Sometimes I think writing a blog is just the operation of the Baader-Meinhoff effect, writ large. For those who don’t know, and I didn’t until two minutes ago, the Baader-Meinhoff effect or frequency illusion is “the illusion in which a word, a name, or other thing that has recently come to one’s attention suddenly seems to appear with improbable frequency shortly afterwards.”

In my case it was the idea of the spotlight effect. I was seeing it everywhere. The “spotlight effect” is the phenomenon in which people tend to believe they are being noticed more than they really are. Your haircut, what kind of shoes you are wearing or the car you drive are good examples. Which prompted the following question: Is the spotlight effect a reason why we feel the need to ‘keep up with the Jones’?

A little while back Ben Carlson and I discussed the high financial and opportunity cost of driving a big new SUV or luxury sedan. At the time I wrote:

As with most things in life you are in charge of your own stuff. If you want to drive a new luxury vehicle, more power to you. Just realize that there are financial (and environmental) trade-offs involved. But don’t be under the illusion that anyone really cares what car you are driving.

Okay, maybe someone cares. But not very many. Adam M. Grossman writing about the spotlight effect at Humble Dollar notes:

First, it tells us that there’s no point in trying to keep up with the Joneses. If I come home with a new Mercedes, my neighbors probably won’t notice and, if they do, they probably won’t care. This, I think, is liberating. If you’re stretching yourself financially to gain social acceptance, there’s no pointsince most people won’t notice anyway.

One of the big consequences of the spotlight effect, unless the chain is broken, is that it can really ratchet up your spending. There is always someone out there with the cool new phone, car, house etc. It is mathematically impossible to keep up. But we still try. Seth Godin at his blog notes:

Conspicuous consumption is not absolute, it’s relative.

It’s sort of a selfish potlatch, in which each person seeks to demonstrate status, at whatever the personal or societal cost, by out-consuming the others.

It really can be a vicious cycle, especially if you scale it up from the neighborhood level up the national or even global level. Joachim Klement writing at the Enterprising Investor notes:

Comparing ourselves to our neighbors or our peers creates a vicious cycle. A little bit of inequality is amplified as the less fortunate are tempted to take on more risk than they can afford in order to keep up with the Joneses. This, in turn, magnifies their losses in downturns and creates more inequality, which further incentivizes those who fear falling behind to take on even more risk. And on and on it goes.

What you don’t want to happen is end up living your life in pursuit of the approval of other people, whether they be family, friends or neighbors. Unfortunately this happens far too often than we care to think. Laura Gassner Otting writing at HBR notes:

If you’ve determined that your dream job is not really all that dreamy, it may be that you have done all the right things along everyone else’s path to everyone else’s definition of success, only to realize when you’ve moved into a new age or life stage that the great life you built was meant for someone else.

What we want and what we need change over time. Just ask Ben Carlson at A Wealth of Common Sense. He recently wrote about the “end of history illusion.” Or the idea that the person we are today is the same person we will be in the future. Carlson writes:

It took me a while but I’ve finally come around to this idea of understanding that my preferences are sure to change over time and my future self will likely be different in many ways from my current self in terms of tastes, values, and priorities.

It’s not easy to stop comparing yourself to others. But you can’t understand, or come to terms with, your own preferences if you are constantly looking over your shoulder to see what your peers are doing. Just be yourself, because there is no spotlight on you.

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