Have you ever wanted a thing badly? Something money can buy. You never knew of its existence, until one day, boom! You hear of it or it stares you right in the face. Then, life is never the same until you possess it.
While this want can take root in a positive way, instilling in you a drive to become a better entrepreneur, investor, to live a better life, it could also lead you on a downward spiral.
Let’s say you finally possess it. How long does the satisfaction last before you avert your eyes to yet another want – one that’s even better or that’s meant to complement that item you’ve always wanted?
The Diderot Effect takes hold in such a manner. Many of us may be victims without realizing it, like a frog in slowly boiling water.
What is the Diderot Effect?
The Diderot Effect was coined in the 18th Century after the French philosopher and writer, Denis Diderot.
It describes the buyer behaviour whereby we acquire items we normally wouldn’t purchase, or can do without, simply because we recently came into the means to do so – maybe due to an increase in income, or an unexpected inheritance, or a lottery win.
The purchase of one new item necessitates the next, and then the next until you begin to live from paycheck to paycheck (no savings, no investments) or even fall into debt.
Let’s say you live in a two-bedroom flat. On getting a promotion or landing a new job, you can now afford to move into a better apartment.
But doing so might mean you have to purchase new furniture. The old ones probably wouldn’t be a good match anymore. Who pours new wine in an old skin?
Soon, your friends and family hear you are doing well for yourself. So demands and request for favours come pouring in. What choice do you have but to try to live up to your new social status and keep up with the Jonses?
Before long, amidst all the glitter, you realize that you have plunged yourself into debt. Denis Diderot was a man of meagre earnings who managed to live within his means. At the age of 52, he had written a vast collection of books.
Catherine the Great, the Empress of Russia at the time, purchased Diderot’s library for a whole lot of money, appointed him as the caretaker, and paid his salary 50 years in advance.
Finding himself in sudden wealth, Diderot decided to look the part and bought a beautiful scarlet robe. Soon, he realized how mismatched it looked amongst his old possessions.
He replaced his comfortable straw chair with one of Moroccan leather. But then, it was no longer a good fit for his writing desk. So he had to get a befitting one. Next was a fancy rug from Damascus. And thus went the purchasing spree, each item more expensive than the one that came before.
Before long, he found himself in financial trouble. Believe it or not, we often fall prey to this habit – constantly buying new things that we believe will make us feel rich and happy – excessive consumerism.
The Diderot Effect can, therefore, be summarized thus:
- Goods purchased by a consumer are in line with his/her self-image, and as a result, always complement.
- The acquisition of a new good, which deviates from the consumer’s current complementary possessions, creates a dissatisfaction that triggers a purchasing spiral.
How to overcome the Diderot Effect
Life is all about improvements and achieving greater heights. As we grow, it’s only natural that we acquire more things.
But the key to good living is learning to focus on the things that matter, especially if you have a wife and kids, and if you care about your retirement.
Let’s now look at some of the ways you can curate your spending and master the Diderot Effect:
Eliminate FOMO (Fear of Missing Out)
Advertising agencies, fashion trends, and social media show us things we do not have. Therefore today, we’d rather purchase new items than maintain the ones we already own.
Oftentimes we tend to forget that most of the posts on social media only show us the good life, but never the burdens those people have to bear just to maintain their standards.
Set purchase limits
To avoid tumbling down the hole of the Diderot Effect, set a limit on new purchases. When you have the cash, instead of immediately buying a big ticket item that you can do without, consider saving gradually towards it.
Achieving your savings goals makes you fulfilled and ensures that you always have an emergency cash reserve. Such purchases will then only serve as rewards for good habits.
Acquire good debt
This is debt that yields returns. Intentionally borrowing money to make good investments helps you keep your spending under control. When you remember you have a loan to repay, you simply have no choice than to set strict budgets for yourself.
Maintain your current system
Buy goods that complement the ones you already have. If getting that new pair of jeans means you also have to buy an extra pair of shoes (while you already have so many), consider getting another jean that will go well with the shoes you already have.
The Diderot Effect is a subtle phenomenon. You may never realize when it has taken hold. And it has a huge impact on our finances.
Therefore, beware of sudden exposures to wealth. It may sometimes happen that the more we acquire, the less happy we become. The little things we used to enjoy are no longer enough as we try to upgrade our lives and meet up with social convention.
Remember, once you’ve set a higher spending limit for yourself, it can be difficult to go back down.