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How Insights from Thorstein Veblen and Gypsy Traditions Can Help in the Design for Financial Security

December 8, 2017

A marginalized ethnic group’s tradition of blatantly displaying wealth gives some valuable insights on financial behavior in the XXIst century world. Moreover, “Conspicuous saving” offers valuable insights for the design of consumer financial products aimed at increasing financial security. (7 min read + an invitation).

 

A Marginalized Ethnic Group's Tradition on Saving: Minuscule Anthropological Insight 

 

Eastern and Southern Europe host the bulk of the Romani people, an ethnic group known to English speakers as Gypsies. According to Wikipedia, the Romani people are a traditionally itinerant ethnic group, living mostly in Europe, originating from the northern regions of the Indian subcontinent.

 

In my country of birth – Romania, the Romanian majority has a bad image of the Romani people (I am aware that there can be a phonetic confusion, but let’s say that the Romanians and the Romani are two different ethnic groups).

 

In general, Romanians look down at the Romani (Gypsy) people and Romanian culture and language are full of contempt towards the Gypsies. Romanians scorn one particular custom (tradition) of the Romani people, namely the acquisition and, not seldom, conspicuous display of gold. For several years, Romanian TV stations paraded outrageous cases of wealthy Romani people who had gold shoes, gold crowns, gold purses etc. When I say gold, I mean solid 14 or 24 karat gold.

 

These extreme cases have their origin in the Romani tradition of storing their wealth in gold, most often, gold coins. The gold coins were worn by women in their hair or in the form of necklaces. The Romani people needed portable-wealth for two main reasons. First, their itinerant (nomad) old-way of life and second, after being freed from slavery (in Romania) they were not allowed to own land.

 

 

Until recently, I viewed this ongoing tradition of storing one’s wealth in gold (gold coins) as the remains of an ancient way of life and simply a lack of civilization. However, I came to realize that there is a very valuable insight of financial behavior in the Romani way of storing wealth.

 

Conspicuous Saving

 

What the Romani (Gipsy) people do is Conspicuous Saving. They literally showcase their wealth publicly and gain social status and social validation, within their community, by how much wealth one accumulated.

 

In the huge majority of the developed and developing societies, people showcase their value and gain social status and validation through conspicuous consumption. The term Conspicuous consumption was coined by Thorstein Veblen in his 1899 book The Theory of the Leisure Class and it refers to consumers who buy expensive items to display economic power rather than to cover their real needs.

 

In the case of displaying economic power through conspicuous consumption, one gains status by showing that they can throw away money (wealth) on frivolous goods that quickly lose value.

 

In the case of displaying economic power through conspicuous saving, however, one gets status by showing how much wealth they accumulated so far and the wealth is stored in a highly liquid asset – gold artifacts, particularly, coins.

 

Conspicuous Saving Sheds Light on some Psychological Relevant Aspects of Regular Saving.

 

Conspicuous saving brings positive feedback (social status / social validation) to the saver. The regular way of saving (e.g. putting money in a savings account or in a retirement fund) brings no positive feedback social or otherwise. In the Western cultures, money and how much one makes, generally, is a taboo subject. Thus, getting social positive feedback on your increase in wealth through saving might be culturally inappropriate.

 

At the same time, however, when one saves money there is no other form of positive feedback. When someone puts, say $50, in the rainy day fund there is no ka-ching, thumbs up or any other form of feel good, feedback.

 

When someone saves money, the only feedback available is that she has less money available now to achieve the feel-good sensation through consumption, may it be conspicuous or not.

 

Then there is the aspect of the visibility of savings (wealth). Conspicuous savings are highly visible not only to others but also to the saver herself. When a Romani family saves the amount of money needed to purchase an additional gold coin, then money is transformed into the wealth-token that is visible and tangible in the household.

 

In the XXIst century modern financial world, from a sensorial perspective, wealth is reduced to some numbers on a screen or piece of paper.

 

Traditional wealth accumulated by a regular-Joe individual takes an almost immaterial form such as money in savings accounts, investments in mutual funds etc. From a sensorial perspective, wealth is reduced to some numbers on a screen or piece of paper. Moreover, additional savings – i.e. increasing the wealth is perceived only as a change in those numbers.  

 

I’m not advocating for keeping one’s savings in stacks of cash under the bed, in the freezer or in other open-secret locations. But, financial institutions need to address the immateriality of money and accumulated wealth.

 

Do you think your co-workers would find this matter interesting?

  

I’m offering a combo: talk and behavioral design workshop for consumer finance product design. It includes a brief presentation on the psychology of money, including the topic described in this blog post, followed by a workshop on designing better financial services that enable people to  

build a financial cushion.

 

Contact me for details.