In Stop Acting Rich I profiled the glittering rich: people who generate extremely high incomes, have a vast amount of wealth at their disposal, and spend accordingly on high prestige cars, mansions, etc. No matter what they spend their money on, though, it is just a fraction of their overall net worth. These people are highly concentrated in neighborhoods which my friend, Jon Robbin, refers to as “blue blood estates.”
Last week I spent over an hour at a reception in my favorite American history museum. While there I met Gillis for the first time. After a brief conversation about the artifacts on display, we discovered a common interest in high performance [HP] automobiles. Gillis told me that he has owned a stable of HP Porsches, BMWs and V 12 Mercedes. Then he asked me, “what do you think of the new Corvette?” I responded that it was given the highest praise by Car and Driver, Road and Track, Autoweek, Motor Trend, i.e. super car, fast, tremendous handling, high quality workmanship, and an enormous bang for the buck. Then Gillis told me that he really wanted to buy one, but he just couldn’t do it. “If you live in the center of [blue blood estates] you can’t drive a Corvette!” In fact, this topic had just been discussed among Gillis and his neighbors who didn’t want a Corvette in the neighborhood.
I often explain why people like Gillis, who is a highly compensated Fortune 100 senior executive, will not drive a Corvette. I frequently quote from a Car and Driver article:
. . . performance and cachet are not the same. Sure the Corvette is fast, very fast. . . under the heading of “The Lows” or negative features of the Corvette . . . ‘that gold chain rep’ [reputation].
The glittering rich [Gillis is one] who drive Porsches do not want to be associated with they perceive to be the gold chain crowd. That is why they will pay substantially more for a Porsche than buy a Corvette which outperforms the Porsche. In earlier blogs I have asked which of the following three variables is the best predictor of consumption: income, net worth or market value of home. The market value of a home is the best of the three. If you live in a pricey home situated in blue blood estates there is enormous social pressure to forego performance for prestige brands.