When I was purchasing my car, I began with a certain budget in mind. The vehicle came within the budget planned but little did I expect the expenses to shoot beyond my budget after my purchase.
Once I got my car from the showroom, I imagined how cool my car would look with shinier wheels. I drove straight to the store to add some great looking mag wheels and a spoiler. I also purchased some seat covers, perfumes, foot pedals, and whatnot. I even considered replacing the sound system but dropped the idea because I had run out of money.
I had never accounted for these extra purchases when I was shortlisting the car.
Have you purchased a new item and went on to buy more stuff to match or accommodate it? I am sure you have done the same.
So why do we buy more things when we do not need them? The Diderot Effect is the reason why we fall victim to splurging money buying one new thing after another. In this article we will cover:
- How the Diderot effect works
- How it affects your buying decisions
- Examples to the effect
- Ways to overcome poor decisions due to the Diderot effect
- What is the Diderot Effect?
- Why is the effect called the Diderot Effect?
- What are some examples of the Diderot Effect?
- Why do you undergo the Diderot effect?
- How to overcome the Diderot Effect
What is the Diderot Effect?
As per psychology, the Diderot effect states that purchasing one item can lead to a shopping spree of more things. When you buy a new laptop, you purchase a new bag and earphones to go along with it. Grant McCracken coined the term in 1988 based on a poem written by Diderot.
This is how the Diderot effect works:
- Every person has an identity that influences most of the buying decisions. For example, you might drive a decent car, live in a reasonably priced locality, and wear a mid-ranged watch. Such expenses complement each other and maintain a balance.
- The moment one of these expenses steps into a higher range, you feel all the other items need an upgrade. For example, if you move to a costlier house, you feel conscious to drive your previous car and wear the usual brand of your watch. You buy a more expensive car and a watch to make all items fall under a complementing bracket, even if they were in a perfectly working condition.
Why is the effect called the Diderot Effect?
The Diderot effect story goes back to the 18th century. The phenomenon is named after a French philosopher Denis Diderot. Though he was famous for his writing one of the most famous encyclopedias at that time, Diderot hardly had enough money to run the expenses of his family.
The real trouble kicked in when he had to get his daughter married and he did not have enough funds. Fortunately for him, the Empress of Russia, Catherine the great, knowing Diderot’s state offered to help him for his literary contributions by purchasing his library. Diderot got an equivalent of roughly 100K USD today.
All of a sudden, Diderot went from a state of poverty to having a reasonably comfortable amount of money. He now had enough for the wedding with more to spare. So Diderot decided to buy a shining gown for himself. Whether he purchased the gown himself or if he received it as a gift from a friend is unclear, but that has little relevance to the phenomenon.
The new gown made Diderot look at his existing possessions in a different light. His other garments looked out of place compared to this majestic gown. He purchased new accessories one after another to match the gown. His spending did not even stop there.
He went on to replace the rug in the house, the cutlery, the decor on the walls, the furniture and more.
By the end of his buying spree, he had new items all over his house and an empty bank account. He was back to his poor state of finances. As Diderot put it, “I was an absolute master of my old dressing gown, but I have become a slave to my new one.”
The visual above explains the Diderot effect economics.
What are some examples of the Diderot Effect?
If you look into your daily life, you will notice many instances of the effect. I have been a victim many times myself.
1. Buying a new laptop
When you buy a new laptop, chances are you will also buy a new mouse, headphones, and speakers to get a better feel of the new device. Even if you have old accessories in a working condition compatible with the new device, you can mentally justify the need for new ones.
2. Buying a new phone
When you replace your old phone with the latest model, you will also purchase a new cover. Though this purchase is necessary and justified, you do not consider the expense as a part of the phone budget.
3. Buying a new house
When you buy a new house, your old furniture and appliances seem more faded and dull than they actually are. You imagine how lackluster your new house would look with the old furniture.
A new house almost certainly leads to a new couch, a bigger TV and more expensive curtains.
4. Spending on weddings
A similar string of purchases occurs when a couple plans a wedding ceremony. Having better decor leads to a more fancy cake and champagne. Adding majestic chandeliers requires the bridal party to wear more exquisite clothing. An extra dish added to a menu calls for another item to supplement it.
Based on the Diderot effect, someone might feel the need to replace the bride or the groom itself one day.
5. Buying new things for a new job
When you join a new job, you will buy one or more new sets of clothing to make a good impression. You might even go a step further and purchase a new bag or a laptop.
If nothing else, new pens and stationery are a must.
Why do you undergo the Diderot effect?
Diderot effect persuades you to buy new stuff even if you have been comfortable with the old items for years. As human beings, you and I feel a natural urge to experience better things in life. We do not like downgrading our lifestyle or living life a step below we always have.
Here are the two most common reasons for the Diderot effect.
At the grass-root level, the Diderot effect stems from greed. Once you have a goal and you achieve it, you start thinking, “What next? How can I step it up from here?”
For example, if your goal was to save 25,000 USD, you will not stop there. You aim for 50K next, followed by a 100K and eventually a million. If you buy a Ford today, you dream of buying a Mercedes next.
Our desires are like a treadmill running on infinite electricity. No matter how fast you run, you still feel you have more ground to cover.
Diderot effect can also stem from comparison. Once we have a new item, it turns into a benchmark against which we compare other possessions even if they are not related.
Purchasing a BMW might warrant buying a new couch. A new couch can lead to a bigger TV. A nicer TV can end up with a brand new dining table. Though the items are not related to each other directly, your brain justifies the need to replace them all.
How to overcome the Diderot Effect
Like all the other flaws of the human mind, knowing that such an effect exists helps in overcoming its consequences.
Here are 5 ways to beat the Diderot effect
1. Avoid unnecessary purchases
The most simple and elegant solution to the problem is to reduce the number of purchases itself. The fewer items you buy, the less you will spend on related items.
Stay from the mega discount sales that happen on e-commerce sites and local stores. While the cost of some items seems like a steal, you add item after item into your cart blowing all the money you have. When an e-commerce website announces a massive discount sale, sure, you can save some money by buying items on discount. But you can save even more if you do not buy anything at all.
Another smart way to avoid unnecessary purchases is to delay buying any item for 24 hours unless you have an urgent need. What seems like a need right now can diffuse in a day making you change your mind.
When you spend a large sum of money, you will need some more items to accommodate your purchase. A car needs further expenditure to ensure a long life. For example, car enthusiasts believe an undercoating helps prevent rust and a Teflon coating keeps the car shiny.
The argument here isn’t about what extra purchases are rational and justified. Some of those extra expenses might occur due to a real reason while others fool you with a false reason. But planning for the extra expenses in advance helps you be better prepared.
The fear of total expenses might stop you from thinking about adding one item after another.
3. Put a limit on expense
Now that you know about the Diderot effect, putting a limit on the additional expense can help you reduce the extra expense you can incur. When you know the buffer you have set, you can choose among the top items that can go with your original purchase.
If you are looking to buy a TV for 500$, set a buffer limit of 50$ for the accessories that go along with it. Anything beyond the limit gets no for an answer. Knowing your limit can help you pick and choose only the right items.
4. Consider your current circumstances before buying a new luxury item
Spending a few minutes thinking about how your new purchase could fit into your current environment will help you foresee the next purchases you might make.
For example, if you want to buy an expensive leather sofa when the rest of your house is furnished with average material, you can easily predict what else you need to purchase to fit it into your house. You do not have to wait for the couch to arrive in your living room to have a flash of ideas on what else you need.
If a new purchase does not seem to fit into your existing situation, hold off the idea of buying it for now. You can wait for the right time when the extra expense won’t burn a hole in your pocket. Sometimes, holding off the decision might lead to you changing your mind from feeling the need of the item anymore.
5. Avoid the trigger
Charles Duhigg explains the habit loop, in his book The Power Of Habit. Every habit has a trigger that initiates the behavior.
For example, going out with friends on a Friday night is a trigger to drink some alcohol. Accompanying a friend to the smoking zone triggers the possibility of you taking a few drags off the cigarette. Going to a shopping mall triggers the urge to pick a new pair of clothes and shoes.
If you avoid the trigger, you shield yourself from impulsive buying. For example, if you purchased a new car, staying away from a bunch of car lovers can help you avoid buying fancy accessories to make the vehicle look a class apart.
Diderot effect can increase the budget of a purchase by tagging in more items that seem justified on their own. Since the items do not even relate to the original purchase, you believe the extra items were necessary.
Knowing how the Diderot compels you to spend more helps in taking corrective action. Using the tips mentioned above, you can put a full stop on the extra burn you incur after a big purchase.
Leave a comment and tell me your story about where you spent more money due to the Diderot effect.
Maxim Dsouza has spent over a decade experimenting and finding various time management techniques to improve his productivity. He strongly understands the fact that time is a limited commodity and tries to make every second count. He has extensive experience in leadership in startups, small businesses, and large corporations.
He has helped people of different professions and age groups gain clarity on their goals, improve focus, revise their time management skills and develop an awareness of their psychological cognitive biases.