There are various reasons as to why giving leads to wealth creation. Some are intuitive and others supported through research.
Sense of Wealth Creation Increases through Act of Giving
Zoe Chance of Yale University and Michael Norton of Harvard Business School, in their research ‘I Give, Therefore I Have,’ observed the act of giving increases the giver’s ‘Sense of Wealth.’ The giver psychologically feels wealthier than they actually are through the act of giving. This change in mind-set leads to more wealth. Winston Churchill intuitively supported this theory “We make a living by what we get, but we make a life by what we give.”
Please check out what some of the donors say in their words:
Ted Turner, the founder of CNN: “Being generous always made I feel great, and it seemed like every time I gave money away, I somehow made that much more.”
Ackman hedge fund billionaire: “Over the years, the emotional and psychological returns I have earned from charitable giving have been enormous. The more I do for others, the happier I am. The happiness and optimism I have obtained from helping others are a big part of what keeps me sane.”
Mobile phone entrepreneur John Caudwell: “Philanthropy gives me far more pleasure and satisfaction than making money. In fact, making money is now largely driven by the knowledge that I will be able to leave even more wealth behind for charitable causes when I go.”
Hedge fund billionaire Tom Stayer: “Surely the pleasure we derive from… consoling, understanding, loving, giving and pardoning far outweigh any selfish and passive pleasures of owning, having, or possessing.”
Michael Bloomberg, founder of Bloomberg: “Making a difference in people’s lives – and seeing it with your own eyes – is perhaps the most satisfying thing you’ll ever do. If you want to fully enjoy life, give.”
Hedge fund billionaire John Arnold: “There is no more worthwhile work and no greater mission [than philanthropy].”
Here’s a quote from the book “Start Late, Finish Rich” by David Bach:
“Over the years, I’ve spent a lot of time studying the rich and the superrich. The more I’ve learned, the more I’ve become convinced that most people who achieve great wealth have at least one thing in common – giving.
When I first heard the billionaire investor and philanthropist Sir John Templeton make this point, I wondered if it could really be true. Could the secret to being rich really be as simple as “give more and more will come back to you”? Does giving really attract wealth?
Some 10 years later, I can say that I am certain of it. Time and again, I’ve come across examples of superrich individuals who made a point of donating a portion of their earnings to charity – even before they became rich. Indeed, virtually every self-made billionaire I’ve ever studied echoes Templeton in declaring that tithing or giving was a principle of their life well before they had any money.
As a result, I’ve come to believe that giving of your time or money to help others is more that the “golden rule.” It is the golden magnet. I have seen this happen in my own life and in the lives of hundreds of people around me. It’s a simple, observable fact: Those who give lead more abundant lives.
This sums up my thoughts, beliefs, and experiences as well. In fact, I’ve commented that in the years that I’ve given the most, I’ve seen the largest increases in my net worth. It’s not a coincidence in my opinion.
This doesn’t mean that we give to get more. Really, our motivation should be to help others and that’s why we should give. Then, as we’re blessed even more financially, that allows us to give even more – and the cycle goes on and on this way.”
Increase in Happiness Index and Productivity
The act of giving to under-privileged leads to inner fulfillment which in turn increases the happiness index of a person. Statistics have shown that a happy person is more productive. When a person is more productive it leads to higher levels of earning and wealth.
Studies show that act of giving lowers stress levels. People with low stress levels are more productive and successful. A relaxed person generally has better health, happiness index is higher and more successful. Giving creates strong communities. A charitable person will eventually profit from it even though he did not desire it.
Highest of human motivation according to Maslow’s hierarchy is self-actualization. This is taught in every business class. Just before Maslow died he put self-transcendence one step beyond self-actualization. According to him, the greatest fulfillment comes when a person seeks a benefit beyond what is personal. He called it self-transcendence – when one’s own needs are put aside for service to others, which provides the ultimate fulfillment and happiness. This level of motivation leads to highest productivity.
When we do any good to others, we do as much, or more, well to ourselves. —Benjamin Whichcote
The act of giving creates psychological changes within a person. Researchers have found that the act of giving stimulates parts of your brain associated with fulfillment of basic needs and primal instincts. Once the brain feels that our fundamental needs are met, it becomes more productive; our decision making skills, including financial decisions, improve.
Studies also show that giving stimulates empathy and compassion. You tend to become more confident as a person. These subtle changes in personality traits are observed by people around you. They will perceive you as a kind and gentle human being. They will invariably gravitate towards you. They recognize leadership qualities in services to othrs.
Servant leadership is the new mantra to success whether one plans it that way or not. When people see you giving, it inspires them – they cannot help but help you. You will be viewed as a natural leader amongst people and your voice will be heard. These are simple by-products of act of giving and will indirectly result in making you a happier and successful person.
Giving Starts the Receiving Process
The act of giving starts the receiving process. Have you ever tried to receive money with your fists closed? This is simply not possible. If you are hurt after a broken relationship and shut down your heart for fear of pain then you are not in a position to receive love from even the most beautiful and loving person on the planet. You have to open your heart in spite of fear of pain to receive love again.
Similarly, if your mind is closed then you are not in the right frame to receive wonderful thoughts that may transform your life forever. The act of giving not only opens your hands, but also your mind and heart. Once you give, you are in a position to receive great wealth. You have to keep your heart, mind and palm open to receive great gifts of life.
“The more doors you open, the more you will allow the universe the opportunity to bring something to you and in ways you could never have imagined.” -Anonymous
This is something I can share from my own experience of life: whenever I was stingy, it invariably lead to some financial catastrophe in my life. When I observed this fact repeatedly in my life, I forced myself to give even when I found myself in most difficult financial situations. I never wavered in my support of under-privileged children I was educating or refuse anyone who asked me for help in worst of financial times. Providence would always come to my rescue. This magic has never failed.
There is always an ebb and flow of money in our lives. Give when you have cash in hand. Give even more when you are low in money and see the magic happen. I can’t prove it scientifically, but it happens. Just try this simple recipe and it will do wonders to your financial health. In every action we take in our lives there is an element of luck involved. Ask any successful person; once you get into the habit of giving the element of luck for some strange reason will favor you.
Law of Cause and Effect
“Give cheerfully and freely. It is the energy behind giving that matters so do not give grudgingly. The law of cause and effect guarantees that you shall receive plenty for what you give.”
Pitanjali, an ancient Indian philosopher, explained this fact a bit differently. He said that there is no linear motion in this universe—everything moves in a circle: planets rotate around the sun, the moon circles the Earth, the Earth rotates around its axis, water rises from the seas becomes cloud, the rain water forms rivers and flows back into the sea completing the full circle. A tree rises from the earth and when it perishes, it goes back to the earth. Man is formed from five elements of the earth and goes back to those elements after death.
Good or bad, deeds come back to us in some form whether we realize or not. Similarly, when you give money away it will always come back to you – this is the universal law of nature that no one can escape. Sometimes in our greed, we fail to see the implications of this law. Most enlightened wealth creators understand this basic fact and act according to this law.
Giving Increases Size of Your Network
Although giving is not done with an aim of any monetary benefit, it generates goodwill in hearts and minds of people. It is like a certificate of good health and many people and businesses will like to partner or associate with you.
Bill Ackman, hedge fund billionaire has stated that:
“While my motivations for giving are not driven by a profit motive, I am quite sure that I have earned financial returns from giving money away. Not directly by any means, but as a result of the people I have met, the ideas I have been exposed to, and the experiences I have had as a result of giving money away. A number of my closest friends, partners and advisers I met through charitable giving. Their advice, judgment and partnership have been invaluable in my business and in my life. Life becomes richer, the more one gives away.”
There is also inherent fun and joy in giving that brings people together. Ask this question to donors, activists and volunteers and they will tell you about the sense of happiness and camaraderie that happens when people work together for a nobler cause than personal gain.
By giving your time, effort or money you increase your circle of influence. You meet diverse and interesting people. As your network grows, so will your wealth.