Do you want status or money?

For the Brain, Cash Is Good, Status Is Better

The article linked above has some very interesting results of a pair of tests researching which parts of our brains are concerned with earning or losing money and our reputations. The unexpected, and interesting, results of the studies revealed humans process making money and increasing our social status in the same area of the brain!

The area of the brain called the striatum had previously been identified as the brain’s monetary reward center. These new studies show the striatum is also where we process social values. This means having a good reputation affects our thinking in the same way as earning money. The studies further revealed that improving our reputation has priority over earning money in the straitum. So the answer to the title question of this post is that our brain functions to prefer status over money!

I can think of several ways this effect shows up in our lives:

An improved job title will often satisfy us more than getting a raise. We want our reputation and job description to show our status in life and will forgo more money.
A smart employer will understand that an employee’s status and reputation may have higher priority than actual income (within reason!). Employers should make sure employees are recognized in a public way for there contributions.
This characteristic can be dangerous in our financial decision making. Are we electing to make or avoid a financial decision because of how we think it affects our reputation? Or how it will affect us financially? This can apply to many areas: buying a home, making an investment, choosing an advisor, and even making everyday purchases.
This information may explain why we will pay significantly more money for similar items because of the brand or store.

Now that you are aware that your brain process your reputation and earning money in the same brain region, try to be cognizant of your financial decisions. Are you making them to improve or maintain your status, or to improve your net worth?

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This entry was posted on Sunday, May 4th, 2008 and is filed under Investing, Money, Psychology. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.