I’m not a car guy. Yes, I like nice things. But I can’t understand why some people spend so much on a car that it’s a hardship or, worse yet, it causes them to go into debt.
Homes work the same way. Many of us buy a house that we can’t afford because we want it.
Cars and homes have something in common: they’re external symbols of our perceived wealth. So why put so much money into a car, and so little into a retirement account? Perhaps it helps build our identity. Maybe it boosts our perceived monetary and social value.
People buy social status.
I wrote about the story of the Prius in Part 3 of this series, and that so many people buy it to cement their identity as responsible environmentalists. They also buy it for the social status.
I worked in the solar industry for a spell and spoke to homeowners who wanted solar panels installed at their homes. The essential pitch was “save money on your electric bill,” but this wasn’t always the driving reason for the buyer. In many cases, customers asked for the panels to be installed so they were visible from the street, even though it reduced the energy output of the panels. Why? For the social status that came with the “going solar.” The external validation.
Some people buy services (at least partially) for social status, too. Some clients take pride in saying who they’re working with, or who built their website, or who wrote their code. They tell their friends because it puts them in an exclusive club.
You may be thinking that it’s not rational. But we’re social creatures, and our social connections are currency in times of need, so it is rational to seek social status.
How people get it is another question. Some choose to buy it.
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