Oh, another new TV?
You’re going on a new international tour?
Wait, a second new car?
From the moment we are handed our first pay cheque to the day we decide to invest in a new credit card, everyone seems richer than me!
“Well of course some people will be wealthier and some poorer,” you say, “that’s just the nature of capitalism.” However, on a level playing field – for example, a street filled with similar middle-class families – there are many who still complain that those around them seem better off, despite everyone having a similar level of income.
The friendship paradox
Believe it or not, there is a mathematical equation that proves why this unfortunate fact is both real and provable. It’s called the generalised friendship paradox (GFP).
The GFP looks to form a correlation between people seeming more wealthy and another similar occurrence in our society: us thinking our friends have more friends than we do. Scientists Young-Ho Eom and Hang-Hyun Jo were the brains behind this operation, publishing their paper with the Cornell University Library’s arXiv network.
In a nutshell (and skipping all the mathsy bits), it surmises that the reason we perceive our friends to have more friends than us is because it is statistically more likely for us to meet someone with a lot of friends.
These people have more chances of making an introduction with another person than you because they already have that existing network. You don’t meet the lone wolves because you have less opportunity.
The key point here is that people always seem more than ourselves because of our single-view perception.
I think, therefore I am
“When we compare our characteristics like popularity, income, reputation, or happiness to those of our friends,” the scientists wrote in the paper, “our perception of ourselves might be distorted as expected by the GFP.”
We only see a small portion of other people’s lives, though we still seem to assume everything about them from this little information.
To use a metaphor cleverly outlined by Business Insider Australia: When we go to the gym, everyone seems fitter than we are. The reason for this is that it is statistically likely that the people you meet at a gym are regular gymgoers – that’s why they are there in the first place. As regulars, they are of a higher fitness level than non-gymgoers. You’re not seeing all of the unfit people in this situation, of which there may be many many more, leading you to formulate a skewed opinion of reality.
How do I become the perceived wealthier one?
The answer is quite simple: You actually probably don’t want to.
In order to be considered the wealthiest out of your peer group, without actually acquiring a higher-paying job, you would have to spend like crazy on outwardly perceivable, superficial goods. This would mean your friends and neighbours see your extravagant lifestyle and formulate the opinion that you are well off.
However, temporary happiness is far from superior to lasting investments.
If you’re smart about your spending, and regularly contribute money to investments such as building your superannuation fund, obviously you will have less immediate cash in hand. This may be another reason you feel less wealthy. Your money will last potentially decades longer, though, which a reckless spender may not be considering. At the end of the day, and indeed towards the end of our lives, it will be far more beneficial for us to have led a careful, frugal life, even if it may seem a little worse in the short term.
How do you spend your money?