I often write on Quora.com, where I am the most viewed writer on financial matters, with over 434.9 million views in recent years.
In the answers below I focused on the following topics and issues:
- Is owning an expensive car as a status symbol really worth it, or is it a pointless exercise, which doesn’t increase our happiness?
- How and when did you lose 10 million dollars?
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Source for all answers – Adam Fayed’s Quora page.
Is owning an expensive car as a status symbol really worth it?
Different people have contrasting experiences, but we can look at the statistics.
One of the best papers on the subject is “don’t we learn from poor choices? The consistency of expectation, choice, and memory clouds the lessons of experience”. It was written in 2011 and is below.https://dornsife.usc.edu/assets/sites/780/docs/11_jcp_schwarz___xu_why_we_don_t_learn__fin_.pdf
They asked luxury vehicle owners how they felt driving and those thinking about buying one.
They found that
– People imagine enjoying the experience of a luxury vehicle more than an economic one, but their actual experience driving is no different.
– Many are likely to over-estimate how positively they remember events in the past. A bit like that great night out when you are 18, or fantastic first travel experience, seems to become legendary when you look back on it twenty years later. Think about it. When you are 75, you are likely to think ‘in the good old days when I drive that luxury car when I was 35’. You are less likely to think about the road rage!
These findings have been backed up by this paper, which looks more generally at overall happiness levels between luxury and non-luxury car owners.
This makes sense because if you think about it, your experience driving a vehicle is more likely to be influenced by mundane issues like traffic, your worries and so on.
A luxury vehicle driver is unlikely to gain more pleasure from most trips compared to everybody else, as they are thinking about the same issues, like getting to the destination on time.
Only if you are driving for pure pleasure will a luxury vehicle’s entire “benefits” become clearer.
You also have the issue of hedonistic adaptation, which is a fancy way of saying that we get used to our new reality.
Ever notice how you get a sugar rush from a new purchase, which goes away, whilst experiences tend to last long in the memory?
So, my take is this. If driving is your hobby, then spending more on it might make you happier.
I do know some people who participate in racing events. They buy cars, build them up into quicker models, and race.
That seems to satisfy them, but they aren’t doing it to impress others.
They are doing it as a hobby. If you do things to impress others, you will only impress shallow people anyway and won’t make yourself happier.
That isn’t to mention that studies have shown that the average wealthy person doesn’t spend that much on vehicles, even if a minority do.
With increased environmental consciousness, wealthy people using bikes will soon become the new status symbol. It already has in some places.
Either way, do what feels better for you. Don’t drive a bike if you are wealthy or a Lamborgini just to make others feel good about you.
The biggest reason to get wealthy is to have more personal freedom. That includes the freedom to do things which others don’t understand or like.
If you allow other people to influence your decisions or allow your stuff to own you, then the extra money doesn’t have the effect you wanted.
How and when did you lose 10 million dollars?
In 2013 I was given a chance to invest in Bitcoin:
I did some due diligence and asked questions such as:
- Does the asset pay a dividend, coupon or any other form of income?
- What does the asset do? Is it a currency or something else?
- Why would the asset go up or down in value?
- How do I buy it if I am satisfied with the due diligence process? Is the process easy and secure?
I found that almost everybody advocating it was suggesting it was something different to the next person who came along.
Some said it is a currency which could one day supersede the USD. Others said it is a source of value, similar to gold.
A certain percentage admitted that it is just a speculative investment and, therefore something to only put a small portion of a portfolio in.
Almost all said it was difficult to buy for non-technical people anyway, as, in 2013, you couldn’t just buy with a Visa or MasterCard.
I guess my total would amount to $10m+ sum if I had invested at that time, but I don’t regret it. You can only base your decisions on the information you have on hand at the time.
What is more, you either need to understand whatever you invest in well or have a trusted advisor who can do the due diligence on the asset.
I had neither at that stage, and my calculation that this is a speculative asset hasn’t changed over the years.
When making investment choices, it is better not to judge your actions by results alone but why it makes sense to go down a particular route.
Somebody holding onto Chinese stocks must have felt smug in 2006, after years of overperformance, or US real estate in 2007.
That didn’t mean it made sense to be 100% in those asset classes then.
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Adam is an internationally recognised author on financial matters, with over 693.5 million answer views on Quora.com, a widely sold book on Amazon, and a contributor on Forbes.