What’s Wrong with The Millionaire Next Door

I put a passing reference to The Millionaire Next Door in my post Wednesday on The Tragedy of Impulse Saving.  A commenter asked about it and actually followed up to say that he would love to hear my opinion on the book.  I can’t bring myself to write a proper review of a 13 year–old title, but on the flimsy pretense that one person who comments must represent thousands of silent readers who feel  the same way, let me share why I don’t like it.  (That’s the problem with leaving comments here, I just read what I want to.)

MND To start with, Millionaire Next Door is poorly written.  Large sections just dump information on the reader without drawing any conclusions or giving any advice.  And the authors’ choices of topics, and how much ink to use on them, is peculiar, as if they just threw together the book from notes they happened to have had lying around.  So, for example, 70 pages (of 245 in my paperback copy) are spent on giving money to your children.  36 pages cover buying cars.  There isn’t much of anything on buying houses.  There’s a big section on selecting financial advisors, but little on investing as such.

The core advice in the 70 pages on giving money to your children is that you shouldn’t give money to your children.  Not only will it make you poorer, but it is bad for the kids. They will amuse themselves by spending it and not learn to be frugal like you. The authors cite data that shows that adult children who get money from parents are in general poorer and argue that giving your kids money will have the opposite of the intended effect. Unremarkably, they do not consider the possibility that maybe those children got money from their parents because they were poorer, not the other way around.

The other reason not to give your children money, besides it being good parenting, is that if you give it to them then you will not have it anymore. And it is here that I stop being able to even relate to the message of the book. You save your money carefully throughout your life not so you can spend it on the finer things, nor even so you can spend it on the ones you love. You save it because it’s the right thing to do. This is the Scrooge McDuck school of wealth management.

The authors describe sharing their research with an audience of “affluent grandmothers.” (Yes, really.) One takes them to task.

I’m as indignant as hell. What am I supposed to do with my money? My daughter’s family is having a rough time making ends meet. Do you know about the problems with public school around here? I’m sending my grandchildren to private schools. (p. 145)

I’m with grandma on this one. Starting a statement claiming to be “indignant as hell” is not the way people, even affluent grandmothers, talk in my part of the country. But where I come from, sending your grandchildren to private school is just about the most wholesome thing you could do with your money, short of anonymous donations to charity. The authors of Millionaire Next Door have different values. Private school tuition is mentioned repeatedly in the same category as big houses, country club memberships, and, of course, luxury automobiles. (Did I mention the other day that the authors were professors of marketing at state schools?)

And their analysis of this obviously deranged old lady:

It is obvious to us that this grandmother is not completely at ease about providing economic outpatient care to her daughter’s family. The real problem is not with the public schools; it is that her daughter’s family is in a situation of economic dependency. Mother has difficulty with the fact that her daughter married someone who is unable to earn a high income. (p. 146)

Even I have trouble getting beyond the Neanderthal sexism implicit in this diagnosis. Perhaps the son-in-law does just fine but it is the daughter’s career as an aroma therapist that disappoints her mother. Or maybe daughter is a single mom.

Even if we accept that this woman is disappointed in her daughter’s choice of life partner, can it really be that the authors are blind to the fact that it is not the daughter or son-in-law who are the recipients of grandmother’s largess? It is the grandchildren who are going to private school. Perhaps Grandma wants them to have every advantage they can, something especially important given their good-for-nothing father.

Alas, these authors cannot get beyond the fact that this person is allowing her descendants to live a lifestyle beyond their means. The right course is to live well below your means. Living at your means is bad enough, but beyond it is just flat out wrong. And reading this book you come to realize that they do not mean wrong in the sense that it is fiscally unwise. They really mean immoral.

Scratch the surface of Millionaire Next Door and you find an ugly streak of class envy, or maybe class disgust. The heroes of this book are the millionaires who look and act like ordinary folks. They shop at J.C. Penney and drink two kinds of beer: “free and Budweiser.” The villains are those that have expensive tastes and spread those tastes to others. And nowhere is it suggested that those expensive high status things might actually be objectively nicer than the lower status alternatives. For the authors of this book, status is the solitary benefit you get from the country club or from sending your kids to a private school.

Millionaire Next Door has, and I use this term carefully, a Marxist view of consumer culture.  It holds that the reason that most people with steady jobs lack tidy fortunes is that they are seduced into spending all they make, and possibly more, on high status items consistent with their perceived station in life. The problem is not that you, the reader, cannot figure out how to live the lifestyle that you desire but that you desire it to begin with. The point of the millionaire living in the ordinary house next to yours is not that even somebody like you from this neighborhood can get rich. The point is that the millionaire had the good sense not to take on pretensions and move on to a nicer area.

Millionaire Next Door sold about three million copies and spent three years on the New York Times bestseller list.  I don’t think this was because the late ‘90s was a time receptive to an anti-materialism, anti-status, anti-rich message.  On the contrary, it was the surface message, that anybody could become rich if they followed the secrets in the book, that generated enthusiasm.  Readers just ignored the anti-rich stuff and the kooky advice about buying cars by the pound.  That’s the trouble with giving advice, folks just read what they want to.

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