Home Societal / Political Economics The Shadow Side of Wealth and Money: Loss, Regret, and Negative Utility

The Shadow Side of Wealth and Money: Loss, Regret, and Negative Utility

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How, then, do negative utilities impact our perspective on and actions we take regarding wealth? I begin by exploring two of the three motives identified by the behavioral economists: loss and regret. I then turn to two other closely related motivators: risk and envy. Finally, I consider the monetary factors related to the behavioral economists’ third motive (win), alongside that elusive motivator called “happiness.” I conclude by turning specifically to the underlying theme of this essay, this being the psychological “shadow” that underlies the power of motivating monetary factors that I addressed in this essay.

Loss

A woman I was coaching about a decade ago had just experienced a significant loss in the business she owned. While keeping her business alive, Jane (not her real name) made use of her own personal credit card (as often occurs, sadly, with those owning small businesses). She had built up credit card debt of close to $50,000. Simultaneously with this debt accumulation, Jane’s mother had passed away. As the heir (with two brothers) of a small family fortune, Jane’s mother had received about $800,000 over the years and now left the remaining $150,000 to her three children. Jane received $50,000—the same amount that remained on her credit card. It was not a hard decision to put all of the money she received from her mother into paying off the card. Yet, there was a strong feeling of loss that Jane wished to address during our coaching sessions.

Guilt accompanied Jane’s sense of loss. She had “squandered” the funds that her thrifty mother had carefully managed for many years. Jane also used this opportunity to “bash” her own sense of competence in running a business. Her father had failed at running his own business and relied for brief periods on the money his wife was receiving from her trust each month. Jane felt that she was following in her father’s footsteps. As in the case of her father, Jane was being “bailed out” by her mother’s thrift. There was also the matter of strain in her marriage. Jane was married to a man who had retained a very secure job (in part so that his wife could start her own business). Now, the money coming in from Jane’s mother was “wasted” on that #*^*!&* business. Jane is not sure if her marriage can hold together during this stormy period.

I worked with Jane on many business-related matters over several years. I found that she not only experienced guilt, a sense of failure, and fears about her marriage. She was also grieving the loss that had taken place in her life. The grieving process closely resembled that described many years ago by Elizabeth Kubler-Ross (1969/1997). While Kubler-Ross was focusing on physical death, there is also a financial death that accompanies loss of income, loss of savings, or loss of a business. In Jane’s case, it was the loss of funds given to her by a caring and thrifty mother.

Negative Utility and Loss

The negative utility associated with financial Loss is easy to appreciate. It is equivalent to getting a tummy ache after eating too much pie; though, in this case, the ache is much greater, and the pie is a business or investment in which we got too involved or ineffectively involved.  As I just mentioned regarding Jane’s plight, the challenge is not just to recover financially from the loss but also to address the strong emotions that are often associated with this loss. It ends up that financial loss often involves not just the matter of lost money, but also the matter of lost self-esteem. As Jane discovered, the loss could involve abandoned support for those involved in the business or those members of the family involved in proceeds from the investments. The hole created by the negative utility often feels bottomless, and prospects of ever filling the hole seem remote (at best).  In many ways, this form of negative utility feels like a multi-dimensional death—and should be treated as such.

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