The headline above is aimed to describe an ideology that sometimes is able to threaten the confidence I have in the frugal lifestyle that I lead.
I recently heard the world-renowned strength coach Charles Poliquin say something to this effect, on the Tim Ferriss podcast, and he gave the example of his airplane travelling between the seminars he gives all over the world. He explained, that he always makes it a point to fly first class, to ensure that he gets a good night’s sleep on the plane, so he can show up refreshed for the seminars and give a first class performance, which ultimately results in repeat business with the customer. And it makes total sense, right?
To my ears though, what he was actually saying, was that the first class tickets were an investment that generated a long term positive return – and that you can’t really argue with.
But I think we should be careful not to oversimplify this idea, unless we want some impressionable people to get hurt from the advice.
Say I, as a young man, who is just getting started with life, goes out and takes an expensive loan to buy a Lamborghini, with the thought in mind that it will raise my overall standard of living. Maybe this expensive sports car can enhance my social status, which will allow me to establish relationships to rich people, who has business opportunities that I can capitalize on, and thereby be able to pay back the car. Is this a possibility? Probably! But what you may also call this, is “betting on dumb luck”, and I think that it may even slightly resemble some other popular self-help concepts such as The Law of Attraction and The Secret.
“But I know a guy, who one day decided to start living the good life, had no basis for it, and suddenly had all the best things in the world flowing towards him”. This is called the survivorship bias. You probably also know a lot of other people who went bankrupt because they tried to jump 10 steps ahead in the game, without being particularly calculated about it – those examples we tend to forget.
You see, there is no luck involved in the case of the strength coach I mentioned before. He will hop on an air plane, check in to a hotel, give his lecture and go home again. All steps throughout the process are already known from the beginning. The first class tickets are just a way of optimizing this process (you may even define it as improving upon the value chain that is the product he delivers).
In the case of the Lamborghini, we are just optimizing or even amplifying uncertainty, instead of a known process, and that can only result in extreme outcomes – most likely a negative one.
I think the key lesson here, is that we should learn to be more calculated than just taking mindless head-dives into economic uncertainty. We should even be aware, that a luxurious lifestyle can hurt us sometimes. For example: the marketing genius Seth Godin talks about how he had to stop wearing expensive suits early in his carrier, because it resonated badly with the type of people he was trying to establish partnerships with.
In short, the better we are at anticipating the future, the more success we can expect. But hoping is never a strategy.
If you carefully estimate that a 1000-dollar suit is going to a give you a great return on the investment within the near future, then by all means, go ahead and buy it. But if reality says, that a 200-dollar model will get the same job done, I think only a fool would count on the law of attraction to do any other magic than just hollowing out one’s bank account.
The examples of the strength coach and the Lamborghini are opposite extremes of a spectrum, but we should always be careful not to lean too much towards the latter.
Thank you for reading