The Signaling Motives Behind Purchasing Decisions

Recently I have written about the way we use wealth and money to purchase things that signal something about us. The ideas for my posts have been from The Elephant in the Brain where Kevin Simler and Robin Hanson discuss ways in which we intentionally deceive ourselves and others in order to gain something, demonstrate a quality about ourselves, or provide some type of message to others without needing to be overt about our actions. There are lots of things about our identity, our values, and our survival that work much better under the surface rather than explicitly addressed.

 

Our wealth and money can be signals for our identity, personal character traits, and group status, plus they can be used to purchase other things that further signal these things about who we are. What is interesting is how much we are not aware of these signals, and the extent to which we fail to recognize or acknowledge the drive these signaling mechanisms have in our purchasing decisions.

 

Simler and Hanson write, “as consumers, we’re aware of many of these signals. We know how to judge people by their purchases, and we’re mostly aware of the impressions our own purchases make on others. But we’re significantly less aware of the extent to which our purchasing decisions are driven by these signaling motives.” We go out of our way to make certain impressions on other people, to show that we are part of a certain group, that we truly belong in a particular space, and that we are competent enough to know what we are doing. We put a lot of effort into demonstrating something about ourselves, even if we don’t think we are.

 

Sometimes we are expected to make these signals, and sometimes we make them so that we can fit in with a particular group or identity that we want to adopt. Doctors might purchase fancy cars even if they have high levels of student debt and can’t really afford the car. Runners might buy particular sunglasses to look cool at the group runs, and many religious people might spend a lot on fancy religious jewelry to show off wealth and faith at the same time. The things we buy, or don’t buy, reflect something about ourselves, the groups we belong to, and our values. With some purchases we try to be as visible as possible – like buying a fancy thing at a charity auction, and with some purchases we try our hardest to hide the evidence of our transaction – like say paying off a porn actress to stay silent about an affair. The thing we purchase may be an approved way to flaunt our wealth and social value (like a Tesla), but it could also signal a moral deficiency or a selfish behavior. We don’t always acknowledge it directly, but many of our purchasing decisions have these qualities, and it is probably best to be aware of this signaling behaviors when we are making purchases.

Conspicuous Consuption

Conspicuous consumption is probably one of the most damaging aspects of American society. It involves using our purchases to serve as a way to show off a particular aspect of who we are want to be. As Kevin Simler and Robin Hanson write in their book The Elephant in the Brain, “the idea that we use purchases to flaunt our wealth is known as conspicuous consumption. It’s an accusation that we buy things not so much for purely personal enjoyment as for showing off or keeping up with the Joneses.”

 

Throughout the book Hanson and Simler look at human behaviors and consider them alongside the stated reasons, beliefs, and excuses that people have for those behaviors. There are many things in life that we do without acknowledging ulterior motives. We have motivations that lie beneath the surface and drive our thoughts, feelings, and opinions. We do not examine and acknowledge these motivations, but they are real, and they are there.

 

Conspicuous consumption is the use of our wealth and ability to make purchases in a way that is ostensibly about one thing, but very likely are about something else that we would like to keep hidden from others. When we buy a fancy new sports car, we will tell others about incredible new technology, about how hard we have worked and how we deserve to treat ourselves, or about the incredible performance of the car. What we likely won’t tell people is that we felt that we deserved more attention and wanted to show off that could afford a new sports car. What we won’t acknowledge, even to ourselves, is how much our behavior is driven by others and by a desire to fit in, be praised, and make sure everyone is aware of our beliefs about our personal value.

 

Each of those things (showing how much we fit in, telling people how valuable we are, and receiving praise) are aspects of social life that we can’t just go around and obtain directly. Instead, we have to signal those things through behaviors and activities that we can spin as more sociable and more acceptable behaviors. Money and wealth gives us a chance to show off and to signal our competence or connectedness to the outside world. It gives us a way to brag without having to outright brag. We can be more humble in the ways that we show off by being indirect.

 

However conspicuous consumption can drive us to ignore climate change and the externalities of our actions. It can create stress as we strive to make purchases that put us in perilous financial situations – the opposite of what the purchase is supposed to signal. And it is ultimately all about gaining more status at the expense of others who cannot keep up. We spend a lot of time and energy attempting to show off our wealth so that we can be rewarded not by the thing we purchase, but with praise and respect of others that we may not really deserve. We should acknowledge these pressures and chose when we are going  to be conspicuous with our wealth, and when we will exit the signaling contest avoid showing off.

Two Messages

In The Elephant in the Brain Kevin Simler and Robin Hanson write about the ways in which we act to signal something important about ourselves that we cannot outright express. We deceive ourselves to believe that we are not sending these signals, but we recognize them, pick up on their subtle nature, and know how to respond to these cues even if we remain consciously ignorant to them. In the book, the authors focus on how we use these cues in language and communication.

 

The authors write, “Every remark made by a speaker contains two messages for the listener: text and subtext. The text says, ‘Here’s a new piece of information,’ while the subtext says, ‘By the way, I’m the kind of person who knows such things.’ Sometimes the text is more important than the subtext … but frequently, it’s the other way around.”

 

It is important to acknowledge that sometimes the text truly is the important part of our message. Because we occasionally have really important things that people need to know, and because that information outweighs the fact that we are the one who knows it and shared it, we can use that as a screen for us in this game of two messages. We can believe that all our communication is about important important information because there are times where the things we communicate are crucial to know. Hanson and Simler’s idea above only works if sometimes it is true that the text is the important piece and if almost always we can plausibly say that we are just trying to convey useful information as opposed to showing off what we know or what we have learned.

 

No matter what, at the same time our communication says something about us and about what knowledge and information we may have. It can also say something about what we don’t know, which may be part of why we go to great lengths to make it seem like we were not ignorant of something – our language/knowledge might tell people we are not the kind of person who knows something that everyone else knows.

 

Our language also tells people that we are the kind of person who cares about something, or has great attention to detail, is strict and disciplined, or is from a certain part of the country/world. Some of these signals are fairly hidden, while others are more clear and obvious. When we look more closely at the way we signal in our conversation, we can see how often our words are only part of what we are communicating.

Curious Conversations

In The Elephant in the Brain authors Kevin Simler and Robin Hanson investigate human communication and ask why we are so quick to speak, communicate, and share information we have acquired, even if we acquired that information at great personal costs. Humans communicate a lot, and we generally like to be the one talking and expressing something about ourselves and our experiences. The problem however, is that it would make more sense for us to do all the listening, and only talk when absolutely necessary or when we were getting a reward.

 

If I spend a lot of time reading a book and learning something interesting and useful, I should desire a reward for the cost of learning the information I know. Before I write a blog post about interesting information, pontificate at the water cooler, or tell my family something I find fascinating, I should ask to be compensated. Instead, what we usually see, is that we can’t wait to tell people about the interesting thing we have learned. We expend a lot of effort in learning new information, and then we give that information away as quick as we can to anyone.

 

We also don’t do a great job listening. Rather than spending a lot of time absorbing what the other is saying, we prepare ourselves for what we are going to say next, missing the entire thing that is actually being said as we mentally prepare for our turn to talk. From an economic standpoint, this does not make sense.

 

“We aren’t lazy, greedy listeners. Instead we’re both intensely curious and  happy to share the fruits of our curiosity with others.” Write Simler and Hanson, “In order to explain why we speak, then, we have to find some benefit large enough to offset the cost of acquiring information and devaluing it by sharing. If speakers are giving away little informational ‘gifts’ in every conversation, what are they getting in return?”

 

I’ll explore this idea a little more in coming posts, but the authors argue that conversation is not really (at least not solely or even primarily) about conveying information. We do a lot of group and alliance signaling in our conversation. We show how creative and insightful we are. We demonstrate to others that we are willing to go learn new and useful information that can benefit the whole group and we show how altruistic we are by sharing this information which we acquired at a great cost. These are important but often unrecognized or unacknowledged parts of our communication. When we speak and when we share information, we are doing much more than just telling people what is inside our head.

Wasteful Signals

One of the great things about competitive markets (in an economic sense) is that they reduce waste. If multiple firms are competing against each other to sell a good, each firm has an incentive to find a new way to produce their good that makes the process cheaper and quicker. This allows each firm to eliminate waste, and over time the efficiency of the market improves, costs come down, and we are able to produce a given thing using less energy and resources.

 

But when we look at living creatures and consider evolution, we don’t always see the same thing happening. “The problem with competitive struggles, however,” write Kevin Simler and Robin Hanson in their book The Elephant in the Brain, “is that they’re enormously wasteful.”

 

The simple view of evolution that I always held was that animal species evolve over time to become better. Survival of the fittest meant that smaller, slower, weaker animals in a population would die out, and we would be left with the best individuals and the best genes reproducing into the future. The resulting population would be smarter, faster, sleeker, and in some ways more efficient. But evolution, it turns out, is more complicated than this simple model, and survival of the fittest is not always the best way to describe how evolution works. There is still a lot of random chance, random accidents, and waste that can occur in evolution.

 

In an earlier post I shared Hanson and Simler’s story about redwood trees competing against themselves to become taller. The trees did not compete to live in as diverse an ecosystem as possible, and if they had, Simler and Hanson suggest the trees could have been much shorter and could have occupied more space. The trees are wasteful, driving toward new heights in a confined area rather than efficiently spreading out and remaining at a smaller size.

 

In many ways we do the same thing. Creating a beautiful painting is wonderful, but it is also a bit wasteful. One reason we may want to create art is to demonstrate that we can do something relatively difficult to impress other people. We deliberately create something that uses resources for no practical value as a way to demonstrate that we have extra resources to burn and extra time to spend practicing and creating art. It is an indirect way to say, look how impressive I am and look how many resources I have that I don’t have to spend my time accumulating more resources and can instead use them in any way I choose.

 

We create art and buy fancy sports cars to be wasteful with resources to show off and signal something about our suitability and desirability as a mate. There are other things happening here of course, but this is a key component. Animals develop expensive plumage to signal to mates. Some birds will build fancy nests with shiny objects in them to catch the eye of a potential mate, and others will battle among each other to show which animal is the most physically dominant. Shows of skill, strength, and suitability as a mate can be very expensive using energy, time, and resources that could otherwise go toward finding more food. Evolution has lead animals to be very wasteful in a way that we would not expect if evolution worked like an ideally functioning market. Evolution is not simply survival of the fittest, sometimes there are other elements that get us to waste a lot of resources in our signaling competitions to pass our genes along. Sometimes evolution is selecting for things that really don’t seem to demonstrate a lot of great fit in a direct sense for a species.

The Purchases We Make

In their book The Elephant in the Brain, Kevin Simler and Robin Hanson write about “conspicuous consumption,” a term coined by economist and sociologist Thorstein Veblen who lived about 100 years ago. Simler and Hanson write, “When consumers are asked why they bought an expensive watch or high-end handbag, they often cite material factors like comfort, aesthetics, and functionality. But Veblen argued that, in fact, the demand for luxury goods is driven largely by a social motive: flaunting one’s wealth.”

 

The other pieces of the argument, the good performance of the item, the colors we were dying to have, and the durability of the product might be true sometimes, and that allows us to make those excuses even though they only describe part of our purchase. A big part of Hanson and Simler’s book focuses on the idea that we use these excuses that sometimes are true or that partially describe our decisions to justify actions that signal something other than the stated reason for our action.

 

In the case of buying luxury goods the thing we are signaling is our wealth, which demonstrates our financial resources and can be used as a proxy for our social capital and human value. Our wealth may give others insights into our skills and abilities to do hard things, helping us stand out against a crowd. Our wealth may reveal our deep social connections or our family’s high status, two traits that certainly helped our ancestors pass their genes along in a small political tribe.

 

The problem today, however, is that we don’t admit this is what we are doing with our purchases, and as a result we have trouble addressing major externalities from our consumptive habits. We spend a lot of money on unnecessary luxury goods, and many people go deeply into debt to signal that they are the type of person who would own a certain type of luxury good. Our unyielding desire in the United States for ever further and greater consumption leads us to buy larger houses that we have to heat, faster cars that use more energy, and to own more clothes that will take millions of years to break down thanks to the new synthetic fibers we make them from. Our consumption and our drive to continuously signal our wealth and social value, some would argue, is poisoning and heating our planet to dangerous levels.

 

Simler and Hanson don’t focus on the externalities of our signaling behavior in their book, but they do acknowledge that they are there. In the book, the authors make an argument that most of us would rather ignore. That we do things for selfish motives that we would like to keep under the covers. This is important if you are an economics, sociology, or policy researcher, and for us in our daily lives, we can take a lesson from Hanson and Simler that stems from an awareness of our self-centered behavior. We can think about our signaling behaviors and ask if conspicuous consumption is really worthwhile. We can step back and ask if the ways we signal our wealth help or hurt the planet, and we can start to make decisions with positive externalities and attempt to avoid the negative externalities I mentioned above.

Loyalty and Beliefs

Loyalty in social tribes is important. If you are consistently loyal to a strong, smart, and well connected individual in a small group, you can receive a lot of direct benefits. Being disloyal, failing to conform, and only occasionally supporting the person in the social group with the highest social status will not get you the same level of benefits. In our world today we still do this, though it is probably less of a major driver of whether we pass on our genes and have enough food to eat. In the world of our tribal ancestors, however, this likely played a huge role in who was able to pass their genes along, who got to eat from the communal dinner, and who was left out in the cold when there was not enough shelter.

 

Our relationships involve a certain amount of loyalty, and loyalty cannot be ascertained or demonstrated by just asking someone, “to what degree are you loyal to me?” Loyalty must be demonstrated and shown in subtle indirect ways. When a wife asks, “do these jeans make me look fat?” she may really be asking how loyal and loving her husband is, as opposed to actually asking about her appearance in a pair of jeans (as a guy, I would like to note that I may be 100% dead wrong on this particular example – forgive me if I am totally missing the mark here).

 

In The Elephant in the Brain Kevin Simler and Robin Hanson write, “we often measure loyalty in our relationships by the degree to which a belief is irrational or unwarranted by the evidence.” So a group or tribe may adopt a completely irrational belief as a type of test, to see who is the most loyal and the least willing to question the leader or cut against the tribe. “It only demonstrates loyalty to believe something that we wouldn’t have reason to believe unless we were loyal.” 

 

I think a lot of religion includes these types of tests. I also think we see this in sports relationships, our relationships to some consumer products, and clearly in our political parties. We need coalitions to do great things or we will only make it so far. People won’t want to join our coalitions unless we can demonstrate loyalty and group belonging. Believing something clearly inaccurate is a good way to show loyalty in an indirect sort of way and to signal to others that we are on their side and have their back.

The Trouble with Labels

“The troubling thing about labels is that we very seldom have the exact same definitions for them,” Colin Wright writes in his book Becoming Who We Need To Be. I am disappointed by how frequently we use labels without giving them much thought. Labels are a necessity and a way to convey a lot of information without having to provide extensive background and definitions for every little thing. Labels are also things we use to signal something about ourselves and they are also something we use to make fun of other people and groups to which we don’t belong. If you are not aware of the labels you use, you are not aware of how frequently you are using them for signaling or just how insulting labels can be to the people you label.

 

Wright continues, “as soon as you decide to watch for them, you realize how many labels we use in every discussion, even beyond the exploratory ones. But it’s worth the effort if you really want to learn, understand, and communicate clearly.” When we use labels haphazardly, we end up talking about different things from our communication partner. My concept of any given label is going to be different from your concept of that label, and even if our ideas are just a little off, what I am saying may not make any sense to you at all. Our conversation could devolve into an argument where we are each trying to argue that something is or is not something else, not realizing that we are both arguing with a different set of definitions for the thing we are arguing about.

 

Beyond just confusing conversation, my biggest fear of labels is that they will become subtle digs and insults at our communication partners. We may throw in a label here or there that we don’t think our interlocutor will recognize, but that will be recognized by other people in our social group. This allows us to make subtle insults at individuals or groups and allows us to talk behind someone’s back, insulting them in a way where we feel superior because they did not even realize that we insulted them. This is typical of the types of arguments we see online, and it is something that has the ability to absolutely destroy productive conversation. It can ruin opportunities to learn and it actively drives us away from becoming a more cohesive society. Recognizing when use labels in this way will help us to have more clear and constructive conversations, and if we can help other people recognize how they use labels, then we can begin to have more productive and rational discussions about the direction our society should move.

The Purchases We Make

In their book The Elephant in the Brain, Kevin Simler and Robin Hanson write about “conspicuous consumption,” a term coined by economist and sociologist Thorstein Veblen who lived about 100 years ago. Simler and Hanson write, “When consumers are asked why they bought an expensive watch or high-end handbag, they often cite material factors like comfort, aesthetics, and functionality. But Veblen argued that, in fact, the demand for luxury goods is driven largely by a social motive: flaunting one’s wealth.” The other pieces of the argument, the good performance of the item, the colors we were dying to have, and the durability of the product might be the true reason we made a purchase in some instances, and that allows us to make those excuses even though they only describe part of our behavior. A big part of Hanson and Simler’s book focuses on the idea that we use these types of excuses to justify our actions. Further, they argue that our behaviors often signal something about ourselves implicitly that we don’t want to say explicitly.

 

In the case of luxury goods the thing we are signaling is our wealth. Our wealth demonstrates our financial resources and can be used as a proxy for our social capital and human value. Our wealth may give others insights into our skills and abilities to do hard things, helping us stand out against a crowd. And, our wealth may reveal our deep social connections or our family’s high status, two social traits that certainly helped our ancestors pass their genes on in small political tribes.

 

The problem today, however, is that we don’t admit this is what we are doing with our purchases, and as a result we face major negative externalities from our consumptive habits. We spend a lot of money on unnecessary luxury goods, and many people go deeply into debt to signal that they are the type of person who would own a certain type of luxury good. Our unyielding desire in the United States for ever further and greater consumption leads us to buy larger houses that we have to heat, faster cars that use more energy, and to own more clothes that will take millions of years to break down thanks to the new synthetic fibers we use to make them. Our consumption and our drive to continuously signal our wealth and social value, some would argue, is poisoning and heating our planet to dangerous levels.

 

Simler and Hanson don’t focus on the externalities of our signaling behavior in their book, but they do acknowledge that they are there. The authors simply make an argument that most of us would rather ignore. That we do things for selfish motives and reasons we don’t want to talk about. This is important if you are an economics, sociology, or policy researcher because you need to understand what people are really doing when they rally politically or make economic decisions.  For the rest of us, in our daily lives, we can take a lesson from Hanson and Simler that stems from an awareness of our self-centered behavior. We can think about our signaling behaviors and ask if conspicuous consumption is really worthwhile. We can step back and ask if the ways we signal our wealth help or hurt the planet, and we can start to make decisions with positive externalities and attempt to avoid the negative externalities I mentioned above.

Changing Our Speaking and Advice Giving Habit

Michael Bungay Stanier’s book The Coaching Habit is all about changing the ways we relate to others by changing how we give advice to, listen to, and generally speak with those around us. Most of the time, as Robin Hanson and Kevin Simler explain in their book The Elephant in the Brain, we are in a hurry to share what we know, give advice, and speak up. Bungay Stanier suggests that what we should be doing, if we truly want to change our coaching habit to be more effective and helpful for those around us, is spend more time listening and more time asking questions rather than giving advice and speaking. Hanson and Simler suggest that our urge to be helpful by speaking and giving advice is our brain’s way to show how wise, connected, and valuable we are, but the problem as Bungay Stanier would argue, is that this gets in the way of actually developing another person and helping someone else grow.

 

To make a change in our speaking habit, first we must understand what we want to change and we must focus on the why behind our change. Once we have built the self-awareness to recognize that we need to change, we need to understand what is driving the habit that we are working to get away from. This is why I introduced Hanson and Simler’s book above. If the habit we want to change is speaking too much and not asking enough questions, we need to understand that when we are coaching or helping another, we are driving to give advice in part to demonstrate how smart we are and how vast our experiences are. We are driven in other words, to not help the other but to boast about ourselves. Understanding this small part helps us know what we actually want to change and what is driving the original habit.

 

Bungay Stanier references another book, The Power of Habit by Charles Duhigg, and writes, “if you don’t know what triggers the old behavior, you’ll never change it because you’ll already be doing it before you know it.” The self-awareness necessary in changing habits requires us to first see what needs to change, second to identify the ‘why’ behind our desired change, and third to become aware of the small things that trigger our habit. If we know that having our phone near our bed leads to us being more likely to check Facebook first thing in the morning, then we can remove that trigger by placing the phone in another room and finding a new alarm. Ultimately we can be more likely to succeed in changing our habit of checking Facebook as soon as we wake up. Similarly, Bungay Stanier would agree, knowing that we provide advice to make ourselves look valuable to society helps us see the mental triggers that encourage us to share bad advice rather than to listen and ask helpful questions. Ultimately, to change our habit we need to further expand self-awareness to recognize not just the change we want to make and the reason we want to make a change, but to also recognize the large and small things that drive us into our old habits. Addressing these triggers and structuring our life in a way to avoid them can help us be more successful in changing habits for the better.