Acting Dead, Trading Up and Leaving the Middle Class

by Venkat on December 8, 2011

I want to share the story behind approximately $2700 dollars worth of my spending this year that reveals how I am finally starting to leave the middle class, materially, financially and psychologically. No, I am not moving up into the rich class or down into the poor class. I am doing something complicated called trading up. 

This $2700 is money that, if I’d decided to pull the trigger and spend it a few months earlier, would have spared me a ton of unnecessary frustration. Why didn’t I spend it when I should have?

One reason is that I still have residual middle-class financial programming in my head, expertly misguiding me to the wrong answers. Getting it out of my head feels like getting a bad malware and virus infection off a computer. It is painful and messy, and there are really no completely reliable tools that work in all cases. And you’re never quite sure if you got the last infected file off the system, when the infection is really bad.

Another reason is that I was (and remain to some extent) guilty of what science fiction writer Bruce Sterling calls acting dead: being irrationally averse to spending money where it matters, in a misguided attempt to “save” money to the point that the behavior paralyzes you. A large segment of the middle class is starting to act dead these days. Which makes sense since the class itself is dying. To stop acting dead, you have to resolve to exit the traditional middle class as well, unless you want to go down with it.

Not acting dead involves a strategic spending pattern that marketers are starting to call trading up: buying premium in some areas of your life, while buying budget or entirely forgoing spending in other areas. This pattern of conscious, discriminating consumption defines the emerging replacement for  the middle class.  As the picture above illustrates, there isn’t really one “New Middle Class.” Instead, it is a fragmented social space, with each little island being defined by a specific pattern of trading-up, and an associated lifestyle design script.

This effect is a sort of the opposite of what I called Gollumization earlier this year: unthinking, undiscriminating consumption to the point that consumption defines you.

There’s a pretty neat book about it, Trading Up by Michael Silverstein and Neil Fiske, which you should read if you, like me, have exited or are planning to exit the traditional middle class.

But back to acting dead and my $2700 dollars, which I’ll use as my running example to get at various things.

The Dead Great-Grandfather Test

Sterling was using the term specifically to describe the hairshirt green lifestyle that is driven by eco-anxieties. For hairshirt-green types, life is all about saving water, recycling, composting, reducing eco-footprints and various other behaviors marked by a kind of fearful, non-generative retreat from living. Permanent existential hibernation.

Sterling’s rule of thumb for spotting acting-dead behaviors is a great one: if it’s something your dead great-grandfather can do better than you, it’s a case of acting dead. Your dead great-grandfather uses no water or plastic, and is actually recycling himself as we speak, not just his possessions. Try and top that.

But acting dead goes beyond hairshirt-green behaviors. While spartan frugality is a virtue, when it becomes the entire purpose of your life, there’s a problem. For a portion of the dying American middle class, frugality has turned into a life purpose.

An example is extreme couponing, which is why I used that as an example of radical Gollumization. It is saving gone amok: never buying anything not on sale (and therefore never buying things that never go on sale) and systematically being a jerk to businesses that may be running loss-leader sales to get new customers.

So how should you spend?

Spending Money

In his talk, Sterling offers up a simple rule for how to spend money. If it is something you use a lot everyday, spend the money, and get the good stuff. Don’t buy cheap. Look for deals, but don’t let deal-seeking make you compromise on quality or wait too long. It will cost you more in the long term. Sterling’s examples are obvious and physical: a good quality bed and work chair for instance. You might spend up to 8 hours a day in each; that’s 2/3 of your life.

I own both an excellent bed and a great chair. I am not sure the latter was a good investment for me in particular, since I spend most of my sitting hours in coffee shops, but in principle, it is a great example. Other examples include: a great kitchen knife, a nice car if you spend many hours commuting per day, plenty of quality gym clothes and a membership at a good gym, so you never have an excuse not to work out. Good quality produce to cook with.

If you work mostly at your desk, a large monitor. Heck, multiple monitors. The best keyboard.

Sterling also has ideas on what not to buy, or get rid of if you already own it. Expensive china sets for example, if you never do any formal entertaining. Things you think are assets but are actually liabilities. Things you are being unnecessarily sentimental about.

Sterling’s ideas seem to have been independently rediscovered by a growing segment of the middle class. Hence the phenomenon of trading up (the book has lots of data and anecdotal evidence for the trend).

I think of these sorts of examples as “physical furniture.” Stuff in your life that can make it hoarder hell if you buy the wrong things, or heaven if you buy the right things.

$2700 Worth of Acting-Dead

My acting-dead behaviors this year were more about mental furniture. Here’s the breakdown of the $2700 that I eventually spent when I stopped acting dead:

  1. About $250 to get Tempo converted to epub and Kindle formats
  2. About $300 odd to get an agent to file some Nevada business paperwork for me
  3. $2100 for a Matlab (scientific computing software) license

In each case, I procrastinated for months, with the vague idea of saving money. Actually, it was worse than mere procrastination, since I was expending useless effort. In each case, my dead great-grandfather could have achieved what I did around those tasks during those months: nothing. And he’d have done it more efficiently.

In the first two cases, I tried to do it all myself, even though I have an aversion to fussy kinds of technical formatting work and paperwork to the point that they should count as phobias.  When I finally pulled the trigger and outsourced the work, it was like a major load being taken off my mind, coupled with severe regret for the time already spent on pointless frustration.

In the third case, it was again about saving money. I spent months mucking around with Python, R and various other open source alternatives to Matlab. Here, the messiness of having to deal with a unwieldy and weakly integrated open-source tools, along with my own serious aversion (similar to my paperwork aversion) to fussy configuration issues, and my generally poor ability to pick up new programming skills, had me wasting months in frustrated spinning-of-wheels.

And in the meantime, I was not doing things I wanted to do, simply because I was too cheap to buy a quality tool that I was familiar with, and could save me months of painful learning (especially painful now due to the Python 2.x to 3.x transition).  As with the other two cases, finally pulling the trigger made me intensely relieved.

You could say that each poor decision (each a case of delaying the right decision) was caused by specific phobias, aversions and irrationality.

But there is also a general pattern here. I really was not able to rationally assess the costs and benefits of each decision until after I had persisted with the wrong decision for months and made the right decision out of frustration. I could only see the simple logic after I’d made the right decision and stopped rationalizing the wrong one.

The general pattern that causes such poor decision-making is the middle class financial script.

The Middle-Class Financial Script

The middle class financial script is simple really. It involves uniform spending habits within a large class, based on norms that are learned via imitation.

If you are in the middle class, you are expected to own certain things, do certain things and do so at quality levels that exceed the quality purchased by the poor class (if they purchase that category of things at all) but don’t hit luxury levels.

You are also expected to not buy certain things that are either above or beneath you, or do certain things for yourself. Vanity,  humility and a sense of entitlement are all at work here. For the middle class, there are things that are beneath your station and things that are above your station. For the rich and poor, things are much more one-sided.

To take some simple examples, you’d be looked upon with suspicion if you bought a car that was either too luxurious or too cheap for somebody claiming middle class status. You are expected to vacation in certain places and not others.

In fact, imitation and uniformity in consumption define the middle class. In countries where the middle class is burgeoning instead of dying, especially in Asia, the growth of the class is tracked via measurement of ownership rates of certain typical goods at typical quality levels. By contrast, there is much more variety in how the poor are poor, and how the rich are rich.

Why does the middle class script (or any script) exist?

Mainly because it makes financial management easy. Constantly computing the total costs of ownership, potential returns and risks around all spending decisions,  is hard. And it doesn’t seem worthwhile when the income side is predictable and comfortable. Why bother to control costs when revenues are fixed and somebody else has already made up a predictable-costs script with reasonable margins designed to get you through retirement?

In other words, the middle class in recent history has been defined by its ability to both earn and spend money in very predictable ways.

Then of course, the risks started creeping back in, around 1980, slowly at first, and then with increasing rapidity over the last few years. All the things the middle class relied on — job security, defined benefits pensions, affordable mortgages, predictably rising real-estate values — one by one, all these supports began to break down.

But autopilot spending has persisted, long after the new patterns of exposure to financial risk have become clear. The reason of course is that the old financial habits were not really financial per se, they were driven by class norms rather than financial risk-management calculations.

My own examples are a case in point. My behavior is readily explained with reference to middle class norms:

  1. The eBook conversion example: Middle class people do not hire other middle class people outside of a few approved exceptions such as doctors, lawyers and accountants; they work for the rich and hire the poor.
  2. The business paperwork example: Middle class people do not “indulge” in “luxuries” like hiring administrative help to do paperwork. That’s for rich people with complicated financial affairs. Honest middle-class people should be able to do their own paperwork, with at most some professional help at tax time. Needing help probably means you are up to shady things.
  3. The Matlab example: Middle class people do not pay for their tools. In fact, they shouldn’t need tools beyond the basic tools of literacy (books, pen and paper 100 years ago, a computer today). Poor people use specialized tools. Rich people buy them. Middle class people merely supervise the use of the rich people’s tools (capital) by the poor (labor). Even today, if you use specialized tools to work, your membership in the middle class is suspect.

Above all this, the middle class script involves a certain aversion to talking about or dealing with tough financial decisions. It is considered unseemly. Decent people don’t talk about money, let alone risk. If you work hard and play by the rules, the money should take care of itself. If it isn’t doing that, you are probably looking for dishonest and exploitative shortcuts like the evil rich or doing dumb things like the stupid poor, and deserve what you get.

If you have to budget and watch your money too closely, you were probably being irresponsible with credit cards and deserve your pain. For decent people, paycheck-in, on-time-credit-card-payments-out should work smoothly on autopilot.

And above all, you don’t speculate. If forced to speculate by pensions being turned into 401(ks) (American stock-based defined contribution retirement plans), decent people leave the actual risk-taking decisions to professional fund managers, telling themselves things like  “you cannot beat the professionals.”

So what will happen to people operating by such obviously dangerous attitudes in difficult times?

Turns out, we’ve been here before. They’ll die out.

Middle Class Declines in History

This is not a new phenomenon in history. Middle classes have appeared and disappeared several times before in history.

Tennessee Williams’ plays (A Streetcar Named Desire, The Glass Menagerie) tell exactly such poignant fall-from-the-middle-class stories set in early 20th century America.

Early twentieth century British novels set during the decline of empire (such as Agatha Christie novels), often contain aging spinsters desperately keeping up appearances and surviving on small incomes derived from being “companions” to richer old women.

You can also find examples outside the Western world. In nineteenth century India for example, where the Urdu and Sanskrit-literate middle classes, which had grown around the courts of the Nawabs and Maharajas in older medieval cities, went into severe decline. The new English-literate middle class began supplanting it in the newer cities of the British Raj.

I suspect similar middle class declines can be found in the Middle East (during the Ottoman decline), China (after the Boxer Rebellion)  and Latin America (after the Monroe Doctrine perhaps? I am not too familiar with Latin American history).

When a middle class goes into decline, you get a large segment of the population engaging in a desperate scramble to keep up appearances, while switching from collective-norm-based to individual-risk-based financial thinking.

Keeping up with the Joneses becomes far harder, because the financial support starts to collapse at different times for different people, but everybody agrees to pretend that everybody is in it together.  For the current American decline, there have already been a couple of good movies chronicling the decline: The Joneses (2009) and The Company Men (2010).

A norm-based social class will persist with disastrous financial choices long after the secure financial environment, on which its scripts are based, collapses. Simply because membership of the class is the source of all social identity and access to social capital.

Except that the social capital, which the members are clinging to, is eroding rapidly as well. There is no point in two non-swimmers with immense trust between them, clinging to each other while drowning. Mutual trust and social capital within a group only mean something when there are objective reasons to expect a prosperous future of indefinite length stretching out ahead.

When this is not the case, it makes sense to cash out your hard assets, rethink your financial life more directly, write off investments in the social capital of the declining class, and look for an alternative emerging class to join.

Trading Up and Fragmentation

As the picture I started with shows, a key effect of the trading-up phenomenon is that it causes serious fragmentation. The social landscape starts to get restructured along new lines. Cultural geography changes, as governing financial scripts change from one city block to the next (you see a lot of this in San Francisco in particular).

The transition from a monolithic middle class to one of many trading-up classes is a very tough one. First, you have to go through a period where you manage your finances very directly, with no help from a script that simplifies decision-making.

Then you have to evaluate various alternative trading-up scripts to figure out which ones might actually fit your situation and encode meaningful adaptations to the new environment. Not every lifestyle design script is likely to work.

In the last few months, going back to the broader context of my three examples, I’ve done a good deal of very direct financial decision-making. I’ve made up detailed scenario planning spreadsheets, risk models and the like. I’ve done minute tracking of spending (only for a month, to sort of calibrate; it is far too difficult and depressing to do on an ongoing basis).

Here’s the funny thing: doing this kind of very direct financial management around my small-business book-keeping felt good. It felt smart, like I was learning valuable new skills. But doing it around personal and household finances still felt somehow dirty. That’s how deeply embedded the middle class script is.

The three examples were interesting and particularly tough because they bridged the two mental models: my healthy business mental model (within which the right spending decisions would have been easy) and my toxic middle-class-paycheck mental model (within which they were unnecessarily hard).

Scared, Foolhardy and Brave New Scripts

Once you’ve worked with your finances directly for a while (it’s like working in assembly language, on a computer without an operating system) to start the transition away from the middle class script, you have to end the transition. Staying in limbo doesn’t work.

The transition can end in three ways:

  1. Prolonged Misery: You get so scared, you retreat to the middle class and do your best to delay the inevitable
  2. Waiting for Godot: You latch onto some script and  stick to it even after it becomes clear that it isn’t working for you.
  3. Quick-Change Artists: You try on different scripts for size, attempting to force outcomes and fast failures, until you find one that fits and works, the way those quick-change artists change clothes.

Prolonged misery makes for the best tragic literature but is entirely unpleasant to live through. You act increasingly dead, get increasingly frugal, gradually squeeze out all the generativity in your life, and then finally you die.

The characteristic sign that you are practicing unhealthy acting-dead frugality is that you cut back on core expenses that might help you be more generative, in order to keep up appearances as long as possible.

If you are cutting back on the quality of the food you eat (trading fresh vegetables for canned, say), in order to buy the same clothes your friends wear, you are on the prolonged misery path. This incidentally, may be part of the reason why the middle class has become so attached to recycling and other hairshirt-green behaviors (outside of the actual merits of the behaviors) during exactly the period that the class itself has been in decline.

Waiting for Godot is your classic arrival fallacy. You fixate on specific narrative elements (like moving to Bali or working for 4 hours a week), make the few big moves, and spend the rest of your life waiting for the Big Event signifying that it is working, while slipping slowly into destitution and denial. I see a lot of people in this mode right now. They’ve never really stopped to analyze the logic of the script, but accepted it on faith based on assurances from a few for whom it has worked.

Quick-change artistry is of course, the card I think you should pick. It is a turbulent, experimental approach, where there are no absolute life truths, no permanent commitments to any script, no one-book formulas, and no easy no-brainer decisions.

It involves trying different trading-up patterns until you find one that works. It involves a commitment to stop acting dead. It involves a conscious decision to leave the middle class.

Or you can wait for all the King’s men and all the king’s horses to put Humpty-Dumpty together again.

This piece is sort of a continuation of my Las Vegas Rules series, but I’ve abandoned the attempt to keep a coherent larger narrative going. This is going to be more of an occasional diary-entry sort of thing.

anon December 8, 2011 at 11:51 pm

I was really respecting this post until you said “Matlab”. I can’t imagine what possesed you to buy it. What exacylt did you need it for? It’s a steaming pile of shit.

JP Hill December 10, 2011 at 8:40 am

Mathlab has the best user and corporate ecosystem of any package out there for specific areas of effort. It is the worst tool for casual effort, but the best tool for many things. It is not a general purpose tool and is a very good example of trading up as it is not a general purpose tool for the middle class. It is “trading up” for a very small fragment of the population. Hence I agree with Venkat. Mathlab is trading up for Venkat and would not be trading up for you. And that is the point.

jld December 10, 2011 at 9:42 am

You shouldn’t confuse Mathlab
http://en.wikipedia.org/wiki/MATHLAB
and Matlab
http://en.wikipedia.org/wiki/MATLAB
Venkat is using Matlab I guess.

JP Hill December 10, 2011 at 11:00 am

Yes, you are correct it is Matlab without the H that is a good example of trading up for the right person. Mathlab, was an error in spelling.

Akanksha December 9, 2011 at 12:56 am

This is such an accurate description of what is happening in the US right now. I had an opportunity to experience this myself recently and I was completely baffled and frustrated by the need for uniformity in all possible decisions. Coming from India, where everyday you meet so many people who have a different priorities and accordingly make their decisions, it was a revelation to be part of a society on an auto-pilot. This explains this very well.

jld December 9, 2011 at 3:04 am

Hummm… Yeah! Matlab is probably not the best example you could choose.
Instead of trying to whip up something yourself out of bits and pieces there are 3 other free integrated environments you could have use:
- GNU Octave, closest to Matlab, http://www.gnu.org/software/octave/
- Sage, http://www.sagemath.org/tour.html
- Last but not least and a bit exotic J
(providing only one true link to avoid daft anti-spam meddling)

jld December 9, 2011 at 3:06 am

Apologies to the anti-spam, it outsmarted my truncated links instead of screwing them. :-)

aepxc December 9, 2011 at 7:06 am

Class-based definitions have always been deficient because they look at only one half of the equation, namely income. You earn $X and then buy everything that is out there, which is aimed at the $X earning segment. To me this seems a little nuts. Money is a tool (and far from the only one available) towards an end that is undefined until you define it. Which exact tool you choose, let alone how you deploy it, inherently depends on what you want to achieve and why. Yet I see very few people asking themselves the “what” and “why” questions first.

Surely, how much you would benefit from spending a particular amount on a given thing depends on what you need from that thing and why? Surely, how much time you should shift from using the things you acquire to working to earn money to acquire those things again depends on what you want to acquire and why?

In fact, from my own experience, this only very rarely needs either common/shared, extrinsically defined scripts, or careful management. Human beings tend not to be that complex, and a few simple heuristic principles, flexibly applied to whatever situations one finds oneself in, are almost always sufficient. Spend as much as you need (or as much as you can, whatever is lower) on the things you care about (in the order you care about them), and do not spend anything on things you do not care about. This is equally applicable if you are poor, middle class, trading up, or rich. The order of things should not be screwed up: 1. Goals (and their justifications) -> 2. Inventory of your own capabilities -> 3. Inventory of environmental conditions and constraints -> 4. Plan of action.

Xianhang Zhang December 9, 2011 at 7:11 am

Your post illustrates another fascinating quirk which is the peculiar middle class tax that arises from making frequent, out of band purchases. Nobody purchases Matlab at full retail except for the middle class. The poor gleefully pirate it, the rich access it through institutional licenses. It’s similar to academic papers, I refused to believe anyone ever paid the $30 for a single paper until I moved to SF and found the delusional middle class cheerfully coughing it up.

jld December 9, 2011 at 8:10 am

Ouch! So Venkat did not actually escape middle class status (I had no idea of the license rates, not interested in paying any nor pirating either).
The same probably apply to other kind of purchases where the cognoscenti don’t pay full rate anyway.

Dan December 9, 2011 at 8:18 am

I gotta say, I’m doing pretty much the same, but here’s a small tip for getting the best of the budget stuff: buy used!

My smartphone, which I use for calls and sometimes photos, is a used Droid I bought on eBay. It was cheaper than the new phones I could have bought in stores, and it’s much better built, too. I also got a used Beretta PX4, which was a lot cheaper than anything new of similar quality.

Obviously, you depend a bit on luck and you need to know what problems to look for, but usually buying something high end used is better than buying a new low-end product, AND you save money for the really important premium purchases…

Steve Heise December 9, 2011 at 8:18 am

“To compensate for the repression of genuine individual happiness, mass diversions had been devised to defuse discontent.” [Martin Jay]

Such diversions often mimic tribal affinities (GO IU! DUKE SUCKS!). Uniformity of consumption has an implicit message of You Are Not Alone. Very important when normal identity roles are imploding.

David Ledoux December 9, 2011 at 8:27 am

It was bordering on epic for a few moments, especially with the historical references to support the thesis about the middle class. But it doesn’t ring true in my experiences in dealing primarily with entrepreneurs and small business owners. They view spending as investing, even if they are solopreneurs.

The working drones are still asleep out there in frightening numbers. Take a survey this Christmas, I think you’ll be shocked at how many employed worker bees think the economy is ok and “green shoots” are appearing. Poor cows, don’t see the hammer coming.

Venkat December 9, 2011 at 11:21 am

Yes, I agree the small business class is an exception. They aren’t really middle class culturally even if they are financially.

Venkat December 9, 2011 at 12:20 pm

Responding to everybody trying to go down the Matlab rabbit-hole in one comment. I used that example to illustrate a point that has nothing to do with software quality or context-free comparisons among scientific computing tools. I wasn’t asking for advice. I know this little corner of computing well enough to make my own technical evaluations and decisions :)

My point was about with willingness to spend money on tools you decide you want instead of always looking for someone to buy ‘em for you or save money by spending 3x more time. In pre-industrial societies, autonomous workmen owned their tools. Those who couldn’t were not autonomous. We are going back to that era, was my point, where ownership of work tools is a mark of a certain degree of autonomy.

Hang: in my experience, with software, the middle class is actually the main pirating class (the poor don’t even have computers half the time, and if they do, have ancient hand-me-downs; most are struggling with MS-Word level skills… they mostly browse, use email, and occasionally struggle to format and print out a resume).

The rich, in my experience, are in fact the ones who don’t mind paying full retail when they have no institutional affiliations that could help them get a deal. The middle class is more likely to do without.

I don’t agree that frequent out of band purchases is a normal trait of the middle class as traditionally defined. In fact that is the defining trait of the emerging “trading up” class. The book has plenty of examples. SF being on the cultural edge is rather full of trading-up types, so your sample is hardly random.

Paying $30 for a paper — yeah I’d do that if I absolutely had to and a quick Google search didn’t reveal a free copy online. If you’re in the market for things normally sold to institutions, and there is enough inconvenience or social friction involved in getting access cheap or free, paying can be worth it. A big personal realization for me in recent months has been the futility of spending a lot of time thinking about how to save money/getting things for free. Life is too short.

The point is, there’s a difference between spending money because you are clueless or lack social networks, and spending money because you value your time too much to spend it dealing with certain things. Only a few spending battles are worth picking.

I’ve done things the other way, and know the costs/benefits. It’s a recipe for a life I don’t like. It’s time for an attitude change.

Kay December 10, 2011 at 2:58 am

I used that example to illustrate a point that has nothing to do with software quality or context-free comparisons among scientific computing tools.

But your article was about “spending up” not about buying costly junk – something which is the norm in the software industry, where product price as a quality selector falls for short. I don’t want to belabor this point and the value of programming communities for programmers ( professionals or not ) but wonder if the relation between “spending up” and “premium quality” isn’t more subjective than objective in which case “spending up” reduces to “spending more”? In some sense I’d like to read from you why prize can produce quality illusions easily and why sociopaths are also clueless?

jld December 10, 2011 at 4:20 am

Sorry to keep bothering you Venkat but did you notice that nobody came in defense of Matlab?

Venkat December 10, 2011 at 11:21 am

LOL! Why would you think I’d defer to social proof for something like this? I’ve used the thing for over a decade, have tried several other tools hands on at various points and been completely underwhelmed, and concluded based on material evidence and actually DOING things that this is the tool I need and will have the lowest actual costs for me. The learning costs alone would make other tools more expensive, even if they could do all the things I am looking for (none of them even comes close, since they are programming languages rather than modeling/simulation environments).

Ho-Sheng Hsiao December 10, 2011 at 2:25 pm

This article is great. It goes into detail in what Kiyosaki mentions but never goes into great lengths for. That is, he uses narrative but doesn’t explain the process. For example, when Kiyosaki was younger, he got access to a badass sports car because he likes driving. He didn’t see a point in driving a middle class car even though his income was less than middle class. However, he did not own it outright: it came with the badass penthouse he lived in, which he traded services with a wealthy family that did own those things. So “trading up” combines powerfully with another principle: “Poor people wants ownership, Rich people wants control.”

Another interesting thing from Kiyosaki in which this particular thread reminds me of: the poor and middle-class *will* project their own fears onto someone they see trading up by giving advice :-D (If you have domain expertise, then you know the tools you need).

I will say, what is not emphasized here is the emotional processing to get to this point. Emotions precede thought. No matter how rational you think you are, without emotional clarity you will be predictably irrational. (It goes beyond bad instrumentation; your subconscious actively deceives you into avoiding feeling fear). Every time I unravel some emotional hangup, the blinders come off of things related to my possessions or the actions I have to take. When I chose my “bailout laptop” (as a software developer), I ended up getting a maxed-out Air. But I procrastinated for years with my bookshelves. They were crappy and did not hold weight well. I finally got new ones. Granted, Ikea bookshelves are not high-quality either, but being 7-feet tall and better quality than the stuff I had before amped up my work area. (Now to get rid of books I don’t really need).

The incorporation was really funny. The first time I messed with it, I had a lot more time than money so I did it myself. I spent two weeks before I submitted it to the county courthouse and mailed the documents to the state. But wow, the fear. I was shaking so bad throughout the whole process. Sweat pouring out that has nothing to do with the heat. The fear wasn’t there the second time I set it up. By the third time, I already knew how to “configure” the Articles of Organization, but this time I ran it by a lawyer who added some interesting provisions.

And if you ever run a small business: find a way to afford a bookkeeper (a CPA to do taxes and give advice is a given, a bookkeeper has a different role). It’s worth the $100 – $200/mth. Or you will hate yourself at the end of the fiscal year :-D

Ho-Sheng Hsiao December 10, 2011 at 3:19 pm

Oh yeah, one interesting thing to experiment with yourself:

If you do get something nice for your daily use, are you getting it because it *is* badass or because of the branding? Would you be willing to go as far as obfuscating or sanitizing the branding?

Example: I was able to sanitize the carry bag for my bailout laptop, but I haven’t quite brought myself to cover up the logo for the laptop itself. It invokes fear off loss, meaning I’m attached to the branding and what it communicates to people. Examining deeper, it’s need to show off, to gain some subtle attention rather than the quality of the tool itself for the purpose you employ the tool. All the more reason to relinquish it and see what happens.

(Counter-point: if your purpose IS to communicate prestige and image because your professional mission requires it, then the branding itself becomes a tool. However, I doubt most of the middle-class are playing in that field. A high-end salon stylist might need this, but an office worker probably does not. More self-deception).

Venkat December 10, 2011 at 3:23 pm

Curious thing about book-keeping. I am actually enjoying it for now, though I am not doing a great job. It is very educational to try and understand your cash flows directly.

But I think next year, I’ll probably try and get a book-keeper, especially because I should shift from cash-basis to accrual accounting. I am now comfortable with the former, but I can see I need to move to the latter and I can see that it would take too much time to get comfortable with that, especially as I have to juggle more clients and revenue streams.

Ho-Sheng Hsiao December 10, 2011 at 3:50 pm

@Venkat Yeah, for myself, I don’t have the good habits to keep up with the bookkeeping. When I was running the consultancy with my partner, I usually end up doing the bookkeeping at the end of the year. It was a lot more like troubleshooting a buggy piece of software at that point — start resembling forensic accounting than anything. “Now where did *this* line item come from?”

If you enjoy bookkeeping to the point where you work on it on a regular basis, you won’t hate yourself at the end of the year. I can do bookkeeping, but I don’t enjoy it, so I know I need to hire a bookkeeper when I reboot my small business firm.

Ho-Sheng Hsiao December 10, 2011 at 3:56 pm

But I don’t regret the effort though. Like you, I learned a lot. Learning bookkeeping and then actually doing it in a living business, tracing and documenting the cash flow, did help me understand the nature of money a lot more. Picking up Kiyosaki’s Cashflow game and plotting out strategies was easy after that.

Heh. Enough procrastination, time to eat food.

aundh December 18, 2011 at 3:32 am

Give it a rest, jld. To each his own. I have used all the computing tools Venkat mentions, and would prefer Matlab any day of the week. If Matlab wasnt as good, why would these packages try and emulate Matlab so closely? Octave practically tries to keep the same interface as Matlab. And about python: install python, then iPython (with a broken command line interface), then numPy, then sciPy, then matplotLib all to get functionality and interface that is about half as good as Matlab. Goodluck if you install incompatible version of any of these “tools”. Venkat is right, its not worth all the effort. I know, because I have been there.

The open source community likes to claim their software is better than anything else out there. They are free to belive that. But, as a wise man once told me: open source software is worth what it costs. GNU, Octave, Linux, are all important/popular not for what they are, but for what they are not (Microsft, Apple, Google, etc.). But lets not turn this post into a discussion of the relative merits of mathematical packages.

On a more serious note, the article provides an accurate description of middle class “expectations”. However, I am not sure if the phenomenon of Trading Up is new, or unique to the middle class, or rare. In the end, it is about making sacrifices in some areas for gratification in others. This is not something most people don’t know about, or indeed don’t practice.

We are all surrounded by imagary that sells the perfect lifestyle. That is the job of marketing and sales firms. Is is up to an individual to buy that story (or the story your parents, friends, comunity sell you).

Jehan Tremback January 9, 2013 at 1:26 am

Depends on the field. This site, like any other, is almost certainly running on a full open source stack. Probably Apache or nginx server on Linux on some open source VM platform, with a Python, PHP, or Ruby back end app, with the frontend done through HTML CSS and JavaScript of course. All of these things were likely coded up in an open source text editor like Emacs or Vim on either a Linux box or a Mac (Unix).

jld December 10, 2011 at 10:53 am

LOL, I missed that one by a narrow time margin, beats Matlab by a factors 1.5 to 600 (on speed, on cost it’s &#8734 :-D)
https://github.com/JuliaLang/julia#readme

jld December 10, 2011 at 10:58 am

I meant ∞

fajensen December 23, 2011 at 2:26 pm

Here, Denmark, the pattern is that “the poor” get the majority of their “stuff” through pirating and various grey goods. Things imported privately for personal consumption (legal), then sold off for cash (illegal – but who can check).

The Danish poor have more computers and TV’s than everyone else; they prefer to spend their time on entertainment; pirated cable TV, pirated software, porn. They rent their computers and TV’s from f.ex. “Leasy” with credit deals running at 28% p/a interest rates in rates of DKK 200 per month, which everyone can pay.

The rich do not pay for anything if they can avoid it – it is simply not efficient use of capital. They get most of their “stuff” as favours, or trades; One needs a holiday, someone will offer the use of their Swiss cottage. The favor is returned in some other way – maybe the guy who borrowed the cottage is a board-member of a yacht-club and now a space becomes available. Maybe the guy knows a tax-accountant that can “have a look-see” in exchange for some other favour.

The middle class has nothing to trade, no specific skills, no influence, no alpine cottages in Swiss resorts and no criminal connection – so the middle class has to pay for everything. The middle class will buy stolen goods, but only if they are very expensive designer items that they cannot afford. Now they have started to lease their cars – and in that way they are acting more like the poor.

Jon December 9, 2011 at 12:42 pm

Spoken like someone who doesn’t have kids.

When you’re single, or dating, or married with no kids, the script is easy to throw out. Unfortunately, that’s also when the middle class seems most within reach. With two professional-type incomes, you can usually afford luxuries if you space them properly, and you can always afford the needs. No problem, mon!

Introduce kids, though, and things get logarithmically complex. Now a career change that makes you less money may not be possible. Now risks that might go bad, which you could have weathered alone or as a couple, are risking your childrens’ health and welfare. Sure, I can drive my old car (I don’t drive it but 2 miles every other day) infinitely, and I can wear my pants ’til the seams start falling apart, but if my kids don’t have average-at-minimum “status” necessities like sneakers or sweatshirts, they’re going to be outcast at best and bullied at worst, even if we successfully raise them to value functionality over status.

Kids are the trap – and the problem is, (this coming from someone who adores his kids), they’re a trap you jump into willingly and are kind of grateful for the opportunity to be captured by. But unless you’re willing to take them off to a commune somewhere, they’re going to be subject to peer situations that can show whatever plans and intentions you-the-parent have just how ridiculous your plans are…

Venkat December 9, 2011 at 12:50 pm

Yes, kids completely change the equation. That’s why I don’t have any and don’t intend to.

Another sign of the decline of the middle class is that having kids becomes unaffordable to a large proportion. If they still insist on having kids they are forced to give up a lot or compromise on the life they can give their kids.

That said, I do know people who are breaking the script and have kids. They have to work like dogs to do so.

jon December 9, 2011 at 6:38 pm

…which kind of detracts from “because it’s great to get to know them and watch them grow” part of having kids. Working 60 hours+ a week, all the time terrified that it’s all going to fail and you’ll be sharing a can of beans for dinner… no, thanks. I mean, one may not have a choice, so it is what it is. But if there IS a choice, then the struggling-to-keep-your-middle-class-status would seem to me to often be the logical (and even best) one.

Bill Seitz December 10, 2011 at 4:46 pm

The question is: does your *wife* plan to? :)

TL December 12, 2011 at 7:23 am

I’m eternally grateful to my parents for breaking the script by homeschooling me and my brother and sisters (counting my two adopted siblings, there’s five of us now). Although for some people homeschooling is the equivalent of “moving to a commune”, it worked pretty good for us. Lots of family time, expenses were based on function rather than status (and thus were *much* cheaper), and I got an introduction to the operation of small businesses from my Dad.

Andy December 12, 2011 at 2:26 pm

Yes kids completely change the equation. We put it off for a couple of years so I could quit my job as a bare-minimum-effort loser and setup my own business. If kids had come along whilst working for the sociopaths, it wouldn’t have been an option. I saw many of my fellow losers fall into the kids trap.

We try to keep our spending habits as independant of the other middle-classes as possible. We buy all sorts of crap for our little girl that she doesn’t really need (plastic jumpy toy things and the like), but I haven’t bought any new clothes for myself for about a year!

Food is another strange one – we buy local, organic, over-priced middle-class food for the most part, but for things where it doesn’t make much difference (or there isn’t a ‘good’ option) we go for the bottom-of-the-barrel supermarket basics option. When someone does our shopping for us (that would be a kind family member, not hired help!), these two shopping extremes can raise a few eyebrows.

Ben December 9, 2011 at 1:06 pm

I agreed with the idea of this comment (“kids make quick-change more difficult”) but not with its motivation (“because without conspicuous consumption, your kids are going to be miserable”). I agree that quick-change is difficult with children, but it’s largely because of financial dependency. (Full disclosure: I don’t have a school-aged child yet, just a toddler and a fetus.)

Kids sometimes get bullied for not participating in conspicuous consumption, it’s true. Also true, however, is that kids get bullied for their religious beliefs (or lack thereof), their ethnicity, their speech patterns, hair color, or no good reason at all. Having, you know, *clothing* is important, but it doesn’t cost that much to clothe kids if you decide that that’s an area in which you can live on the cheap.

It *is* tricky to do quick-change with kids because of financial dependency. It would be easy for me to life alone while I give a new plan months to become profitable, but it’s a lot more frightening to subject your toddler to the same.

jon December 9, 2011 at 6:35 pm

Well, I may be overstating the cause – my twins are 2+ years old, so they’re not there yet. I’m just extrapolating from my own childhood, which may not be the best idea; it was a while ago.

To clarify, I’m not saying “stay on top of the trends” is necessary (I sincerely hope my little folks don’t want that) – but a minimum level of non-kmartiness is (or at least was) necessary if you didn’t want to be picked on ‘cuz you were broke. (You’re dead on that there are going to be a hundred other reasons, but why add one?)

Christian Molick December 9, 2011 at 10:52 pm

Targeted spending makes sense, but puts pressure on the targeting. Quick changes may be necessary and a best, but adaptation is complex and layered. In technology corporations one emerging strategy for dealing with the speed and magnitude of ongoing change is to use a protean structure, so named by Michael Malone, in which a solid, central core interfaces to the chaotic world through an amorphous periphery that is connected to the core though a bridge that moderates executive function. In the corporate context the core keeps the essential mission intact and on track while the bridge role is played by the CEO or other such as a corporate board. The periphery consists of whatever full and part time employees are necessary to meet work goals. In the personal context this strategy can allow core strengths to be applied whatever situation is presented. Practical considerations might make protean organization the best way to respond to the challenges of a quick change approach.

Steven December 10, 2011 at 4:44 pm

One thing that bothered me about Kiyosaki’s books was the simplistic notion of assets versus liabilities; he conflated all assets as the assets that return money (ie houses, businesses). This feels like its based on the assumption that you can only trade your time for money in one exchange at a time (your full time job.) If this assumption is true, you don’t want to waste your money to save time, because money is finite while your time is infinite.

The middle class script is basically “Trade time (in units of years) for money, invest money to make more money.”; the rich script is more like “trade money and time (in hours) for more money and time at the best exchange rates possible.” The poor script is “Trade time (in units of hours) for money and spend the money.”

So to Venkat’s point, Matlab is not considered an asset by Kiyosaki and the middle class because it doesn’t return money; saving time is not considered valuable because it can’t yield more money. To the middle class, pirating Matlab is okay, even if it takes two weeks of spare time, because their money is finite while their time is relatively abundant. To the rich, buying Matlab is fine because the time saved can be reinvested to make more money or time.

Small businesses sometimes avoid the middle class script because their business accounting instructs their personal accounting. But I’ve also found small businesses where the personal middle class script instructs the business accounting, and a business owner chooses to spend $400 worth of billable time to save $50.

Ho-Sheng Hsiao December 10, 2011 at 5:04 pm

@Steve one thing I learned from doing my own bookkeeping: the designation of whether something is an asset or a liability has nothing to do with any intrinsic, cosmic property. They are not physical properties such a weight and dimension. They are not even mathematical properties.

Bookkeeping at its core is documentation. It’s about communication. You designate asset and liability classes based on what you want to communicate and what you want to document. It as more to do with verbal than mathematical skills (because’s let’s face it, bookkeeping never goes beyond elementary arithmetic). That you stated “he conflated all assets as the assets that return money” points more to your own confusion of bookkeeping with mathematical rigor.

My reading of Kioysaki’s books was that his insights has more to do with emotional skill more than anything. Income-generating assets are a good example. The real point of not regarding your primary residence as an asset is to do away with a rationalization and self-delusions that keeps people working in the grind. Most people are not renovating their own homes for sale. They simply fool themselves by thinking that, just because their neighbors are selling higher, the value of their own house magically goes up with it.

As for the assumption, “you can only trade your time for money in one exchange at a time (your full time job.)”, I’m curious, what is an example of trading your personal time in multiple, simultaneous exchanges?

Steven December 10, 2011 at 5:44 pm

I said nothing about bookkeeping, and everything about the class assumptions of the time and money values.

The exchanges of time need not be personal nor simultaneous.

One middle class assumption is the division between personal time and work time. If you own a business, your only personal time is that which you designate as personal. If you are independently wealthy, all of your time is personal except that which you designate as work. If you’re poor, all of your time is personal, and you just happen to be at work for some of the hours.

Middle class: work time is worth x/hr, personal hours are worth nothing. The exchange rate is set every year at an annual review.

Rich / business owner: a “work hour” can be spent many ways:
* Reallocate investments
* Hire a freelancer, VA, housecleaner, cook
* Train someone to work for you
* Meet a potential business partner
* Consult for pay or equity
* Review a potential business investment

Lets take the example of subcontracting. Suppose you generally charge $200/hr for consulting work, and you spend time to win a contract to work 200 hours at $100/hr (20k total). You then hand the work to an employee at $25/hr ($5k) and a project manager at 20 percent($1k). If your total work is ten hours, and you pocket the remainder, you’ll make $1,400/hr.

The consultant chooses $200/hr, while the business owner chooses $1,400/hr.

Ho-Sheng Hsiao December 10, 2011 at 7:36 pm

@Steven what’s weird is that you criticize Kiyosaki’s approach, yet you more or less share the same views. Maybe I just take this class view for granted, it’s not as insightful now as it was when I first learned about it.

Steven December 10, 2011 at 7:39 pm

I agree with his approach but I think he didn’t go far enough, unless I missed the part where he talks about time assets.

Ho-Sheng Hsiao December 10, 2011 at 8:03 pm

@Steven “… but I think he didn’t go far enough” Gotcha.

I read many of his books. I think he does discuss them in the later books, framed as “OPT” (other people’s time). My mentor from way back taught the concept to me so I might have read into the books. It certainly shows up when you play his Cashflow game. The game has built-in methods for you to take wealth-building action even when it is not your turn.

Russell Brown December 10, 2011 at 9:11 pm

Wow! This is what I’ve been doing for my last six years in NYC….. Some areas of my life are very luxurious and others may appear desperately poor.

For example, I live in one of the top ten richest zip codes in America….but I never eat out. I don’t care for eating out (and neither does my digestive system) and I like to spend most of my time alone, so never going out to bars or restaurants with friends (which is the main fun group activity people do here) is no loss to me at all. Living in a nice neighborhood gives me the luxury of doing my favorite activity I do outside of my apartment: go for a walk in a nice, safe neighborhood.

I hate television so I don’t have to pay for cable or a fancy new tv every year. But I love being creative and learning new things on the internet so I have a nice Mac and fast internet.

And this is one that even shocks me…..sometimes I’ll pick a few healthy (and usually expensive) items at the grocery store that aren’t quite enough food for me than buy a lot of unhealthy cheap food. I’ve learned my body works just fine with less food and I feel healthier.

I wrote this on one of your previous posts which says essentially, people should be able to define what they wish their own standard of living to be and whether or not they are meeting it. To measure that would help us understand a great deal more about how our economy works:

Coasean growth can perhaps be a study of people and the standard of living they desire to be happy. This and related data can give data about how many people have all they want, how many want more, what income classes have higher growth, where is growth higher, how many have enough to survive and how many don’t. It can also tell us how effective advertisers and corporations are at mining new areas of interest (if the Coasean growth factor goes down then perhaps a new iPhone is to blame….). If it severely goes down, perhaps rising oil prices and high cost of basic needs goods is to blame.

The great thing about this measurement system is that it isn’t a growth measuring model. Get rid of the growth model. This is a finite measuring system (it is say only 1-100 percent) so if we manage to reach 100% someday, we can stop acting like a spastic cancer cells and realize we need no growth for the time being. It removes the illusion of infinite resources of space and time. It also helps us measure how many people are meeting their right to life, liberty and the pursuit of happiness.

Russell Brown December 10, 2011 at 9:14 pm

And I forgot the greatest luxury. When you spend less, you can work less. You may appear “poor”, but hey, a lot more of my time is mine versus the dude paying for the lifestyle he’s told he’s supposed to have a in finance in NYC.

Dan Weese December 10, 2011 at 11:08 pm

The middle class is something of a myth: it’s always been a population of folks trying to Trade Up. Thorstein Veblen had a great deal to say about this phenomenon, giving rise to the term Veblen Goods: high-priced status symbols which are often not as good as the moderately-priced goods with which they compete. Roederer Cristal champagne was all the rage amongst the spendy rapper set for some while. The bloom is off that rose.

Good for you, deciding you couldn’t do without MATLAB. Never stint on tools you’ll use to make money. Time is the one thing money won’t buy: though it’s a truism to say “To a man armed with a hammer, all the world’s problems look like nails”, it’s madness to buy a lousy hammer when you’re confronted with the myriad nails a career presents us all.

Using coupons for good products won’t hurt the retailer, unless he is stupid enough to think GroupOn will actually benefit his business.

Thirty years of consulting have taught me to pay for expertise. I wouldn’t dream of doing my own tax returns. In my travels, I’ve found fellow consultants who are far better in certain areas than I am: I have no compunction about calling them in.

This business about one’s station in life doesn’t ring true for me. I drive an elderly Isuzu Rodeo which I’ve carefully maintained for years. I should have long since bought something with power door locks and windows but I haven’t. I am a nomad: all my worldly goods can fit within it. The middle class is always a temporary phenomenon: each middle class appears when there’s more demand than supply in certain expanding market segments. As soon as that market space has been commoditised, those jobs disappear into the hinterlands where roughly equivalent quality can be obtained for a third of the price. Such reversals have been seen since the end of the Black Plague. The rise of the burghers and the end of serfdom arose from the plain lack of farm laborers and the possibilities of movement within society.

The Japanese have a word, 渋さ , shibusa, implying an unpretentious and subtle elegance. If form follows function, shibusa sternly rebukes the gaudy and gives us things which work exceedingly well and if beauty arises from it, only the discriminating mind can perceive that beauty. I currently live among the Amish people in rural Wisconsin: much of what they produce is simple, well-made and purposeful. They despise all manner of adornment, calling it Hochmut. I commissioned an Amish woodworker to make an oak table for my girlfriend, exactly to the height of her elbow as she sat in her favourite chair.

Your point about Waiting for Godot is entirely true: there is no Big Event. There is only the journey. Purchase a good camera: you’ll need it.

Venkat December 10, 2011 at 11:32 pm

Shibusa sounds awesome.

My Corolla is pushing 130k miles/12 years, though I am afraid my possessions no longer fit into it.

And yes, Veblen goods fit into this perfectly. I still have no idea why so many people still buy china. Almost nobody entertains that way anymore. Most times, when I go visiting, people seem to put out buffet style functional dinnerware with the focus on the food, as it should be.

Dan Weese December 11, 2011 at 1:28 pm

Shibusa became a guiding principle in my life after a decade of working with Japanese engineers. I live by two dicta: Honour Thy User and Data First.

Perhaps I fit into the Hair Shirt category in my ruthless paring-down of my possession count but it doesn’t feel like it. Your animus to fine china is gently amusing: understandable insofar as fine china is a seldom-used status symbol. Yet well-made china can be used every day: I know people who do. Though I seldom stay anywhere for longer than six months or a year, one of the great joys of my life is entertaining and I have some lovely table service. I will go so far as to obtain banana leaves for entertaining my Tamil friends and yes, elegant tea service for my Japanese friends. Such are the small joys of life; though happiness may not arise from possessions, a few good possessions beat their alternatives hollow. My pet peeve along those lines is the McMansion, too much house on an insufficient plot of land.

The world is too much with us; late and soon,
Getting and spending, we lay waste our powers:
Little we see in Nature that is ours;
We have given our hearts away, a sordid boon!
The Sea that bares her bosom to the moon;
The winds that will be howling at all hours,
And are up-gathered now like sleeping flowers;
For this, for everything, we are out of tune;
It moves us not.–Great God! I’d rather be
A Pagan suckled in a creed outworn;
So might I, standing on this pleasant lea,
Have glimpses that would make me less forlorn;
Have sight of Proteus rising from the sea;
Or hear old Triton blow his wreathed horn.

Venkat December 11, 2011 at 2:00 pm

It’s not fine china per SE, but whether you actually use it regularly enough to justify owning. Most don’t. And I borrowed that example from Sterling, rather lazily. No personal animus. You can have me over for dinner anytime, with either fine china or banana leaves :)

Jack Bennett December 24, 2011 at 10:22 pm

Enjoyed the article very much. Lots of actionable material – the question for me is, what specific actions?

The comment about fine china reminds me of Paul Graham’s article on “stuff”:

The worst stuff in this respect may be stuff you don’t use much because it’s too good. Nothing owns you like fragile stuff. For example, the “good china” so many households have, and whose defining quality is not so much that it’s fun to use, but that one must be especially careful not to break it.

from http://www.paulgraham.com/stuff.html

Kay December 11, 2011 at 2:10 am

The middle class is something of a myth: it’s always been a population of folks trying to Trade Up.

If there is something like a “class-consciousness” then it is an obsession about the economy: work, income, spending, inflation etc. which makes up the boring life of the majority of the population, something which has even become the utopian political horizon of libertarianism.

Venkat’s blog is an echo of the intellectualization of the subject which is, culturally, a very recent phenomenon. The economy as a whole is chaotic, creative, destructive and instable, a mixed beast and the role of an intellectual who, unlike socialists, enjoys it, is to find and define a fitting subjectivity. Under his guidance mundane and petty bourgeois activities like book-keeping, picking certain consumer goods and delegating work for money, becomes a mindful and potentially transformative act. This also sets “spending up” aside from mimicking the behavior of the upper-classes, which is, as you rightly observed, the defining criterion of the middle class aside from preventing to sink down.

But this is only the economical aspect once again and we would have to talk about an ambiguous figure, the Bildungsbürger, a potential revolutionary and aristocratically minded person with respect to the genealogy of the human mind, unfolding in history. The intellectual is asymmetric and attempts to side-step the economical hierarchy as a reference system for social status. They are always already “leaving the middle class” but this is not expressed through a difference in income and spending.

Now it looks like that the Bildungsbürger is also dying, that their genealogical lines have lost their power and losing their life. Bruce Sterling is certainly not ironic about good shirts and beds and chairs. He ties meaning close to the well being of the body, if it’s dying everywhere else, where the human sphere becomes an empty space of development without any goals and accidents with a technological and a mass movement dimension. It’s not about spending up or class change but about the positive dual to the negativity of inwardness and the moral of austerity and abstinence.

Dan Weese December 11, 2011 at 3:41 pm

Well, yes, Kay, class consciousness is obsessive behaviour. It’s not so much Acting Dead but Dead Acting:

There’s a brand new dance, but I don’t know its name
That people from bad homes do again and again
It’s big and it’s bland, full of tension and fear
They do it over there but we don’t do it here

There’s a brand new talk, but it’s not very clear
That people from good homes are talking this year
It’s loud and tasteless and I’ve heard it before
You shout it while you’re dancing on the old dance floor.

We must be cautious in our intellectualization of this Dead Acting: what exactly are we rejecting and calling boring? If our tastes are not pedestrian, we are no less prone to emulation, even in our search to avoid such emulation we recapitulate every teenager’s sudden realization of the plasticity of his own identity and re-enter the search for meaning as did our fathers before us and theirs. Plus ça change…

This discussion has put me in mind of Generation “П” by Victor Pelevin, a bizarre novel also available in English under the titles Homo Zapiens ( Andrew Bromfield’s translation ) or “Babylon”. Some of you may find it of interest: Pelevin’s brutally weird satire of Russian culture as it entered the Consumer Society in the era of Yeltsin is mixed with ancient Mesopotamian Ishtar myths, culminating in a baroque apokalypsis wherein the drivers of consumer desire are revealed… no spoilers: check the wiki link if you want some.

human mathematics December 11, 2011 at 5:46 am

Some neuroeconomists at Carnegie Mellon did an experiment a few years ago that suggested that there are two basic impulses in everyone’s head: guilt or negative feelings that guard against spending money unwisely, and pleasure/utility or positive feelings derived from spending money.

Both switches can be thrown at the same time, and there are people who suffer from too much / too little / wrong circumstance of either switch being thrown. For example some feel guilty for spending money even when they really enjoyed what they bought.

I’m not convinced that middle-class people don’t already buy premium in some areas and save in other areas. That’s almost the definition of fiscal intelligence. I doubt anyone behaves optimally — to do so would be too difficult — but whenever people critically analyse their spending (as you are) they are going to ask (1) what could I do without and (2) what would I be happier if I spent more on?

human mathematics December 11, 2011 at 5:55 am

Tim Ferriss has written usefully on this topic. Money is always traded in exchange for an experience, or at least in exchange for something (in your case, a business service).

Prime yourself by thinking in those terms. That may be more effective than guidelines like “If you use it often, get a good one” (those ignore budgetary constraints).

human mathematics December 11, 2011 at 6:00 am

I totally agree with your characterisation of “the Middle Class Financial Script”. A lot of it is social. Hey, do you want to go to this $25 restaurant for lunch? It won’t give you much utility but we’re all going. Wow, you live in _that_ neighbourhood? Must be tough. You don’t have a bed?! Are you crazy???

human mathematics December 11, 2011 at 6:02 am

How is there greater variety in how the poor are poor? We all shop at Wal-Mart, we all get f**ked by bills when things break, and the range of cars available to us is much narrower than it is to the middle class.

In economic terms, the feasible set is simply much smaller for poor than middle incomes.

Value Indexer December 12, 2011 at 8:48 am

A narrow range of cars? Having 25+ model years to choose from gives you a much wider range of selection! As you said the middle class wouldn’t even imagine going there.

Mungy December 15, 2011 at 2:28 am

If Carl Sagan were an economist, he would have probably wrote something like this. I’ve also recently noticed that the middle class financial script is plastered on many mainstream media outlets like CNN, FOX, ABC, CBS, MSNBC, and many other alphabet networks. Tuning all of that crap out then reading something like this, overall, really helps ones mind detox then think more rationally.

W-at-Off-Road-Finance December 16, 2011 at 8:05 pm

I think you’ve got a good insight here as to what’s happening to the middle class, and like you I’m attempting to leave it. I’ve been following the breakdown in the “buy a house” script and the coming breakdown in the “401K/pension” script with much interest – documented at http://www.offroadfinance.com/2011/11/07/why-im-a-speculator-rather-than-an-investor/

KY3 Democrat December 24, 2011 at 10:18 pm

Hey daddy-o… Next time get Octave.. Keep your money in your wallet, you’ll need it when you’re old!

Greg December 27, 2011 at 2:23 pm

FYI, the $250 you spent on getting the Kindle version of Tempo created + the insights in this post allowed and inspired me to buy the Kindle version of Tempo a few minutes ago.

JiaoNing Bu March 24, 2012 at 11:18 am

I have been thinking a lot lately about your “Milo Criterion” writing. Basically a lot of what you talk about revolves around a PUA concept called “social proof” where it’s easier for somebody to think something is true or go along with doing something if there’s a group or someone in authority backing it up. “Social proof” probably has some kind of evolutionary usefulness in saving people difficult decisions — I guess.

We’re talking largely about “social proofing” in a broad sense. Here you see people basically doing something that has been “time tested” by a larger group as opposed to thinking it through and making more rational decisions (not to say that making a social-proofed decision cannot be rational). Even the examples you gave of people “Waiting for Godot” are basically following a socially proofed model they haven’t figured out for themselves. I think that losers and clueless are fundamentally slaves to social proof.

Maybe the essence of a Sociopath is one who cares not for social proof as a guide except in well thought-out circumstances.

Venkat March 24, 2012 at 1:25 pm

Social proof is actually not a concept originated by the PUA community. It’s broader and a general behavioral economics concept. I haven’t posted about it specifically, but I’ve alluded to it in many posts.

The Milo criterion though, is not about social proof so much as learning by imitation (in the second stage of adoption). Imitation is about how, social proof is about why.

This post is also more about imitation than social proof. We copy middle class scripts from others partly because social proof makes us believe they are valuable, but mainly because constructing a script to live by is quite hard, and it is easiest to copy somebody else’s formula that appears to work upon superficial examination.

Alexander Boland June 21, 2012 at 1:27 pm

Have you ever read Ramit Sethi of “I Will Teach You To Be Rich”? Yes, I know that that makes it sound like 4-Hour Kool-Aid, but one can judge that for themselves. The reason I’m bringing it up is not to give advice, but because he may actually signify the first steps in the direction you’re talking about.

The underlying theme of his blog/book is “you can live richly by trading up”, and his primary means are to think of your habits, expenditures, and goals in terms of systems and scripts. While he may not know the term “acting dead”, he constantly rails against the idea that you should “stop that latte in the morning.” He actually goes a step further by saying that you shouldn’t attempt comprehensive budgeting because it simply causes too much cognitive dissonance. I’m tempted to say that his approach boils down to (1) make a commitment to trade up and spend money on what you really value and (2) change your narrative so that you don’t go wandering back to foolhardy pseudo-striving.

Andrew B. Martin June 24, 2012 at 1:58 pm

Comprehensive budgeting sounds like calorie counting. In both behaviors, the individual seeks to get a specific result (financial independence, weight loss) from a complex system (the economy, their body) by obsessively controlling what they introduce into the system (how they spend their money, what they eat).

I get the impression Sethi is suggesting that instead of trying to control the outcomes of a complex system by obsessively controlling details people are better off spending money on principle. In this way, they are better positioned to deal with what the system tosses their way.

Andrew B. Martin June 24, 2012 at 1:31 pm

Venkat,
Thank you for articulating the ideas of acting dead and middle class programming.
They resonated with me because, oh damn, I have been acting dead in a middle class mindset.
Some of the matters are goofy:
I was only stocking coconut oil, or virgin coconut oil in my pantry when I could buy both and reap the benefits of having a delicious high heat oil, and a fragrant medium heat oil. I could never bring myself to buy both at the same time.
Others, more significant:
In my research, I have been fighting with code for weeks instead of hiring someone for a few hours who knows what they are doing.

I’m glad I read this. You have given me something to think about, and even better; triggered me to identify a few matters to act on (first stop: the grocery store).

Michael November 12, 2012 at 12:04 am

We live in Marin County, just north of San Francisco. Wealthiest County west of the Mississippi.
Lots of very conservative preppers living and working among the trust fund babies. Great thrift shops, nice parklands and safe. A commenter above talked about living in an expensive zip code and being able to have the luxury of going for a walk in a safe neighborhood. This entire county, with the exception of one or two easily avoided pockets is safe because it’s mostly educated, wealthy and White. Very family oriented. You can thrive here.
Downside, rents are very high until you go north in the county. Great ecological consciousness and clean air are a bonus.

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