Acting Dead, Trading Up and Leaving the Middle Class

I want to share the story behind approximately $2700 dollars worth of my spending this year that reveals how I am finally starting to leave the middle class, materially, financially and psychologically. No, I am not moving up into the rich class or down into the poor class. I am doing something complicated called trading up. 

This $2700 is money that, if I’d decided to pull the trigger and spend it a few months earlier, would have spared me a ton of unnecessary frustration. Why didn’t I spend it when I should have?

One reason is that I still have residual middle-class financial programming in my head, expertly misguiding me to the wrong answers. Getting it out of my head feels like getting a bad malware and virus infection off a computer. It is painful and messy, and there are really no completely reliable tools that work in all cases. And you’re never quite sure if you got the last infected file off the system, when the infection is really bad.

Another reason is that I was (and remain to some extent) guilty of what science fiction writer Bruce Sterling calls acting dead: being irrationally averse to spending money where it matters, in a misguided attempt to “save” money to the point that the behavior paralyzes you. A large segment of the middle class is starting to act dead these days. Which makes sense since the class itself is dying. To stop acting dead, you have to resolve to exit the traditional middle class as well, unless you want to go down with it.

Not acting dead involves a strategic spending pattern that marketers are starting to call trading up: buying premium in some areas of your life, while buying budget or entirely forgoing spending in other areas. This pattern of conscious, discriminating consumption defines the emerging replacement for  the middle class.  As the picture above illustrates, there isn’t really one “New Middle Class.” Instead, it is a fragmented social space, with each little island being defined by a specific pattern of trading-up, and an associated lifestyle design script.

This effect is a sort of the opposite of what I called Gollumization earlier this year: unthinking, undiscriminating consumption to the point that consumption defines you.

There’s a pretty neat book about it, Trading Up by Michael Silverstein and Neil Fiske, which you should read if you, like me, have exited or are planning to exit the traditional middle class.

But back to acting dead and my $2700 dollars, which I’ll use as my running example to get at various things.

The Dead Great-Grandfather Test

Sterling was using the term specifically to describe the hairshirt green lifestyle that is driven by eco-anxieties. For hairshirt-green types, life is all about saving water, recycling, composting, reducing eco-footprints and various other behaviors marked by a kind of fearful, non-generative retreat from living. Permanent existential hibernation.

Sterling’s rule of thumb for spotting acting-dead behaviors is a great one: if it’s something your dead great-grandfather can do better than you, it’s a case of acting dead. Your dead great-grandfather uses no water or plastic, and is actually recycling himself as we speak, not just his possessions. Try and top that.

But acting dead goes beyond hairshirt-green behaviors. While spartan frugality is a virtue, when it becomes the entire purpose of your life, there’s a problem. For a portion of the dying American middle class, frugality has turned into a life purpose.

An example is extreme couponing, which is why I used that as an example of radical Gollumization. It is saving gone amok: never buying anything not on sale (and therefore never buying things that never go on sale) and systematically being a jerk to businesses that may be running loss-leader sales to get new customers.

So how should you spend?

Spending Money

In his talk, Sterling offers up a simple rule for how to spend money. If it is something you use a lot everyday, spend the money, and get the good stuff. Don’t buy cheap. Look for deals, but don’t let deal-seeking make you compromise on quality or wait too long. It will cost you more in the long term. Sterling’s examples are obvious and physical: a good quality bed and work chair for instance. You might spend up to 8 hours a day in each; that’s 2/3 of your life.

I own both an excellent bed and a great chair. I am not sure the latter was a good investment for me in particular, since I spend most of my sitting hours in coffee shops, but in principle, it is a great example. Other examples include: a great kitchen knife, a nice car if you spend many hours commuting per day, plenty of quality gym clothes and a membership at a good gym, so you never have an excuse not to work out. Good quality produce to cook with.

If you work mostly at your desk, a large monitor. Heck, multiple monitors. The best keyboard.

Sterling also has ideas on what not to buy, or get rid of if you already own it. Expensive china sets for example, if you never do any formal entertaining. Things you think are assets but are actually liabilities. Things you are being unnecessarily sentimental about.

Sterling’s ideas seem to have been independently rediscovered by a growing segment of the middle class. Hence the phenomenon of trading up (the book has lots of data and anecdotal evidence for the trend).

I think of these sorts of examples as “physical furniture.” Stuff in your life that can make it hoarder hell if you buy the wrong things, or heaven if you buy the right things.

$2700 Worth of Acting-Dead

My acting-dead behaviors this year were more about mental furniture. Here’s the breakdown of the $2700 that I eventually spent when I stopped acting dead:

1. About $250 to get Tempo converted to epub and Kindle formats
2. About $300 odd to get an agent to file some Nevada business paperwork for me
3. $2100 for a Matlab (scientific computing software) license

In each case, I procrastinated for months, with the vague idea of saving money. Actually, it was worse than mere procrastination, since I was expending useless effort. In each case, my dead great-grandfather could have achieved what I did around those tasks during those months: nothing. And he’d have done it more efficiently.

In the first two cases, I tried to do it all myself, even though I have an aversion to fussy kinds of technical formatting work and paperwork to the point that they should count as phobias.  When I finally pulled the trigger and outsourced the work, it was like a major load being taken off my mind, coupled with severe regret for the time already spent on pointless frustration.

In the third case, it was again about saving money. I spent months mucking around with Python, R and various other open source alternatives to Matlab. Here, the messiness of having to deal with a unwieldy and weakly integrated open-source tools, along with my own serious aversion (similar to my paperwork aversion) to fussy configuration issues, and my generally poor ability to pick up new programming skills, had me wasting months in frustrated spinning-of-wheels.

And in the meantime, I was not doing things I wanted to do, simply because I was too cheap to buy a quality tool that I was familiar with, and could save me months of painful learning (especially painful now due to the Python 2.x to 3.x transition).  As with the other two cases, finally pulling the trigger made me intensely relieved.

You could say that each poor decision (each a case of delaying the right decision) was caused by specific phobias, aversions and irrationality.

But there is also a general pattern here. I really was not able to rationally assess the costs and benefits of each decision until after I had persisted with the wrong decision for months and made the right decision out of frustration. I could only see the simple logic after I’d made the right decision and stopped rationalizing the wrong one.

The general pattern that causes such poor decision-making is the middle class financial script.

The Middle-Class Financial Script

The middle class financial script is simple really. It involves uniform spending habits within a large class, based on norms that are learned via imitation.

If you are in the middle class, you are expected to own certain things, do certain things and do so at quality levels that exceed the quality purchased by the poor class (if they purchase that category of things at all) but don’t hit luxury levels.

You are also expected to not buy certain things that are either above or beneath you, or do certain things for yourself. Vanity,  humility and a sense of entitlement are all at work here. For the middle class, there are things that are beneath your station and things that are above your station. For the rich and poor, things are much more one-sided.

To take some simple examples, you’d be looked upon with suspicion if you bought a car that was either too luxurious or too cheap for somebody claiming middle class status. You are expected to vacation in certain places and not others.

In fact, imitation and uniformity in consumption define the middle class. In countries where the middle class is burgeoning instead of dying, especially in Asia, the growth of the class is tracked via measurement of ownership rates of certain typical goods at typical quality levels. By contrast, there is much more variety in how the poor are poor, and how the rich are rich.

Why does the middle class script (or any script) exist?

Mainly because it makes financial management easy. Constantly computing the total costs of ownership, potential returns and risks around all spending decisions,  is hard. And it doesn’t seem worthwhile when the income side is predictable and comfortable. Why bother to control costs when revenues are fixed and somebody else has already made up a predictable-costs script with reasonable margins designed to get you through retirement?

In other words, the middle class in recent history has been defined by its ability to both earn and spend money in very predictable ways.

Then of course, the risks started creeping back in, around 1980, slowly at first, and then with increasing rapidity over the last few years. All the things the middle class relied on — job security, defined benefits pensions, affordable mortgages, predictably rising real-estate values — one by one, all these supports began to break down.

But autopilot spending has persisted, long after the new patterns of exposure to financial risk have become clear. The reason of course is that the old financial habits were not really financial per se, they were driven by class norms rather than financial risk-management calculations.

My own examples are a case in point. My behavior is readily explained with reference to middle class norms:

1. The eBook conversion example: Middle class people do not hire other middle class people outside of a few approved exceptions such as doctors, lawyers and accountants; they work for the rich and hire the poor.
2. The business paperwork example: Middle class people do not “indulge” in “luxuries” like hiring administrative help to do paperwork. That’s for rich people with complicated financial affairs. Honest middle-class people should be able to do their own paperwork, with at most some professional help at tax time. Needing help probably means you are up to shady things.
3. The Matlab example: Middle class people do not pay for their tools. In fact, they shouldn’t need tools beyond the basic tools of literacy (books, pen and paper 100 years ago, a computer today). Poor people use specialized tools. Rich people buy them. Middle class people merely supervise the use of the rich people’s tools (capital) by the poor (labor). Even today, if you use specialized tools to work, your membership in the middle class is suspect.

Above all this, the middle class script involves a certain aversion to talking about or dealing with tough financial decisions. It is considered unseemly. Decent people don’t talk about money, let alone risk. If you work hard and play by the rules, the money should take care of itself. If it isn’t doing that, you are probably looking for dishonest and exploitative shortcuts like the evil rich or doing dumb things like the stupid poor, and deserve what you get.

If you have to budget and watch your money too closely, you were probably being irresponsible with credit cards and deserve your pain. For decent people, paycheck-in, on-time-credit-card-payments-out should work smoothly on autopilot.

And above all, you don’t speculate. If forced to speculate by pensions being turned into 401(ks) (American stock-based defined contribution retirement plans), decent people leave the actual risk-taking decisions to professional fund managers, telling themselves things like  “you cannot beat the professionals.”

So what will happen to people operating by such obviously dangerous attitudes in difficult times?

Turns out, we’ve been here before. They’ll die out.

Middle Class Declines in History

This is not a new phenomenon in history. Middle classes have appeared and disappeared several times before in history.

Tennessee Williams’ plays (A Streetcar Named Desire, The Glass Menagerie) tell exactly such poignant fall-from-the-middle-class stories set in early 20th century America.

Early twentieth century British novels set during the decline of empire (such as Agatha Christie novels), often contain aging spinsters desperately keeping up appearances and surviving on small incomes derived from being “companions” to richer old women.

You can also find examples outside the Western world. In nineteenth century India for example, where the Urdu and Sanskrit-literate middle classes, which had grown around the courts of the Nawabs and Maharajas in older medieval cities, went into severe decline. The new English-literate middle class began supplanting it in the newer cities of the British Raj.

I suspect similar middle class declines can be found in the Middle East (during the Ottoman decline), China (after the Boxer Rebellion)  and Latin America (after the Monroe Doctrine perhaps? I am not too familiar with Latin American history).

When a middle class goes into decline, you get a large segment of the population engaging in a desperate scramble to keep up appearances, while switching from collective-norm-based to individual-risk-based financial thinking.

Keeping up with the Joneses becomes far harder, because the financial support starts to collapse at different times for different people, but everybody agrees to pretend that everybody is in it together.  For the current American decline, there have already been a couple of good movies chronicling the decline: The Joneses (2009) and The Company Men (2010).

A norm-based social class will persist with disastrous financial choices long after the secure financial environment, on which its scripts are based, collapses. Simply because membership of the class is the source of all social identity and access to social capital.

Except that the social capital, which the members are clinging to, is eroding rapidly as well. There is no point in two non-swimmers with immense trust between them, clinging to each other while drowning. Mutual trust and social capital within a group only mean something when there are objective reasons to expect a prosperous future of indefinite length stretching out ahead.

When this is not the case, it makes sense to cash out your hard assets, rethink your financial life more directly, write off investments in the social capital of the declining class, and look for an alternative emerging class to join.

Trading Up and Fragmentation

As the picture I started with shows, a key effect of the trading-up phenomenon is that it causes serious fragmentation. The social landscape starts to get restructured along new lines. Cultural geography changes, as governing financial scripts change from one city block to the next (you see a lot of this in San Francisco in particular).

The transition from a monolithic middle class to one of many trading-up classes is a very tough one. First, you have to go through a period where you manage your finances very directly, with no help from a script that simplifies decision-making.

Then you have to evaluate various alternative trading-up scripts to figure out which ones might actually fit your situation and encode meaningful adaptations to the new environment. Not every lifestyle design script is likely to work.

In the last few months, going back to the broader context of my three examples, I’ve done a good deal of very direct financial decision-making. I’ve made up detailed scenario planning spreadsheets, risk models and the like. I’ve done minute tracking of spending (only for a month, to sort of calibrate; it is far too difficult and depressing to do on an ongoing basis).

Here’s the funny thing: doing this kind of very direct financial management around my small-business book-keeping felt good. It felt smart, like I was learning valuable new skills. But doing it around personal and household finances still felt somehow dirty. That’s how deeply embedded the middle class script is.

The three examples were interesting and particularly tough because they bridged the two mental models: my healthy business mental model (within which the right spending decisions would have been easy) and my toxic middle-class-paycheck mental model (within which they were unnecessarily hard).

Scared, Foolhardy and Brave New Scripts

Once you’ve worked with your finances directly for a while (it’s like working in assembly language, on a computer without an operating system) to start the transition away from the middle class script, you have to end the transition. Staying in limbo doesn’t work.

The transition can end in three ways:

1. Prolonged Misery: You get so scared, you retreat to the middle class and do your best to delay the inevitable
2. Waiting for Godot: You latch onto some script and  stick to it even after it becomes clear that it isn’t working for you.
3. Quick-Change Artists: You try on different scripts for size, attempting to force outcomes and fast failures, until you find one that fits and works, the way those quick-change artists change clothes.

Prolonged misery makes for the best tragic literature but is entirely unpleasant to live through. You act increasingly dead, get increasingly frugal, gradually squeeze out all the generativity in your life, and then finally you die.

The characteristic sign that you are practicing unhealthy acting-dead frugality is that you cut back on core expenses that might help you be more generative, in order to keep up appearances as long as possible.

If you are cutting back on the quality of the food you eat (trading fresh vegetables for canned, say), in order to buy the same clothes your friends wear, you are on the prolonged misery path. This incidentally, may be part of the reason why the middle class has become so attached to recycling and other hairshirt-green behaviors (outside of the actual merits of the behaviors) during exactly the period that the class itself has been in decline.

Waiting for Godot is your classic arrival fallacy. You fixate on specific narrative elements (like moving to Bali or working for 4 hours a week), make the few big moves, and spend the rest of your life waiting for the Big Event signifying that it is working, while slipping slowly into destitution and denial. I see a lot of people in this mode right now. They’ve never really stopped to analyze the logic of the script, but accepted it on faith based on assurances from a few for whom it has worked.

Quick-change artistry is of course, the card I think you should pick. It is a turbulent, experimental approach, where there are no absolute life truths, no permanent commitments to any script, no one-book formulas, and no easy no-brainer decisions.

It involves trying different trading-up patterns until you find one that works. It involves a commitment to stop acting dead. It involves a conscious decision to leave the middle class.

Or you can wait for all the King’s men and all the king’s horses to put Humpty-Dumpty together again.

This piece is sort of a continuation of my Las Vegas Rules series, but I’ve abandoned the attempt to keep a coherent larger narrative going. This is going to be more of an occasional diary-entry sort of thing.