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In this episode, I’m joined by Dr. Elizabeth Dunn, a professor at the University of British Columbia and one of the world’s leading researchers on happiness.
Liz’s earlier book, Happy Money, has had an outsized influence on how I think about personal finance. Her work helped me recognize that the mathematically optimal decision is not always the happiness-optimal one—and that good financial planning should account for both.
Her new book, Leave the Lights On, co-authored with Jiaying Zhao, applies that same lens to spending, commuting, work, travel, investing, and some of life’s biggest decisions. Rather than framing better choices around guilt, perfection, or sacrifice, Liz looks for “sweet spots”: changes that improve our lives today while also producing better long-term outcomes.
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Why better decisions should focus on impact, not guilt (00:43)
Liz describes herself as a happiness researcher, which means she studies what actually makes people feel better—not what we assume should make them happy.
Her path to Leave the Lights On began while biking to work. She realized she was not riding primarily because it was good for the environment. She did it because the exercise and fresh air put her in a better mood, and she arrived at work feeling more energized and pleasant toward her colleagues.
That observation led to a bigger question: How many decisions that are good for the future might also improve our quality of life right now?
The book takes aim at the guilt and moralizing that often surround environmental behavior. Liz tells the story of a former boyfriend who would glare at her whenever she left a room without turning off the lights. She later learned that leaving every light on in her two-bedroom condo for the rest of her life would create roughly the same emissions as eating thirteen hamburgers.
Reusable shopping bags offer another example. An organic cotton bag may need to be used more than 150 times before its carbon cost falls below that of a disposable plastic bag.
The lesson is not that small actions never matter. It is that our time and attention are scarce. Obsessing over symbolic gestures can distract us from decisions with much greater consequences.
That idea applies just as well to money. A good financial plan should concentrate effort where it is most likely to improve someone’s life rather than demanding perfection in every category.
How to spend more on comfort and less on comparison (06:20)
One of the most useful ideas in Liz’s new book is the distinction between Type A and Type B purchases.
Type A purchases satisfy basic, widely shared human needs. A comfortable room temperature, a good night’s sleep, waterproof boots, or a meal you genuinely enjoy can improve your experience without requiring you to compare yourself with anyone else.
Type B purchases depend more heavily on status and social comparison. The enjoyment of a larger diamond, designer bag, luxury brand, or more powerful car may depend partly on knowing that someone else has less.
That distinction matters because Type A spending can raise happiness in an absolute sense. If everyone has a more comfortable home, everyone can benefit. But if everyone receives a bigger diamond, the comparison simply resets and the status competition continues.
This does not mean people should never buy expensive things. It means we should ask what the purchase is actually doing for us.
A related principle is to buy fewer, better things. Fast fashion encourages constant purchasing, but the more frequently we buy, the faster we adapt and the less pleasure each new item tends to provide.
Liz suggests that a smaller collection of high-quality, versatile clothing may create more enjoyment than a crowded closet. A capsule wardrobe can also reduce clutter, simplify travel, and save time.
The better question is not merely, “How much does this cost?” It is, “How often will I use it, and how much will it improve my daily experience?”
Why generosity can provide a bigger happiness boost than spending on yourself (12:17)
Some of Liz’s most influential research examines what happens when people spend money on others.
In her early experiments, participants received small amounts such as $5 or $20 and were instructed to spend the money either on themselves or on someone else. By the end of the day, those who spent it on others tended to feel happier.
But Liz wondered whether that result would hold when the money became truly consequential.
The opportunity to answer that question arrived through Chris Anderson, the head of TED. A wealthy couple in the TED community wanted to give $10,000 each to 200 people across several countries. Participants could spend the money however they wished, as long as they documented each purchase.
People bought cars, phones, household appliances, education, and trips to Disney World. Yet the greatest reported happiness came from charitable donations.
Liz was also surprised by how much of the money people chose to use generously. On average, participants donated more than $1,000 directly to charity and spent more than $6,000 in broader prosocial ways, including gifts and support for other people.
Her research identifies three conditions that make generosity especially rewarding:
Connection: You feel connected to the person or cause you are helping.
Impact: You can see or vividly understand the difference your contribution makes.
Choice: You feel that the decision to give is genuinely yours.
This has important implications for charitable planning. Tax efficiency matters, but the most technically efficient strategy may not produce the greatest sense of meaning. A strong giving plan should preserve the financial benefits while helping the donor feel connected to the cause and understand the outcome.
How housing, commuting, and remote work shape everyday happiness (15:42)
Housing decisions are often evaluated through visible features: square footage, countertops, school districts, and price.
Commute time is easier to overlook because it feels abstract when touring a home. But once the decision is made, it may affect daily life for years.
Liz explains that commuting consistently ranks among the least enjoyable parts of the day. Longer commutes also reduce “time affluence”—the feeling that we have enough time for the people and activities that matter.
That makes the commute a major consideration when deciding where to live. A larger or less expensive home may not be a bargain if it requires giving up an extra hour every day to traffic.
For people who cannot move closer to work, the mode of transportation matters. Biking tends to produce greater well-being than driving, and e-bikes make it feasible for more people. Although e-bikes require less effort per mile, their owners often get as much total exercise as traditional cyclists because they ride more frequently and travel farther.
Carpooling can also help. Driving alone combines two things that tend to reduce happiness: commuting and isolation. Sharing the ride introduces social interaction, one of the most consistently enjoyable parts of the day.
Remote work appears to solve the commute problem, but Liz says the research is more nuanced. Working from home can return valuable time for sleep, family, and exercise. It can also reduce stress and increase job satisfaction.
But full-time remote work may create loneliness and weaken mentorship, particularly for younger employees. Informal feedback, trust, and professional relationships can be harder to develop through scheduled video calls.
The emerging sweet spot may be hybrid work, with two or three days at home and the remaining days in person. That model can preserve time savings while maintaining connection.
Employers also need to make office days worthwhile. Asking someone to commute for an hour only to spend the day alone on Zoom defeats the purpose. In-person time is most valuable when used for creative work, mentoring, collaboration, and relationship building.
Why experiences matter—and how to get more happiness from travel (23:29)
One of the central lessons from Happy Money is that experiences often make us happier than material purchases.
Experiences can deepen relationships, become part of our identity, and create stories we remember. Liz shares a personal example: paying an extraordinary amount to take her 13-year-old son, who loves soccer, to a World Cup match.
The expense was difficult to justify through a purely financial lens. But it gave them a meaningful experience they will likely remember much longer than another physical item she might have bought him.
Travel is one of the most common ways people purchase experiences, but Liz’s new book complicates the standard advice to “buy experiences, not things.”
Research examining tourist happiness found that eating, shopping, visiting museums, and sightseeing were all enjoyable. The major exception was spending most of the day traveling.
That creates an opportunity to find experiences closer to home. Many people overlook the attractions, neighborhoods, restaurants, and activities in their own area because those options will always be there. Yet acting like a tourist at home can provide novelty without sacrificing a day to airports, flight delays, and transit.
Liz is not arguing that people should stop taking ambitious trips. She recommends making long-distance travel more special: go less frequently, stay longer, and get more value from the trip once you arrive.
She calls this maximizing your “return on emissions”—getting the greatest possible happiness from the environmental cost of travel.
That may mean choosing direct flights, packing lightly, extending a distant trip rather than making several short visits, or treating a weekend near home more like a vacation.
The larger point is that travel should complement a satisfying life, not compensate for one that feels miserable most of the year. Putting all of our hopes for happiness into one expensive annual trip may be less effective than investing in daily pleasures, relationships, and a more enjoyable routine.
What your bank account and investments may be supporting (28:23)
One of the most surprising sections of Leave the Lights On concerns banking and investing.
People often focus on the environmental impact of what they buy while giving less thought to where they keep their savings. Banks use deposits to support lending and other financial activities, including financing carbon-intensive industries.
Liz offers a striking comparison: Keeping $1,000 in a typical large U.S. bank may generate roughly as much carbon as a one-way flight from New York to Seattle.
Changing banks may require an unpleasant afternoon of paperwork, but unlike decisions about meals or commuting, it is largely a one-time action whose effects can continue for years.
Retirement accounts create similar questions. Many investors hold fossil-fuel companies through broad market funds without realizing it. Liz discusses funds designed to remove that exposure, while acknowledging that investors still need to consider diversification, expected returns, fees, taxes, and risk.
Shareholder voting introduces another layer. Investors often delegate their voting rights to asset managers without understanding how those shares are being used. The result may be that someone’s ownership stake supports policies they would not personally choose.
The takeaway is not that everyone should make the same portfolio change. It is that investors should understand what they own, how their shares are being voted, and whether their financial strategy reflects their priorities.
For anyone considering a values-based portfolio, labels such as “ESG” are not enough. The relevant questions are what the strategy excludes, what it includes, how it differs from the broader market, and what financial tradeoffs may result.
How to approach life’s biggest choices without moralizing (31:09)
Questions about where to live, whether to have children, and how large a family to build can quickly become moral debates.
Liz argues that this framing is usually counterproductive because it strips away nuance.
Claims that anyone who cares about the environment should not have children ignore enormous differences in how and where families live. Geography, transportation, housing, local energy sources, and consumption patterns all shape the outcome.
The same is true of many large financial and lifestyle decisions. There is rarely one universally correct answer.
Rather than adopting a checklist of approved behaviors, Liz recommends understanding which choices have the greatest impact and then finding a combination that fits your circumstances and values.
That is very similar to sound financial planning. The perfect portfolio is not the same for everyone, and neither is the perfect lifestyle. Both require tradeoffs, prioritization, and an honest understanding of what matters most.
How small choices can compound through other people (33:45)
The final chapter of Liz’s book is called “Upward Spirals of Joy,” which immediately made me think about compounding.
Our behavior can influence other people without either party recognizing it.
Liz describes a study conducted at the University of British Columbia in which researchers observed customers ordering from a cafeteria line. Diners selected the exact same meal as the random stranger immediately ahead of them 72% of the time.
Most people would probably deny that a stranger’s order affected their choice. But the behavior they observed helped shape what felt normal or appealing.
The same process can apply to commuting, food, spending, investing, and generosity. When someone bikes to work, installs solar panels, orders a vegetarian meal, or visibly supports a cause, that decision may subtly influence friends, neighbors, and coworkers.
A small action can therefore matter in two ways: through its direct effect and through the behaviors it encourages in others.
That is where the connection to long-term investing becomes especially strong. Small choices may feel insignificant in isolation, but repeated actions can compound into habits, social norms, and much larger changes over time.
Finding your own sweet spot (35:09)
I close by asking Liz what listeners should reconsider after hearing the conversation.
She deliberately avoids prescribing the same action to everyone. The goal is not to hear one idea on a podcast and add it to a universal list of obligations.
Instead, she recommends asking:
Where is there an opportunity in my life to increase happiness while also producing a better long-term outcome?
For one person, that may involve food. For another, it could be housing, commuting, remote work, travel, banking, investing, or charitable giving.
The best place to begin is the area where change would be both meaningful and realistic.
Liz also encourages people to make the process social. Friends, family, and colleagues can offer support, accountability, and ideas. Change is easier to sustain when other people are participating—and one person’s positive decision can make the next person more likely to follow.
The broader message of our conversation is that good long-term decisions do not need to be built around deprivation. The most durable choices are often those that use our money, time, and attention to make life better today while improving the future at the same time.
Resources:
- Elizabeth Dunn
- Leave the Lights On: How Joyful Decisions Can Save Our Species
- Happy Money: The Science of Happier Spending
The Long Term Investor audio is edited by the team at The Podcast Consultant
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