Conspicuous Consumption
Conspicuous Consumption
Many in the financial independence community are familiar with the term stealth wealth. Popularized, in part, by the book The Millionaire Next Door was the idea that the rich don’t always look rich. In fact, there are many burgeoning millionaires who live fairly modest lifestyles. Those of us who believe in financial freedom have grasped onto this concept as one of our rallying cries. It is part and parcel of what defines us. Our superpower. Yet, the opposite concept has a far more rich history. Spending money on luxury goods to publicly display power, conspicuous consumption, has a long and colored history.
What? You say you have never heard the term before?
A History Lesson
Today, on our summer vacation, the term came up as we were touring a series of mansions in Newport, Rhode Island. Thorstein Veblen coined the term in a book he wrote to describe the spending habits of the nouveau riche social class during the second industrial revolution (1860-1914). And let me tell you, as we discovered today, The Vanderbilt’s were magnificent at this. One walk through their Newport cottages left little to the imagination. These multi-million dollar expenditures (made in the early 1900’s) were opulent, and a clear show of both economic and political power.
Back then, as today, there was a clear line between rich and poor. The wealth of a nation was concentrated in a small number of hands. They called it the Gilded Age. An era of serious social problems covered with a thin layer of gold covering (gilding).
Conspicuous consumption, back then, was a sure sign of social status. Only the sparing few could afford such expenditures.
Things Change
In the twentieth century, a continuous improvement in the quality of life of the average American family and the presence of discretionary income changed the meaning of conspicuous consumption. Not only the wealthy, but also strongly middle class families were starting to show economic strength and well being by often unnecessary and occasionally opulent spending.
Everyone knew when the guy next door flew down the street with a brand new sports car. Or bought the latest high tech Television. Or built the most expensive home.
The Millionaire Next Door
What was so amazing about Danko’s treatise was that it demonstrated that often the truly wealthy actually practiced frugality. Instead, it was the lower socioeconomic classes and emerging economies that were embracing conspicuous consumption to psychologically combat the impression of poverty.
Easy and readily available credit made the impression of wealth available to just about anyone. Yet these false economic displays, as we now understand them currently, have become the chains that hold the lower classes to their current indentured servitude.
We are drowning in debt and credit. And we know it, because we can track our own destruction in the comfort of our 5000 square foot home while flipping through cable on our 75 inch plasma, and monitoring our bank account on the newest thousand dollar Iphone.
Final Thoughts
Conspicuous consumption or stealth wealth. I think we all have gotten it wrong. Money is only power in as much as it provides us the basics, and frees us up from doing things we don’t want to do.
The rest is just water under the bridge.
And you don’t have to own the bridge!
“…we can track our own destruction in the comfort of our 5000 square foot home while flipping through cable on our 75 inch plasma, and monitoring our bank account on the newest thousand dollar Iphone”.
>80 inches is the new 75 this sounds like roughing it, *jking*. I’m still shocked when I see the price of the most expensive iPhone though.
“Conspicuous consumption or stealth wealth. I think we all have gotten it wrong. Money is only power in as much as it provides us the basics, and frees us up from doing things we don’t want to do.”
>Doesn’t the power of money go further than this? It can also open doors to other opportunities – e.g. enabling one to afford a particular educational experience. Also, why stop at the basics? Money may also be ‘power’ if one wanted to engage in discretionary travel or other discretionary experiences, for example. Perhaps part of the difficulty lies in determining what is meant by the ‘basics’ for each person.
HH
Conspicuous consumption is good if you’re wealthy. Spread it around a little if you’re super rich. The problem is when middle income people spend too much.
Is consumption a form of saving? Consumption is merely buying property. Buying stocks is merely buying property. If you have a portfolio stuffed with property, why is buying something like a boat or a Tesla extravagant? Why is pretending you are not well off when you are, desirable? Life is about right sizing. About owning the right things, the right amount of debt, the right amount of property, the right amount of work to be able to sustain yourself. At some point work may be optional but consumption never is, so judging someone else’s consumption is a bit of the pot calling the kettle black or an expression of avarice and projection.
I grew up in Newport, RI, in the shadow of the mansions. Always figured I’d own one someday, but now most of them are owned by the Historical Society due to high taxes and maintenance costs. Even the rich have trouble affording them! I settled for a 1000 sq foot condo on a small island, with a great view. it’s just big enough, but I really miss not having servant’s quarters and a stable!
it’s me money thanks