Money 2.0: The Rich and the Rest of Us

This is Hidden Brain. I'm Shankar Vedantam. Have you ever wondered what it's like to be rich? I'm taking Oliver for a detox in the Hamptons. Standardized testing has really stressed him out. Really rich.

Why are you wearing a tux? It's after 6:00. What am I, a farmer?

Extreme wealth is something that few of us will experience. We'll never jet somewhere on a private plane. We'll never employ a butler or own a mansion on a secluded island. The gap between the uber-wealthy and the rest of us, already massive, is growing, due in part to the COVID-19 pandemic. The richest 10% of people on the planet now own more than 3 quarters of all the wealth. And since the start of the pandemic, the world's 10 richest men have doubled their fortunes. On a smaller scale, in our own communities, it can often feel like those with lots of money and those with less are living in completely different worlds. Today, in the latest of our Money 2.0 series, we talk with a sociologist about the mindset of the uber-rich.

The lives of the, the richest people in the world are so different from those of the rest of us, it's almost literally unimaginable.

We'll also ask, what does inequality do to us? How does it shape the ways we think about ourselves, And the ways we think about the people around us.

We think about ourselves in terms of being on a certain rung with some people above us and other people below us. Where we think we stand on that ladder tells you a lot about a person's life and their life outcomes.

Wealth and inequality, this week on Hidden Brain. Support for Hidden Brain comes from Planet Visionaries. Professional climber and environmental advocate Alex Honnold hosts Planet Visionaries, This is Planet Visionaries, a podcast spotlighting the people tackling climate challenges with real hopeful solutions. Throughout season 6, Alex brings together extraordinary changemakers for powerful conversations about grit, determination, and the power of hope to fuel our fight for a better future. In partnership with the Rolex Perpetual Planet Initiative, this is Planet Visionaries. Listen or watch wherever you get your podcasts. Support for Hidden Brain comes from Southern New Hampshire University. Science consistently tells us learning starts with motivation. That's why SNHU offers over 200 flexible, affordable online programs to help you get where you want to go. Take classes that spark your curiosity, shape your skill set, and prepare you for what's next. A degree can help move you forward no matter what motivates you. Start yours at snhu.edu/brain. Support for Hidden Brain comes from Progressive. Whoever says saving money is hard doesn't know that new customers who bundle and save with Progressive save hundreds. Because switching your home and auto insurance is better than cutting down on those iced lattes you love. Switch to Progressive and see if you could save. Get your quote today at progressive.com. Progressive Casualty Insurance Company, affiliates, and other insurers. Not available in all states. Brooke Harrington is a sociologist at Dartmouth College. Several years ago, she decided to explore the secret lives of billionaires. Her strategy? Become a wealth manager. Brooke discovered that in order to manage money for the super rich, wealth managers learn a lot about the private lives of their clients and the very different set of rules that govern their world.

Well, it usually starts with what's called know your client activity. So if you were to come to me, with me acting as the wealth manager, I would first ask to see some proof of identity, like your passport. And then we would talk about what goals you had for your wealth. And that begins the series of increasingly delicate and increasingly intrusive questions. Then usually we get into Whatever real reason is bringing you to me. Maybe you want to avoid your taxes. Maybe you really don't like your family. That's surprisingly common among wealthy people. For example, if you have a relative, or if you yourself are engaging in some activity that might get you extorted— it may not be illegal, but it might be socially shameful— that's a financial risk that your wealth manager needs to know about. If you have a son or daughter with a drug problem, That's a financial risk that your wealth manager needs to know about. There can also be issues like, I think I'm headed for a divorce, but I don't want my spouse to get half my assets. How do I hide those assets, preferably offshore, so that whatever is legally provable as mine is such a small amount that it's not worth fighting about?

So it's really interesting because these professionals in some ways get to know their clients better than the client's own family or friends or even their own spouse.

Yes, it's apparently something of a cliché in the offshore world that the average client is a man in his 50s with a secret family somewhere. Might be a gay lover, might be a common-law wife and some children, but there are usually all sorts of secrets that these wealthy folks wish to keep hidden, and that they have the additional privilege of being able to hire people to take care of.

So I understand you conducted about 65 interviews in 18 countries for this book. Tell me a little bit about the people you met. To be a wealth manager, you have to understand finance and the law, but this kind of role also calls for a certain psychological makeup. What kind of person becomes a wealth manager?

Well, several of the people I spoke to described themselves in only somewhat joking terms as social workers for the rich. So you have to have empathy. and a desire to help people, but also a very high tolerance for people who would otherwise seem to be so extremely privileged that you might be otherwise inclined to smack them around and say, snap out of it. You're lucky.

You write in your book about the extreme lengths that some managers go to please their clients or to provide services to their clients. You write about a manager named Eleanor in Geneva who said that one of her clients once called her from outside a restaurant in London.

Tell me that story.

So this is one of the first stories that I heard that really made my eyebrows raise. It was while I was training to be a wealth manager. Eleanor told this story over lunch of receiving a phone call from a client who was in another country saying, I've just lost my bracelet outside of a restaurant. Help me find it. And the client didn't identify the restaurant by name. So imagine having someone call you from another country. I mean, obviously the country was identified, but not anything remotely approaching a location. So you have to sort of marvel at the immaturity of the client expecting someone else to help her fix a problem like this. But Eleanor somehow did it. She determined where the client was and what exactly had been lost and got the local authorities on the case, found the bracelet, and billed the client for all the time. And apparently the client was happy to pay.

There are sometimes clients do make requests like this not because they are acting childish, but because they actually have an ulterior motive. They actually want to test the loyalties or ability of the wealth manager. You tell the story of a wealth manager in Hong Kong named David.

Yes, he got a call early on in his relationship with a client in which the client said that he was in Japan and he was meeting with a Japanese gentleman who had expressed a desire for smoked salmon and that this client had promised him, I think, 1,000 sides of smoked salmon straight from the factory in Scotland and was now calling David saying, get me the salmon. And David said, well, I'm your wealth manager, not your fishmonger. And the client said, well, today you're the fishmonger. And so David happened to know someone who knew the head of the smoked salmon factory in Scotland. He fulfilled the client's wish. And the client later told him, I basically made up that story. I wasn't sitting across from a Japanese fellow who wanted 1,000 sides of smoked salmon. I just needed to see that you had the connections and the will to do what I wanted when I wanted and not ask any questions.

It was almost a test of his ability to jump in and sort of perform this outlandish request, perhaps as a guide to sort of other requests that would come further down the road.

Exactly. And also, it was a test of what kind of powerful social connections this wealth manager might have, because one of the wealth manager's roles is to set up private markets for deals. So it's not uncommon for them to have several clients, each of whom owns incredibly valuable real estate, art collections, yachts, and so forth. And since these clients are very, very concerned about maintaining their privacy, they don't want to list these things on the open market for sale. If they need to raise cash, they want to do the sales as quietly, as discreetly as possible, with as little public recording as possible.

One thing that I got from your book is that there are important ways in which the very rich are very much like the rest of us and ways in which they're not. So wealthy people, unsurprisingly, turn out to have troubled marriages and wayward children, just like, you know, everybody else. But wealth, you argue, can compound those challenges?

Well, apparently, it's not uncommon for the wealth manager to be asked to find or recommend rehab facilities for kids, or a parent will ask the wealth manager to break some bad news to the next generation, to his or her own children. Sometimes the wealth manager has to broker a truce between feuding family members. Say one family member feels that they've been done by unfairly, in the inheritance plan and has to be somehow brought back in so that they don't sue the family. The big risk here is if you have a disgruntled family member who sues, the lawsuit process in many countries makes public many, many private documents that would reveal the extent and nature of a family's wealth, all of which has— have been carefully guarded secrets.

In the course of her many interviews with wealth managers, Brooke talked to one professional in Switzerland who told her a revealing story.

So this wealth manager and her boss had been summoned to a country outside of Europe by a client who was sending a private plane for them. She showed up at the Zurich airport with her boss waiting for this plane, and she discovered that she'd left her passport back home in a different purse. And she said to her boss, I've got to go home and get my passport because we're leaving Europe. And he said, don't worry about it. And she said again, no, they're gonna check my passport. They won't let me leave Switzerland, much less enter another country. I've gotta go home. And he said, no, really, don't worry about it. So she didn't say anything further, figuring, you know, it would be his problem if she got refused the right to leave. Sure enough, the private plane pulls up, they get on it, nobody checks a passport. It lands in this other country outside Europe. Nobody checks a passport. They get into the private car sent by the client. They're taken to the client's home. They have their meeting. Private car takes them back to the private plane. Private plane flies them back to Switzerland. They get off the plane and go home. At no point has anyone encountered passport control or a customs agent. And this wealth manager's comment was, the lives of the, the richest people in the world are so different from those of the rest of us, it's almost literally unimaginable. National borders are nothing to them. They might as well not exist. The laws are nothing to them. They might as well not exist. It's potentially very, very dangerous. And I think she's right about that.

You spoke with a wealth manager named Dieter. I think this was a German wealth manager who talked about how his job allowed him to schmooze with powerful people, but also in some ways discover things about foreign countries before even the citizens of those countries would find out about those important Yeah, he was very proud of the fact that when he was working in Africa, he would have parties, and the heads of state of the various countries he lived in would come to his house, and he'd get them drunk.

And they'd be spilling state secrets by 2 in the morning. And then people like Katharine Graham, the late publisher of The Washington Post, would call him up for advice. And, you know, he could speak authoritatively about at least affairs in some African countries because he'd heard it directly from the mouths of the people who made those policies. It reminds me a little bit about what we learned when the Panama Papers scandal broke. I kept seeing photos or drawings of the faces of people whose names turned up in the Panama Papers, and they were— it was really a rogues' gallery of people from all walks of life, as well as heads of state and corporate leaders, people who you would think have nothing in common with each other. But at one level, the fact that they are so rich gives them these very important things in common, which is to say, for them, national boundaries and laws are all optional. Taxes are optional. All forms of law are essentially optional at that level of wealth.

During the 2016 election, then-presidential candidate Donald Trump talked with pride about finding ways to avoid federal taxes.

He didn't pay any federal income tax.

So—

That makes me smart.

I asked Brooke to talk a little bit about whether this sentiment was widely shared by other wealthy people.

Some of them actually do sound a lot like Donald Trump. When I heard Donald Trump say that not paying taxes made him smart and that if he had paid his taxes, they would have been wasted anyways, I was like, yep, he's the voice of a lot of very wealthy people around the world and, and their wealth managers who said essentially the same thing to me. They're very committed to neoliberal ideology, and very committed to the idea that these elite clients are doing the world a favor as wealth creators, and that their initiatives should be protected against the government and what they regard as theft by taxation, by incompetent governments that would just waste any money they collected anyways. They also, by the way, regard redistribution of collected tax as immoral because it creates dependency on the part of the poor.

So I'm fascinated because what you're saying is that, in effect, the wealthy and their tax managers don't just think they're doing something that's practical and expedient. You're saying they actually feel like they're doing the moral thing?

There is a very strong component of ideology here, and you see this in the wealth management training program. You see it among at least about a quarter of the people I interviewed really seem to believe quite unironically in the justice of protecting the wealth of their clients from taxation. They literally view taxation as theft, and they view government in general as being incompetent at best, corrupt at worst. And they're deeply suspicious of any sort of welfare state programs because they see it as destroying initiative.

The picture you've painted for me, Brooke, of the wealth manager is someone who is a loyal person, a resourceful person, trustworthy. I fully imagine that lots of wealthy people are probably very good people, high-minded people, but I want to talk for a moment about the professionals whose clients are very clearly sleazebags. How do you, as a wealth manager, serve the interests of someone who is Cheating his country on taxes, cheating on his wife, cheating his employees. How do you serve a client like that and then go home, tell yourself that you're a good person, and sleep well at night?

Well, some of them don't. I think that's one of the reasons why we're seeing a wave of leaks recently, that some people are so troubled by what they're seeing that they just can't stomach it any longer and they blow the whistle, often with dire personal consequences. About a quarter of the people I interviewed, I would characterize as being conscience-stricken about the larger impacts of their work. And they had a range of strategies to reconcile themselves to the implications of that for their own conscience. One of the, the ways that they dealt with it was to encourage their clients to donate to charity to offset the negative impact of depriving the state of revenues. Other people I interviewed including one gentleman in Panama City said he would actually lecture his clients on the work of Amartya Sen and Joseph Stiglitz, basically on the theory and practice of inequality in the world. And he would point out to them that as they sat in his office in Panama City, a couple miles away, people were living in cardboard shacks and had no access to clean drinking water. And what did the client think about that? Now, that may seem mild, but it's a fairly risky strategy to pursue with wealthy people who are used to having people fawn over them and not challenge them. And frankly, most wealth managers are replaceable. There aren't a lot of them in the world, but if you find one a little too in your face, you could always go get another one or get another one within a different company.

I think a lot of people have impressions of the lives of the very wealthy and imagine what life must be like when you're jetting around in a private plane and being waited on by service staff all the time. And I'm wondering, in your conversations with wealth managers, whether any of your own assumptions or beliefs about the connections between wealth and happiness were either confirmed or challenged.

I was struck by a man I spoke to in the Channel Islands who talked about how suspicious wealthy people are. It jibed with some things that I've seen personally. And what he said was, when you're really wealthy, it's not uncommon to have the experience that everyone is out to get a piece of you. It's like what happens to lottery winners. All sorts of so-called relatives come out of the woodwork asking for loans, asking for help of some sort. Con artists come out of the woodwork looking to get a piece of you. But that's what happens throughout the lifetime of wealthy people, and so it breeds a kind of suspicion. Why do you want to be my friend? Why are you being nice to me? Are you just trying to get me to give you something? And that must be very unpleasant. And you can see how that would lead, at the extreme, to a sort of Howard Hughesian retreat or isolation from people. Because if you can't trust anyone, why bother?

I mean, the sad thing that you're saying is that the wealth manager might end up being perhaps among the very few people that a rich person can trust.

Yeah, I think that seems to be a common story. It's wealthy people and their servants. It almost comes to the point where you can— if you're a wealthy person, you are more trusting of the people you pay to be in your service than the people you don't pay. Because with your family, you might have sort of a King Lear problem, you know, which of my children actually loves me and which are out to get something from me. But at least when you are having a transactional relationship with an employee, at least The boundaries there are clear. You're paying them for certain services, and you can assess whether they are giving you those services at the standard you require. If they're not, you fire them. If they're doing a good job, you keep them on. There's a simplicity to that that is not present in emotional relationships.

Brooke Harrington is a sociologist at Dartmouth College. She's the author of the book Capital Without Borders: Wealth Managers and the 1%. Coming up, how financial inequality affects our work, relationships, and even our physical well-being. You're listening to Hidden Brain. I'm Shankar Vedantam. Support for Hidden Brain comes from Progressive. Whoever says saving money is hard doesn't know that new customers who bundle and save with Progressive save hundreds. Because switching your home and auto insurance is better than cutting down on those iced lattes you love. Switch to Progressive and see if you could save. Get your quote today at progressive.com. Progressive Casualty Insurance Company, Inc. affiliates, and other insurers. Not available in all states. Support for Hidden Brain comes from Quince. We all have those pieces in our closet that we can count on— the versatile jacket, the perfect t-shirt. These are the pieces that make getting dressed easy, and that's what Quince does best. Quince makes elevated everyday essentials using premium materials in designs that are timeless, thoughtfully crafted, and made to be worn again and again. And when the temperatures start to drop, Quince makes it easy to build on these everyday staples with versatile layers designed to keep you warm and comfortable all season long. Find your next fall favorites at Quince. Download the Quince app for app-exclusive offers, or go to quince.com. Get free shipping on your order and 365-day returns. Now available in in Canada and the UK too. And when Quince asks where you heard about them, let them know it was Hidden Brain. This is Hidden Brain. I'm Shankar Vedantam. Are you rich? Are you poor? Or are you somewhere in between? The answer isn't just a matter of your salary or how much money is in your bank account. It's also driven by your perception of the people around you. Is your house nicer than your next-door neighbor's? Does your best friend drive a more expensive car than you do? What about the neighborhood you call home? Is it more upscale or more modest than the one your parents lived in? At the University of North Carolina, psychologist Keith Payne studies how we think about those who have more than us and those who have less. He's the author of The Broken Ladder: How Inequality Affects the Way We Live, Think, and Die. Keith, welcome to Hidden Brain.

Thanks so much for having me.

I want to begin with a personal story that you've told in the book and elsewhere, Keith. This goes back to your childhood when you were in the 4th grade. You were standing in line at a cafeteria in your school, and you had your first visceral experience with the awareness of inequality.

Tell me that story.

What had happened was we had a new cashier, a new lunch lady in the line that day. And when I got to the cashier's desk, she asked me for, I think it was $1.25. And that was the first time that anybody had ever asked me to pay for my lunch because I had always been on free lunch. But I didn't know it because nobody had ever pointed it out or talked about it. And previously, the cashier had just waved me on as part of the normal process. But this new person She didn't know how things worked, and so she asked me to pay for my lunch. And there was this awkward moment. I didn't have any money, of course, and I didn't know what to do about it. And so that moment of awkwardness made me suddenly realize that, wait, some of these kids have been paying for their lunch all along, and some of us haven't. And all of a sudden it dawned on me why that was, that, that, you know, we got free lunch, that that meant that We were the poor kids, and that, that had never occurred to me before. And so that, that awkward moment standing in the lunch line suddenly increased my awareness of not only the inequality in my classroom, but the implications of what it meant to be one of the poor kids. And so I started thinking about myself differently. I started seeing my friends and my peers differently, and all of a sudden This, this relative difference between me and the other free lunch kids versus those who paid for their lunch all of a sudden loomed larger than it ever had before, at least for me. And the interesting thing is, you know, that it's not like I was poorer the day after that than I was before. Nothing objectively had changed, but because of that subjective awareness Now, everything seemed different to me.

I want to talk about a wonderful analogy that you've explored in the book, and it really grows out in some ways of this conversation we're having about what happened in your school lunch cafeteria. Let's say I'm boarding a plane, and on my way to seat 36J in economy, as I make my way down the aisle of a traditional plane, tell me what I see and how that affects me.

So usually you enter at the front of the plane, and you're walking down the aisle past the first class section with the large seats and the legroom, and everybody's already settled in because they boarded first. And you're walking past that to go to where I usually sit, which is in coach, right? So as you go to find your, your way, you're literally walking along this sort of status hierarchy that's laid out in front of you. And so there's a wonderful study that shows the psychological and behavioral consequences of experiencing that kind of hierarchy embedded in the airplane. The researchers looked at data from millions of flights to look at what predicted incidents of air rage. That is, cases where passengers were unruly or disruptive or violent in some way. And they found that In planes that had a first-class cabin, incidents of air rage were several times more likely to happen than in flights that didn't have a first-class cabin, which suggests that to witness that inequality seems to have some kind of psychological effect on people that really ramps up the disruptive behavior.

Now, it's worth noting that planes with a first-class cabin might be larger, with more passengers and longer flights. More people and more time spent in the air could also increase the likelihood of air rage. But there are some other indications that seeing the inequality between first class and coach does affect passengers. For example, some planes don't start boarding with their first class passengers. They board from the rear of the aircraft, and Keith says that makes a difference.

Yeah, there's a difference in the sense that if you board a plane in the middle or at the rear and don't have to walk past the first-class cabin, there's a much lower incidence of air rage in the coach cabin.

I remember a scene in the movie Bridesmaids. Kristen Wiig plays a woman named Annie. She's in economy, but all her friends are flying first class.

You cannot be up here.

Hey, hello, Grandpa.

I'm sorry.

I just want to be here with my friends because I'm with this Um, the sign just went off.

Can't she stay up here for, like, a minute? Absolutely not.

Coach passengers are not allowed up here in first class.

It's policy. I'm sorry.

Oh, this is a very— this is a very strict plane that I'm on.

Welcome to Germany.

So Keith, if all of Annie's friends were in economy, she would feel a lot better, wouldn't she?

Right. The feeling that she deserves to be in first class because her friends are in first class is really powerful because, you know, if she didn't have any connection to the people in first class, she might pay less attention to them. And so it's that feeling that not only do I not have something that other people have, but I deserve that thing that other people have that makes that relative comparison so much more painful.

Why is it that the comparisons we make are invariably upward Comparison. So if the folks in coach are comparing themselves to the folks in first class, the folks in first class are probably comparing themselves to the folks who fly private jets.

There's a pronounced tendency we have to make upward comparisons in all areas of life. And it's not always the case. Sometimes we compare downward or to other people who are similar to us. But we have this pronounced bias to compare upward. And the reasons for that upward bias are not fully understood, but it seems to have something to do with the fact that upward comparisons, on the one hand, feel painful because you're comparing to somebody who has something that you don't. But on the other hand, they're also potentially inspiring, potentially motivating. And so they can sort of get you moving to work harder in some cases as well.

Mm-hmm.

So there's something adaptive about it, but also something painful.

I remember whenever there are stories in the press about inequality and you read the comments section, you will invariably find someone writing in from New York's Upper West Side saying, $1 million isn't what you think it is. It really doesn't get you all that much. I'm barely keeping up with all the people around me. But this is how nearly everyone feels at every income level.

That's right, and it's incredibly frustrating for ordinary people to read those kind of comments, but you can kind of see the psychology at work, right? If you're a middle-class person being frustrated at that New Yorker saying that, just think about how you're viewed by other people who are not middle-class Americans. Either they're people who live in poorer countries around the world, or they're people who are struggling to make ends meet in the United States. That same dynamic happens all up and down the income ladder.

We increasingly live in a world where you have extremes of inequality. The world's 2,000 or so billionaires together have more wealth than about 60% of the rest of the world's population. That's 4.6 billion people. I asked Keith to explain how his book title, The Broken Ladder, captured this staggering divide.

One of the images that I use throughout the book to capture the relative differences between people is this idea of a status ladder. That we think about ourselves in terms of being on a certain rung with some people above us and other people below us. And where we think we stand on that ladder tells you a lot about a person's life and their, their life outcomes. And as the scale of inequality gets larger and larger, as it's been doing in the United States and other advanced economies, around the world, it becomes harder and harder to climb that ladder for a number of reasons. And so when the scale of inequality gets out of proportion to what we can psychologically handle, the ladder is essentially broken. It becomes harder and harder to occupy the rung that we think we ought to be on.

When we come back, the deep and insidious ways that inequality affects our lives. You're listening to Hidden Brain. I'm Shankar Vedantam. Support for Hidden Brain comes from Instagram. Instagram Teen Accounts' automatic protections limit who can contact teens, the content they can see, and the time they spend on the app. Teens are automatically placed into Teen Accounts. Teens under 16 will need a parent's permission to change any of those settings to be less strict. Learn more about teen accounts and Instagram's ongoing work to protect teens online at instagram.com/teenaccounts.

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Onboard, enjoy menus from renowned French chefs, wines and champagne selected by a sommelier, and free high-speed Wi-Fi. When it's time to rest, settle into a fully adjustable lie-flat bed with added mattress comfort. The art of travel elevated, because Air France Business Cabin goes further in every detail to make your journey exceptional. This is Hidden Brain. I'm Shankar Vedantam. Financial inequality affects how we perceive ourselves and the world. It can fill us with envy and a sense of injustice. But those are just the surface-level ways that inequality affects us. At the University of North Carolina, psychologist Keith Payne has found that inequality shapes us even more deeply than we realize, with measurable effects on both our bodies and our minds.

Inequality does a few different things to the way that both our minds and our bodies respond. One is that it makes us focused on the short term. It makes us impulsive, focused on the here and now, and it makes us more willing to seek out risks and engage in high-risk, high-reward sort of gambling behaviors. It also affects our bodies in ways that are similar to physical threats. So the social threat of feeling lower on the status ladder than somebody else provokes very similar reactions physiologically to a physical stressor. So we react as if we were about to be physically attacked. We react with stress responses as if we were about to face a literal physical challenge. And the total of all of those effects adds up to feeling that we're constantly in crisis.

I asked Keith to talk about the difference in the homicide rate between countries that are equal and countries that are less equal.

If you look across countries, one of the strong predictors of homicide rates, as well as other kinds of violent crime, is the level of income inequality in those countries. Now, we have to make an important distinction here between wealthy developed countries and poorer countries. Because in poor countries, the best predictor of crime and lots of other bad health and social outcomes is actually poverty. Because we're talking about countries in which poor people may not have their basic physical needs met. But when we look at wealthy countries, like the countries of Western Europe, and North America, poverty ceases to be the strong predictor of things like homicide rates, and inequality becomes the stronger predictor. Because once people's basic physical needs are met, it becomes the relative comparisons to other people that becomes one of the major stressors that affect people.

Now, of course, it's important to mention that some of these findings are correlations. You're basically looking at patterns. You're not actually conducting an experiment where you're varying how unequal people are and then measuring the outcomes in things like homicide. But tell me about another correlation that people have looked at that has to do with politics, the relationship between inequality and political polarization.

If you compare either across countries or within the United States over time, you see a pretty strong correlation between the level of income inequality and the level of political polarization. So it's not that inequality makes people more conservative or more liberal. per se, it's that people who are already in those— on those sides go further into their corners when inequality is high.

What is it about inequality that causes people to drive into their separate camps, Keith?

There seems to be a back-and-forth dynamic between how much money people have and what they see around them and how certain they feel in their own opinions. So people who are wealthy tend to feel that they deserved it and they earned it, and that tends to make them favor more sort of free market policies and ideologies. And people who are struggling, who are working hard to get ahead but can't seem to do so, tend to feel like the market system is rigged against them. They favor more progressive taxation and redistribution policies. And both sides tend to think that the system is rigged largely by the other side. And so, The spreading of inequality in terms of money has also spread apart our politics and increased our confidence that we're right and the other side are not only wrong, but out to get us.

As I was preparing for this interview, Keith, I came by this interesting study that Daniel Zizzo had conducted. He gave money to volunteers. Some got more, some got less, and he found that volunteers were willing to spend their own money If it allowed them to reduce the money that other people had. Zizzo called this burning other people's money, and he found that a substantial number of people were willing to reduce their own wealth if they could also reduce the wealth of other people. In other words, inequality has such strong effects on us that we are willing to make great sacrifices to level the playing field.

From an economic point of view, that's just crazy behavior, right? But from a psychological point of view, it makes perfect sense. perfect sense because we're not judging these things the way an accountant or an economist would. We're thinking, what do I have compared to what that other guy has? And that relative sense of entitlement and having enough compared to what other people have is so powerful.

Keith, the researchers Michael Norton and Dan Ariely once asked volunteers what kind of a country they would like to live in. The first option was a country where the top 20% own a third of the wealth, And the bottom 20% own 10% of the wealth. Option 2, the top 20% own 84% of the wealth. The bottom 20% own 0.1% of the wealth. What did the volunteers say?

Most people chose, by an overwhelming margin, the more equal option.

And of course, this was not even a small difference. 92% of Americans apparently chose the first option. And that first option doesn't look a lot like America, does it?

No, in fact, those pie charts that you just described were taken from actual data. The first one, which describes Sweden, and the second very unequal one, which actually describes the United States.

Almost universally, people preferred the first option to the second. The survey, which was conducted in 2005, found that of those who had voted in the last presidential election, 90% of those who voted for a Republican and 94% who voted for a Democrat said they preferred option 1 to option 2. I asked Keith why this preference for equality doesn't get translated into policy. What explains the mismatch between what we say we want and what we do?

Well, the important thing in that study was that the charts demonstrating those different levels of inequality were not labeled. Right? And so if you were to add the labels that this is the United States and that's Sweden, now people would start sorting themselves out and choosing the United States or Sweden based on their beliefs. And for those on the right, they see it through largely through a lens of meritocracy where you work for what you get and you deserve whatever that outcome is, whereas people who are more on the left see it through a lens of fairness and differential starting places. So the gulf there gets mixed up with lots of aspects of our identities, and that makes it very difficult to discuss.

One of the places where you can see this tension between meritocracy and fairness is in the world of professional sports. In 2019, the Los Angeles Angels awarded baseball player Mike Trout a contract worth more than $400 million. I asked Keith if he thought the Angels were paying Mike Trout too much.

Well, if you look at teams, whether it's baseball or basketball, that have extreme levels of inequality, which are driven by paying superstars astronomical salaries, they don't outperform other teams that have more equality. And that's counterintuitive if you think that paying the superstars huge salaries means that they're going to work harder and perform better, you would expect better scores and more wins. But in fact, in team sports like that, higher levels of inequality and extreme pay for the superstars is associated with poorer performance in subsequent seasons.

Of course, this idea might be explained by what you said earlier, which is that even if you buy the idea that maybe the superstar does perform very well, the resentment and unfairness that others experience might come at a cost to the team's performance.

That's right. The team coordination seems to be a critical factor here. So extreme disparities like that overall tend to be destructive to teamwork and cooperation. So in team sports, that interferes with overall performance. Although in other kinds of sports, like golf or NASCAR racing, where it's just the individual performing their best, there, Higher stakes, larger pay do seem to incentivize better performance for the individual.

Let's think about what happened to Mike Trout just a little bit more closely. Let's say that the Angels read your book and they decided, we want to do away with inequality. Let's take the extreme thought experiment example where they basically said, we're going to pay everyone on the team the same amount. We're going to pay everyone— let's say there are 40 players on the team. Everyone gets $4 million instead of some people getting $500,000 and some people getting Do you think that would be a better outcome, and what kind of problems do you think it would cause if the Angels were to do that?

Well, there are trade-offs here. Probably your highest-paid superstars would be very angry at that, and maybe they would leave the team. That would be a problem. If you had a more equal level of compensation, it would also increase teamwork and coordination, so that would benefit the team. So, in most cases, the argument here is not for absolute equality so that everybody makes the same. It's that, you know, people should be compensated in proportion to their contributions. But the scale could oftentimes be much more compressed so that the superstar isn't making 30, 40, 50 times what other people are making and could still be compensated in proportion to how much they're bringing to the team.

Hmm.

I want to switch gears just a little bit. The newspaper, the Sacramento Bee, published the salaries of every California state employee. What happened when people discovered that they were being paid less or more than other people who are working for the state of California?

The effects of learning what you made in comparison to what other people made depended on whether you were a high earner or a low earner to begin with. So people who were below average, when they learned that other people were making much more than them, they felt very dissatisfied. People who were higher up, when they found out how well they were doing compared to other people, ironically, it didn't have the same effect. They didn't feel overjoyed at the fact that they were doing so well. Their reaction was just sort of neutral. They weren't any happier, but the people at the bottom were made more unhappy.

When you look at the example of the Sacramento Bee and the publication of the salaries, it raises a question in my head about whether transparency is a good thing or a bad thing. Obviously, as a journalist, I believe that transparency is a good thing, but in this case, if you make salaries transparent and then people end up quitting their jobs and leaving, Is that a good outcome?

Well, I don't know whether transparency in pay itself is necessarily a good outcome or a bad outcome. But what I think transparency shows is the underlying assumptions that we have. So if you think that incentivizing good performance with very high pay is a good thing, then you would want your company to have full transparency so everybody in the company could see that the superstars were getting paid a lot. And that other people weren't getting paid so much. And the people who are the poor performers are getting paid very poorly. If your idea is that pay inequity increases performance, you should want total transparency. And yet, what we have is a system in which most companies, most organizations want to keep their pay inequality secret. And the social norms are not to talk about these things, which means that at some level, we must kind of know that there's something else going on Besides just incentivizing good performance, we know at some level that there's this negative feeling surrounding talking about differences in pay and that that's likely to have some bad outcomes as well.

When you looked at the example of the aircraft studies that you told me about at the start of our conversation, you mentioned that in aircraft that do not board Passengers from the front or aircraft that don't have first-class cabin at all, you have fewer of these problems. Now, of course, you're going to have rich people and slightly less rich people on those airplanes as well, but the differences are not visible and those differences therefore don't translate into some of the problems that you're describing. It raises the question again, if you have inequalities in a society, an organization, a community, are we better off making them visible or better off keeping them invisible?

It's a good question. There's no simple answer because, on the one hand, when people are economically segregated and you have the wealthy living behind gated communities and very separate from the way ordinary people are living and the way poor people are living, it might be psychologically easier on the middle class and the poor people not to see that. But on the other hand, it creates a greater feeling of distance between the haves and have-nots and less of a feeling of community. You know, that leads to increased polarization and lower levels of trust. So there's no simple answer in terms of whether we want highly visible or highly transparent inequality versus less visible and less transparent inequality, because there's always a trade-off at work between what feels good versus what has negative consequences down the road.

You're a psychologist, Keith, and you know that there are several small warehouses filled with studies that show that comparing ourselves to others is often a recipe for unhappiness. It's clear that at a societal level, we need to sort of take heed of the lessons of inequality, the psychological consequences of inequality. Yeah.

Does that also translate to the individual level? Are individuals better off thinking about inequality or better off not thinking about it?

I think there's not really any option of not thinking about it because we're constantly making social comparisons to what others have around us to define what's normal and what's enough. But I think there are wiser and less wise ways to think about inequality and to make those social comparisons. So one of the things I recommend In the book is that we can be more strategic in making upward versus downward social comparisons. We talked earlier about how people tend to, by default, make upward social comparisons to those who have more than them. But we can strategically make downward social comparisons also, right? So instead of just thinking about what other people have who have more than us, we can remind ourselves that, you know, There are a lot of people around who have less than us. And upward and downward social comparisons have opposite consequences. Upward social comparisons, as I mentioned before, feel terrible, but they can be motivating. Downward social comparisons feel great, and yet they can be demotivating. So it depends on what your goal is. Do you want to feel— take a break from feeling stressed? Well, then do some downward social comparison. Do you want to feel motivated and energized to go out and, and do more, do some upward social comparisons. So neither one is, is good in itself. It's just that we can be more mindful about the kinds of comparisons we're making on a daily basis.

Keith Payne is a psychologist at the University of North Carolina. He's the author of The Broken Ladder: How Inequality Affects the Way We Live, Think, and Die. Keith, thanks for joining me today on Hidden Brain.

Thanks so much.

Hidden Brain is produced by Hidden Brain Media. Our audio production team includes Bridget McCarthy, Annie Murphy-Paul, Laura Querelle, Kristin Wong, Ryan Katz, Autumn Barnes, and Andrew Chadwick. Tara Boyle is our executive producer. I'm Hidden Brain's executive editor. Our unsung hero today is Keith Woods. Keith is the chief diversity officer at NPR. Over the years, Keith has offered helpful insights and guidance on a number of Hidden Brain episodes. He has also created opportunities for countless journalists to learn more about the craft of storytelling. Keith is the epitome of the inclusive leader, always ready to share his thoughts or to lend a hand. Thanks, Keith. If our work has given you food for thought or helped you with some aspect of your life, please consider making a donation at support.hiddenbrain.org. That site again is support.hiddenbrain.org. I'm Shankar Vedantam. See you soon. See you soon.

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