There has been a steady stream of research over the last few years showing how people are hardwired to make poor money decisions. This book takes a look at how our brains wiring makes us particularly inept at pursuing happiness. Unlike Blink, this book is not a fast read and is significantly more academic in its approach. But the insights you will gain will make it worth your while.

Here are some of the highlights from the book. But there is so much good stuff, you need to read it for yourself.

Your brain is constantly editing your memory. Particularly painful memories are significantly redacted. This is what allows women to have a second child and parents to go on another vacation :-). Interestingly, small annoyances do not get redacted, so all those times you find the cap off the toothpaste, clothes on the floor or one of the myriad of life’s minor annoyances, can add up significant unhappiness. One lesson from this is you will get more happiness bang for your buck by eliminating the small annoyances in your life than the big ones.

Another aspect of this redaction capability is that the brain can redact actions with bad outcomes much more easily than bad outcomes that had no associated action. This is why our long term regrets focus on what we didn’t do (our brains have already “edited” the regrets for things we did do).

Society perpetuates lies for benefit of society. For example, studies have shown that married couples become less happy after they have children and get happier again after the children leave the nest. Of course, for people to believe this would be very detrimental to society,
so society puts out a steady drumbeat of propaganda to ensure people have children (and yes I have three kids :-).

Variety is better concurrently, not needed over time. For example, when eating a meal, having variety in the meal can make it more
enjoyable even if some of the variety is not your absolute favorite. On the other hand, you would be happier having your favorite food every
Monday rather than trying to eat something different every Monday. This is because after a week, you are back to being able to receive full
enjoyment from your first bite.

Positive mysteries are best left unsolved. Such as “why is chocolate the perfect food?” :-).

Unusual occurrences are seen as more probable since we remember them. We all know how bad people are at calculating certain kinds of probabilities. The reason for this is because the way that our brains calculate probabilities is to check how many occurrences we remember. If we can’t remember any occurrences, then it must be unlikely, but if we can remember some, then our opinion changes to thinking that it is much more likely. In the era of being bombarded with unusual events from around the world, this leads people into thinking those unusual events are more common because we can now remember a number of them occurring (our brains don’t compensate for the fact that these occurrences are now from a sample the whole world instead of our local village). People worrying about Mad Cow disease is a classic example (the risk is many orders of magnitude lower than people would guess due to how much they have heard about it).

We naturally shop for evidence that supports our interpretation. Jason Zweig pointed out how this affects our investing ability. How often have any of us shown clients what there performance would have been if we had not made the trades we did over the past year? Related to this is that we tend not to remember the paths not taken.

When imagining, brains fill in lots of automatic details (often favorable ones) which are key in actual happiness result. If we try to anticipate how happy an event will make us by imagining that event, the reading we get will likely be inaccurate. For example, we might imagine how it would feel if a new client calls us tomorrow to engage our services. Unfortunately it is the small details that our brain
automatically filled in that will likely determine the actual outcome. For example, if you were to be sick that day, or have a fight with your
spouse, the happiness derived would be much less than anticipated.

We use relative comparisons that are easy to make rather than opportunity cost analysis. We have seen this in the recent research I sent out about how people make economic decisions (e.g., pain of giving this money versus pleasure of acquiring instead of what is the opportunity cost of acquiring).

Greater experience makes more difficult to reach peak happiness experience. Here is a catch-22 for you. Each time you expand your horizons and achieve a new peak experience, the bar gets moved higher to achieve the next one. On a sad note this is one of the reasons for the declining spiral of drug addiction.

Other people engaged in an activity can provide a more accurate estimate of how happy that activity would make you than your own estimates on the subject (people have tremendous difficulty accepting this). In other words, if you are considering becoming a plumber, and want to get a feel for how likely you will enjoy the work, you will get a much more accurate assessment by asking a few plumbers how happy they are instead of imagining yourself being a plumber and asking yourself the same question.

Choices cause stress. No surprise here. While the logical sides of our brains like to keep our options open, from a happiness standpoint, being committed (i.e., no choice to make) makes us happier. For those who have trouble believing this, think about the last time you struggled
with a decision and how good it felt when you finally committed to a course of action.

We remember our past and imagine our futures using filters of the present. When we remember the past or imagine the future, our brains borrow the machinery that we use for the present. When there is a conflict between the two, the present wins. This is why it is impossible when you have a full stomach to imagine what you want to eat tomorrow or remember what it is like to be starving.