I’ve been speaking to audiences about investing for about 16 years. From 2003-2017, I didn’t charge a dime. “Just fly me to your location,” I said, “And I’ll speak for free.” I’ve spoken hundreds of times, in more than 25 different countries. My friends said I was crazy. My wife did too. That’s why we started to charge in 2018. But something changed after I began to take people’s money. They put a higher value on what I said.
That’s just my opinion. It’s hardly scientific. But let me share what I’ve observed and then introduce the science. One stand-out example occurred earlier this year. An organization paid me a fee that we agreed to in advance. They then made a solid profit, charging 300 attendees about $700 each.
I didn’t know they were going to charge that much. I felt sorry for the attendees. But when everything was over, I signed autographs for an hour. Many of the people gushed, “You’ve just changed my life!” I’ve spoken to bigger groups. And I’ve signed autographs before. But the lineups for my signature have never been that long.
Did they value the experience more because it was expensive? Science might support that. In 2008, Hilke Plassmann, John O'Doherty, Baba Shiv, and Antonio Rangel published research in The Proceedings of the National Academy of Sciences. They selected 20 volunteers who all enjoyed drinking wine. They then gave them samples to try. Some of the wines were cheap; others were expensive. But before they sipped each one, researchers lied about how much each bottle cost. You might expect what happened next. The subjects all claimed to prefer the higher-priced wines. But because the researchers lied about which wines they were drinking, the subjects proved they couldn’t tell an expensive wine from a cheap one.
I know what you’re thinking. This could easily be explained. The subjects might have just pretended to prefer the pricey wine. But there’s more to this story. Researchers scanned the subjects’ brains while they sampled each wine. When we experience greater pleasure, it increases brain activity in our medial orbitofrontal cortex. The subjects weren’t lying. When they thought they were drinking higher-price wine, they gained more pleasure.
Researchers published something similar in the British Medical Journal. You can access it here, at the U.S. National Library of Medicine. They studied more than 800 women who regularly took aspirin for pain relief. In some cases, they took branded names. Other times, they took generic versions with the exact same ingredients. When subjects took what they thought were the more expensive brand-name aspirins, they reported feeling about 30 percent improved pain relief, compared to when they took the lower-priced pills. As with the wine, they weren’t just faking this. The higher relief was real. This placebo effect wasn’t just fantasy.
Researchers from Cornell University found we also feel better when we pay more for restaurant meals. In 2014, David R. Just, Özge Sığırcı and Brian Wansink offered subjects an all-you-can-eat buffet at an Italian restaurant in upstate New York. They divided their subjects into two groups. The first group paid $4. The second group paid $8. By now, you can probably guess which group enjoyed their meal more: the group that paid twice as much.
What’s more, the group that paid less said they ate too much. The group that paid more said they ate the perfect amount. But according to the researchers, each group ate about the same amount of food!
This brings me back to the people who each paid $700 to hear me speak. If they had paid less, or if they hadn’t paid at all, would they have valued it the same? It seems strange to say this. But based on the research, I would guess not.
Andrew Hallam is a Digital Nomad. He’s the author of the bestseller Millionaire Teacher and Millionaire Expat: How To Build Wealth Living Overseas