Mind Your Money The Perception of Wealth, Expectations Debt of AI, and Better Investment Decisions | Cass Sunstein
Jul 20, 2023
Cass Sunstein, Harvard professor, talks about perception of wealth and social networks, hidden debt of early success, and the hype around artificial intelligence. He shares two ways to make better investment decisions, discusses belief formation, and highlights the power of desirability bias.
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Wealth Is Relative To Your Local Reference
- People define 'rich' relative to local costs and peers, not by absolute numbers.
- A $2.2M net worth or $1M income reflects housing and regional reference points, not universal truth.
Life Stage Shapes Feeling Rich
- Age and responsibilities radically change perceived wealth; early paychecks feel richest when expenses are nil.
- Comparing 19-year-olds to 39-year-olds conflates very different life stages and expectations.
First Paycheck Felt Richest
- Morgan Housel recalls feeling richest at 17 after his first paycheck working at Denny's.
- The memory shows how low expenses and youth can create oversized feelings of wealth.