Dialogue with Xi Kaiyuan

From the very beginning of the establishment of management science, psychology has been one of its pillars. From the early Hawthorne experiment to the later Maslow theory, etc., the research results of psychology have promoted the development of management science. And such influence has been increasing recently. In 2008, the Wall Street Journal published three of the top ten management gurus from the field of psychology (including Harvard psychologist Howard Gardner, see the May issue of this issue, "With Howard Gardner Conversations).

The influence of psychology has actually penetrated into the field of economics in a broad sense. In 2002, psychologist Daniel Kahneman shared that year's Nobel Prize in Economics for his seminal contributions to behavioral economics. Fortunately, Chinese scholars have also made contributions in this field. In his award-winning speech, Kahneman mentioned the research results of Chinese scholar Xi Kaiyuan.

Professor Xi Kaiyuan received a post-doctorate in psychology from Yale University and has been teaching at the University of Chicago Business School for a long time. Professor Xi Kaiyuan is a world-renowned scholar who uses psychology to study marketing and decision-making, and he has named a new discipline—well-being.

Themes of Happiness Studies

Liu Lan: Your main research interest is happiness studies. How is happiness related to psychology and economics?

Xi Kaiyuan: When economics came into being, people's resources were very limited, and food and clothing were still a problem for many people. What economics studies is how to maximize people's wealth with limited resources, so that more people can solve the problem of food and clothing. This question is of course a very important issue in human history, and I also believe that economics has played a very important role in the economic development of many countries.

But even economists, such as Jeremy Bentham, recognize that maximizing wealth is not an ultimate goal. Wellbeing actually goes one step further than economics, studying how to maximize happiness with limited wealth.

Liu Lan: Is there a difference between what you say about happiness and what Bentham says about utility?

Xi Kaiyuan: Simply put, utility is defined in two very different ways in economics. One way of defining it is what Bentham said. Happiness is actually a concept, which is a subjective experience of human beings. Kahneman called the utility Bentham spoke of as experiential utility, which is what we call subjective well-being.

But in the 20th century, economics may have been influenced by a lot of natural sciences for a period of time, and it seems that it is not scientific to study subjective feelings, so it is defined as the preference of choice. If I give you two things, if you choose A or B, it means that A has a higher utility than B, excluding human experience.

Liu Lan: You just talked about the relationship between happiness and economics. What is the relationship between happiness and psychology?

Xi Kaiyuan: A considerable part of the study of happiness is about human psychology. A considerable part of psychology studies human emotions, that is, what affects human emotions, and how human emotions affect human behavior. Psychology has accumulated a lot about the relationship between external stimuli and people's emotions in the development of many years, in fact, it has laid a theoretical foundation for the study of happiness. Therefore, it should be said that one of the main foundations of happiness is psychology.

Liu Lan: It is generally believed that positive psychology studies happiness. You once told me that your research is very different from positive psychology. What is the main difference between Wellbeing and Positive Psychology?

Xi Kaiyuan: I am concerned with two issues in the study of happiness: one is the relationship between external stimuli and a person's subjective well-being. For example, what is the relationship between stock price fluctuations and people's psychology. We are doing a long-term follow-up study to study the relationship between China's stock price volatility and the subjective well-being of investors and non-investors. This is a very typical example. The second question is the relationship between decision-making and subjective well-being, that is, what kind of decision will improve your happiness, and what kind of decision will reduce your happiness. For example, do you buy something you really like, do you find someone who can make you happy in the future when you are looking for a partner, and do you find a job that truly satisfies you when you are looking for a job?

Well-being studies these two types of questions, which in fact complement each other. Let me make an analogy: For example, if you have some building blocks, we will study what kind of thing will make people look the happiest. This is the relationship between external stimulation and people's happiness. We also study whether you ask a person to build blocks by himself, whether he will build the shape that makes him or the people around him happiest, and whether he will make the wrong one. Building blocks are metaphors for all external stimuli, external wealth, stock prices, prices, and all material stimuli related to money.

Positive psychology research questions are also important. The question it studies is how to discover the positive factors in a person's heart, so as to improve the subjective well-being. For example, if you wake up every morning and think about how many people around you are treating you well, and how much you are grateful for, you will be in a better mood for the day. We study the relationship between a money-related factor and your happiness, such as how a company pays employees a bonus to make employees happier.

Liu Lan: They pay more attention to the inside, you pay more attention to the outside.

Xi Kaiyuan: Yes.

The Significance of Happiness Studies

Liu Lan: What direct significance does the study of happiness studies have for companies and managers?

Xi Kaiyuan: The study of happiness studies wants to achieve three goals. The first is to contribute theoretically, which is what we care most about. The second is to have an impact on businesses and consumers. The third is to have an influence on the government's policy formulation.

From the enterprise level, there should be several places where happiness science can be used. Starting from a small place, it is how to improve the happiness of employees with the least amount of money, thereby improving employee loyalty and performance to the company. We Chinese often send red envelopes, but in fact, from the perspective of happiness, it is not the best way. The purpose of our gifts is not to meet some of his needs, but to make him remember and appreciate me. We tend to give gifts a bit like doing charity, asking you if you need something, which is totally wrong. What gift should I give? I often say that you want to give people this kind of thing, which is what other employees want but they have no excuse to buy themselves.

Liu Lan: That is to say, instead of rewarding him with 3,000 yuan, it is better to give him a seven-day trip to Thailand.

Xi Kaiyuan: Yes, let him remember. This level is related to organizational behavior. The second level is the level of marketing, which studies how businesses can make consumers more willing to buy their own products. These are all things that can be studied in the study of happiness: what kind of things consumers are happy to see, and what kind of things consumers do not buy at all.

For example, we have a study: when two products come out, should they be sold on the shelves in the store at the same time or should they be sold separately? This can make a big difference in purchase intention. What kind of products should be sold together and what products should be sold separately is actually very knowledgeable, and there are completely theories that can guide you to do it.

Liu Lan: Your "Xi's blind date principle" (see the sub-column) is very impressive, which is similar to this principle.

Xi Kaiyuan: Exactly. The third level is the financial market. I have just started to do some research, but I think it is a very important area. For example, how should the company release news, whether it should be released all at once or little by little, whether to make people look forward to it or not to make people look forward to it. For example, what is my estimated sales in the second half of the year, and how does the way the news is released affect the stock price?

For example, the Federal Reserve cuts interest rates. It is going to cut interest rates by a percentage. Is it going to be cut all at once or in several batches? Is it a little bit of wind before the cut or a sudden cut? What is the impact of releasing this news in different ways and in different ways? This is a question worth studying.

These three aspects can be used by enterprises to maximize their benefits. But I think this is only one aspect of the application of happiness science. Many people are now concerned about how to maximize the interests of business owners and managers, but I think we should be concerned about how to increase the interests of the common people and how to increase the subjective welfare of employees and consumers. This is an area where happiness science can be applied more widely.

I now propose a concept: sustainable satisfaction. Many things can make everyone happy quickly for a period of time, but in the end people will "adapt", so although a lot of money is spent, the happiness is actually relatively short-lived. We need to study how choices and products can maintain and improve a person's sustainable well-being. This is not only about happiness from the perspective of business owners and management, but also how to improve happiness from the perspective of consumers and labor.

Liu Lan: This is very important. Some products are beautiful and attractive, but consumers don't like them after using them for a while, resulting in a waste of social resources.

Xi Kaiyuan: Yes. Well-being also has a very important application in policy making, which is actually a very broad field. Right now I'm working on several very interesting topics. One is urban planning, what kind of urban planning can make ordinary people happier. For example, should we encourage more private cars, or should we encourage public transportation and rail transportation? In the end, is the city more paved so that people can live in larger houses, or is the city relatively small and people live in crowded places but spend less time commuting to get off work? Should migrant workers be encouraged to stay in the cities, or should they be encouraged to return to the countryside after earning money? In the past, we have studied these questions from the perspective of economics, but the answers from the perspective of well-being may be very different. These issues are all policy-making, and in a sense, the impact is greater than the impact on enterprises.

A-type things and B-type things

Liu Lan: I know you have done research on the happiness index of Chinese cities. Can you share some main findings?

Xi Kaiyuan: A very important question in the study of happiness is whether economic development can improve happiness. With the development of society, people become richer and richer, and whether generations of people will become more and more happier, this is a very worthy of study.

We are now trying hard to develop the economy, the implicit assumption is that the development of the economy will definitely make each generation happier. But in the West, someone said in the 1970s that increasing the wealth of the whole society does not make the whole society happier, because the growth of wealth is a zero-sum game. Just like a diamond ring, if everyone has a small diamond ring, you will feel very happy if you have a big diamond ring, but if everyone's diamond ring is enlarged, in fact, you will be as happy as everyone wears it. The level of happiness is the same when the ring is small. So if a society is desperately trying to mine diamond rings, or trying to improve the technology of mining diamond rings to make diamond rings bigger and bigger, but in fact everyone’s happiness has not increased, then these efforts are in vain. If this is the case, it is a great paradox - why do we develop the economy like this?

Some people believe that economic development is a zero-sum game, and some people believe that economic development is not a zero-sum game. It is a very controversial issue in academia. Our research provides a little basis for this debate.

We think that there are mainly two types of things: one type of things we call it A type of things, which are inherently easy to evaluate. Another class of things, called B-type things, are things that are inherently difficult to evaluate. What is inherently easy to evaluate things? It means that people are born with a measure of this aspect, and they know how to feel comfortable and how to feel uncomfortable. For example, temperature, people are born with knowing what kind of temperature is comfortable and what kind of temperature is uncomfortable. We are born knowing that it is a pleasure to be able to eat when we are hungry. We are born to feel that being alone will make us unhappy, and having friends around is happy. Such things are class A things.

B-type things are often things that are learned in society after one is born, such as the bigger the diamond ring, the better, the better brand of the car, the faster the computer, the better, and so on. These things are acquired. Of course a lot of things are in between, with a lot of grey areas in between. Temperature is a very extreme A-type thing, and the size of a diamond ring is a very typical B-type thing.

Our theory is a very simple one: Personally, whether you're better than someone else's A's or B's, you'll be happier than others. For example, in winter when others have no heating, you will be happier than others if you have it. Others don't have big diamond rings, if you have them, you will be happier than others. In terms of social development, if you develop things of type A, you can make generations happier and happier; but if you develop things of type B, this development is a zero-sum game and will not make future generations A generation is happier than it is now.

This theory has enlightening significance for what kind of industry the government should develop and what kind of products the enterprise should develop. If our purpose is not to make more money for ourselves, but really to improve the welfare of society and make our descendants happier than us, we should devote ourselves to developing things of type A, rather than developing B. kind of things.

In the past 100 years, what has been the greatest increase in human welfare? Many people say that there are computers, many people say that cars are faster than before, but many of these things are still B-type things. Some things are really class A things, but they don't get the attention of a lot of people. For example, the drug for depression, this is definitely making people happier. For example, the birth of contraceptive measures...

Liu Lan: These two examples are major breakthroughs in medicine.

Xi Kaiyuan: Class A things are not just medicine. For example, I believe that the emergence of computers and the Internet has enabled people to communicate more with others, which can also make people happier. Because loneliness is a category A thing, people are social animals, and more communication between people and people will definitely make people happier.

Liu Lan: Some people also say that the Internet makes people less communication with each other, they are playing games online, or they communicate through some cold emails, ignoring face-to-face communication.

Xi Kaiyuan: Possibly. But no matter what, this is in line with what I just said about the happiness and unhappiness brought about by the generation of computers because of its impact on A-type things, not what we call high or low work efficiency.

Liu Lan: Going back to what you just said about the impact on policymaking, I think it's very meaningful. For example, the government should encourage the development of the luxury goods industry less, which is a category B thing, and should encourage the development of the category A thing industry, such as public facilities, medical and health research.

As you mentioned just now about the impact on enterprises, enterprises also need to conduct innovative research on A-type things. Many companies aim to make money and pursue products that give people a sense of short-term satisfaction. For example, if you launch a mobile phone that makes you happy for three months, then you are unhappy after three months, and it launches a new one, and you rush to buy this new one.

Xi Kaiyuan: From my point of view, it is more able to improve the welfare of a society than to improve the interests of an enterprise. From a long-term perspective, improving the welfare of the entire society is also beneficial to the sustainable development of enterprises. But in the short term, these two things are not necessarily consistent, and may even contradict each other.

If a company wants to make some money in the short term, maybe it will make more money by producing B-type things than A-type things, because people like to compare. If a business can produce something for comparison, people will buy it, and even though people are not very happy in the end, the business will make a lot of money.

Personal Happiness Studies

Liu Lan: Lastly, I asked two more personal questions. First, have you applied the results of your research on happiness in your own life? Second, do you have any simple and effective advice for an ordinary individual who wants to enhance their subjective well-being?

Xi Kaiyuan: The study of happiness has two effects on me: First, I think I am doing a very meaningful thing, which in itself brings me a great sense of happiness and satisfaction. Second, I think many psychologists feel this way, because your research on this aspect will allow you to look at things from a relatively new perspective, and you will be more aware of the misunderstandings when making decisions between yourself and others. But this does not necessarily bring you happiness and joy in the short term. Just like a dentist, he may have better teeth than others, but at the same time he is more aware of dental problems than others, which may also reduce your happiness. When we study happiness, we often catch our own mistakes in decision-making.

Liu Lan: Doctors are not necessarily healthier than patients.

Xi Kaiyuan: Yes, doctors are not necessarily healthier than patients, but I think they will pay more attention than patients.

As for advice to others, there are actually a lot of suggestions, so let me just talk about shopping. There are many things that people can easily adapt to after they buy them, but there are also many things that are not easy to adapt to. For example, you can spend money to buy a real dog, you can also spend money to buy a very beautiful fake dog. At the moment you buy it, a real dog and a fake dog may give you about the same level of happiness. But you have to realize that if you buy a fake dog, you will get used to it after a while, because the fake dog is immobile, and your initial pleasure will soon be gone. But the real dog will do some different tricks for you every day, and it is not easy to adapt. So, people who like dogs should try to buy real dogs instead of fake ones.

In a broad sense, it means that when we choose good things, we should try to choose those things that are not easy to adapt to. Often material things are easier to adapt to, you spend a lot of money on a big house, you spend a lot of money to decorate your kitchen with marble, these things are easy to adapt to. But if you spend money to travel, keep pets, make friends, these things are not easy to adapt to, these things are alive and can always bring you new excitement. This is an important point when making choices.

Xi's blind date principle

If you are a girl, someone introduces you to a boyfriend, and I heard that it is very good. Today, you have dressed up and are preparing to go on a blind date for the first time. It happens that the roommate is also free, so you are thinking about whether you want to take her with you, so that she can help with the staff.

Should you take her there? Let's imagine four situations: (1) you are beautiful and your roommate is ugly; (2) you are ugly and your roommate is beautiful; (3) both you and your roommate are beautiful; (4) both you and your roommate are ugly.

If it's the first case, take her with you, because in the joint evaluation process, your strengths are more prominent than the individual evaluation (you go alone). In the same way, if it is the second case, go alone.

What about the third and fourth cases? According to research done by Xi Kaiyuan and his colleague France Leclerc: If "you and your roommate are both beautiful", you should go alone. Because when a man evaluates alone, he will compare you with other girls he meets every day, which will highlight your advantages; but if you two go, what he does is a joint evaluation, comparing between the two of you, maybe you will find out Your relative inadequacy. In the same way, if "you and your roommate are ugly", you should choose to go together.

However, there are two other cases. (5) You are better than your roommate in hard-to-evaluate traits (such as being knowledgeable), but not as good as her in easy-to-evaluate traits (such as a prominent birthmark on your neck). (6) You are inferior to your roommate in hard-to-evaluate traits, but better than her in easy-to-evaluate traits. In the fifth case, it should go together. If you go alone, a man sees your birthmark at a glance, and his impression of you is discounted, and he doesn't know how to be knowledgeable about you. If you take your roommate with you, your talent and charisma will be on display as you chat about the past and present, and the birthmark on your neck won't matter. In the same way, if it is the sixth case, you should go alone. "Xi-style blind date principle" is not only applicable to blind date, but can be widely used in job search, product promotion and so on.