Something You Should Know - SYSK Choice: Your Mindset About Money & How Looks Matter

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Starting point is 00:00:27 Download June's Journey now on Android or iOS. Today on Something You Should Know, why believing you're healthy seems to make it so. Then, how you think about money and why it's often so hard to manage. There's never a sense of enough for most people and to me the most important but also the hardest financial skill is getting the goalposts to stop moving. It's very difficult to do but if you think about it that is the only way to gain any sort of happiness with the money that you have. Also when was the last time you cleaned your car seats? I

Starting point is 00:01:02 mean really cleaned them and have you ever noticed how attractive people often seem to get better treatment from just about everyone? We prefer to deal with better-looking people. We prefer to sell to them. We prefer to buy to them. We prefer to be employed by them. We prefer to work with them. That's the basic reason. Of course, the question is why we care about the person's looks. All this today on Something You Should Know. This winter, take a trip to Tampa on Porter Airlines. Enjoy the warm Tampa Bay temperatures and warm Porter hospitality on your way there. All Porter fares include beer, wine, and snacks, and free fast streaming Wi-Fi on planes with no middle seats. And your Tampa Bay vacation includes good times,

Starting point is 00:01:52 relaxation, and great Gulf Coast weather. Visit flyporter.com and actually enjoy economy. Something you should know. Fascinating intel, the world's top experts, and practical advice you can use in your life. Today, Something You Should Know with Mike Carruthers. Hi, and welcome to Something You Should Know. Thank you for listening. And I'm quite sincere about that because given the number of podcasts that you could listen to, the fact that you're listening to this one right now is very much appreciated. First up today, we're going to talk about the placebo effect. I've always been fascinated by this because it does seem to be

Starting point is 00:02:38 real powerful medicine. And here's some more evidence to make that case. A British doctor did an experiment. He told half his patients who came in with minor ailments, he said, I definitely know what's wrong with you and it will definitely get better. He told the other patients with minor ailments, I really can't figure out what's wrong with you, but just go home and you'll probably be fine. The patients who got the positive and definite advice got better faster at twice the rate of the others. Why? No one knows exactly why. No one knows how the placebo response

Starting point is 00:03:15 works. But believing you are healthy seems to help make and keep you healthy. In fact, reassurance from your doctor that you're alright may be some of the best medicine you ever get. And that is something you should know. Everyone has a unique relationship with their money. Money means different things to different people. We handle it in our own way. And it's interesting to me that sometimes I'll hear

Starting point is 00:03:46 financial experts talk about what you should do with your money. What's the financially savvy thing to do? And it might be financially savvy, but it doesn't necessarily sound right for me. I guess that's because money is so personal. When we talk about money, we often talk about the math of money, but not the psychological and the behavioral aspects of money. But that's exactly what Morgan Housel talks about. Morgan is a partner at the Collaborative Fund. He's been a columnist for the Wall Street Journal and the Motley Fool, and he's author of a book called The Psychology of Money.

Starting point is 00:04:24 Hi, Morgan. Thanks so much for having me. Since everyone has their own relationship and their own attitudes towards money, where do those attitudes come from? I imagine from childhood or whatever, but where do we typically get our thinking about money? I think it's two things. One, you just hinted at in terms of their childhood. And the important thing that's really moves the needle here is that everyone's childhood is different. Let's not just confine this to childhood. Your early years, particularly from your young teens to your mid-20s, those tend to be your impressionable, formidable years where you

Starting point is 00:05:02 are learning kind of a baseline knowledge about how money works, how the economy works, maybe how the stock market works. That's when people are doing their learning, setting their beliefs. And setting is the right word because they kind of tend to get set in stone. And obviously, everyone's experience during those years is different based off of different generations, different countries that you live in, the values of your parents and your teachers, the socioeconomic status of your parents growing up. All of those things differ from person to person. And therefore, a lot of people, it's not like we're learning about math, where in math, two plus two is four no matter who you are, what generation you're from, where you live. It's the

Starting point is 00:05:39 same answer for everybody. Whereas finance, people come to vastly different conclusions. Even people who have the same education, the same information, the same mental capacity can come to vastly different conclusions because they see the world through a different lens and they see the world through a different lens because their upbringing was different from one another. It also seems in addition to how you were raised and what your experiences were, it's also important when they were, what era more or less you grew up in. Let me give you one kind of stark example of this. If you were born in 1950, then the stock market during your teens and twenties went nowhere, even adjusted for inflation over time. During your teens and twenties, the market basically flatlined with a lot of volatility. You had zero return at the end of your 20s. If you were born in 1970,

Starting point is 00:06:30 the stock market went up tenfold in your teens and 20s, completely different return. And those experiences stick with people. And therefore, when those people later on in their career debate with each other, often the source of that debate is just because they see the world through a different lens and money and wealth and goals and opportunity and risks mean very different things to very people, to different people who have different life experiences. But it does seem that at the heart of much of this is this feeling that I need more money. I need to invest my money so it makes more money. I need to earn more money.

Starting point is 00:07:09 More, more, more is never enough. Right. There's this great story from Daniel Kahneman, the famous psychologist who won the Nobel Prize. When you win the Nobel Prize, you do fairly well for yourself financially. I think just the prize money is a million dollars and then you have all the opportunities from there. Anyways, Daniel Common went to a financial

Starting point is 00:07:27 advisor, uh, after he won the Nobel prize. And he told the financial advisor, he said, I have no desire to earn more money. I just want to keep safe what I have. I don't, I have no desire to grow my money at all. And the financial advisor looked at him and said, I can't work with you just because that was such a foreign idea to the foreign idea to the financial advisor. The idea that you did not want to be richer did not make any sense to this financial advisor, but it made sense to this Nobel Prize winning psychologist. So you're right that there is that there's never a sense of enough for most people. And to me, the most important, but also the hardest financial skill is getting the goalposts to stop moving. It's very difficult to do, But if you

Starting point is 00:08:05 think about it, that is the only way to gain any sort of happiness with the money that you have is to be able to earn more money and have that accrue to making your life better, not necessarily buying more stuff or inflating your aspirations. That's a really tricky one, but actually just having more money and saying, great, like I was already satisfied having X, but hey, now I have X plus one. So that's just a bonus. That's just a cherry on top. That's great. That's the only way to actually build wealth over time. It's a really simple, obvious statement, but the only way to grow wealth is to spend less money than you make. And the only way to spend less money than you make

Starting point is 00:08:37 is if your income does not grow or is, is if your income grows faster than your aspirations, really simple idea that should shock no one, but it is so easy to overlook. And then if you are lucky enough, fortunate enough to go on to earn a lot of money from your salary or from your investments, whatever it is, you're not going to gain much pleasure out of that if your aspirations grow in lockstep. That is a lot of why here in the United States in 2020, or let's say pre-pandemic to make this clean, let's say in 2019, the average American, the median American adjusted for inflation was earning almost twice as much money as they were in the 1950s.

Starting point is 00:09:11 Median inflation adjusted incomes doubled. Now, there's some nuance to that because the average household has more people working in the household. There's a little bit of nuance. But the average household adjusted for inflation is earning twice as much money than they were in the 1950s. But were they happier? Were they more satisfied financially?

Starting point is 00:09:28 No, there's no evidence that they were. And to me, the best explanation for that is that people's aspirations are just so much greater than they were in the 1950s. If you look at just something like the median house size, it has more than doubled since the 1950s. So even though we're richer, we have a greater desire, a greater baseline expectation of what we expect. So that's why just being able to keep the goalpost in place, or if not in place, just growing, just making sure the goalpost moves slower than your income

Starting point is 00:09:57 is the only way to gain a lot of satisfaction and happiness from the money that you earn over time. That's just true whether you make $20,000 a year or $20 million a year. And yet people struggle with it. It makes all the sense in the world when you say it, well, why wouldn't you do that? But people don't. Why don't they? I mean, so much of money is more than money. I mean, if at the most practical sense, money is a tool to buy stuff, of course, but it is so much more than that. Because a lot of times we want to buy stuff to prove our social status, to put out our peacock feathers, to attract a mate, a spouse. There's so many other nuances of what money is. A lot of times, particularly for people with a higher income, it's just a scorecard for how well you're

Starting point is 00:10:39 doing at life. So it goes so, you know, water is a utility. You get thirsty, you need it, you drink it. And that's the end of what we think water is. But money is so much more. It's a scorecard. It's a social status in a way that water or food is not. You know, something like water or air is purely utility. It does nothing else other than exactly what it's supposed to do. Money is such a deeper, complex issue in life.

Starting point is 00:11:04 And that's why having enough is so difficult. Because if you say, just to keep the numbers clean, let's say you're making $100,000 a year, you might aspire to make $200,000. And let's say you're fortunate enough to earn $200,000. As soon as you hit that level, you're going to start looking at people who are earning $400,000 and saying, well, that's my next, that's my competition. And then let's say you make $400,000. The moment you get there's my next, that's my competition. And then let's say you make 400,000. The moment you get there, you're going to start looking at people who make 800,000. That treadmill never, ever ends. There are billionaires who do not feel that well off because they socialize with multi-billionaires and multi-billionaires who don't feel that well

Starting point is 00:11:40 off because they socialize with deca-billionaires. It never, ever ends. Well, even though, as you just described, there is this almost human desire, I guess, to want more money no matter how much you have, there's also, since we're talking about the psychology of money, there's also that feeling that I have felt, and I know other people have felt, of having money in the bank. There's something very comforting, secure feeling, knowing that there's cash in the bank, even though putting money in the bank may not be the best place for it in terms of investing it or growing it, but there is that feeling of security.

Starting point is 00:12:21 I wrote in the book I wanted to be kind of open about my personal finances. I didn't give any numbers, but I wanted to open the kimono about what my wife and I do with our money. And I wrote in the book that we do not have a mortgage on our house. We paid off our mortgage, which I write is the worst financial decision we've ever made. Because you can get a 30-year fixed rate mortgage for 2.9%. It's ridiculous. There's no way that I can justify doing that. I should have doing that. I should have taken that money and invested it in the stock market where I know I'm going to earn a higher return. On paper, it's the worst financial decision we've made because it makes a very sizable share of our net worth. But it is the best money decision that we've ever made.

Starting point is 00:12:59 It is the one thing that my wife and I have done with our money where we high-fived each other and said, oh my gosh, I can't believe we did it. This is so cool. This is amazing. This house is ours. It belongs to us. The bank can't ever take it away from us. The bank's not involved anymore. No one can ever kick out our kids. This is ours. It gave us the greatest amount of joy that I think we've ever done with anything with our finances, even though it's the worst thing we've done with our finances. So back to your point, yes, having money in the bank, giving yourself options in the future, I think gives a lot of satisfaction, even if you can't justify it on a spreadsheet. To me, and again, this goes back to everyone's different, but to me, I just don't have any desire to maximize the return I earn on my money. I want

Starting point is 00:13:42 to earn a great return and I'm going to be compounding in the stock market for decades. Don't get me wrong. But what I really want to maximize for is how well I sleep for at night. That's what, to me, that's the whole purpose of money. It's like, how can I give myself a better life? First principles. That's what we're trying to get done here. And for me, having a better life for me was just being independent. And I wouldn't even necessarily recommend other people do that. What I would recommend is that you really try to figure out what you're trying to do with your money and maximize for it, even if it does not make sense in a spreadsheet.

Starting point is 00:14:12 We are talking about money, specifically the psychology of money, how you think about it, how you spend it, how you save it. Morgan Housel is my guest. He's been a financial columnist for the Wall Street Journal, and he's author of the book, The Psychology of Money. Ugh, who knew you could give yourself the ick? That's why Bumble is changing how you start conversations. You can now make the first move or not. With opening moves, you simply choose a question to be automatically sent to your matches. Then sit back and let your matches start the chat.

Starting point is 00:14:56 Download Bumble and try it for yourself. Since I host a podcast, it's pretty common for me to be asked to recommend a podcast. And I tell people, if you like something you should know, you're going to like The Jordan Harbinger Show. Every episode is a conversation with a fascinating guest. Of course, a lot of podcasts are conversations with guests, but Jordan does it better than most. Recently, he had a fascinating conversation with a British woman who was recruited and radicalized by ISIS and went to prison for three years. She now works to raise awareness on this issue.

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Starting point is 00:15:58 Check out The Jordan Harbinger Show. There's so much for you in this podcast. The Jordan Harbinger Show on Apple Podcasts, Spotify, or wherever you get your podcasts. So Morgan, I like what you said about paying off your mortgage because most financial experts will tell you that paying off your house is a bad idea because you could take that money and invest it somewhere else and make a better return. But there is something about paying off your house that appeals to a lot of people. And they're often, I suspect, dissuaded from doing that because it's, quote, not the financially right thing to do. But that's not always the bar. That's not always the litmus test.

Starting point is 00:17:50 It's that sense of, for some people like you, that sense of knowing it's paid off and you never have to worry. Because you could go take made this decision so everyone else should. That's not the case. But to me, the broader point is just doing things with your money that may not be rational, but are very reasonable to you and your own unique personal goals and mindset and personality. And that is, I think, the important thing to do. In what other interesting ways does our thinking or our psychology affect our money decisions? Maybe in ways we invest in German companies. Japanese people only invest in Japanese companies. People invest in stocks that are just domiciled in their nation's home, which is not rational at all. The idea that the best investments are going to happen to be all based around where you are, where, you know, the nation you were born in. Of course, that's ridiculous. That's not the case. I think the home bias, it's not rational, but it's very reasonable. If investing in companies that you are familiar with and you're familiar with them because they are located down the street from you, if that helps you take the leap of faith of investing

Starting point is 00:18:15 your life savings into these companies, if it makes you feel a little bit more comfortable in where your money's going, if it helps you understand how investing works, then it's a very reasonable thing to do. And I think you should do it. So that's just another example of something that is not rational. And academics and maybe some financial advisors would tell you this is not a rational thing to do. But it's a very reasonable thing to do if it makes you feel more comfortable with what you're doing with your money. Well, one of the things that doesn't seem to be very rational, and yet many, many people do it and regret doing it, is getting into debt. Because it gets in the way of everything.

Starting point is 00:18:49 It gets in the way of life. It gets in the way of investing. It gets in the way of everything. And yet, people willingly do it. To me, the most important thing to think about here is that every penny of debt that you have is a slice of your future that is owned by somebody else. Somebody else owns a slice of your future. You have to get up and go to work for somebody else in the future. Whereas to me, every penny of savings is a slice of the future that you own. Obvious statement. I know that's not blowing anyone's mind, but that's such an important thing

Starting point is 00:19:21 to think about is how much of your future do you want to own? It gets back to independence and control. If you want a glorious independence that is so appealing to me and I think many others, that is a path that you really need to minimize debt. Because by definition, if you have a lot of debt, you're not independent. Someone else owns your future time. I think another interesting example of what you're talking about, about the psychology of money, is people who play the lottery. I mean, every financial guru or any reasonable person will tell you that the math is terrible. It is a stupid thing to do, financially speaking. Yet, millions of people play the lottery.

Starting point is 00:20:02 So, it must be doing something for them that isn't financial, that's not the math. It's something else. The cohort of Americans that buys the most lottery tickets, by far, they buy the majority of lottery tickets, are the poorest Americans. They come from the lowest income decile. They spend on average $400 per year on lottery tickets. And people like myself

Starting point is 00:20:25 and you and many of these listeners will look at that and say, well, that's a bad decision. That's ridiculous. These people are not very smart. They can barely afford food for their families and they're spending $400 a year on lottery tickets. How does it make any sense? I think that that might be the right answer. That might be the right explanation. But if you try to really empathize with what those people are going through in life, the people from the lowest income decile that statistically have a much lower chance at moving up the income ladder, then maybe the explanation in their heads goes something like this. They do not have the sense of growth and opportunity about future economic circumstances that I would or you would or many other people listening would. And therefore, buying a lottery ticket is the only time in their life where they

Starting point is 00:21:10 can hold something tangible and say, this is my ticket out of the economic circumstances that I'm in. Other people can say, hey, if I do a good job at work, I'll be promoted to manager. I'll get a big promotion. Maybe I'll do well in the stock market. That's my ticket to the next level of wealth. If you feel trapped in your income cohort, and statistically people in the lowest group are much more likely to be trapped there, then the lottery ticket is the only thing in life that gives you a little bit of hope for the future. And therefore, even though it's not a rational decision, I kind of understand why they do it. Even though I would encourage them not to do it, I kind of understand why they do. I think there's a lot of things like in money that are like that, that really require a deeper sense of empathy and psychology to

Starting point is 00:21:49 understand the decisions people are making and realizing that people make crazy decisions, but nobody is crazy. They're all trying to do things with their money that makes sense to them in that given moment. And since people come from different backgrounds with different circumstances and different goals, a lot of the things that we do with our money don't look smart. And a lot of times they are not smart, but they make sense to people in that moment. It just highlights the emotional side of investing. The other end of the spectrum that I will give you is I myself, I am a passive investor. I invest in passive index funds, low-cost index funds.

Starting point is 00:22:21 I plan on holding them for 30 or 40 or 50 more years. That's what I plan on doing. But I'm not a passive zealot. I think good active managers exist out there who can outperform the benchmarks. So then look, there are a lot of passive zealots out there who say, no one should invest, no one should try to beat the stock market. I'm not one of those people. I just think that for people who try to beat the stock market, it's never going to be more than about 10% of people who are successful, who endeavor to do it, who are successful to do it, because that's the way it should be. It should not be that everyone who tries to beat the stock market succeeds. That would be a

Starting point is 00:22:57 ridiculous world. It's never going to be like that. So when people say, look, 90% of mutual fund managers underperform their benchmark, I always want to respond, yeah, that's exactly how it should be. It's not supposed to be easy. It's like if you said 90% of NCAA players don't make it to the pros. You're like, yeah, that's how it should be. It's not supposed to be easy to make it to the pros. That's how it's supposed to work. So I'm a passive investor, but I believe that there are people out there who can beat the market. But for me, keeping it really simple and easy. And look, if I can invest in my index funds and actually hold them for 30 or 40, 50 years,

Starting point is 00:23:30 I'm going to achieve every financial goal that I have and then some. So I just don't want to make it more complicated than it needs to be. If I can check all the boxes doing something simple, I'm not going to make it any more complicated than it needs to be for us. I'm sure you know people, I know people who have that attitude about money that, oh, I just can't be bothered. I'm too busy. You know, I just, I can't really, I don't have time to understand it all. I think there are two things in life that everyone has to become somewhat of an expert in, health and money. It doesn't matter if you're

Starting point is 00:24:03 not interested in those fields, those fields are interested in you. They're going to apply to everyone. They're going to affect every single person, whether you like it or not. You can go through life without knowing anything about chemical engineering or aerospace technology. You don't have to learn how to code, but you have to learn about health and money because those things will definitely affect you. And we don't teach those things in school, either of those topics. Well, and even when we do learn about money, if you read a book or take a class about how money works, it's usually the math.

Starting point is 00:24:32 It's all about how the math works and what's financially responsible. It isn't the kind of things you're talking about, about how money works in terms of making you happy. I think people need to be introspective about money and really just look themselves in the mirror in the context of who they are, where they're going in life, what they've experienced in life, and come up with a plan that works for them,

Starting point is 00:24:56 even if it doesn't work for other people. That, to me, is probably the biggest takeaway for me for money, is that there is no one-size-fits-all answer for anything, for anything that we do. Different for everyone. And it makes money more interesting when you look at it through your lens instead of looking at it where it's all about the numbers and it's all about what's financially the right thing to do. It's not always about what's the financially right thing to do. It's about what's right for you in a lot of cases. And it's interesting and refreshing to hear money talked about through that lens.

Starting point is 00:25:31 My guest has been Morgan Housel. He is a partner at the Collaborative Fund. He's been a columnist for the Wall Street Journal and the Motley Fool. And the name of his book is The Psychology of Money. And you'll find a link to that book in the show notes. Thank you, Morgan. Thank you for coming on. Great. This has been fun. Thanks very much. People who listen to Something You Should Know are curious about the world, looking to hear new ideas and perspectives. So I want to tell you about a podcast that is full of new ideas and perspectives,

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Starting point is 00:26:34 Intelligence Squared is the kind of podcast that gets you thinking a little more openly about the important conversations going on today. Being curious, you're probably just the type of person Intelligence Squared is meant for. Check out Intelligence Squared wherever you get your podcasts. Do you love Disney? Then you are going to love our hit podcast, Disney Countdown. I'm Megan, the Magical Millennial. And I'm the Dapper Danielle. On every episode of our fun and family-friendly show, we count down our top 10 lists of all things Disney. There is nothing we don't cover. We are famous for rabbit holes, Disney-themed games,

Starting point is 00:27:12 and fun facts you didn't know you needed, but you definitely need in your life. So if you're looking for a healthy dose of Disney magic, check out Disney Countdown wherever you get your podcasts. I think everyone has witnessed some event, some experience where an attractive person has gotten preferential treatment. They got a better table at the restaurant. They got to go to the head of the line. It does seem that good looking people have a distinct advantage.

Starting point is 00:27:44 And given that this appears to be true, it brings up all kinds of questions, like why do they have an advantage? How big an advantage do they have? If you're not attractive and you make yourself as attractive as possible, basically accentuate what you have, can that make a difference? Here to discuss this is Daniel Hammermesch. He's an economist and professor of economics at Royal Holloway University of London, and he's author of a book called Beauty Pays, Why Attractive People Are More Successful.

Starting point is 00:28:20 Hi, Daniel. Thank you. My pleasure to be here. So, as I said, I think we've all witnessed that attractive people get preferential treatment. So, I imagine that overall, that's a true statement, that good-looking people have an advantage. Yes, it certainly is generally true. Again, my own research is on beauty, which I've looked at in a number of countries, and people have done the same thing after me. And there's no question in terms of how much the same person, same age, same race, same gender, same education, etc., would make. The better-looking person is going to make more, and the really bad-looking person is going to make a substantial amount less. And why is that?

Starting point is 00:29:07 That is a $64,000 question. I mean, clearly it's, I don't know if you remember the comic Pogo, but at one point we've met the enemy and he is us. The fault is all of ours. We prefer to deal with better looking people. We prefer to sell to them. We prefer to buy to them. We prefer to be employed by them. We prefer to sell to them. We prefer to buy to them. We prefer to be employed by them. We prefer to work with them. That's the basic reason. Of course, the question is,

Starting point is 00:29:31 why do we care about the person's looks? And yet, for some reason, I think it has to do with sort of something left over from the jungle, where a person's looks might have indicated how good they were for reproductive purposes, we still behave this way. And so what's the ramifications of all of this? Ramifications are in every aspect of our lives. I mean, comparing, I did the study for the U.S. from the 70s and 80s, it's been done since then for Australia more recently. The good-looking person, the person the top third of looks has somehow rated,

Starting point is 00:30:05 is going to be making 5% more, if it's a male, than the average guy who's otherwise the same. And the really bad-looking person, person the bottom sixth or seventh, might be making as much as 10% less each year than the average person. This is a substantial difference between the really good-lookers and the really bad- lookers. And so let's define looks. What is attractiveness? Because it would seem to me that there are things anybody could do to appear more attractive. Actually, that's not the case. I mean, I look at myself.

Starting point is 00:30:39 I think I'm an average looking person. And I don't think there's very much I could do to make myself better looking without completely destroying my facial structure and rearranging my face bones, sort of like the movie Face Off with John Travolta. But short of that, there's a lot of evidence that says there's really not a heck of a lot you can do. I did a study on women in Shanghai, China, where we looked at how much they spent on looks and how much it improved their looks. And the answer was the spending didn't help very much at all. Another study asked people to rate faces in the U.S. with more or less makeup on. It just doesn't matter very much. I mean, you are what you've got and there's not very much you can do

Starting point is 00:31:23 to enhance it. I mean, clearly, if it were, we'd all not very much you can do to enhance it. I mean, clearly, if it were, we'd all be doing it, and we'd all look fantastic, and yet we all don't look fantastic. But when I look at someone and make assumptions about or judgments about their attractiveness, it's a bigger package than just their face. It's what they're wearing, how their hair is combed. Those kinds of things enter into my equation of what makes somebody attractive. They do in mine, too, and they do in most people's. Nonetheless, compared to the basic looks, these are lesser important. I don't know if you're old enough to remember the Four Seasons, Frankie Valli and the Four Seasons song Rag Doll.

Starting point is 00:32:06 I actually know that one. I mean, there's a case where the person, the girl was dressed terribly. She came from the wrong side of town. Yet she was still considered very good looking by the singer. And I think that's true in general. I mean, we focus on face structure. And sure, you can jazz it up a bit, fix yourself up. But the old saying goes, you can't make up a bit, fix yourself up, but the old saying goes,

Starting point is 00:32:32 you can't make a silk purse out of a sow's ear. There's not much you can do for somebody who is inherently not very good looking. But someone who is inherently very good looking, but doesn't accentuate it, you know, looks disheveled, doesn't comb their hair, doesn't do the things that basic hygiene would suggest. I don't care how good-looking they are. They're not attractive in my view. I agree with you personally, myself. Nonetheless, we did one study of professors, not a very good group to look at, obviously,

Starting point is 00:33:04 where no question, whether or not they dressed up fancy or not, the ones who there was a substantial difference in how their looks were rated by students and those who, independent of how well dressed they were, were rated higher, were in fact doing better in their jobs in various ways. So yes, I agree completely, but there's something inherent in us, regardless of what we can do to make ourselves better dressed, better hair, better teeth, etc., that generates a lot of the impression we make on other people about how we look and how they perceive us. When you ask the people who do the hiring and do the paying of attractive people, do they agree that that's what they're doing, or do they see it as being, no, that has nothing to do with it? Look, very few people will admit that they discriminate on any criterion. most discrimination be it race gender religion or in this case uh against bad looks is subconscious so people will never say that and yet the evidence says that again and again they do there have been studies where they send out people who are of different looks with the same resumes and the better looking person will get more callbacks

Starting point is 00:34:25 every time. And I wonder if, I don't know if anyone's ever looked at this, but when you convince people that that's what they're doing, do they do it less? I certainly hope so. I've never seen a study of that. I have seen studies that are relevant and similar, in fact, did one involving racial discrimination, where in cases where it mattered more, when people were aware they're being watched in their decision making, they behaved in a much less discriminatory way. So what this says to me is, I mean, if we turn over the rock and let the bugs crawl out and get some sunshine, why then maybe there won't be as much lookism affecting how people perform in labor markets and other markets. But until the light is shone on people, we're going to still be having this

Starting point is 00:35:17 for a long time. When we say that beautiful people make more money, more likely to get the job, that kind of thing. Is beauty in the eye of the beholder? Like one employer might find someone more beautiful and another employer might find somebody else? Or are these objective standards of beauty that we're looking at? It's certainly not objective. It's inherently subjective. But we're all people.

Starting point is 00:35:44 The average person is pretty much average. And we tend to view these things similarly. I mean, countless times I've done studies where we've asked people to rate a bunch of faces. And sure, they differ. But they also agree an awful lot, too. I mean, if you walk down the street and you see some male or female and you say, gee, that person is just gorgeous. The odds are very good that if I'm walking behind you, I won't agree exactly, but I'll tend to agree and say, yeah, at least they're quite good looking,

Starting point is 00:36:16 if not drop dead gorgeous. So it's subjective. It isn't the eye of the beholder, but we tend to behold things in a similar way. We're all people with the same cultural backgrounds. Hasn't there been, and it seems to me I've seen, research about how people dress, that that does make a big impact on whether people are paid, get the job, that kind of thing? It makes some difference, but again, the inherent beauty still matters an awful lot. Again, there's not that much you can do to improve things. I mean, if there were, we'd all be doing it. I mean, for example, I mean, I used to think, boy, if I got hair implants, maybe people would perceive me better.

Starting point is 00:37:01 But, you know, in response to that is Patrick Stewart, as my wife says, who's bald as an egg, but women think he's really hot. I just don't think there's that much you can do. It helps. There's no question you're right. But it doesn't remove the basic problem. Or on the other hand, if you don't do it, it doesn't really hurt greatly the essential beauty that you have. So what do we do with this? If this is just a bias, biases are biases, people think what they think, and you're saying, and I actually thought you were going to say, that everybody should, because beauty pays, everybody should do their best to look as good as possible, but you're saying exactly the opposite, practically. So what do we do about this?

Starting point is 00:37:47 Well, I'm not saying the opposite. I'm saying we should try to make ourselves as good-looking as possible. It's just that you're not going to be able to do very much, given what you've got and the way of inherent looks. And the real questions are, should we be worrying about this as a society? And I have mixed feelings on that. On the one hand, I don't like any kind of discrimination. On the other hand, in my view, and this is purely a personal view, there are more important

Starting point is 00:38:14 dimensions of discrimination than looks. I like to think that, as I said at the start of our talk, that discrimination based on looks arises from some evolutionary thing where you think good looks are associated with reproductive fitness, which certainly is no longer a fact. And maybe I hope over time that people will recognize that and pay attention to people as they are rather than as their faces appear to be. Do you think this will ever change? I mean, it just seems that, I don't know, there are some things that are just characteristically human. And they're not necessarily right or wrong, they're just human. And it just is the way it is. Again, why should that really be? Even for marriage, where attraction really matters, especially female attraction, much more than male attractiveness, why should it matter? Unless we really enjoy looking at good people.

Starting point is 00:39:16 In other words, we just prefer the good-looking face for its own sake, which, you know, maybe that makes sense, but certainly is no sense rational by me. Well, you just brought up an interesting point. When you, if you did this, if you segregate men and women employers, does it apply equally to both? Yes, it certainly does. In fact, in most of these studies, we have both women and men looking at faces, and they tend to look at them exactly the same way. It's not gender specific. The main difference is, and this is very sad for me, if you tell people, rate a person's looks on some scale, 10 to 1, 5 to 1, whatever you want, and say, do it independent of their age. The person doing the rating is incapable of abstracting from the age of the person he's looking at. You tell them to rate a bunch of old people average for age, they can't do it. They rate old people lower, and they rate younger people higher. Youth is beauty.

Starting point is 00:40:22 But you just said that, you know, when you show pictures of faces, when people look at face, but people aren't faces. There's a lot more to somebody than just their face. Sure there is. And there's how they dress. There's their physique. But for most of us, we aren't that short or immensely tall. Most of us, too many are, but most of us are not morbidly obese. And therefore, these other things, they matter. But independent of them, the face matters a lot.

Starting point is 00:40:56 That's the basic point of all the research I've done this for the last 30 years. But is the research that you've done showing pictures of faces? It's showing pictures of faces. It's showing pictures of whole bodies. It's individual interviewers interviewing somebody and ask to comment on their looks, in which case they're surely seeing the whole body. And they're doing that both before they start interviewing them, right when they first meet them, and after a 45-minute interview. The results are the same. There's a disagreement, but there's also substantial agreement among interviewers, among raters of pictures of faces or of whole upper bodies or even whole bodies. Well, that was going to be my next question was about looking at somebody without having interacted with them. Does that view of that person change once you've gotten to know them?

Starting point is 00:41:48 Well, but the gotten to know is a hard thing. Certainly in one of the data sets that I use, the interviewer rated the person's beauty at the start, before they even done any chatting, and then 45 minutes later at the end of an interview. And the ratings changed remarkably little. Now, of course, once I hire somebody who's bad looking, I might, after 10 years of dealing with them, not paying attention to their looks. And they may do just as well. That's hard to say. My evidence suggests that even there, the looks matter, even after a person has been on a job for quite a number of years. But I'm willing to admit that, in fact, those effects will diminish over time with more

Starting point is 00:42:29 knowledge and more familiarity. Yeah, I would think so. Familiarity does not breed contempt. It breeds affection. But even so, even with all that affection, after a large number of years at a job, the average person, given his age, sex, education, race, where they live, is still going to be doing worse than the good-looking person, even with all that familiarity. To the point where, like in, say, a job interview situation, that somebody who is a 7 on a scale of 1 to 10 will most often beat out somebody who's a 6 or a 6.5, or is it the differences aren't that tiny? Exactly. I mean, again, it looks like everything else.

Starting point is 00:43:21 People just don't distinguish well small differences. I mean, there's some areas where small differences matter. I mean, running a marathon, a small difference makes a huge difference in the outcome. But for most things, no, it doesn't make much difference. Does attractiveness trump everything else? I mean, if you're completely unqualified for the job, but you're just god-awful gorgeous, do you win? No, certainly you don't because other things matter too. This is one of many things we bring to job markets and also to marriage markets.

Starting point is 00:43:54 We bring our looks, we bring our smarts, we bring our personality, our knowledge in a particular topic. Of course these things all matter. But looks also matter. If everything else is the same, they matter somewhat. But in marriage, you often see couples, at least my perception is, that they're more or less in the same ballpark. You seldom see a 2 with a 10.

Starting point is 00:44:22 Sure, right, absolutely right with that. There's huge amounts of evidence on that. You saw this certainly when you were, I don't know how long ago you went to high school. But when I went to high school in the late 50s, the athletes dated the cheerleaders. I'm sure it's true in your school too the most gorgeous girl. But in most cases, it's a market. And they, at that time, thought they could do much better than me. They were out of your league. They were out of my league in terms of the looks league. Now, had we been later on in life where they realized, gee, I'm actually going to make a lot of money and do real well and run around the world. In fact, I did marry a woman who I think is gorgeous. I wrote this book on beauty.

Starting point is 00:45:09 I dedicated it to her because of that. But just in terms of looking at looks in high school, we don't care about too much else. No, I was not. I was out of my league with the cheerleaders. It's interesting that we're kind of blind to this when we do it. We notice it when other people treat attractive people better and we kind of look down

Starting point is 00:45:32 on that and go, no, you know, look at that. But we don't necessarily notice it when we do it. And we do it all the time. We do all the time. And what bothers me most, it really logically is very little difference from much more important dimension discrimination like race or ethnicity. And again, these are prejudices that really shouldn't matter. But we have them deep down in us and it's very hard to overcome them. If not impossible. Still though, I think it helps to understand that we all do it, that it does happen

Starting point is 00:46:08 and maybe understanding that it happens makes us a little more aware and a little less likely to do it. Daniel Hammermesch has been my guest. He's an economist and professor of economics at Royal Holloway University of London and author of the book

Starting point is 00:46:24 Beauty Pays Why Attractive People Are More Successful. And there's a link to that book in the show notes. Thanks for coming on, Daniel. Thank you for having me. This was great fun and I hope also informative. You take care. When was the last time you cleaned your car seats? I mean, really, clean them, clean them.

Starting point is 00:46:48 There's this video going around of a woman in Australia who took one of those handheld carpet cleaners, you know, with the little water tank on the back, and she cleaned her car seats. And the seats were not visibly stained, but in no time, the tank of water was filthy. I mean, just like black filthy. And the woman said it was just 10 years worth of regular dirt and grime from people getting in and out of the car. If you watch this video, you will be motivated to wash your car seats

Starting point is 00:47:22 because they are likely filled with dirt and who knows what else. And that is something you should know. You know, ratings and reviews are like the lifeblood of a podcast. They really help give a podcast momentum. So if you haven't yet, or even if you have, if you'd like to leave another one, leave a rating and review of this podcast on Apple Podcasts or wherever you listen. I'm Mike Carruthers. Thanks for listening today to Something You Should Know. Hey, hey, are you ready for some real talk and some fantastic laughs?

Starting point is 00:47:57 Join me, Megan Rinks. And me, Melissa Demonts, for Don't Blame Me, But Am I Wrong? We're serving up for hilarious shows every week designed to entertain and engage and, you know, possibly enrage you. In Don't Blame Me, we dive deep into listeners' questions, offering advice that's funny, relatable, and real. Whether you're dealing with relationship drama or you just need a friend's perspective, we've got you. Then switch gears with But Am I Wrong?, which is for listeners who didn't take our advice and want to know if they are the villains

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Something You Should Know - SYSK Choice: Your Mindset About Money & How Looks Matter

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