The Psychology of Money Chapter 8: Man in the Car Paradox

Housel used to work as a valet driver in an upscale part of LA and drove cars like Ferraris, Lamborghinis, and Rolls-Royces. He likes cars, and when he drove these in his youth he had hopes of one day owning one. Now that he can afford one, he reflects on how he felt at that time. “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.” For Housel, the paradox is that although he wanted people to think he was cool, that’s not how he felt about the person who already had the cool stuff. Had Housel bought one of those cars, the onlookers wouldn’t actually be thinking about him, they’d be thinking about themselves in 20 years.

So, when Housel’s son was born, he wrote him a letter. In it he said, “You might think you want an expensive car, a fancy watch, and a huge house. But I’m telling you, you don’t. What you want is respect and admiration from other people, and you think having expensive stuff will bring it. It almost never does—especially from the people you want to respect and admire you. [...] If respect and admiration are your goal, be careful how you seek it. Humility, kindness, and empathy will bring you more respect than horsepower ever will.”

Maybe (like me) you’re not a car person, but chances are you’re a “something” person. Whether it’s cars, clothes, makeup, tractors, hunting gear, cooking gadgets, restaurants, vacations, sporting events, stamps, books, etc., there likely is something that you value and are willing to pay for the higher end versions. The difficulty is that our desire for these things in themselves can easily get mixed with a desire to be perceived positively because of our owning them. The lesson here, maybe one some of you already know well, is to not spend our dollars chasing the respect and admiration that we can get much more of at a much lower cost.

If you’d like to engage further, I’d love to know

• What do you feel when you see someone drive by in a $300,000 car?

• What’s your “thing” that you like to go all in on? That you’d happily have a separate and near unlimited budget for if you could?

Until next time, happy reading!