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Business Journal

Are You Happy Now?

A Q&A Daniel Kahneman, winner of the 2002 Nobel Prize in economics and author of Thinking, Fast and Slow

It took a psychologist, Daniel Kahneman, Ph.D., to show economists how wrong they've always been about human decision making. For centuries, economists have based most of their theories on the rational-agent model, which assumes that people make reasonable decisions and do simple cost/benefit analyses on the things they buy. They don't. Dr. Kahneman's research shows that more often than not, decisions are based on perception, context, and faulty reasoning -- all of which can be manipulated. For his groundbreaking work, Dr. Kahneman was awarded the Nobel Prize in Economics in 2002. (See "The Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel 2002" in See Also.)

But now, Dr. Kahneman -- the Eugene Higgins Professor of Psychology at Princeton University; a professor of public affairs at the Woodrow Wilson School; and a Gallup Senior Scientist, one of a cadre of leading scientists who lend their expertise to Gallup research -- is turning his attention to a whole new realm: the study of well-being. (See "The Power of Positive Psychology" and "The Power of Positive Management [Part 1]" in See Also.) Noting that there's enough to discover to occupy him for the rest of his working life, Dr. Kahneman is studying what makes us happy -- and what doesn't.

PHOTO: Nobel Prize winner Daniel Kahneman calls wellbeing

Dr. Kahneman calls well-being "the ultimate big problem," and he's working with Gallup to develop strategies to understand and measure psychological and physiological well-being. Already, the work has turned up some compelling discoveries, including the fact that though your lips may say yes to workplace satisfaction, your prefrontal cortex may say no -- and the cortex never lies.

This has implications for all humans, but especially the ones who run businesses. In this, the second of a two-part series, Dr. Kahneman discusses matters such as why you shouldn't bother moving your operations to California for the climate, and how negative emotions are actually quite rare. He also relates that he's exploring why your French customers never seem satisfied.

GMJ: Though you won the Nobel Prize for economics, one of your major research interests is well-being. How do you measure someone's well-being?

Dr. Kahneman: Well, there are many approaches to the measurement of well-being. The standard ones are to ask people how satisfied they are with their lives. My colleagues and I have been thinking of other ways of measuring well-being, in particular by trying to identify how people spend their time, to what activities they allocate their day, and how they feel about those activities. It's a much more detailed description of people's lives.

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But it turns out that there are some physiological indices that show a great deal of promise for the measurement of well-being and emotional states. There is a wonderful gauge of affective emotional state that you measure by the amount of activity in the prefrontal areas of the brain. It turns out that in the human brain, the left prefrontal area is sort of the happy one and the right prefrontal area is the more, well, measured one. By comparing the balance of activity in those two areas, you get a very good idea of people's emotional state. It's true for babies, and it's true for adults -- the relative activity of those areas changes when people are in a good mood or in a bad mood.

In my academic research this spring, I will be running a study comparing the well-being of populations in France and in the United States. So by next year, we're going to have fairly extensive measurements in France and in the United States, or at least we hope so. I expect that quite a few people will be interested in the results, including people at Gallup.

GMJ: What do you think you'll find?

Kahneman: Well, we know that the French are very different from the Americans in their satisfaction with life. They're much less satisfied. Americans are pretty high up there, while the French are quite low -- the world champions in life satisfaction are actually the Danes. And yet, when you look at the way that the French live, they seem to have pretty good lives. You know, they spend their time in ways that I think many people would envy.

So the question becomes: Where do those differences in life satisfaction come from, and what is their significance? I expect that we'll replicate the standard differences in life satisfaction [ratings], but I expect that we'll find far fewer differences or perhaps no differences at all in the physiological measurements. And we may just find that the French have better lives in the sense that the activities to which they allocate their time may be at least as good, if not better, than the American ones.

GMJ: Is it possible that the French are just more fatalistic when they respond to the questions you ask them?

Kahneman: Well, they're certainly more negative. They're more negative in their responses to many questionnaires, and this is something we're trying to understand. That's a project that I'm doing at Gallup in collaboration with Robert Manchin of Gallup Europe and Norbert Schwarz of the University of Michigan. We are hoping to figure out why the populations of some countries express much higher satisfaction with their life in general -- with their health and with different aspects of their lives -- so we're beginning a large-scale study of that problem. If we're successful, then it would allow some correction of differences in measures across countries.

It would actually be very useful to have a scale that is calibrated so that multinational companies can compare data across countries. There are cultural attitudes that affect positivity, and there are differences in how people report positivity, and companies need to understand them. You know, in some countries, people appear to be whiners or complainers unless they give very positive responses, while in other countries, people appear rather naïve or stupid if they give very positive responses.

GMJ: Could we use your research here at home? Americans have a lot of trouble understanding the different cultures within our own country -- a culture half a mile away may not make sense if you don't belong to it.

Kahneman: Well, that is very interesting. If we were able to develop measures that predict or explain differences across languages or across cultures, then of course we would turn around and try to do the same thing within the United States. But we first have to solve, or sort of make a dent in, the problem across languages and across cultures. But ultimately, certainly the hope would be to apply the same logic to differences within the country.

QUOTE: Americans are high up in life satisfaction, while the French are quite low. The world champions are the Danes.

GMJ: What are the practical implications for business?

Kahneman: It's clear that policymakers and economists are going to be interested in the measurement of well-being primarily as it correlates with health; they also want to know whether researchers can validate subjective responses with physiological indices. It would have a huge effect on workplace health, insurance, productivity, engagement -- and other things, too, I suspect.

GMJ: You've mentioned that perception and context can greatly influence people's responses, and it isn't difficult to change perception and context -- your own or someone else's. How do you work around faulty perception of well-being?

Kahneman: The particular approach to well-being measurement that I've been involved in tries to get around the issue of context by getting people to remember one day in great detail. Specifically, we get people to think about the day they had yesterday from morning to evening, then try to recall what they did and how they felt about it.

GMJ: What is it about well-being or positive psychology that intrigues you?

Kahneman: Oh, this is the ultimate big problem. It's what people are trying to do with their lives; they're trying to achieve some kind of well-being. So it's a very natural thing to be interested in.

My interest in well-being evolved from my interest in decision making -- from raising the question of whether people know what they will want in the future and whether the things that people want for themselves will make them happy. And I have doubts about people's ability to predict their future tastes or to make choices that will make them happy in the long run.

There's a lot of randomness in the decisions that people make. I think people are quite often wrong in predicting how they'll feel about the outcome of the decisions they make. They tend to exaggerate the emotional result of almost anything they do. Nothing in life is quite as important as you think it is while you're thinking about it. So just thinking about any change that you want to make in your life tends to make you exaggerate its importance.

GMJ: But we have to make decisions about our future all the time. I was told that the most important decision you'll ever make is whom to marry, because it will influence every aspect of your life. And how can you ever guess how that will turn out?

Kahneman: It's actually tricky. Of course, the main determinant of happiness is not whom you choose to marry but whom you choose to be your parents. A lot is determined by genetics, character, and temperament. Other effects exist, but they're not huge. Temperament and character are the main determinants of happiness.

You know, the standard state for people is "mildly pleasant." Negative emotions are quite rare, and extremely positive emotions are rare. But people are mildly pleased most of the time, they're mildly tired a lot of the time, and they wish they were somewhere else a substantial part of the time -- but mostly they're mildly pleased.

GMJ: So if we're mostly wrong when we predict what will make us happy, how come we're most often mildly pleased?

Kahneman: It's called the phenomenon of adaptation. In general, the differences between groups of different circumstances are much smaller than you expect. So, for instance, paraplegics tend to be much less miserable than people expect, and lottery winners are much less happy than people expect. And I think that we have a handle on what is happening there.

What we believe now is that, to a large extent, you change what you pay attention to over time. So, when you're first married or first become a paraplegic or whatever, that is what you think about most often. If you aren't paraplegic and think about what being a paraplegic is like, then you're always miserable while you're thinking about it. But if you are a paraplegic, you will gradually start thinking of other things, and the more time you spend thinking of other things, the less miserable you are going to be. That's why you tend to exaggerate the effect of paraplegia if you aren't one and think less about it if you are one -- because paraplegics are not full-time.

So your emotional state really has a lot to do with what you're thinking about and what you're paying attention to. Adaptation seems to be, to a substantial extent, a process of reallocating your attention. Many years ago, we did a study in which we asked people if they would be happier if they lived in California. Most people think they would be, and that's because the climate is better in California. And people in California think they're happier than people who live in other places. But when you actually measure it, you don't find it. Non-Californians are just as happy as Californians. In fact, when you live in a place, you don't think about its climate very much. You don't think about any of its characteristics very much. You just go through your day.

GMJ: Do you see positive psychology as a new long-term project for you?

Kahneman: Well, you know, this is certainly going to be my last long-term project. I'm approaching retirement, and there is enough to be done on the study of well-being to keep me working for the rest of my life.

GMJ: It must make you happy.

Kahneman: Yes, it does.

-- Interviewed by Jennifer Robison

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