A Corporate Correlation to Happiness?

A Corporate Correlation to Happiness?

By Steven Butler



Because we’d all like to live in happy, prosperous places.

By Steven Butler

“If you’re happy and you know it …” invest some cash. Yes, it’s hard to sing and, according to the jingle, you’re supposed to clap your hands. But it turns out that happy people do more than just clap their hands, stomp their feet and shout “Hurrah!” They actually invest money. And, perhaps even more important:

Companies in communities of happy people invest more money than companies in communities of unhappy people.

That’s the sort of finding you get when you crossbreed a specialist in public policy who studies happiness, Carol Graham of the Brookings Institution, with a finance professor, Tuugi Chuluun at Loyola University Maryland. And voilà: a detailed map of the United States that shows where people are happiest. Seattle, for example, scored in the highest group of happy cities, over 7.25 on a scale of 1 to 10, and it’s similarly high on the investment scale. As for Pittsburgh, below average at less than 7 on the happiness scale, and half or less on the investment scale. (And who knew that Fargo, North Dakota, was such a happy, spendy kind of place?)

OK, maybe it’s not entirely surprising that people tend to have a twinkle in their eye in happening places like Seattle, San Francisco, Los Angeles or Washington, D.C. (Yes, that despite all the political bile concentrated in the nation’s capital.) Baltimore, Chicago, Cleveland? You’re out of luck. Turns out that considerable science has gone into the question of how to measure people’s happiness — “well-being” is the not-so-technical term. It consists, for example, of asking people how their lives stack up against more or less ideal outcomes. Smoking, inflation and unemployment do not make people happy, while high income, exercise and marriage seem to stoke that happy gene everyone is born with.

It’s well-established that happy people are optimistic, and that gives them a sort of suspension-of-disbelief confidence about the future, including in their ability to invest at a profit. What Chuluun and Graham established, however, is that it’s not just happy individuals who open their wallets; companies in communities brimming with merry workers invest more, including long term. They spend more on research and development. That’s not necessarily what’s predicted by economic theory, which assumes our coldhearted, calculating capitalist looks at just the bottom line. In fact, you might predict the opposite. That’s because, as Graham tells OZY, “The least happy people are the most concerned about money.”

Perhaps the biggest gap in the research is that nobody can explain what’s causing happiness and investment. Are people happier because they live in these buzzy communities with free-spending companies? Or is it the concentration of happy people that leads to these even happier outcomes? No answer to that. It could turn out that a traditional approach to analyzing the geography of economics, looking at things like proximity, infrastructure, trade, labor supply and education, not to mention historical accidents, will be of more help to policy planners. Economists, for example, have found that the concentration of venture capital firms in San Francisco, New York and Boston tends to feed on itself, breeding a concentration of success.

As Graham points out, the good stuff — happiness and prosperity — and the bad stuff — unhappiness, divided communities, poverty — tend to cluster together. “We need to understand more about the bad places,” she says.