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- Reasonable, not Rational
Every few months, I experience a surge of inspiration to start something of my own. The ideas are always related to empowering women and marginalized communities holistically. I fundamentally believe that in the world we live in, financial health is the access card to the world. And I’m not talking about having millions to buy luxury goods, but possessing financial security to do more than just sustain a livelihood. It is about uplifting yourself and the people around you, because life is not a zero-sum game.
This means different things to each person. While one dollar is objectively $1, there is a subjective value of a single dollar (or whatever currency you use) that is based on priorities and non-negotiables in your life. It varies based on the country you live in, the culture and values you were raised in, and the circumstances that life has offered to you; it’s unique to each person and so many companies today are trying to create a one-size-fits-all solution. My own financial priorities and investment strategies differ from most of my loved ones and people I grew up around!
I’ve always been introspective around my own relationship with money and even moreso after I started my career. Specifically, I’m intrigued by its ability to subconsciously affect many, if not all, of our life decisions, even when they don’t directly relate to money. There is so much knowledge circulating the Internet and bookstores around wealth building and money creation. With exceptions to the recent times with books like The Psychology of Money and Women with Money, I’ve found most books relating to personal finance are devoid of emotion. But since the ripe age of ten, I’ve had an intimate relationship with money and knew of its emotional undertone. Seems like I’m not the only one to think so:
Why are most divorces the byproduct of financial disagreements?
Why do people in a room go mute when someone brings up their salary?
Why does money become less tabooed of a conversation only after someone has experienced a life-altering event, like the death of a loved one?
I wanted to see beyond what the eye captures to get a deeper understanding of how people look at money and how that impacts their lives. Thus, I ended up conducting interviews with a small group of individuals to gauge their relationships with money. This was by no means a real scientific study, as the sample of people interviewed either come from or are now in privileged positions. But, I thought to start small before expanding my sample. I saw that amongst this group, most if not all people said:
Associated positive or negative emotions with “money” and/or “lack of money.”
Influenced by at least one of their parents around their financial outlook.
Believed wealth is equivalent to long-term freedom and autonomy.
When people hear an emotion in the same sentence as money, alarm bells start ringing in their head because money was always taught to be a rational decision. We think our financial decision-making is a purely rational, logical process because numbers can’t be emotional. But decision-making is. It’s similar to an idea Johnathan Haidt discusses in his book The Righteous Mind: Why Good People Are Divided on Religion and Politics.
Let’s talk about morality
For the longest time, moral psychology in America was focused on rationalism, where psychologists believed reasoning is the most important and reliable way to determine what’s right and wrong. However, Haidt always thought psychology studies were dry and had no mention of emotion or feeling in any studies. He was already familiar with David Hume’s work, a Scottish psychologist, who went against the grain and believed in moral sentimentalism. Hume disagreed that reason alone dictates morality, but rather our feelings and emotions play a crucial role. In other words, moral judgment is a cognitive process, consisting of both intuition and reasoning. But this was deeply rejected by scholars and scientists given the Western focus on reason as the foundation of morality. Philosophers like Plato and Kant believed that humans should rise above their emotions, as they have the ability to cloud our judgment; true moral decisions came from applying reason to ethical principles.
Traveling to India, Haidt was only further intrigued by the role of emotions in morality; it challenged the American studies’ focus on rationalism because Indian morality focused on community rather than individualism and deference to hierarchy rather than autonomy. Upon experiencing this type of morality for the first time, he was shocked and uncomfortable. However, removing his Western philosophy lens, he realized all the moral psychology studies he’d read up until that point were focused on America. Obviously good people exist throughout the entire world, and restricting morality to American studies does not account for the coexistence of multiple moralities. He coined the reasoning as rationalism debate as the “rationalist delusion”; making reasoning the most noble attribute is a trait that makes one like the Gods or brings up beyond the delusion of believing in the Gods. This can create an inherent and almost arbitrary caste system in a society where the rational caste consisting of philosophers and scientists is superior (for the sake of this piece, let’s include the financially empowered in here too).
Instead, Haidt created the “social intuitionist model.” Rather than reasoning being the foundation for humans making their way in this world, he hypothesizes that we make an intuitive judgment and use post-hoc reasoning to justify our “rational” response. He analogizes this to an elephant and its rider, where our rational side is the rider and our emotional side is the elephant. The rider strives to be in control but in reality, the elephant’s power often dictates our initial intuitive response to situations, and the rider aids our post-hoc reasoning to justify our decisions (for a more visual approach, check out this video).
Similar to Haidt, Morgan Housel directly talks about this in The Psychology of Money in the chapter: Reasonable, not Rational. He discusses how it’s okay to make financial decisions partly by how you feel, aka not 100% rational. The example he provides is paying off your mortgage up-front vs. spending a few more years while investing. He experienced this first-hand himself. While the latter option may be more “rational,” he chose the former option because it allowed him to sleep better at night! That introduces another topic called risk tolerance, but we’ll get into that another day 😉 He’s not encouraging individuals to act on a whim and make impulsive decisions, like dropping thousands for the newest Apple gadget on the market when you’re in debt. Circling back to the elephant and rider analogy, I’m not encouraging folks to make financial decisions entirely controlled by our intuitive response either. We can use our rational side to help aid our decision-making and still make reasonable decisions; we’d be lying to ourselves if we denied the role of our emotions with respect to our financial health. And with that said, you don’t need to feed into the narrative that you shouldn’t buy the latte to build wealth; if you like coffee, buy the fking latte.
Closing thoughts
To end this piece, I want to leave you all with a few questions to ask yourself surrounding money & wealth:
What does wealth look like to you?
Why does wealth look like that to you?
What does an abundant life look like to you?
Does that align with your wealth expectation?
What are your non-negotiables in life?
What emotions do you associate with money?
What emotions do you associate with a lack of money?
Do you feel comfortable talking about finances with your family, friends, acquaintances, strangers?
Why do you think you feel this comfort/discomfort?
Does this further incentivize/disincentivize you from having more conversations?
How much does your financial health affect which career you choose?
How much does your financial health affect the type of life you want to lead?
If you feel comfortable sharing, please dm me on Instagram at betweenthebuzz@ 💛
I’ll be sharing books, media & companies that I believe are changing the financial landscape. Stay tuned :)
until the next 🐝 & with 💛 ,
Sneha
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