09th June, 2022
The French philosopher Denis Diderot lived nearly his entire life in poverty, but that all changed one day in 1765.
Diderot’s daughter was about to be married and he could not afford to pay for the wedding.
Despite his lack of wealth, Diderot was well known for his role as the co-founder and writer of Encyclopédie, one of the most comprehensive encyclopaedias of the time.
When Catherine the Great, the Empress of Russia, heard of Diderot’s financial troubles, her heart went out to him. She was a book lover and greatly enjoyed his encyclopaedia. She offered to buy Diderot’s personal library for £1,000 —more than $150,000 today.
Suddenly, Diderot had money to spare. With his new wealth, he not only paid for the wedding but also acquired a scarlet robe for himself.
Diderot’s scarlet robe was beautiful. So beautiful, in fact, that he immediately noticed how out of place it seemed when surrounded by his more common possessions.
He wrote that there was “no more coordination, no more unity, no more beauty” between his elegant robe and the rest of his stuff.
Diderot soon felt the urge to upgrade his possessions. He replaced his rug with one from Damascus. He decorated his home with expensive sculptures. He bought a mirror to place above the mantel, and a better kitchen table. He tossed aside his old straw chair for a leather one.
Like falling dominoes, one purchase led to the next.
Diderot’s behaviour is not uncommon.
In fact, the tendency for one purchase to lead to another one has a name: ‘The Diderot Effect’
which states that obtaining a new possession often creates a spiral of consumption leading to additional purchases.
You can spot this pattern everywhere. You buy a dress and have to get new shoes and earrings to match.
You buy a couch and suddenly question the layout of your entire living room.
You buy a toy for your child and soon find yourself purchasing all of the accessories that go with it. It’s a chain reaction of purchases.
Many human behaviours follow this cycle. You often decide what to do next based on what you have just finished doing. No behaviour happens in isolation. Each action becomes a cue that triggers the next behaviour.
In our wealth management business, we try and use the ‘Diderot Effect’ positively to trigger favourable investment habits.
We try and ask a client to Decide on the Financial Goals, which leads to ‘Need Assessment’, followed by Making a Financial Plan and that leads to start of the saving and Investment journey.
Use the ‘Diderot Effect’ to trigger positive behaviour changes and Stay Blessed forever.