The 58.6 million adults with annual household incomes of $100,000+ have nearly 60 percent of total household income and 70 percent of all privately held wealth — and they are spending their money. They account for nearly half of consumer spending in 38 categories and about a third in 112 categories from airline travel and hotels to second homes and remodeling to jewelry, online gaming and charitable donations.
In most categories, they are outspending the other 254.4 million Americans by a considerable margin, with the intriguing exception of...
cable and satellite TV. Here, the spending numbers are reversed. Most of us spend considerably more than our Affluent neighbors.
Ordinarily that wouldn’t have registered as particularly significant, but I’d just finished reading Poor Economics, on the bedside tables of many of Foreign Policy magazine’s Top 100 Global Thinkers. The book is a culmination of a 15-year study of the world’s poor in 18 nations spanning five continents. The authors note that no matter how hungry or destitute, a good number of their study subjects had flat-screen TVs. We’re talking about people living on as little as 99 cents a day (excluding housing).
When they did have “extra” money to spend, they purchased “better-tasting food, teas, tobacco” and other small luxuries. Even the very poor allow themselves treats beyond a minimally sustainable caloric intake.
How are people deciding what to spend their money on?
The authors of Poor Economics talk about how frequent high-stress situations “directly impair cognitive and decision-making ability. The stress-induced release of cortisol affects brain areas such as the prefrontal cortex, the amygdala and the hippocampus, which are important in cognitive function: in particular, the prefrontal cortex is important in suppression of impulsive responses.” Those high-stress situations basically define the daily life of poor people.
The authors explain that many poor people work at a variety of different jobs. They use all of their skills as a way to make as much money as possible. That’s a smart response, but it makes it difficult to devote enough time and energy to master a specialization that could advance their financial positions. And because health and family issues are constantly in the forefront, the idea of investing and saving for the future is beyond their perceived realm of possibility.
However, the authors assert that because the poor are unusually resourceful and rarely given the ear of their leaders, many of their ideas prove refreshing and viable — despite their lack of eloquent sophistication — when invited to participate in village and community problem-solving situations.
More than a billion poor people around the world run their own tiny farms or businesses, “but most of them do this because they have no other options,” the book reports, not because they have an innate appetite for entrepreneurial risk.
So, at the end of a hard week or month, they use their few extra coins for “treats,” then perhaps they escape into the otherworldliness of TV and the internet. And when conditions become too dire, they may simply give up or join the latest revolution.
Perhaps the next time our own political, corporate and nonprofit leaders are tailoring their speeches for Affluent targets who agree with their ideas, buy their products, and fund their organizations, they might also consider the sensibilities of the rest of their constituents and potential customers.
We don’t have to like someone’s character to value their ideas and perspectives. Heck, who knows what exploitable collaborative opportunities could be waiting beyond our comfort zones?
This is an excerpt from my weekly column in The Daily Sentinel as published in the Sunday, March 4, 2012 edition of the newspaper.
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