This was a bumper sticker I saw at Burning Man in 2007. Over the last decade, it has been for me a source of philosophical inquiry about our consumeristic society, the concept of sufficiency and, dare I say it, the meaning of life.
I was reminded of it again during a recent conversation with the CFO of a hedge fund in Manhattan. I had been invited by a Wall Street insurance broker who attended one of my talks, to address a group of his clients – Wall Street CFOs, on the topics of global finance, ecological limits, ethical finance and Slow Money.
I was struck by a comment the CFO made after I talked about the importance of paying attention to the non-financial impacts of our investments. The idea of investing for returns that might not be as high as the mythical “market rate of return” prompted him to say “My salary is just $600,000 a year and I live paycheck to paycheck.” That statement was particularly striking to me considering that on Wall Street the year-end bonus is often as large as the base salary.
What made someone who earned more than 10 times the median US household income feel financially insecure?
One clue might be found in the book Richistan (2007) by Robert Frank, a Wall Street journalist who was fascinated by the rich in this country and who looked at their lives and psychology through an anthropological lens.
He asked people with a net worth between $10M and $1B (the “poor” rich and the “middle class” rich) how much money they would need to feel financial secure. Think about the way you would answer if you had between $10M to $1B to your name.
Well, just about everyone he interviewed in that wealth bracket said they needed about twice what they had to feel financially secure. In other words, someone with $10M thought that $20M would make her feel financially secure, and someone with $100M did not feel financially secure and said would need $200M to do so.
What’s going on here?
Clearly the sense of financial security does not seem to be related to an absolute amount of net worth. Rather it seems to be a relative concept (the “upper class” rich with more than $1B in net worth was a notable exception since they said they did feel financially secure).
My take is that we compare ourselves to our peers, circle of friends and neighbors. Our sense of financial security is therefore related to whom we compare ourselves and to our social ranking, which in the US is mostly predicated on how much we own or earn.
When the wealthy individuals answering Mr. Frank’s question envisioned themselves having twice as much, they were probably thinking of the same social circle they had at the time. What probably happens is that, as people get richer they move up the social ladder and surround themselves with people who more closely match their new level of wealth, therefore finding themselves, in relative terms, in a similar position as before their wealth increased.
They seem to be engaged in the positional game, whereby their 50’ yacht stops being a source of pride and becomes a liability as soon as their neighbor shows up with a 70’ yacht.
What are the impediments to you feeling financially secure now? Are they financial or psychological?
If your basic financial needs are met and you are not trapped in the positional game, the opportunity exists for you to experience “enough”, to feel financially secure and to explore ways of aligning your investments with your values.
To explore these concepts in more depth and inquire about the possibility of enlisting your own investments in building the better world we are trying to create, you might want to attend my upcoming webinar series Align Your Investments with Your Values in weekly installments starting on Wednesday, September 20th.
Click here to register for the first webinar.
For more information about the content of the webinar series please check my website.
By Marco Vangelisti
Essential Knowledge for Transition
knowledge > empowering > change
This article first appeared in the EK4T newsletter