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When money isn鈥檛 real: the $10,000 experiment | Adam Carroll | TEDxLondonBusinessSchool - YouTube
Channel: TEDx Talks
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Translator: Araminta Dutta
Reviewer: Queenie Lee
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I recently completed an unsanctioned,
unsupervised psychological experiment
[17]
on my children,
[19]
(Laughter)
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the premise of which was
$10,000 in cash on the kitchen table
[25]
and a sign next to it
that said 'Don't touch the money yet!',
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and before I dive into it,
[30]
you should know that we
are a game-playing family.
[32]
We play ball games, board games,
dice games, card games,
[36]
all sorts of games,
[37]
but the games that my children love
to play most are games like Monopoly,
[41]
and when they play Monopoly,
they play marathon games of Monopoly
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that last hours and hours
over days of play.
[49]
Each of my kids has a unique strategy
and personality when they play Monopoly.
[53]
My daughter, who is 11,
she is always the dog.
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She plays entirely for Chance
and Community Chest cards;
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(Laughter)
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you can say that she uses
the 'luck' strategy.
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My 9-year-old son is always the car -
a very strategic player.
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He buys all of the Railroads
and all of the Utilities
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and then proceeds to put houses and hotels
on the most expensive properties -
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very savvy.
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And then his younger brother,
who is seven,
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he buys everything that he lands on
with no exception,
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which is fitting because he
is the wheelbarrow.
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Now, before I tell you
how my experiment unfolded,
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I have to share an observation
that led me to the creation of it.
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One Monopoly marathon, Saturday morning,
I was playing with my kids
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and noticed that they were all playing
just outside of the rules of the game.
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So they were doing things
like buying each other out of jail
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and lending each other money
to buy properties,
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and I found myself going, 'Guys,
this is not how this game is played!'
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to which they'd say, 'Dad, it's fine!
We just want her on the board with us',
[121]
or, 'He can pay me back
at the end of the game,
[123]
when he's flush with cash',
[126]
and I'm thinking again,
'What am I teaching these kids?'
[132]
So, I started watching
how they were playing -
[135]
listening to their banter, getting a feel
for how they were making decisions -
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and I had this thought:
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'What if they're playing this way
because the money isn't real?'
[145]
It's a concept I've been reading a lot
about, lately, 'Financial abstraction',
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the notion that when money
becomes more and more of an idea,
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less tangible and therefore more abstract,
[155]
it changes the way we interact with it
on a regular basis,
[159]
and there's anecdotal evidence
of abstraction everywhere around us.
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All you have to do is listen carefully
to people who say,
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'I loaned my child
or grandchild the phone,
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and a month later,
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all these errant in-app charges
showed up on my bill.'
[172]
In 2014, Apple reimbursed customers
for in-app purchases that were unapproved,
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mostly by children,
to the tune of $32.5 million.
[182]
This is in a US FTC settlement.
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In the documentation,
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it said it was just too easy for kids
to make an in-app purchase.
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The Imagineers at Disney were charged
with making the parks 'frictionless' -
[195]
is what they called it -
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so they invested a billion dollars
in a MagicBand.
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It's a wearable device that functions
as your room key, your park ticket,
[204]
and your ID and wallet
when you're on park property.
[207]
So if your child wants a set of ears
and a dessert in the Magic Kingdom,
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'bibbidi-bobbidi-boo' -
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(Laughter)
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your vacation just cost a whole lot more,
[218]
magically.
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Magically.
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Lastly, I had a conversation
with some teenagers
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who told me that $100,000 a year
really wasn't that much money.
[230]
I said, 'Really?
Why do you think that?'
[232]
They said, 'Well, we both have $500,000
in our ATM machines on Grand Theft Auto',
[238]
(Laughter)
[240]
which is a very popular
and somewhat sketchy video game.
[245]
So as I'm playing with my kids
and I'm watching them play,
[248]
listening to them talk,
[249]
I thought, 'What if the money
were real on the table?
[253]
Would they play differently?'
[255]
And so I calculated quickly on the box,
[257]
'How much would it take
in capital, in currency,
[260]
to play a physical game
of Monopoly with my kids
[264]
so that they actually tangibly
got to feel the money in their hands?'
[268]
And I estimated, for four or five players,
it's about $10,000.
[272]
So one Friday, I stopped at the bank,
[274]
I got all the denominations of bills
on a Monopoly board
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with the exception
of a $500 bill - hard to get -
[281]
and on Sunday, I rounded the family up
for a high-stakes game of Monopoly,
[287]
(Laughter)
[289]
where the winner takes all.
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All of $20, by the way.
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All of $20.
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You have never seen kids' eyes
light up the way mine did
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when I handed each of them
$1,500 in starter capital,
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and you have never seen
anyone's eyes light up like my wife's
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when I took it back on Monday.
[308]
(Laughter)
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All of it.
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Our marathon game
only lasted two and a half hours -
[315]
far shorter and more strategic
than most of the games they normally play.
[320]
True to my hypothesis,
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two of my three kids
actually played differently;
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my daughter still played the 'luck' card.
[329]
She was the first one bankrupted,
[330]
(Laughter)
[332]
and she happily retired
to the living room to read a book.
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My youngest son, the wheelbarrow,
did not buy everything he landed on;
[339]
instead, he carefully calculated
[341]
how many rolls away he was
from one of his brother's properties
[345]
and how much he would owe his brother
if he landed on said property,
[349]
and made his decisions based on that.
[351]
In effect, having real money on the table
and a cash prize at the end
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made him more conservative.
[357]
And my middle son - very strategic -
[360]
still bought all of the Railroads,
still bought all of the Utilities,
[363]
but did not buy Boardwalk and Park Place
or Mayfair and Park Lane,
[368]
but instead, he put hotels immediately
on Oriental and Baltic Avenue,
[373]
or Coventry and Leicester Square
on the UK version.
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When I asked him why,
in his own words, he said,
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'Dad, they're just
more affordable properties.'
[381]
(Laughter)
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At which point, I cried a tear of pride.
[390]
(Laughter)
[393]
So he got it!
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In the end, my son finished
with 28 properties,
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more cash than he'd ever seen
and held in his entire life,
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and he now knows the meaning
of the phrase 'making it rain'.
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(Laughter)
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Look how happy he is,
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(Laughter)
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and how annoyed
his brother and sister are.
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In the confines of my experiment,
there is an idea worth spreading,
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and it is this:
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I believe kids today
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are being raised in a world
where money is no longer real;
[426]
it's actually an illusion,
but it has very real consequences.
[430]
Peter Drucker, famed leadership guru,
[431]
said banking and finance industries today
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are less about money
and more about information,
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and yet young people today
don't get that information;
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they don't get the experiences
of money, early on.
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Three researchers from
the Centre for Creative Leadership,
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in a study done two decades ago
that's been replicated many, many times,
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they interviewed over 200 executives
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in a report called
'Key events in executives' lives'.
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In this report, they found
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that of the 200 top-level executives
who were the top of their game,
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all of them had similar characteristics.
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One of them was
that early on in their career,
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they had been thrust
into a leadership role
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that required them to make decisions
that had serious consequences.
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They also had a mentor in place
that helped them appreciate the lessons
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they were supposed to learn
from those experiences.
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The study created a leadership framework
that said, in essence,
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that someone with potential,
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if given the opportunity to engage
in strategically relevant experiences
[491]
and given the ability to learn the lessons
from those experiences,
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would have a higher likelihood of success
in their career in a leadership capacity.
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Now if you took that study framework
and my $10,000 experiment
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and looked at it
through the kaleidoscope,
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you would get a statement like this:
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if kids are given financially-relevant
experiences in their life
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and someone is there to help them
learn the lessons from those experiences,
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they have a higher likelihood
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of achieving financial
success later in life,
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and in my humble opinion,
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they need to have them early,
and they need to have them often.
[527]
We under this not-so-subtle societal shift
in the way that we pay each other, today.
[532]
It's estimated there are trillions
of dollars circling the globe
[535]
in our global economy every single day,
[537]
yet only four percent of that money
is actually in coin or currency.
[542]
The rest is all digital, data packets,
ones and zeroes,
[546]
and today's digital-native youth -
[550]
they don't see people paying
with cash or cheques.
[552]
In fact, if ever you're in a line,
[555]
and someone in front
pulls out their chequebook to pay,
[557]
you are liable to say to yourself,
'Really, a chequebook?
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This is going to take forever.'
[563]
You're laughing because it's true.
[567]
The currency of today is digital.
[570]
Many of these kids equate spending
with credit and debit cards,
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with Google Wallet and Paypal and Zap.
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All of these are what they
equate spending to,
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and by the way,
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I am not pooh-poohing
the technological advancements
[585]
in payment technology today -
[587]
far from it.
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I think tokenisation and randomisation
and biometrics are the wave of the future.
[593]
The first time that I used Apple Pay,
it was like showing the caveman fire.
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It was amazing.
[601]
But what snapped me back to reality
was hearing my son behind me say,
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'I sure wish I had a phone
so I could buy stuff.'
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(Laughter)
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You see, money, to a young person,
is somewhat abstract, anyway,
[617]
and when we further the abstraction
by waving a MagicBand
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or putting our phone over a sensor
and giving the thumbprint,
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all it does is further the abstraction.
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It's a recipe for financial disaster
later in life to the uneducated
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because, to a young person,
they see money as limitless
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because they have no concept
of the backend
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until it comes around
to bite them in the back end.
[641]
I've seen this firsthand
in my work with university students -
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young people who borrow
and spend untold amounts of money,
[647]
having no concept or understanding
of the increase in payments,
[651]
the decrease in lifestyle,
and the challenges they'll face later on.
[656]
In the UK and the US,
student debt is ballooning problem.
[659]
In the US, we're at $1.2 trillion
in student loan debt,
[663]
second only to mortgage debt in the US.
[666]
One in three students is delinquent.
[668]
One in five is in default.
[672]
It's a huge problem,
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and the reason that this is concerning
for all of us as a global economy is this:
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Dun & Bradstreet found
that people spend 12 to 18 percent more
[682]
when using credit cards over cash.
[684]
They have yet to do a study
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how much more we'll spend
with a MagicBand or a phone,
[689]
but I can imagine
it would be 15 to 20 percent,
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or 18 to 25 percent,
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and all you need to do
is read the headlines
[696]
in the newspapers and magazines
across the world today.
[699]
Places like The Guardian,
The Washington Post, Fortune, Forbes -
[702]
these are the headlines we're seeing:
[704]
'New consumer debt reaching
a seven-year high' in the UK,
[708]
'Consumer debt hitting an all-time high'
in the US, 'Choking on credit card debt',
[712]
'The credit card debt crisis:
the next economic domino'.
[718]
It's what happens when people overspend
[719]
and get in over their head with money.
[721]
Unfortunately, The Money Charity says
that in the UK right now,
[726]
one person every five minutes
and three seconds
[728]
is either declared insolvent or bankrupt.
[731]
To put this into perspective,
since I started speaking today,
[734]
two people in this country
have declared bankruptcy.
[737]
In the UK, Demos.org says
that Americans aged 25 to 34
[741]
have the second highest rate
of bankruptcy.
[745]
25-year-olds.
[747]
Everyone's question should be,
[748]
'Why? Why is this happening?',
[750]
and in my simplistic view, it is this:
[753]
because the money they're spending
isn't real - it's an abstraction.
[758]
So to stem this tide
with the next generation,
[760]
we have to bring them up to understand
that they are living in a world
[764]
where they have to make
very real money decisions,
[767]
in a world money is largely an illusion
but has very, very real consequences.
[772]
Because I want your children and mine
to be super successful financially,
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consider any of the following:
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If you are going
to spend money on children,
[781]
give them a set amount of money
and let them spend it.
[784]
Let them tangibly feel the money
go through their hands.
[786]
Let them succeed or fail
with minor consequences
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so that later in life,
when they're making the major decisions,
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they understand there are
major consequences that go along.
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For older kids, it's this:
[800]
set a budgeted amount for school clothes,
supplies and what-have-you,
[804]
give them that amount,
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and when they are
done spending it, it's done.
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And here's the key; they get to spend it
with your subtle guidance,
[812]
your subtle mentorship,
your subtle supervision,
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and whether you call it an allowance,
you call it commission for chores
[819]
or you call it a weekly stipend,
[821]
every single child,
from the age of five on up,
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needs to be given some tangible amount
of money on a weekly basis
[827]
so that they understand how to function
in a cashless society someday.
[832]
Better to teach the young
the habit of saving
[834]
when they have a little bit
of money to save
[836]
than try to teach savings
when they have no money
[839]
because they're in over their head.
[842]
I met an American named Jos茅.
[844]
He was a 20-year-old student
at an American university.
[849]
He was the child
of two Cuban-born parents.
[852]
At the age of 15, his parents told him,
[854]
'Jos茅, we will give you food,
we will give you shelter
[856]
and we will give you $50 a month,
but the rest is up to you.'
[860]
I asked him, 'What was that like?'
[862]
He said, 'Clothing, toiletries,
school supplies, entertainment, gas -
[867]
it was all on me.
[868]
I resented my parents for a year.
[871]
But you know what?
[872]
I realised it was the single best thing
they could have ever done for me.'
[877]
When I met Jos茅 at 20,
[878]
he was on a full-ride scholarship
at the university he attended.
[881]
He had $20,000 saved in a savings account
from working part-time in high school,
[886]
and this kid exuded financial prowess
and unmistakable leadership potential.
[893]
At the heart of my message today is this:
[895]
it does not take a $10,000 board game
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and it doesn't take cutting kids off
financially to make a difference.
[902]
The first step is, honestly, quite easy.
[904]
It's about educating the next generation
to make decisions in a world
[908]
where money is largely an illusion
but has very, very real consequences,
[912]
and the reason it's so important for all
of us, as a global society, to do this
[916]
is this next generation coming up
[920]
will inherit the global economy
that we are handing to them,
[924]
and we will precariously place it
on their shoulders.
[927]
We owe it to them to set them up
for financial success.
[932]
Thank you.
[933]
(Applause)
[934]
Thanks.
[935]
(Applause)
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