Greater than $35,000,000,000. 35 billion dollars! That’s how much money the self-storage industry makes per year in the United States alone. In fact, 1 out of every 10 Americans rents a storage unit. These figures are even more surprising when you consider that the average size of a house in the US has nearly tripled in size in the last 50 years. Our living spaces have never been bigger, and yet, we still don’t have enough room for our possessions. We own a lot of stuff.
My question is why? Why do we accumulate so much stuff?
Because we have an obsession with new things. But there is another reason which I find even more intriguing – the fact that downsizing is really difficult.
Take out your smartphone and try to delete all of the apps that you have not used or songs that you have not listened to in the past six months. Repeat the same process and sell or donate the clothes that your have not worn in the past year. It’s tough. Although we may have not used the apps, or the songs, or the clothes in a long time, and we may never use them again, they were a part of our identities at some point in time. It is hard to get rid of something that was once a part of our lives.
But why is it so hard? Here are two reasons…
- We overvalue what we own
- We attach to money we’ve spent
We overvalue what we own
“She didn’t care which of the two offices she would get, but a day after the announcement was made, she was no longer willing to trade.” ~ Danny Kahneman in Thinking Fast and Slow
The endowment effect states that we have a tendency to overvalue something just because we own it. In fact, we don’t even have to own the good for us to attribute a higher value to it. In a psychological experiment, Thaler and Kahneman showed that people who were able to hold a coffee mug were willing to pay significantly more for the mug than those who were just allowed to look at it.
This experiment has powerful implications for sales tactics enticing us to buy things. If we get to try a product “risk-free for 30 days with a money back guarantee”, it is unlikely that we will actually return the product, because once we have it in our possession, we do not want to give it back. The same idea applies to test driving a car. The feeling of having something at one point (the car keys), then having that thing taken away from you is much more painful than not having that thing at all.
We attach to money we’ve spent
Imagine that you accidentally purchased tickets for both a $50 and a $100 concert on the same day. Unfortunately, it is too late to sell the tickets and there are no refunds. You enjoy both artists, but you think you will have more fun going to the $50 concert. You must choose one of the two tickets. Which concert would you decide to go to? Rationally, you should decide to attend the cheaper concert, as you think it will be more enjoyable and the purchase price is irrelevant now. It is a sunk cost. However, this concept was tested by Arkes and Blumer with a group of students and over half of them choose the less enjoyable, but more expensive option.
Many of us keep our belongings simply because we spent money on them. We probably invested some of our time before making the purchase as well. Old electronics or designer clothing can be tough to part with – they may be worthless now, but we paid a significant amount to buy them initially.
I have been consciously trying to both stop adding the new and start subtracting the old when it comes to possessions in my life. It’s difficult. I struggle to adequately justify why I don’t like buying new clothes, or really any new possessions (except books…I have a weakness for buying physical books). I came across this quote, and I find it is a good mantra for how I want to live my life (and what I want to spend money on):
When my time comes (hopefully not for a long time) and my progeny has gathered around, I don’t want somebody asking “does anybody want this old baseball?” I want them asking “do you remember the time that Andrew took us to the baseball game?
I’ve come to the realization that maybe the best things in life aren’t things.