and contentment in life.

    The Psychological Effects of Hierarchy and Status on Airplanes

    Exposure to inequality in everyday settings can have significant psychological effects on individuals, leading to disruptive behavior. Keith Payne discusses how hierarchy and status play a role in incidents of air rage on planes with first class cabins. The experience of walking through a status hierarchy on a plane can significantly impact an individual's behavior. Notably, planes that board from the rear of the aircraft experience fewer incidents of air rage in the coach cabin, as passengers do not have to walk past the first class section. This highlights the importance of creating environments that promote equality and minimize exposure to hierarchy and status.

    The Psychological Impact of Upward Social Comparison and Inequality

    Upward social comparison can cause feelings of envy and motivate to work harder, but it can also lead to feelings of inadequacy and frustration. The increasing scale of inequality in society can make it harder for individuals to climb the social ladder, resulting in a sense of brokenness. This dynamic occurs across all income levels, and the tendency to make upward comparisons is ingrained in human psychology. The effects of inequality can seep into every aspect of our lives, and it is crucial to understand its impact.

    The impact of financial inequality on our bodies and minds.

    Financial inequality not only affects our perception of ourselves and the world, but it also has measurable effects on our bodies and minds. In wealthy countries, inequality becomes a stronger predictor of crime and political polarization after basic physical needs are met. The impact of inequality on people's wealth and opinions causes them to favor free-market or redistribution policies and ultimately leads to increased polarization as each side views the other as a threat. These findings indicate that financial inequality is a pervasive issue that should be addressed for the well-being of individuals and society at large.

    The Human Desire for Equality and Its Impact on Wealth and Policy

    Despite economic logic suggesting otherwise, human desires for equality often lead to sacrifices in personal wealth if it means leveling the playing field. Studies have shown that a large majority of people prefer a more equal distribution of wealth, regardless of political affiliation. However, the way in which individuals view equality and inequality is highly subjective and intertwined with personal beliefs and identities, making it difficult to translate desires for equality into policy. Even in professional sports, extreme pay gaps and inequality among players does not necessarily lead to better team performance. The human desire for relative entitlement and fairness can override economic reasoning and have significant impacts on individual and collective behavior and decision-making.

    Compensation and Pay Transparency in Team Sports

    Compensation in proportion to contributions is better than absolute equality for team sports. Pay transparency reveals underlying assumptions about pay inequity and performance. People who are below average in pay are more dissatisfied with pay inequality than those who are higher up. Social norms surrounding discussing pay inequality reflect negative feelings that can have bad outcomes.

    The Psychological Consequences of Social Comparisons and Inequality

    Visible and transparent inequality can lead to a greater feeling of distance between social classes, lower levels of trust, and increased polarization. However, comparing ourselves to others is inevitable and can have both positive and negative outcomes. Strategic upward social comparisons can motivate us, while downward social comparisons can provide a break from stress. It is important to be mindful of the types of comparisons we make on a daily basis and to recognize the psychological consequences of inequality at both the societal and individual level.

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