A rich man in the car paradox is quite an interesting concept in personal finance. Let me give a situation.
—————————
Imagine yourself outside one of the nightclubs smoking. In a few meters you can see few beautiful girls smoking. You wanna start a conversation and then establish a connection.
But they don’t seem to care you at all. In that moment, a red daring Ferrari zoomed in and stopped at the entrance.
You do not like such expensive cars. But this one looks nice; a combo of classic luxury designs and modern aesthetic clues.
The girls who didn’t care your presence dumped their cigarettes and ran to the car in seductive walking styles.
Immediately your thought went ‘only if I’ve a car like that, I will get all the attention and also never miss beautiful girls to….’
Just like that, you wonder how it would feel to drive a car that expensive and flashy without thinking of the man inside the car.
Congratulation!
You just fell into the Rich man in the car paradox.
Meaning of Man in the Car Paradox in Personal Finance
People who drive luxurious expensive cars usually seem to receive more attention than others who do not.
You know what I mean. We watched so many social experiment videos on this in YouTube.
If you drive one of such luxury cars, you will become a centre of attention, admiration, and respect as well.
You think that luxurious design of the Ferrari car, its brand, and price will command respect and admiration.
The man in the car must be thinking all the same.
However, people will only look at the car and then use it to imagine how cool they would be driving it while totally ignoring the man inside.
The man bought the car for the attention, admiration and respect of the people. But he does not receive anything.
Instead the car gets all. Which is like saying they will admire the car even if it’s separated from him, or driven by a monkey.
This is the meaning of rich man in the car paradox.
The Man in the Car Paradox Book by Morgan Housel
This car paradox is from the book The Psychology of Money by Morgan Housel. Let me give an excerpt from the book itself.
Chapter 8: Man in the Car Paradox
‘When you see someone drive a nice car, you rarely think, ‘wow, the guy driving the car is cool.’ Instead, you think, ‘wow, if only I had that car people would think I am cool.’ Subconscious or not, this is how people think.’
The person just signals that he is wealthy and that others should like and admire him. But he doesn’t realize them ignoring him and focusing only on his possession.
Some real life Examples of the Rich Man in the Paradox
We are in a period where most people take having luxury possessions as the only way to gain social admiration and respect.
Social media is a giant ecosystem of comparisons. They have made this even worse.
Now we come across online deceptions like influencers renting limbo or even faking their private jet selfies.
We know one or two within our social circles who went all in for a car to look cool in the society though they cannot afford having one.
My brother-in-law just recently purchased a Kia Seltos. If he can afford it and is buying because he likes it and nothing more, it isn’t a problem.
But he’s doing it just because he wants to drive a car which is better than that of his colleagues.
He wants to be a cooler kid with that expensive Seltos. A back-breaking loan in his name now, he’s a rich man inside the Seltos!
Personal Lessons From the rich Man in the Car Paradox
So if we purchase expensive cars or any possessions for that matter to gain social approval and attention, we’ll be waiting indefinitely to get them.
Considering your possessions as means of getting people’s admiration is a flawed strategy.
The better strategy will be by acquiring skills, traits or personalities that are helpful for others. We’ll be admired based on what we’re or how we are and not on what we have.
Morgan Housel himself gives the better strategy:
It’s recognizing that people generally aspire to be respected by others, and humility, graciousness, intelligence, and empathy tend to generate more respect than fast cars.
We can use the man in the car paradox while taking financial decisions like purchasing houses, cars, watches etc.
We can look only at the utilities or usefulness and not social attention perspective.
The paradox proves that no one is impressed by your fancy cars or big houses as much as you are.
It’s of no use buying things you don’t need only to impress people using money that has cost you energy and time.
The wealth we have built over the time through saving, and investing will be of a waste if we blow them off just to be a rich man in an expensive car.
So, what is in an expensive car?
Basically nothing. If you have bought it with a sole intention to look cool and gain attention in the society.
