James Montier: The Psychology of Happiness

James Montier, Co-Chief, Cross Global Strategy, at Société Générale in London, not only has a long term track record of accurate market calls, he also happens to be well renown on the subject of behavioural psychology. Some years before joining SocGen, he was, along with Albert Edwards, at Dresdner Kleinwort Wasserstein, writing some of the best known papers on behavioural finance and in the case of this article, "The Psychology of Happiness". Montier is eloquent in his writing. Here is the synopsis from the front page of the report, a classic:

If you are after specific investment advice, stop reading now. We seek to explore one of Adam Smith’s obsessions: what it means to be happy. We also discuss why that’s important to investors, and how we can seek to improve our own levels of happiness. The list below shows our top ten suggestions for improving happiness.

• Don’t equate happiness with money. People adapt to income shifts relatively quickly, the long lasting benefits are essentially zero.
• Exercise regularly. Taking regular exercise generates further energy, and stimulates the mind and the body.
• Have sex (preferably with someone you love). Sex is consistently rated as amongst the highest generators of happiness. So what are you  waiting for?
• Devote time and effort to close relationships. Close relationships require work and effort, but pay vast rewards in terms of happiness.
• Pause for reflection, meditate on the good things in life. Simple reflection on the good aspects of life helps prevent hedonic adaptation.
• Seek work that engages your skills, look to enjoy your job. It makes sense to do something you enjoy. This in turn is likely to allow you to flourish at your job, creating a pleasant feedback loop.
• Give your body the sleep it needs.
• Don’t pursue happiness for its own sake, enjoy the moment. Faulty perceptions of what makes you happy, may lead to the wrong pursuits. Additionally, activities may become a means to an end, rather than something to be enjoyed, defeating the purpose in the first place.
• Take control of your life, set yourself achievable goals.
• Remember to follow all the rules.

Download the complete paper here.

James Montier has also written the quintessential books on the subject of Behavioural Finance, Behavioural Finance: A User’s Guide , then, Behavioural Investing: A Practitioners Guide to Applying Behavioural Finance (The Wiley Finance Series).