I was sad because I had no shoes, until I met a man who had no feet.
So I said, "Got any shoes you're not using?"

Tell everyone you'll take the 10 million and they can have the 20 million on the condition they each give you 1 million of their 20 million. Then you will come out ahead. People will be so focused on getting the 20 million (well 19 in the end) that they probably won't think of the inevitable inflation that will occur. But even after inflation if everyone gives you 1 million of their 20 plus your 10 million, you will still be rich compared to everyone and be better off.

I think I would take the $5 million because the other scenario would cause such wild inflation that I would actually be poor. If the scenario changed from "I get $10M and everyone else gets $20M" to "I get 10M and 1000 randomly-selected people around the world get $20M", I'd gladly take the $10M, as that would put the kibosh on inflation. Jealousy isn't really a factor.

So everyone I know gets $20million? So I'd take £10M, my girlfriend gets $20M. Most of our friends are either single or we don't know their spouses very well, so if it's only people we know well, then we'd be better off if I opt for the $10M. That would mean we'd get $30M in total but most people we know would only get $20M.

You are an economist. Consequently, I am pretty sure you realize that this question is one that is asked when evaluating financial advisors. It is usually put differently, without the "you'll forget" component, like this:

Option A: You are offered a job with company X at $80K/year salary. Someone else, with the exact same qualifications and the exact same job at company Y, is offered a job at $100K/year.

Option B: You are offered a job at $60K per year, same situation. The other person is offered a job at $40K/year.

Which option do you prefer - option A or option B?

The answer says a lot about how you approach investing. If you choose option B, you are saying in effect that the most important thing to you is not making money, but rather doing better than someone else. It also means that you are more inclined to speculate rather than invest, and favor chasing particular asset classes (for example, the current 'buy gold' frenzy) rather than building a long-term financial strategy.

For those of you who answered Scott's question, the point he didn't make was that this was about you and how you approach decision-making. If you answered that you'd prefer to get some money if everyone else got none, rather than get more money even though others made more, then you are an emotional speculator. You should consider that when you go to make decisions that involve you and other people, particularly when money is involved.

It is really strange to me that so many of your commenters agree with the premise. I suppose I might just be lacking the "relative success" wiring in my brain, which has been evident in a lot of my preferences recently - that, eg. I would be perfectly happy to live in an old VW camper van decked out with solar panels. And I like it when my friends and acquaintances are happy.

I'd also argue that $5M is such a large amount to most people that the practical difference between $5M and $20M is negligible. $5M is enough to buy myself a large property on a tropical island and hire people to look after the property and me for the rest of my life, while also hiring people for my currently-just-me business so I'd make more money. $20M is enough to... er... do the same thing but have a bunch more unused money that I'd feel like I ought to spend on stupid !$%* because to not spend it would be a waste.

But aside from that "relative value" argument, I'd pick "they get $20M and I get nothing" over "everyone gets nothing" anyway. Even if it includes acquaintances I don't like, it's really no skin off my nose. The apparent fact that people would withhold free money from their friends appalls me.

For me, no hard decision. Everyone else $20M, me $10M.

$10M is still objectively enough to do everything I want and still give a whackload to charity. A 34' ocean rigged boat, a complete woodshop and the remainder of the furniture making course at Rosewood Studios in Almonte, a new home, and a Mustang GT would all come in under $1M. I could probably also buy a set of new computers for LAN gaming and a dedicated space for some cats in my house.

If everyone else had $20M, I'd know my friend's kids had college looked after, had retirement looked after, no longer had to work crappy jobs, and could pursue their dreams. I'm sure a good portion of our time would still be spent hanging out (maybe in nicer places).

That's one of the advantages of having hit 40. You're pretty okay with who you are, who your friends are, and where you are in life. It's not perfect, but you've made your peace with it. A big pile of money would be nice, but you've learned that money does not equal happiness. It would free up some time to do the things you want (sail, work with wood to build stuff, spend time with friends) but you don't even need $10M for that.

And having all of your friends well off would be a lifetime 'license to mooch' if you were concerned about being the least well off. Most of my friends will feed me and beer me when they're near broke, I'm pretty sure that won't change when they have money. And if I'm fed, warm, have friends and beer... really, can't ask for too much more....

T.

As others have said, it depends on who around me gets money. If it's my ex and his family, I'll take the 5. As the saying goes, I wouldn't you-know-what on him if he was on fire.

If it was everyone I knew but him? Then 10 for sure. I'd take 1 and let everyone else get 20. I don't need a lot and I'd like to think I'd handle it well.

The following article appeared in the Straits Times on June 4, 2008:



The poor rich

Would you prefer to live in a world where you earn $60,000 a year while those around you average $40,000, or one in which you earn $100,000 but everyone else gets $200,000?

Robert H. Frank, professor of economics at Cornell University, says that most people find the first option more attractive. When it comes to salaries, we care more about relative size than absolute size. What matters most is earning more than our neighbours.

The same holds true for all sorts of things. The actual size of our apartment matters less than its size compared to everyone else's. And most of us will settle for a modest car - provided our neighbour is driving something worse.

Prof Frank labels things like salaries, houses and cars as positional goods, whose defining characteristic is that the amount of satisfaction we get from them is strongly influenced by comparison with what others have.

The American essayist H. L. Mencken hit the nail squarely on the head when he defined wealth as 'any income that is at least one hundred dollars more a year than the income of one's wife's sister's husband'.

...


But not all goods are positional. Try answering this question: Would you prefer to live in a world where you have two weeks' vacation while those around you average one week, or a world in which you have four week's vacation but everyone else gets six weeks? Most people prefer the second option. With vacation time, the absolute amount is more important than the relative amount.

The same holds true for things like health and marriage. The satisfaction we derive from them is not strongly influenced by a comparison with those around us. Our enjoyment of good health is not spoiled by the knowledge that our colleagues are also fit and well. We do not enjoy our marriages any less because our neighbours are happily married.

Prof Frank labels things like vacation time, health and marriage non-positional goods.



I'll email you the article. It's a little strange nothing comes out on Google. (Or it could be my bad googling skills.)

Take the $10 million and get new friends.

Another benefit of the $10mil-for-me-$20mil-for-you deal is that half of that would go straight to taxes.
You could take your $10mil and run for president on a platform of having single-handedly wiped out the deficit. Hard to beat that as an accomplishment!
Then you'd be more powerful than your friends despite having only half the wealth. AND you'd be set for life on the speaking circuit, and invited to all the best parties.

I can't make any sense of this blog post. I can't imagine any way that me getting $10 million while everyone I know getting $20 million would not be better than just me getting the $5 million.

Seriously, what are you talking about?? It would be MUCH better to receive $10 million AND have everyone I know get $20 million than for just me to get $10 million (let alone $5 million)! Here's why:

1. No one I know would be asking me for money on account of the fact that I won $10 mil, since they each won 20 mil.
2. I don't have to buy that yacht (or some other expensive toys), because most of my friends will have them, and will most likely let me borrow theirs.
3. We could all move into big mansions in the same part of town, so it would be easy to maintain our friendships.
4. We'd have a lot of new things in common to talk about--what to buy, how to invest, how the latest Ferrari handles, how we like out new mansions, etc.
5. We could take trips together and I wouldn't have to pay their way just to enjoy their company on the trip.

I could go on and on...

Sounds like you're channelling topper.

I've repeatedly read stories about how miserable lottery winners are as everyone they know descends upon them for their cash. It ruins their relationships.

I would be happy with 10 million if my immediate circle gets 20. I would be happy with 10 million dollars because of the things 10 million dollars would allow me to do, not because it'd be more than my peers.

I could get a jet trainer. I would be _elated_.

Factor 1: I'm the best investor I know, and the people I like are more likely to listen to my investment advice. (My brother already does and he's halfway to retirement.)

Factor 2: A lot of the people I know, but don't like, are the types of people who if they won the lottery, would be bankrupt in 3 years.

Factor 3: Many of the people I like, but who haven't tried following my investment tips, its because they don't have a penny to spare for it, due to lost jobs, medical bills, and other things beyond their control.

I'd take the $10 million. Quite frankly, I could retire on $200,000, my needs are that simple. I have no desire to one-up people financially. And a lot of my friends who are in desperate straits right now would be helped at the same time.

I have rich friends and not-rich friends. The rich friends are more fun, we can do more fun things together. If I had to pick between being richer than my friends or having more rich friends, it's no contest. I'd prefer more rich friends. I don't hate my current rich friends, and there would always be poor people to contrast our rich selves to.

I'd take the 10.

Money doesn't equate to happiness to me.
Wealth, as compared to that of those I know, also doesn't equate to happiness to me.
Money means freedom to do what I want... and THAT's happiness.
PLUS, this means all my friends and family won't mooch off me... all the better!

I'd definitely take the 10.

If you take only the 5 million, and everyone you know gets nothing. Then everyone you know will be begging you for money. How is that helpful in making me more happy? If 'everyone I know' includes my wife and children, then there is an added bonus for taking the 10 million because this would be 10 million that is all mine.

Of course is this everyone I've ever known? The cousin I haven't spoken to since we were kids? My sister's ex-boyfriend? Or does it just include the people I know today? That could make a difference.

I think you have seriously underestimated people. Or else this is another one of your mind tricks to try and hypnotize everyone to choose the same answer. Your hypnotic suggestion is telling me to say I should think of taking the 5 million, but ultimately take the 10 million.

The obvious answer would be to take the 5 million. Why? Because we are selfish people and would rather have all the money to ourselves. The better answer, and the one I would choose, would be the 10 million. As most people have pointed out, it doesn't really matter either of the three values, 5, 10 or 20 million, because a "smart" person could live off of much less than that. I think that most people would end up spending all the money and end up right where they are now by still living an extravagent spend more than you earn lifestyle. Now they just have more expensive stuff and a bigger debt because their tastes have now become more expensive.

Again, as almost everyone has pointed out, it also depends on how many people get the 20 million. I would say I know OF a lot of people but I don't really know a lot of people REALLY WELL. If we can narrow down the definition to people we know really well or even interact with on a daily/weekly basis, then the inflation will probably not be as big of an issue. I don't care now that most of the people I know have a lot more than me (probably even more than double what I have), so it would be a big deal if they all have 20 million either. They would probably spend it all anyway and end up having less.

Regardless of the decision, I now have a lot of money, and whichever amount it is, I would be happy.