This column is part of Globe Careers' Leadership Lab series, where executives and experts share their views and advice about leadership and management. Follow us at @Globe_Careers. Find all Leadership Lab stories at tgam.ca/leadershiplab
Every day we make tradeoffs. Some appear small, like eating a quinoa salad for lunch instead of a pastrami sandwich so you can shed a few pounds before summer. Other tradeoffs are more important, like working longer hours to increase your bank account and climb the socioeconomic ladder, foregoing spending time with family and friends. Generally we are aware of the tradeoffs we are making. However, as you climb the socioeconomic ladder, you might be unaware that you will be leaving your empathy, compassion and charitable spirit below you.
This is your brain on money.
The effect of money on empathy
In an illuminating Tedx Talk, social psychologist Paul Piff shares a number of shocking studies on the influence money and greed has on behaviour. Mr. Piff begins his presentation by showing videos of people playing Monopoly. However, this is not your average game. One player is given twice the amount of money, able to collect more money passing Go and can use three dice. The video shows that as the game progresses the people with the most money become the people with the most deplorable behaviour. They are rude, aggressive and arrogant. At the end when asked why they won, the respondents who were randomly given advantage said it was because of their hard work and smart decisions.
So, people who have an advantage in Monopoly are mean – what does that mean for real life?
Mr. Piff and colleagues find that those who are lower on the socioeconomic ladder value communal relationships and are more empathetic and compassionate than those higher on the socioeconomic ladder, who value individual achievement and self-interest.
The effect of money and greed on ethical behaviour
Imagine the following day. You have a big negotiation coming up with an influential and successful business executive. On your way to the negotiation, you are stopped at four-way intersection – you got there first but a Mercedes-Benz S-Class cuts you off. Later, you see the same car blow right through a crosswalk ignoring the pedestrian on the corner. You arrive at the negotiation and notice the successful business executive is the owner of the Mercedes-Benz. Your anxiety builds, as this is not the type of person you want to be negotiating with. During the negotiation, unbeknownst to you, the executive lies and gives you an unfair deal. As a final straw, you see the executive steal candy from a candy donation display that raises money for children. If this story seems impossible, I have bad news for you. Mr. Piff and colleagues found that each of these things were more likely to happen the more money you made – even stealing candy from children.
The effect of money on volunteering and prosocial spending
Can how you are paid influence how much you volunteer?
A study conducted by Sanford DeVoe and Jeffrey Pfeffer found that individuals who are paid hourly or bill their time are less likely to volunteer. In another experiment they conducted, individuals who billed their time in the experiment were less likely to send letters to the sick children than those who did not bill their time to volunteer. Remember this the next time you bill your clients.
Does the way we spend money change our happiness?
Research by Elizabeth Dunn, Lara Aknin and Michael Norton has found that those who spent money on others rather than themselves reported greater happiness. In addition, in an experiment where individuals were given money and told either to spend it on themselves or on someone else, those who engaged in prosocial spending – spending it on someone else – reported the greatest levels of happiness. Moreover, this effect has been replicated in 136 countries.
What is the ideal society?
Do we want a society where greed makes people less empathetic, compassionate and ethical? When we see inequality and unfairness, what should our response be?
If you think that unfairness and inequality are not issues, I urge you to watch this video of two monkeys receiving unequal payment. The monkey who received unequal pay for equal work is visually angry at the experimenter. Other primates are angered about inequality, what do we think?
Michael Norton and Dan Ariely find that Americans believe wealth is more evenly distributed than it is and would actually prefer it to be more evenly distributed. And these effects were true for all income levels. Sorapop Kiatpongsan and Michael Norton then found in a study of 55,000 people from 40 countries that people dramatically underestimated pay inequality between a CEO and a low-skilled worker. Estimates of pay ratios between CEOs and unskilled workers ranged from 3.7:1 to 41.7:1. People's ideal ratios ranged from 2:1 to 20:1. However, these estimates and ideal ratios are far from reality. In the United States the pay ratio of CEOs to unskilled workers is 345:1.
Self-awareness is key
Our ideal world is much different than the world we live in now. As you pursue your economic self-interest, remember there are tradeoffs. Understand the true cost of earning more money. When you make individuals high on the socioeconomic ladder self-aware and remind them about those lower on the ladder, emphasizing charity and compassion, the negative effects of greed go away. The key to a better society is to remember we are all in this together.
Justin Weinhardt, PhD, (@OrgPsychologist) is an assistant professor at the University of Calgary's Haskayne School of Business (@haskayneschool). He is an expert in human resources and organizational psychology, and has a particular interest in understanding how motivation and decision-making change over time.