There's probably a corollary, although I don't know the name for it. I still have one pair of shoes and a week's worth of shirts and underwear, an old projector and 10 year old speakers although I own a house and have a net worth over $1m.
I've certainly felt the sudden gravitational pull that comes from having one nice new toy enter your life. It manifests as a sense that "wow, this little overpriced thing is so enjoyable... why am I sitting on a pile of savings and denying myself things that would make my life so much nicer?" Slowly, I started spending $20 for a bag of coffee beans I really like instead of $12 for something that's just okay. But it has to stop somewhere.
I realize I only buy the big ticket items when I either am seriously depressed or feel like I'm going to die soon, or both. The rest of the time, money in the bank is more interesting to me than nicer stuff. This is probably a phobia of spending money that I'll go to my grave with.
I feel guilty spending money on nice things I can do without. I call it therapy by shopping. But I made a rough calculation of how much it added up to over the last 10 years: < 2 months of income. I would not be a whole lot better off having that money in the bank.
So, as always, it's a matter of balance. You can't judge spending as good or bad, what matters is how much relative to your means.
A one-time $1k splurge is less expensive than a new $10/mo habit as long as it really is one time - the whole Diderot Effect thing helping us to think about why the splurge might not be as bounded as we’d hoped, though.
I try to think of recurring expenses in terms of how much capital it would take to fund them in perpetuity (because I may well live another 50 years!), at 3% interest.
That $10/month subscription? $120/yr, or $4,000.
That’s not at all guaranteed to support the expense forever, but I find it’s a useful way to think about little recurring expenses before they add up out of control.
I kind of sweep through those small $10/mo subscriptions once a year with a sponge, as if cleaning the shower. They tend to attach like barnacles. It's good to sit down with your credit card bills and have an overall review of, e.g. "did HBO MAX actually provide me with $160 worth of entertainment?" If you remember $160 is ten burrito supremos, you think one way (i.e. HBO sucks). If you realize it's half an hour with a methed out hooker in Florida you think another way (i.e. Last Of Us was way better and lasted a lot longer). The point is, y'know, to think about it once in awhile so you're not some asshole just dumping money.
I'm joking about all that, if you can't tell. But... Fuck people who say that counting pennies makes you cheap. Those are the people who'll never be rich.
> what matters is how much relative to your means.
Needs, not means. (And some comfort/relaxation is a need). Being richer than most isn't a reason to splurge more, it's a signal that something may be wrong with society.
> Being richer than most isn't a reason to splurge more, it's a signal that something may be wrong with society
I have to disagree hard with this. The rich _should_ splurge, as that makes the money flow back to the economy. And in some cases go to artisans that have no mass market appeal.
This sounds like a useful corollary for a high income individual that should apply generally, but if you watch videos on the "death of the middle class" videos you'll learn that the middle class in America didn't actually die recently, its actually just as big as it ever was, it's just stuff like spending on cars and housing is wayyy more expensive than ever so even us well paid software people are functionally poorer than we should be.
IRL the vast majority of these consumer spending things don't play a massively damaging role in the average consumers life / upward mobility... at least relative to history or other regions. But a few things do. When you start getting serious about personal finance people tend to obsess about the small less important things we're wasteful about. Mostly because it's more obvious locally and easy to feel guilty about (consumer electronics, clothes, restaurants, etc).
But in practice for healthy well employed workers 80-90% of the time self-imposed poverty comes down to two things: cars and renting housing.
Cars ranks #1 easily in terms of actionable things, if you asked 90% of middle class households making >$100k you'll find car loans/costs are easily the biggest burden on disposable income. People buy cars they can't afford and getting $30k+ loans plus the associated costs of nice cars (damaging them, insurance, etc) it becomes very apparently the biggest thing stopping someone from having extra money that could be invested in 10x+ more value like paying off high interest credit card loans (rather than adding another +interest car loan) or simply investing in better things like real estate, small businesses, personal development, stocks, etc etc.
The other elephant in the room that far, far outweighs spending on vanity consumerism is housing. This one involves plenty of personal responsibility but of all the things in Americans/western life this is the least to blame individuals.
Stopping Americans from buying stupid expensive cars is a very hard mostly social problem, but housing is something that could be solved much more simply through stuff like ending zoning and anti-NIMBY laws.
We could gain plenty from working on the smaller tier consumer stuff at the same time (every dollar really does matter and you don't know until you track it) but education about cars and gov action on increasing housing supply would be the most productive work in the short term.
I seriously don't understand how is it possible to overspend on a car. House sure, because many people, conveniently for developers, confuse it for investment, but a car? Besides, cars are cheap and getting cheaper vs inflation let alone incomes. Are people just trying to buy the most expensive car they can get a loan approved for?
Since the vast majority of American car buyers finance them, a lot of them get channeled by salespeople to think in terms of the monthly payment instead of negotiating on the full price. Also, a lot of people go car-shopping when they think they need a new car right away - current one has an expensive problem or just got wrecked, and can’t step back a bit by deciding to spend a few hundred more on Ubers or a rental for a week or two (this is where even somewhat inconvenient public transit can make a huge difference).
And since enough of them have $40k+ SUVs and “crossovers”, those become the norm for middle class families who really would have been just fine with small station wagons (if those were actually available in the US market)
The best way to escape this cycle is to only buy the car you can pay for up front (even if you then take a loan because the interest rate appears to be in your favor). Do this enough times, and you’ll be ok with plonking down the cash for a $15-20k carefully-researched, moderately-used vehicle with a warranty, but be horrified by the very thought of that $600+ 5-7 year loan so many of your colleagues accept as normal.
I'm baffled by how much people spend on cars. But I get it. Everyone else is driving a nicer car, so you feel left out. Even if your rational side knows it's stupid, you still feel less than.
It's the same with homes. But as you say, at least real estate tends to hold it's value somewhat.
In America, the best investments in the past 100 years have been structures like car dealerships built on cheap land around the exurbs of major cities. You get commercial use of the structure, wait 20 years for it to be surrounded by residential development, then sell the land. This, working hand in glove with the driving and commuting culture, had been the middle class gear in the system attached to the resource extraction itself.
I'm not here to pass moral judgments on this method of creating wealth, although to me unnecessary mineral extraction for energy is largely fraught with moral hazard. But to say that real estate isn't an investment is to consider the past two centuries of American economic growth to be a temporary aberration, and I don't think you can do that in light of the degree of economic reliance that has grown up around it.
There's a smart side to this, and a lot of people take it: Buy a car that has all the features you want, for almost half the price. Buy a house in a neighborhood that's run-down but improving and that you can help to improve. You don't have to be famous on social media to be a "thought leader" and increase the value of your assets by pulling gullible people into your aesthetics or way of thinking.
You can just show up and buy the thing and use your skills to improve the thing, which improves everything else around it.
There is enormous financial leverage if you can do that, because most people aren't willing to put in the work.
I think it can be easy to overestimate your requirements for a car.
If you mostly use your car for a ten minute drive to work, but twice a year need to drive several thousand kilometers, it may be tempting to optimize for the latter (in terms of size, comfort, velocity), whilst it may be cheaper overall to optimize for the former and hire a vehicle for the latter.
In my case it's not optimization, it's just constraint satisfying. My constraints are: I don't want two cars and when I drive on holiday I pass through eight countries. Most rental companies don't like you to take the car out of the country. So to satisfy all the constraints I have a big car that is comfortable to drive for long distances.
Of course not everyone takes long holidays (several months) touring so their constraints would be different and satisfiable with different solutions.
Most cars can drive a little over the speed limit just fine, and a cheap minivan has as much space as most expensive three row SUVs. Maybe getting an upgrade with a TV counts as "optimizing?" But you can get portable screens that strap to a seat for under a hundred bucks on sale.
A house in America is an investment and it's considered a depreciating asset for tax purposes, which means that even if it isn't a good investment, it's subsidized against taxes over a long term. A car is an asset that simply depreciates the second you buy it.
parent here... I own two cars. One I bought outright for $2700 and put about $15k into restoring over the last 5 years. The other is the only substantial debt I have, but I bought it for $30k at 2.99% ...and considered that a good place to put my money. I understood interest rates were about to rise and used car prices wouldn't fall anytime soon. Nothing I did in that regard was something they don't teach you in 9th Grade Macroeconomics. I take small loans if the rate is right because I'm pretty sure I can use that $30k to generate more than 3% a year, so, it's free money. Other than that, I'd never take a loan for anything, ever. That seems to be the fundamental piece of logic most people haven't been acculturated to.
Yet... I know a lot of people who are otherwise uneducated (high school, if that) who understand this implicitly. I don't think it's exceptionally American or even related to education level. It's learned by going through actual deprivation and remembering how hard it is to earn every dollar you make.
[edit] what I'm referring to here as 'it' is: Never take a loan unless you are sure the value of the money over time in interest or investment favors you. A loan is just a bet that you can do better with that money than the interest rate you have to pay for it. Why don't they explain this to children anymore? [/edit]
I'm a 3rd generation American. I've had a view, for my whole life, that America is a machine that turns ambitious producers into lazy consumers over the course of a couple generations. Being ambitious, and producing, is at least as much about making wise decisions with your savings as it is about earning.
Personal observation: The immigrant tendency to save their money used to be racially judged and regarded as a type of "cheap" "hoarding" - always, of course, by the 3+ gen stock of old money. But the phrase "a fool and his money are soon separated" is as true today as it ever was: the tendency of the children of the rich to be idiots and blow it all is the greatest bulwark against generational wealth we possess in a free market democracy. Far more effective than any tax.
Deprivation is key not just to the hunger to create, but the hunger to conserve. It has to be experienced or taught.
In my case, personally, this is a product of my upbringing. My parents were the first generation of our family to have a little extra income (grandparents were poor farmers).
I have a good salary by all accounts, but still count the beans, since this was what my father taught me. I am extremely weary of spending large sums of money in anything.
not weary. Wary (it's a different word: weary means tired, wary means suspicious).
You are right. All Americans of the 3rd generation miss this. Many of the 2nd generation miss it.
COUNT THE BEANS. Teach your children to count the beans. The moment you stop counting the beans, you become a degenerate consumer zombie.
How strange -- I'd never heard of the Diderot effect, but it was exactly the topic of a book I had when I was a kid. It starts with an older couple who are poor, and have shabby worn-out things, but are happy. One day the man breaks his shoelace, so he buys a new one. But then it makes his old shoe look shabby, so he buys new shoes. But then his clothes look shabby, so he buys new clothes. But then his wife feels shabby, so she buys new clothes. But then all their furniture looks shabby, so they buy new furniture. But to buy the new furniture they had to borrow a bunch of money; and of course they can't afford the payments, so everyone comes and takes all the new things away, and they're happy and poor again.
EDIT: Although, according to Wikipedia, the term "Diderot Effect" was coined by a paper published in 1988. I don't remember when I saw the children's book, but must have been published before, or very soon after, that paper was published.
Heh, I came into these comments to mention that very book, because this article reminded me of the exact same thing. I bought a (used) copy a few years back for my kids because I like the illustrator. It's "As Right as Right Can Be", by Anne Rose, illustrated by Arnold Lobel. My guess is that it was inspired by Diderot's essay? ... hmmm, turns out it was published in the 70s, so not based on the paper describing the effect.
I can’t remember where I heard this quote, but I often think about it:
“I don’t like to buy things for my things”.
For example, if you buy a car or a house, it’s basically guaranteed that you will soon need car things and house things. Many of those things will in turn require their own things, and so on.
It’s interesting to consider the longest thing chains you have in your life, so you can avoid making them longer or avoid starting new ones.
In my childhood, I was taught that "The more you have, the more you have to have to take care of the things you have." My Dad also taught me never to buy anything unless I have the energy, time, money, and space to maintain it, repair it, clean it, and store it, or to pay someone to do those things.
The price of a thing (like the e-bike I've been looking at to reduce my dependence on my car to get places) becomes considerably inflated when you consider those factors.
It does have a side effect of considerable levels of tool acquisition, and basically mandates having a workshop and power washer.
For a bike avoid pressure washing. I use a manual pump garden sprayer and I'm good. There's a worry that high pressure will force water into your bottom bracket or wheel hubs.
As an owner of an e-bike (Pegasus Siena E8F plus) I have to say that it's surprisingly low maintenance, especially considering how useful the thing is.
> For example, if you buy a car or a house, it’s basically guaranteed that you will soon need car things and house things. Many of those things will in turn require their own things, and so on.
...then eventually, you need a bigger house to keep all those things in.
Me and my wife have recently tried to sell as much as possible after realising this. Anything we know we won't need right now we sell so that we stop just having so many stuff...
I think this some of this is actually forced upon us by technological advancement too.
I started doing photography over the pandemic, I started with a 2009 dslr, because that’s what I had lying around.
Because I did not even know how to expose a photo, it was great, and it felt like it did everything I wanted. I was very used to the layout, the functions, and although it was only 12MP, it took some of my favourite photos. All with lenses worth <300$.
Later I received a new mirrorless, 4K shooting, 24MP camera.
I changed brands, So some of it is on me, but I had to buy new lenses as well.
Getting new $150 lenses was not possible, and it felt wrong to put $150 lens on a $2000 camera.
So I got a few lenses to match. Not only that, but my 2012 MacBook Air was not able to run the latest Lightroom, and the older Lightroom version I had was not able to decode the new raw image format.
So I had to get a new computer as well.
All in all, a gift, that although is very much appreciated, cost me a lot more than the gift itself.
I have no regrets now, the newer sensors, the better tracking, the better lenses, all allow me to take much better photos. But if I would have stayed with my old camera, I would have never known what I was missing.
In my mind studio owners are the main group who suffer from this.
There are so few pieces of gear that will significantly improve your work compared to using the stuff you already have and know how to use. But people still spend a fortune on all kinds of hardware and software in the fear of missing out on some magical device that will give them a shortcut to great results. It's mental.
I had a DSLR camera which was very good in 2005, yet when I bought a 2012 mirrorless, I was born away. It isn't about the megapixels, the staggering difference is the high ISO performance.
I just met someone with a new full frame mirrorless, a very expensive camera. The shooting experience use worlds apart: huge luxurious viewfinder, fast autofocus with face tracking, it's a monster.
But at the end of the day, if I put in the work with my 2012 camera paired with a cheap but great manual focus Samyang 85mm f/1.4 I'll get almost the same results.
Yea you can get very good results with older cameras. You only see the difference when you really push it to the limits of what a camera can do:
Low light, in flight bird photography, sports, high dynamic range etc
Huh. I definitely experienced that with OXO brand tools in my kitchen. Once I had a few of them, the rest of my kitchen tools seemed so cheap/crappy in comparison, now they're somehow 80% OXO after a few years.
The lettuce spinner is where it's at. The top of the new model comes apart completely whereas the older one couldn't be cleaned.
I'm too cheap and lazy to replace what works, although I have:
- a brand unknown manual edgeless can opener
- a "Rabbit" wine corker
- a brand unknown manual cheese grater for parm
- automatic, USB-rechargeable pepper mill
- mortar and pestle for grinding damiana
- aeropress with reusable filters
- sunbeam t-35
- instant pot duo crisp
Trying to make everything match is an expensive and unnecessary obsession. There's a bohemian charm in mismatched socks and things that don't fit a sterile, boring Architectural Digest environment.
On the topic of tin openers, I'll bury one of my most strongly-held kitchen beliefs here -- almost all openers that get produced and used are utter rubbish. The only kind that is any good is a Hebeldosenöffner, or "lever tin opener", like the kind here:
It's fun to ask people to try to figure out how to use it. Once you see how it works, you can see that it's ingenious. It's quicker and easier to use than other kinds and it has only a single moving part and no edges to dull. It can easily last generations.
The "Regrets on Parting with My Old Dressing Gown" is a life-changing short story for me. I considered this as a nice introduce of Stoicism in my life. Old dresses are so more comfortable especially because I do not need to care about minor issues with it and because it forces me to stop considering about my look as something important at all. My work is what really important.
Oh no dear man, you are not right in defining of what the work is. I mean that certainly AI will do what you and me are doing for our living. But neither mine work nor yours is limited by professional means. The most important work is to be a wise man and that is what Stoicism is all about. At least human culture and AI one ought to coexist for a while .
Diderot Effect and a few more points re: our consumption habits. Via Dr Laurie Santos [cognitive scientist and Professor of Psychology at Yale University] and her podcast about 'demonic possessions': https://objet.substack.com/p/demonic-possessions
As a European, I really appreciate San Fransisco deca-millionaires intentionally tastelessness.
I remember a podcast of Tim Ferris where he was boasting that people often complimented him on his Vans black shoes because "they could pass as dress shoes". No one past the age of 15 would be so tasteless as to share such a compliment, and that's what's beautiful about SF.
SF also happens to be the place where I heard a deceptively powerful method to get rid of stuff
1. Put all your stuff in boxes
2. Pick items out when you need them
3. After a year, throw everything you don't use
I can't decide if this is a humble brag or very backhanded compliment.
Either way, the message is clear... Europeans are naturally endowed with taste and sophistication! :-o
That's not my read of it at all. You could make the exact same comment without any mention of Europe -- it's pretty unlikely that a hedge fund manager in NY would hear that comment from someone in their social circle.
It's a genuine compliment! Sophistication is great, but not when it's mostly aimed at increasing social status, which is a zero sum game. Like how mkipper read it.
Photography and similar hobbies tends to have a "quality bottleneck"
A full frame camera needs more expensive bigger lenses which needs a higher quality tripod, larger and faster memory cards, more powerful computer for the editing, etc...
Improving one thing requires improving everything since the final output is limited by a "bottleneck"
The Diderot Effect seems to point out a similar "identity" bottleneck where a higher quality(status) identity is bottlenecked by the lowest quality frustration.
Had a broken mouse, bought an expensive mouse to replace it. Mouse looked better than my keyboard. Ditched my membrane keyboard with a Mechanical keyboard. Read that different switches make different sound. Bought a new pack of switches. Someone recommended that those switches work best with XDA profile keycaps. Went ahead and bought that. This effect is real.
Fascinating article. This has happened to me several times, the most notable of which occurred when I spent an unusual sum of money on a fine Italian shirt for a wedding reception, and everything went crazy after that. I opened my closet one day and I had thousands of dollars of shirts, all of which I wore, but I couldn’t afford. Most of those shirts are gone now, due to their limited shelf life, but as luck would have it, the original Italian shirt was so well made, it’s still in my closet and looks brand new. I’ve worn it and washed it a hundred times and it looks as good as the day I bought it. I’ve never had another shirt like it.
I really wish I could figure out the formula. I have had so many shirts that I wear for a year or two, then they're dead.
But there's this one shirt I bought back in 1999 that still now, today, looks about the same as it did then (I have photographs). I don't wear it any less than any of the other shirts. Just somehow... year after year... it remains decent.
I wish I could go custom-make 20 shirts out of the same material and with the same techniques as this shirt. I'd never need another shirt again in my life!
Been there. Most recently with filmmaking gear. Started with a new camera, I knew I'd need lenses and accessories and budgeted accordingly. What I didn't expect was the external monitor, mounting cage, lens filters, haze/fog machine and some of the lighting-related gear that I ended up getting. Then I found myself going down the vintage lens rabbit hole ... luckily by that time I saw what was happening and cut myself off lol.
Vintage lenses weren't a problem it's just where I chose, arbitrarily, to draw the line. I had already spent quite a bit up to that point. I'm still absolutely interested in vintage lenses, I just need to slow down a bit lol
Even a production company would rent gear quite often. But I'm a hobbyist, have no planned shoot and hate the hassle of renting anything, broadly speaking.
This calls for Comes Boot Theory of Socioeconomic Unfairness!
> The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money. Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles. But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that'd still be keeping his feet dry in ten years' time, while a poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet. This was the Captain Samuel Vimes "Boots" theory of socioeconomic unfairness
That's why consumer finance unlocked new worlds to the savvy: because it allowed non-capital-owners to make capital investments on durable goods, for a relatively small price.
Unfortunately this is not explained properly, so people think it's just a shortcut to instant gratification.
Depends on what you mean by ‘expensive’ ;) … is it absolute dollars, or relative dollars (e.g. fraction of income), or is it time spent earning each dollar, or the effects on health, happiness, and longevity from not having enough dollars? Looking at that list, there might only be one (misleading?) metric that makes being rich more expensive than being poor. But how rich and how poor are we talking?
Tech has this effect very strongly since almost all modern tech is part of multiple ecosystems. Luckily it's nowhere near as expensive as true luxury goods, and often seems to almost replace their role, so overall consumption and expense isn't as bad as one might expect.
I've certainly felt the sudden gravitational pull that comes from having one nice new toy enter your life. It manifests as a sense that "wow, this little overpriced thing is so enjoyable... why am I sitting on a pile of savings and denying myself things that would make my life so much nicer?" Slowly, I started spending $20 for a bag of coffee beans I really like instead of $12 for something that's just okay. But it has to stop somewhere.
I realize I only buy the big ticket items when I either am seriously depressed or feel like I'm going to die soon, or both. The rest of the time, money in the bank is more interesting to me than nicer stuff. This is probably a phobia of spending money that I'll go to my grave with.