2 min read
One bias in particular stood out to me, which Housel calls the rich man in the car paradox:
When you see someone driving a nice car, you rarely think, “Wow, the guy driving that car is cool.” Instead, you think, “Wow, if I had that car people would think I’m cool.” Subconscious or not, this is how people think.
The paradox of wealth is that people tend to want it to signal to others that they should be liked and admired. But in reality those other people bypass admiring you, not because they don’t think wealth is admirable, but because they use your wealth solely as a benchmark for their own desire to be liked and admired.
This stuff isn’t subtle. It is prevalent at every income and wealth level. There is a growing business of people renting private jets on the tarmac for 10 minutes to take a selfie inside the jet for Instagram. The people taking these selfies think they’re going to be loved without realizing that they probably don’t care about the person who actually owns the jet beyond the fact that they provided a jet to be photographed in.
The point isn’t to abandon the pursuit of wealth, of course. Or even fancy cars – I like both. It’s recognizing that people generally aspire to be respected by others, and humility, graciousness, intelligence, and empathy tend to generate more respect than fast cars.
I went back and reread this passage about four times because I was stunned at how much truth it held. When I personally see someone with a fancy car, house, or tech gadget, I don’t envy them, but rather my gut instinct is to imagine what it would be like if I personally owned that thing.
The paradox of this situation is borderline hilarious.
Person A buys some object to impress persons B, C, and D. But when persons B, C, and D see person A with that object, they aren’t impressed by person A at all because they’re too busy picturing themselves owning that object and imagining all of the attention that might come from it.
This means that purchasing things purely to gain approval and attention from others is a flawed strategy. As Housel says,
“But in reality those other people bypass admiring you, not because they don’t think wealth is admirable, but because they use your wealth solely as a benchmark for their own desire to be liked and admired.”
We can all use this insight to our advantage. Whether we’re purchasing something big like a house or something small like a wrist watch, we should be thinking about utility, not attention. If a certain purchase will add real value to your life, you should feel OK about it. But if you’re looking to buy something purely to gain the attention, approval, and admiration from your peers, you’re participating in a game that you can’t win.
Housel goes on to explain the real way to gain respect and admiration from others:
“It’s recognizing that people generally aspire to be respected by others, and humility, graciousness, intelligence, and empathy tend to generate more respect than fast cars.”
If you want people to think highly of you, you should strive to be a good person. You won’t gain anyone’s admiration from buying a large house or a fancy car.
My favorite free financial tool I use is Personal Capital. I use it to track my net worth, manage my spending, and keep an eye on my monthly cash flow. It only takes a few minutes to set up and it makes tracking your finances simple and easy. I recommend trying it out.
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Zach is the author behind Four Pillar Freedom, a blog that teaches you how to build wealth and gain freedom in life.
Zach's favorite free financial tool he's been using since 2015 to manage his net worth is Personal Capital. Each month he uses their free Investment Checkup tool and Retirement Planner to track his investments and ensure that he's on the fast track to financial freedom.
Although the bulk of his net worth is invested in index funds, his favorite place to invest in individual stocks is M1 Finance, a site that allows you to build a custom portfolio of stocks for free.
His favorite way to save money each month on his recurring bills is by using Trim, a free financial app that negotiates lower cable, internet, and phone bills with any provider on your behalf.
His favorite micro-investing app is Acorns, a free financial app that takes just 5 minutes to set up and allows you to invest your spare change in a diversified portfolio.
His favorite place to find new personal finance articles to read is Collecting Wisdom, a site that collects the best personal finance articles floating around the web on a daily basis.
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