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Wealth isn’t necessarily a recipe for happiness, especially if you’re surrounded by like-minded people
Researchers from the University of Warwick and the London School of Economics recently came up with another stark illustration of the North-South divide in the UK, writes Financial Times columnist Rymer Rigby. They found that residents of part of the west London borough of Notting Hill pay more in capital gains tax (CGT) than the combined population of Liverpool, Manchester and Newcastle.
Probably the one positive side of this is that if you’re a Notting Hill resident, you can easily find people like you with high affluence to share your CGT woes with in the local pub. But it also raises an interesting question: Is it good for your neighbor to be in the same category as you? If you’re rich, are you better off living around your own kind – or should you socialize with those poorer than you who are more concerned about their household bills than CGT?
This has become more of a problem in recent years. Wealth is highly concentrated in certain cities. A 2023 survey by Henley & Partners found that New York had 775 centenarians (people with a fortune of more than $100 million), while the area around San Francisco and Los Angeles had 692 and 504 respectively. London was fourth with 388.
It’s not just about cities. Places such as the Hamptons, parts of the Cotswolds in the UK and areas of southern France have also become billionaires’ fields. It was recently reported that the municipal administration of the exclusive ski town of Steamboat Springs, Colorado, could not attract a human resources manager despite offering an annual salary of $167,000 because it was not enough to purchase property in the resort. Even doctors who could afford to pay 1 million for a home said they were being outbid by cash buyers.
You don’t have to be a socialist to think that maybe something is wrong when neither high-income professionals nor middle-income workers can afford to live near where they work. Steamboat Springs may advertise itself as a place for cowboys and skiers, but that’s an image that hasn’t held true for decades.
Of course, even in the 21st century, there are not everywhere centers of the super-rich. The UK has only one city in the top 50 of the Henley&Partners millionaire list. Germany, France and Italy have only two each. Attractive cities such as Lyon, Manchester and even Berlin do not enter it. Unusually, legendary billionaire investor Warren Buffett still lives in Omaha, Nebraska — the Midwestern state has just three billionaires, compared to roughly 100 in New York.
But even if you’re just a millionaire, do you really need to live in a wealthy enclave? What are the pros and cons? One of the problems is that you end up with a distorted view of what counts as wealth. We see this in cities like London and San Francisco, where the top 1 percent of income earners are routinely perceived as the “middle class.” This can become a problem if the rich get into governance. Because they are surrounded only by other rich people, they will tend to assume that everyone is like that and will make policy about those with normal incomes, generalizing their idea of them from their own experience.
It can also lead to a lack of empathy and is definitely not a recipe for social cohesion. Surrounded by peers, you will not only believe that six-figure incomes are the norm, but that wealth is natural, the poor are lazy, and taxes are theft. This echo chamber effect is most acute in Silicon Valley, where libertarian billionaires cheerfully proclaim that the world’s problems can be solved simply by using their genius.
But rich neighborhoods can also have some advantages. They usually have better schools, quality restaurants, lower crime, etc. They also ensure that their residents don’t have to worry about standing out as the rich people in town.
It is tempting then to believe that living in an affluent neighborhood may be bad for society but good for its residents. However, this is not necessarily true.
In fact, the wealth around you can make you less happy if it makes you perceive your own status as inferior. A 2021 study by researchers at Singapore Management University and Yale found that “when people compare their wealth to that of others, there is a stronger link between money and happiness.”
This was well illustrated in Tom Bower’s 2006 biography of disgraced former media mogul Conrad Black and his wife Barbara Amiel, in which an observer quipped, “I don’t understand why Conrad wants to be the poorest rich man in America.” Black, though objectively fabulously rich, had surrounded himself with even wealthier people and so was constantly trying to catch up.
In that case, perhaps living in Omaha (or Manchester, Newcastle and Liverpool) is the key to wealth and happiness. Unless, of course, you have the strength of character not to compare yourself to your neighbors in Notting Hill. Speaking about the study he led, Jacinth Tan, an associate professor of psychology at the Singapore Management University, used a quote often attributed to Mark Twain: “Comparison kills joy.”
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