David Krueger MD
- Annie Leibovitz, perhaps the most famous living photographer, has a contract with Vanity Fair alone worth tens of millions of dollars. Unfortunately, that’s also the estimated amount of debt she has. One chunk of that, $24 million, comes due September 8, 2009 to Art Capital Group, and if she doesn’t pay up, she will lose the rights to her famous photographs (including well known shots like the naked John Lennon and Yoko Ono, and a pregnant Demi Moore).
- Rather than looking more closely at Ms. Leibovitz’s dynamics, let’s examine what we can learn about our own dynamics from this tragedy. And about how our minds and brains operate to sometimes make money mistakes and financial fallacies.
1. Why are we intrigued by a sad story of a famous woman’s misfortune? When something bad happens to someone we envy, the result is that we may feel good. Neuroscientists at the University of Cambridge found that news of the downfall of the rich and famous activates the dorsal interior cingulate cortex of the brain. Their humiliation activates this region of the brain that responds to conflict and social rejection. In fact, the study showed that the more we envy someone, the greater the pleasure in his or her downfall. This accounts for our pleasure in seeing a high-powered CEO who earned several million dollars in bonus get humiliated in front of a Congressional Committee exposing indiscretion, or doing the perp walk. (When Bernie Madoff got shoved on the sidewalk-be honest-how many times did you rewind?)
2. Making or spending money activates the same pleasure center in the brain that cocaine does. This makes the act of spending money potentially addictive. A lifestyle of increasing accomplishment, fame, wealth, and power can all be state-changing, and cumulatively challenging.
3. Good decision-making is a balance in which the right (emotional) brain and left (logical) brain operate together. Stress, whether it’s good or bad, can shift decision-making to the right brain, overriding reason.
We are reminded to delay significant financial decisions when vulnerable, such as at times of death in the family, divorce, or job loss. In recent time, Ms. Leibovitz lost her mother, her father, her longtime companion, Susan Sontang, and added two children to the family.
4. Our minds are drawn to the stories of the extreme to compare ourselves and feel better.
- To reflect: "At least my debt isn’t as bad as hers."
- To anchor an envy of fame or wealth: "I’m glad I’m not her."
- To watch dysfunctional people on reality and talk shows: "My problems are nothing compared to that."
- 5. Any thing (like money) or any process (like spending) can become its own story and eclipse its author. Success has made failures of many men, Cindy Adams reminds us.
- 6. Understanding insatiable appetite does not inoculate to its effects. Ms. Leibovitz’s fame as a photographer in the ’70s and ’80s provided gratification to people’s limitless hunger for stargazing.
- 7. Expertise in one area does not equate with expertise in another. From successful physician to famous artist, people may not translate their accomplishments to money or investment savvy. Different parts of the brain are involved. Even Warren Buffett recognized this about himself: "I don’t think being able to allocate capital means you’re good at anything else."
- 8. Money can solve many problems, or at least make them easier. But then we over-reach, and make money solve more than it should. It gets pressed into service because it’s a commonly accepted social and personal resource-it makes people feel self-sufficient.
- 9. We compare our inside to someone else’s outside, and perhaps think money can bridge the differences. Stories such as Ms. Leibovitz’s confront this illusion. Her creative work has exposed more than just the surface for decades.
- 10. Money is the legal tender of desires. It becomes the inkblot of the Rorschach test. Emotional valuation can over-write brain valuation. Money can be equated with emotional and social signifiers, such as power, freedom, and limitless opportunity.
- 11. Credit cards and loans decouple buying and paying: The pleasure of the purchase is segmented from the pain of future payment. Our optimism bias then makes rainy days and repayment an abstraction.
- 12. Like perfection, "more" is not a goal. It’s unreachable-no end point. Ms. Leibovitz was supplied with an almost limitless budget to shoot her increasingly exotic and expensive photographs. Jane Sarkin, a Vanity Fair Features Editor said, "Her demands became bigger…whatever she wanted she got."
- Please share your thoughts, reflections, or money stories.