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Using The Diderot Effect To Your Advantage

March 21, 2019 by Jason Fieber 19 Comments

Denis Diderot was a French philosopher, art critic, and writer who was a prominent figure during the Enlightenment.

What an apt name for that period, because he’s definitely enlightened me. And I believe he can enlighten you, too.

See, Diderot lived most of his life in poverty, despite the fact that he was actually a well-known figure in his own time. He was even the co-founder, chief editor, and contributor to the Encyclopédie.

But becoming a philosopher isn’t exactly a path to great wealth. Even being a writer isn’t a great path. Trust me, I’d know.

Well, Diderot’s poverty came to a head in 1765. His daughter was set to be married. However, Diderot had no dowry to offer.

Catherine the Great, upon hearing of his dire financial situation, offered to buy his library and appoint him caretaker of it until his death. She even paid him 25 years of salary in advance.

Diderot was no longer a poor man.

Shortly after this, Diderot came into possession of a new scarlet dressing gown to replace his old gown.

And that’s when the wheels came off…

The Diderot Effect

How and why the wheels came off is described best by Diderot himself.

He shared his reflections on the downward spiral via his essay: Regrets for my Old Dressing Gown.

The dressing gown was, perhaps, an innocuous purchase in and of itself. But its innocence was quickly tainted.

As Diderot puts it:

I was the absolute master of my old robe. I have become the slave of the new one.

The dressing gown was apparently impressive and beautiful. So beautiful, in fact, that Diderot quickly became aware, by virtue of comparison, how old and relatively shabby the rest of his possessions were.

In fact, he started to refer to his existing possessions as “old rags”.

And they simply didn’t match his new dressing gown:

All is now discordant. No more coordination, no more unity, no more beauty.

So the purchase of this one dressing gown led to a cascading series of purchases across the rest of his life so that the rest of his material possessions could match the impressiveness, newness, and beauty of his dressing gown. He sought that coordination, unity, and uniform beauty.

In the process, he ran himself right into debt.

What we can learn from this episode is this: a purchase is rarely singular in nature. A purchase is almost never a singular event. It’s almost always part of a plurality.

It’s just like how a new dress might inspire the purchase of a matching pair of shoes and handbag.

This forms the basis behind the Diderot Effect.

The Diderot Effect explains how a purchase or gift creates dissatisfaction with existing possessions and environment. This potentially leads to additional consumption that can quickly spiral out of control.

Essentially, we’re talking about lifestyle inflation here.

Using This To Our Advantage

The Diderot Effect is a bit of a bummer. It’s basically human nature.

But I believe we can use the Diderot Effect to our advantage.

At its surface, the idea of being aware of this psychological phenomenon and using it to your advantage might be as simple as being content with what you already have. Don’t buy new things that make your old/existing things look worse off. Don’t buy stuff that requires the purchasing of other/additional stuff.

At the very least, recognize the potential for a downward spiral with every new purchase and defend yourself against it to the best of your ability.

However, I think we can do way better than that.

I believe we can actually flip the Diderot Effect upside down. 

In fact, that’s basically what I’ve done. I’ve experienced this in my own life.

And I’ll share with you readers how that works through a two-pronged approach.

The Less You Have, The Less You Want

The first prong is minimalism.

What I’ve personally experienced over the years, as I’ve gone about downsizing and simplifying my life, is this: the less I have, the less I want.

It’s the Diderot Effect. Except it’s in reverse.

If you buy a newer, bigger house, you suddenly feel compelled to fill the empty space with newer, larger furniture. We don’t need Diderot to clue us into that one.

However, if you cut your housing in half, you suddenly feel just as compelled to get rid of the stuff that no longer fits. Otherwise, it’s ridiculous.

You right-size things as you go. its part of our psychology. And that scales up and down.

Once you start getting rid of things, it’s a chain reaction. It’s a domino effect. You feel happier and lighter with less stuff, which promotes more paring down. So on and so forth.

Furthermore, getting rid of one piece makes complementary/related accouterments unnecessary, begetting more downsizing.

I’m now down to what can fit inside of just two bags.

That’s all I brought with me when I indefinitely relocated abroad to Thailand to live out my early retirement dreams. To this day, I own no more than what can fit inside of two bags. And it’s unlikely I’ll ever own more (or less) than this because I’ve reached a harmonious balance between minimal stuff and maximum utility/happiness.

This didn’t happen overnight, of course. It was a process, just the same as Diderot went about slowly acquiring new possessions. But it’s a process that can work to your benefit, instead of your detriment.

For instance, if I were to suddenly buy a new suit (the modern-day version of Diderot’s gown), the rest of my life would suddenly look quite weird/shabby by comparison.

And I’d no doubt be looking at add-on accouterments to make sense of this one thing. A nice watch. A pocket square. The right hangar. Mothballs. New shoes and socks for sure.

I also couldn’t see myself eating at Thai markets, sitting on plastic stools, while wearing a suit. Upscale joints would obviously follow.

In fact, to the extreme end of things, I might even look to relocate to a city where wearing a suit is more commonplace and befitting. Certainly not Chiang Mai. Maybe Bangkok.

My life would have to be tailored to fit this suit, instead of the suit being tailored to fit me. It’s a case where the more things you own, the more things own you.

As Diderot put it, I’d be the slave to the object. The downward spiral would be evident and disastrous. And that’s just one purchase.

But it’s worked in reverse for me as I’ve taken advantage of the Diderot Effect.

For example, when I sold my car and started riding the bus back in 2011, I started getting rid of some of my fancy clothing that looked strange on the bus. I used to wear an assortment of blazers. But I slowly eliminated them from my wardrobe almost solely because I stood out wearing them on the bus in Sarasota, Florida. If I were driving around a nicer, newer car all by myself, it might have been a different story.

Diderot can tell you all about this:

The poor man may take his ease without thinking of appearances, but the rich man is always under a strain.

The less I’ve owned, the more free I’ve felt. And the less I’ve wanted to own as a consequence. It’s a chain of events that you can’t help but participate in once you begin. Getting rid of things begets getting rid of things.

Ownership of less stuff almost reinforces itself through the nature of relativity, which is the same thing that tripped up Diderot (because his other stuff looked relatively shabby next to the new gown).

See, when you own 1,000 things, adding just one more thing to the pile is nothing more than a drop in the ocean. The more stuff you own/buy, the less incrementally noticeable each item is. There’s not much relative change. And the less impact each new item has, too. Less impact on your life/happiness plus less visibility sets you up to repeat this behavior.

However, I now own only a handful of items. Let’s say 30 items. If I add one item, it’s quite a large change in relative terms. That’s additional weight I have to seriously consider because of how much it changes the dynamics of my life. I’ll certainly notice one more item in my life at this stage.

I’m not only more careful to consider the purchase because of how much less free I might be, but I’m also surely going to notice and utilize this item on a regular basis because of how that works. It’s more impact on my life/happiness, and it’s greater visibility, which naturally limits my likelihood to buy things. At the very least, I’m forced to be more cognizant.

The More You Invest, The More You Want To Invest

The second prong is dividend growth investing.

Compounding is this magical, wonderful process where you earn on top of earnings. New earnings are reinvested into old earnings. Compound interest is interest on interest. Instead of linear gains, it’s exponential. And once you see the power of this, you can’t help but be enthralled by it.

Dividend growth investing is arguably the most tangible and powerful way to experience compounding firsthand and achieve FIRE.

What I experienced on my way to FIRE was this: the more I invested, the more I wanted to invest.

It was something where I started to align my whole life around this owner/investor mentality.

And the larger my portfolio grew, the more dividend income I collected, and the greater the effects of compounding became, the more I wanted to accelerate all of this. It was almost addictive. Kind of like how shopping can be for consumers.

Thus, my favorite store in the whole world became the stock market. That’s because my favorite merchandise became dividend growth stocks, which allowed me to build my FIRE Fund into the compounding machine it is.

The more I invested, the more I wanted to invest. And the freer I became, the more free I wanted to become. The more I saw compounding compound, the harder I wanted to push that compounding snowball downhill.

It’s the same psychology that’s at the heart of the Diderot Effect.

And relativity shows up once more.

Indeed, once I bought one new stock for the Fund, the more I saw the appealing nature of a complementary stock that would round it out and improve it.

For example, acquiring shares in The Coca-Cola Co. (KO) way back in the day was great.

Just as well, however, I saw the blatant holes in my exposure to other areas of foods and beverages, which led to a cascade of subsequent acquisitions in companies like Hershey Co. (HSY) and PepsiCo, Inc. (PEP).

My exposure to chocolate (which was zero) looked relatively shabby once I saw my exposure to a beverage powerhouse.

Likewise, acquiring shares in Johnson & Johnson (JNJ) felt amazing back in 2010.

But that also made me see just how lacking I was across the rest of the healthcare space, which eventually led to becoming a shareholder in companies like Abbott Laboratories (ABT) and Medtronic PLC (MDT).

So on and so forth. You see where I’m going here.

Just like how a new dress might inspire the purchase of a complementary pair of shoes and handbag, the purchase of stock in a high-quality business inspires the purchase of stock in a complementary business. It’s a chain reaction. A domino effect. Investing begets investing.

Conclusion

Diderot was obviously a highly intelligent person. But he wasn’t immune to human nature. Nor is anyone else.

I’m sure Diderot wouldn’t be happy about being associated with his namesake effect, but we can recognize human nature for what it is. And we can use the Diderot Effect to our advantage.

The more you buy and own, the more you’ll want to buy and own. If you don’t invest a single dime, it certainly won’t beget more investment. This behavior will keep you chained down, unhappy, and poor.

However, the less you own, the less you’ll want to own. And the more you invest, the more you’ll want to invest. This behavior will allow you to become free, happy, and wealthy.

In the end, Diderot realized what was truly valuable in life and what brought about real happiness:

With time all debts will be paid, remorse will be calmed and I will have pure joy. Don’t fear that the mad desire to stock up beautiful things has taken control of me. The friends I had I sill have, and their number hasn’t grown. I have Lais but Lais doesn’t have me. Happy in her arms, I am ready to cede her to she who I’ll love and who she’ll make happier than me. And I want to tell you a secret: that Lais, who it cost others so much to buy, cost me nothing.

Use the Diderot Effect to your advantage and become happier, richer, and freer for it!

Full disclosure: I’m long all aforementioned stocks.

What do you think? Ever heard of the Diderot Effect? Do you use it to your advantage? 

Thanks for reading.

Image courtesy of: Wikimedia Commons.

P.S. If you’d like to use the Diderot Effect and become financially independent, check out some amazing tools and services I personally used on my way to becoming financially free at 33!

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Filed Under: Financial Freedom

About Jason Fieber

Jason Fieber became financially free at 33 years old through a combination of hard work, frugal living, strategic entrepreneurship, intelligent investing, and geographic arbitrage. He currently lives his early retirement dream life in Thailand. Jason has authored two best-selling books: The Dividend Mantra Way and 5 Steps To Retire In 5 Years (also available in paperback).

 

Jason recommends Personal Capital for portfolio management, Mint for budgeting, Schwab for the brokerage account, and Seeking Alpha, Daily Trade Alert, and Motley Fool for stock ideas. He uses TunnelBear VPN service while living abroad. Traveling Mailbox handles his US mail. This blog is hosted by Bluehost. If you'd like to start your own blog, Jason offers free coaching when you use our Bluehost affiliate link.

 

Jason's writing and/or story has been featured across international media like USA Today, Business Insider, and CNBC.

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Reader Interactions

Comments

  1. Clarence @ Oracle of FI says

    March 21, 2019 at 5:28 am

    I’ve experienced the “reverse Diderot effect”. A few years ago I gave away most of my clothes. Basically, I threw away everything that didn’t “give me joy”. I ended up getting rid of almost all of it!

    The result? My closet is much less crowded these days. Plus, I spend only a few seconds choosing what to wear. Getting rid of stuff paid off!

    The more we have the more we want. In my case, the opposite is also true. The less I have the less I want. And that’s the way I like it.

    Reply
    • Jason Fieber says

      March 21, 2019 at 6:00 am

      Clarence,

      Sounds like you flipped the Diderot Effect upside down, precisely as I prescribe. Glad it worked out so well for you! 🙂

      Cheers.

      Reply
  2. retirebyforty says

    March 21, 2019 at 10:45 am

    I learn something new, that’s great. Never heard of the Diderot effect before, but it makes sense.
    The house example is spot on. If you buy a nice big house, you need to put really nice stuff in it. My friend has a very nice house near Tahoe and he commissioned art works, got upscale furniture, and spent a ton of money. You can’t fill a nice house with old stuff.

    Reply
    • Jason Fieber says

      March 21, 2019 at 11:23 am

      Joe,

      I came across this a few months or so ago. Wrote the article shortly thereafter, but I just now got an opportunity to publish it.

      It’s a really neat concept. It makes sense as soon as you read about it. One of my favorite things about FIRE is the ongoing learning. I didn’t have a chance to learn like this back when I was spending so much time at the job. Now I’m free to expand my horizons.

      Thanks for dropping by!

      Best wishes.

      Reply
  3. SR says

    March 21, 2019 at 5:21 pm

    This is fascinating. Thank you for sharing.

    Reply
    • Jason Fieber says

      March 22, 2019 at 1:56 am

      SR,

      Glad you found it fascinating. I find the whole concept fascinating as well. Some of this stuff on human behavior is pretty timeless.

      Best regards.

      Reply
  4. Mike H says

    March 21, 2019 at 11:53 pm

    This is a really great article, Jason. I really like how you linked his essay and pulled out some very solid and relative nuggets.

    Bringing this up to the modern psychology of human behavior terms, the Diderot effect is a combination of our fine ability to process relative changes while being less attuned to large absolute changes that occur over time, combined with the tendency to have consistency in our commitments. Charlie Munger once quipped that a combination of individual elements of persuasion can have a “Lollapalooza effect”” on our behavior. If you were to add the effects of social proof the it would be even more compelling.

    Basically to become FIRE one needs to shift their behavior accordingly. Learning about the different factors that impact human persuasion and psychology is a must for those interested in FIRE.

    Best regards up there in Chiang Mai.

    Sudi

    Reply
    • Jason Fieber says

      March 22, 2019 at 2:03 am

      Mike,

      FIRE is amazing for so many reasons. But I’ve come to really appreciate the opportunity to learn and grow. I mean, if I still had a job, there’s absolutely no way I’d be learning about the Diderot Effect and pulling all of these ideas together like this. I wouldn’t have had the time, energy, etc. This is all such a gift for me.

      One other thing I’ve come to learn over time is that it’s hard to change people. People are very resistant to change their behavior. There’s a sense of being “wrong” when it comes to changing. Nobody likes to be wrong.

      So you can go about it two ways.

      You can try to be one of those few people who can actually be cognizant of what’s right and wrong, learn the processes that will help you improve and change, then actually implement the changes/habits across your life. It’s great if you can go this road, but it’s tough due to human nature, biases, etc. I believe only extraordinary people have this ability. Munger, as you note, would be one of these people.

      Or you can simply try to turn some of these human behaviors around a little bit without totally going against your own nature. I think what I laid out above is a good way to “take advantage” of a behavioral trait. Being able to flip or reverse some of these things is a nice compromise between improving yourself and still being something closer to a regular person.

      Thanks for adding that!

      Cheers.

      Reply
  5. Tim says

    March 23, 2019 at 4:19 pm

    I agree with this 100%. I just find it hard to enact, in large part because I hold a lot of items that used to belong to my parents, or were gifts that were given to me by them or other relatives. I feel horribly guilty throwing things like this out, even if I have no use for them.

    Tim

    Reply
    • Jason Fieber says

      March 24, 2019 at 2:08 am

      Tim,

      I’m not sure if it’s a blessing or a curse, but I definitely do not have that problem. I have no issues with getting rid of things.

      However, my issue is that I’ve sometimes been guilty of just being oblivious. Especially when I was busy with other things. But FIRE has given me more clarity and focus. Plus, I’m not terribly busy any longer. I just recently threw out pictures I’ve been carrying around with me since childhood. That came after I threw away my high school diploma. Diderot Effect flipped around. 🙂

      Cheers!

      Reply
  6. Reverse The Crush says

    March 24, 2019 at 8:42 am

    Fantastic post as usual, Jason! I have not heard of the Diderot Effect before reading this so thanks for sharing. It makes perfect sense to me, and it’s great to hear the quotes of an intelligent philosopher after experiencing this first hand. I love your points about minimalism and investing. The reverse effect works for sure!

    Reply
    • Jason Fieber says

      March 24, 2019 at 10:01 am

      RTC,

      Thanks so much!

      Great to hear that you learned something new. I love coming across something new and having my perspective changed/improved. It’s awesome stuff. This was really fascinating for me, so I felt compelled to write about it. It all makes total sense once you think about human behavior.

      Once I started really contemplating about what happened to Diderot, I realized something similar happened to me on my way to FIRE – except in reverse. 🙂

      Best wishes!

      Reply
  7. Randall says

    March 24, 2019 at 12:48 pm

    Great read thanks for the post. I too have seen this. I recently bought a bed at a nice fancy place then everything else did not work. I updated some things but caught myself. I was able to reverse this by flipping the things ( all bought on sale ) and replaced things with a brief simple trip to ikea target Floyd etc. this is my level now and I have good design and if properly selected good usefulness out of the items. While not in 2 bags. I did move recently with everything in 6 ikea shopping bags. For sure getting there. Thanks again for the post.

    Reply
    • Jason Fieber says

      March 24, 2019 at 1:00 pm

      Randall,

      Hey, I’m glad you caught that. It’s a slippery slope!

      Thanks for sharing. 🙂

      Best wishes.

      Reply
  8. Get Rich Brothers says

    March 24, 2019 at 2:11 pm

    Hey Jason,

    Plenty to relate to in this post. I’m living the first prong at the moment in my one-bedroom apartment (living in Canada) that costs me less than $800 per month with everything in. It’s central to all amenities in my city and so my transportation costs are quite low. The second prong has been enjoyable; when I started with the DGI style, I made my way across sectors to diversify and now I’m able to circle back and add more from each of the sectors.

    Take care,
    Ryan

    Reply
    • Jason Fieber says

      March 24, 2019 at 2:51 pm

      Ryan,

      That’s good stuff there. I think it’s really fun to take advantage of those two prongs. The less you have, the less you want. The more you invest, the more you want to invest. It’s a momentum that serves as an incredible tailwind across your life. 🙂

      Best regards!

      Reply
  9. Alaska49 says

    March 26, 2019 at 4:50 am

    Needed a new wood stove, old one was not efficient. New stove with catolitic converter and thermostat – $4,000, stove guys installing it informed our hearth was not up to code, $300 in tile, $300 to lay it, same guys also found out previous stove had non insulated stove pipe. $100 bucks a section for a cool $1,200. Carpet looked old…$1,200, now couch and love seat looked bad….leather replacements, $5,000….that was one expensive stove. (It works great, three pieces of wood last about eight hours..check out Blaze King stoves for you northern readers)

    Reply
    • Jason Fieber says

      March 26, 2019 at 5:00 am

      Alaska49,

      Thanks for sharing. I’m glad to hear the new stove is working out great. I certainly hope it proves worth it in the long run. 🙂

      It’s a slippery slope. You can fall victim to this very quickly. I was actually looking at buying a nice leather laptop bag a while back. Figured I could justify the purchase since I’m walking around with my computer a lot and access so much online, but then I quickly started to realize how odd the rest of my life would look if I were carrying around this beautiful leather bag. I mean, even my clothing (workout gear) would look strange next to the bag. Fortunately, I quickly realized it was a bad idea. I’m still rocking a bag I bought for about $10 here in CM.

      Cheers.

      Reply

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I'm Jason Fieber, Mr. Free At 33. I became financially free at 33 years old by working really hard, living well below my means, engaging in strategic entrepreneurship, intelligently investing, and using geographic arbitrage to my advantage. I currently live in Thailand, where I'm making my early retirement dreams come true. I write and coach so that I can help others make their early retirement dreams come true.

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