The Diderot Effect

The Diderot Effect

Diderot

Time for a quick history lesson, with a good little life lesson (who said we never learn from history?)

The 18th century French writer named Denis Diderot once received a lovely gift: a beautiful scarlet dressing gown.  He immediately threw his old gown away. He wouldn’t wear it ever again he thought, so why keep it?

Of course, he needed to make a few extra purchases to accommodate his new gown.  If one of his books was covered with dust, he’d simply use his old gown as a rag. But he couldn’t wipe away dust with his lovely new gown!  Dust rags needed to be obtained.

Previously, when there was excess ink on his pen, he used the sleeves on his old gown to wipe it clear.  He couldn’t do that with the new gown.  He needed to buy new handkerchiefs, or perhaps he needed to purchase better pens.

Diderot began to notice that the rest of his home looked shabby in comparison to his new gown.  His drapes were faded, his furniture was old and scratched.  He now needed to replace them.

It wasn’t long before Diderot found himself broke, even deeply in debt.

Diderot Effect

We’ve all seen – or experienced first-hand – the Diderot effect.

You buy a new bicycle, but now you also need new water bottles, new lights, a new cycling computer, new pedals, new shoes, and on and on.

You buy a new couch for the living room, but now the window curtains don’t match, so you need to replace them as well.  Now the coffee table looks too bland and faded to match the lovely new curtains.  And on and on.

“I was absolute master of my old dressing gown,” Diderot said, “but I have become a slave to my new one.”

So we end up spending way more money than what we thought our initial purchase would cost us.  Another big problem with this is that, once we’ve obtained all these new things (and paid an anormous oportunity cost), we become accustomed to them (sometimes refered to as “lifestyle inflation” or “lifestyle creep“).

Going back to the cheaper lifestyle is nearly impossible for most people, so most end up with a higher cost of living and – crucially – with a lower savings rate (and thus implicitly implied, a lower investing rate).  So we become slaves to these things that we didn’t really need in the first place.  We end up working a lot longer (sometimes, YEARS longer!) before we can comfortably retire, just because we gave in to the Diderot effect!

Watch out for it, learn to recognise it, and you’ll save yourself tons of money in the long run.

Happy saving!

Hamster

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