The Prius Over the Boxster

By Dan Ariely, professor of psychology and behavioral economics at Duke University, adapted from Predictably Irrational.

One of the things that holds us back in terms of happiness is that as we get more, we adjust, change our reference point for what is basic, and want more.

There are some tricks around this very human tendency. This is one of the best recipes for making sure that we manage our well-being more thoughtfully. .

James Hong made a fortune co-founding Hotornot. Then he sold his Porsche Boxster and bought a Toyota Prius.

He could afford the Porsche. That wasn’t the question. The question was what owning a Porsche was doing to him.

“I don’t want to live the life of a Boxster,” he told the New York Times, “because when you get a Boxster you wish you had a 911. And people with 911s wish they had a Ferrari.”

We don’t have an internal value meter. We compare. A salary that delights us on Monday feels insulting on Friday, once we learn what the person in the next cubicle is making. A house we loved when we bought it shrinks the first time we visit a neighbor’s bigger one.

In 1993, federal regulators forced public companies to reveal their CEOs’ pay. The goal was to shame boards into restraint. What happened instead was that every newspaper started running rankings, and CEOs started comparing themselves with each other. Average CEO pay went from 36 times the average worker’s wage in 1976, to 131 times in 1993, to about 369 times a decade later.

Transparency didn’t restrain them. It handed them a new comparison circle.

I once met a physician at his twentieth college reunion. He’d graduated from Harvard dreaming of a Nobel Prize for cancer research. A few years in, he noticed that several of his classmates had become medical investment advisers at Wall Street firms, and they were making more than he was. He felt poor. He left research for Wall Street. By the reunion he was making ten times what most of his peers in medicine earned. He stood in the middle of the room, drink in hand, surrounded by a small circle of admirers. He told me he still didn’t feel rich. His new colleagues just had bigger yachts.

You usually can’t pick your salary. But you can pick your comparison circle.

You can skip the open house that’s above your price range. You can stop visiting the Instagram account of the college friend whose life looks like a travel brochure. You can, like James Hong, sell the thing that opens the door to wanting the next thing.

H.L. Mencken wrote that a man’s satisfaction with his salary depends on whether he makes more than his wife’s sister’s husband. A sharp observation, and also practical advice: when you’re looking for a spouse, consider the sister’s husband carefully.

The Porsche isn’t the problem. The people standing next to their Porsches are the problem.

For more insights, you can explore Dan Ariely’s books to understand these ideas in greater depth.