This article is an excerpt from the Shortform book guide to "The Psychology of Money" by Morgan Housel. Shortform has the world's best summaries and analyses of books you should be reading.
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Can money buy respect? Do you respect people who have luxurious cars or expensive houses?
According to Morgan Housel, the author of The Psychology of Money, money flexing with status symbols won’t buy you respect. People may be in awe of your sports car or your Rolex, but they’re admiring the item, not you.
Here’s why you should only buy something expensive if it’s for you, not to flex on others.
Status Symbols Don’t Buy Respect
One way to prevent yourself from spending more money than you need to is to understand the lesson Housel shares: money flexing with status symbols won’t buy respect.
Housel argues that people often covet status symbols because they want respect. When others admire your possessions, you assume that they’re admiring you. However, Housel contends, when people admire your status symbols, they barely notice you. Rather, they imagine how much other people would admire them if they owned that symbol.
For example, if you buy a mansion and notice delivery drivers gawking at you when they pull up, you imagine that they think, “This house is so nice. The owner must be so sophisticated—I should treat her with respect.” But in actuality, they’re looking only at the house—not you—and thinking, “That house is so nice. If I lived here, people would think I’m so sophisticated and treat me with respect.”
So if you buy a status symbol, Housel recommends, remember that owning it won’t make people respect you as much as you expect. Instead, Housel urges, realize that you’ll gain the most respect from embodying good values like kindness.
(Shortform note: Some studies contradict Housel’s argument and suggest that status symbols do buy respect—in other words, how wealthy you appear affects how well people treat you. In Pitch Anything, sales coach Oren Klaff describes how the higher-status you appear, the more likely people are to follow your lead: When a well-dressed man jaywalked across a busy street into traffic, pedestrians often unthinkingly followed—but they didn’t follow a sloppily dressed person in the same situation. So while someone who sees you in fancy clothes may very well imagine themselves in those clothes, they also probably will treat you with the respect those clothes suggest you deserve.)
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Here's what you'll find in our full The Psychology of Money summary :
- Why the key to financial success lies in understanding human behavior
- How to make better financial decisions
- How chance plays a bigger role in our financial lives than we think
