The Spending Problem You Didn't Know You Have - The Deridot Effect
Picture This -
You’ve been working out for a while and your friend is constantly pressuring you to come to a crossfit class at their gym. After all, your friend has a "guest pass". So, partially as an attempt to get them to stop asking you, and also out of curiosity for the sport, you tell them you'll go to the class in the morning.
Against all expectations, you love the class. You loved the class so much that you bought your own membership to the gym. You go to the next class and find yourself climbing a rope, only to realize that your 7-year-old New Balances don’t provide the right grip to propel you up the rope as fast as everyone else.
So, what do you do?
You go and buy those sexy, new NOBULL training shoes at their full retail price of $139 and can’t wait to get back in to gym and beat everyone up that rope.
But, the next class doesn’t have rope climbing in it.
Instead, you find yourself doing a flailing variation of a pull-up, known as a butterfly pull-up in the crossfit world. At the end of the workout, you notice your hands are torn to shreds from the abrasive grip on the Rogue rig, and your new shoes certainly didn't help one bit.
You know what happens next.
You go out and buy a new pair of hand grips to ensure you’re ready to tackle every workout imaginable.
The next class is full of high-rep barbell complexes, and you realize that you need tear-resistant, cling-free, sweat wicking shorts with a no-pinch, no-bunch waistband.
Then you need chalk. And a chalk bag. And performance socks that prevent barbell scrapes against your shins. And lifting-specific shoes. And a new, "CrossFit-specific" gym bag to put all your new things in.
Next thing you know, you have more “CrossFit” gear than you ever imagined owning and spent more than what it would’ve cost you for a year of membership to the gym in doing so.
This is known as the Deridot Effect.
The Deridot Effect is a social phenomenon, coined by Grant McCracken in 1988, that states consumer purchases don’t rely solely on a purchase’s functionality or practicality. Instead, one purchase acts as a starting point for a spiral of consumer spending on things to go with the initial purchase that the consumer wouldn’t have otherwise considered buying in the first place. I mean, really think about this for a second.
- You want to buy a new iPad and start looking around online for the best “bang for your buck” model. Next thing you know, you spent several hours watching YouTube reviews on which model to get and well over $700 on the higher end model. Now that you have the iPad, you obviously need the $399 magic keyboard, a tablet sleeve to protect the iPad and keyboard, a mouse to go with it, and a new fast-charging cables to ensure your battery is always at 100%.
- You buy a brand-new couch for your living room, only to realize how it looks WAY nicer and out of place compared to the rest of the living room. So, you buy new end tables and lamps to match. Then, you buy a new rug to go with the couch and end tables and paint the walls light grey and the trim off-white to finalize the “new look” of the living room.
- You buy a new suit and need the new watch, tie, tie clip, and tailored French-collared shirts. Next thing you know, you have three new pairs of dress shoes too.
- Your daughter decides she wants to take up hockey, so you buy her the nicest hockey stick at the sporting good store. Her professional stick looks way out of place compared to her gear, so you buy her brand-new pads, a new helmet, the freshest skates, and even lessons from the nearby professional coach.
These are all examples of the Deridot Effect.
If you’re like me, and arguably the rest of the population, you’ve succumbed to the Deridot Effect.
Here are some steps to avoid the Deridot Effect and put an end to unnecessarily purchasing things.
This is a painfully obvious one – or at least should be. Setting a budget is a staple maneuver in the playbook for financial literacy and success. Simply put – don’t spend more on a category than what you’ve budgeted for. It irritates me that there are no classes in primary or secondary school that teach this stuff, or at least the basics, like the 50/30/20 rule. A basic budget will go a long way and assist in preventing purchasing things you don’t really need.
A tougher one than it needs to be; reducing exposing is key to limiting unnecessary purchases. Meet friends at a coffee shop or outdoors instead of the mall. Unsubscribe from those commercial email marketing lists from stores you like, but only signed up for to get the 20% discount on your first order. Use the built-in app timer on your phone to limit the amount time spent on social media apps or set a time frame where the apps are off limits completely.
Every time you buy something new, donate your old one to charity or give it away to a family member or friend. Do you have a closet filled with shirts you haven’t worn in a year, yet you just bought more? Get rid of the items you haven’t worn or used in over a year. Be honest with yourself – It’s been a year – are you really going to wear it again?
The Deridot Effect is named after Denis Deridot, a famous French philosopher from the 18th century. He was famously known for co-authoring Encyclopédie, arguably the most comprehensive encyclopedia of its time, but lived most of his life in poverty. In 1765 and at the age of 52, Deridot’s financial situation plagued his ability to pay for his daughter’s wedding, which he could not afford to help with at all. The news of his situation disseminated quickly and when Catherine the Great, the Great Empress of Russia, caught wind of Deridot’s situation, she offered to pay 1000 GBP for his entire library (an amount equivalent to $150,000 USD today). Suddenly, Deridot was able to fund his daughter’s wedding with money to spare.
He went on to acquire a new scarlet robe, and that was when the spiral of spending began. Once he had the robe, he realized it had no place amongst the rest of his common possessions and purchased a rug from Damascus. He then outfitted his home with beautiful sculptures and new furnishings.
This spiral of consumption became known as The Deridot Effect.