This could be one of the most important concepts of your life….If you’re like more humans you’re probably a status seeking machine!

This reminds me of Nassim Taleb’s story in Fooled By Randomness of the two couples, one couple gets lucky and wealthy  and the other sticks to their circle of competence. Eventually it becomes difficult to live around people with more money and success (or loosely interpreted as status).

All value investors should understand how they personally relate to social status. To take it one step further Value Investors should understand how appeals to social status can influence their decision making and lifestyle choices.

Click Here To Read: The Psychology of Social Status

Introductin (Via Scientific American)

Nobel Laureate economist, John Harsanyi, said that “apart from economic payoffs, social status seems to be the most important incentive and motivating force of social behavior.” The more noticeable status disparities are, the more concerned with status people become, and the  differences between the haves and have-nots have been extremely pronounced during the economic recession of recent years.  Barack Obama campaigned directly on the issue of the “dwindling middle class” during his 2008 presidential run and appointed vice-president Joe Biden to lead a middle class task force specifically to bolster this demographic.  Despite some recent economic improvement, Senator Bernie Sanders of Vermont just two months ago cautioned that “the reality is that the middle class today in this country is in desperate shape and the gap between the very very wealthy and everyone else is going to grow wider.”  Concerns about status likely will not be leaving the public consciousness any time soon.

Of course, status differences are not simply relevant to economic standing, but they appear to be on our minds at all times.  As renowned neuroscientist, Michael Gazzaniga, has noted, “When you get up in the morning, you do not think about triangles and squares and these similes that psychologists have been using for the past 100 years.  You think about status. You think about where you are in relation to your peers.”  Between CEO and employee, quarterback and wide receiver, husband and wife, status looms large.  Recent work by social scientists has tackled the topic, elucidating behavioral differences between low-status and high-status individuals, and the methods by which those at the bottom of the totem pole are most successful at climbing to the top.

Favorite Excerpts (Via Scientific American)

Henry took on the traditional Culture of Honor hypothesis to suggest instead that differences between herding and farming cultures in violence actually stem from differences in status.  His theory is based on a considerable psychological literature demonstrating that individuals from low-status groups (e.g. ethnic minorities) tend to engage in more vigilant psychological self-protection than those from high-status groups.  Low-status people are much more sensitive to being socially rejected and are more inclined to monitor their environment for threats.  Because of this vigilance toward protecting their sense of self-worth, low-status individuals are quicker to respond violently to personal threats and insults.

Finally, in an experiment with both high- and low-SES college students, Henry demonstrated that boosting people’s sense of self-worth diminished aggressive tendencies amongst low-status individuals. Henry asked some students in the experiment to write about a time when they felt important and valuable.  Other students did not receive this assignment, but instead completed a rote task about defining nouns.  In a second portion of the experiment, all participants answered questions about how willing they would be to respond aggressively to threats. Consistent with the general population studies, college students from low-SES backgrounds expressed more willingness to respond aggressively to insults, but this tendency diminished markedly for those who first wrote about themselves as important and valuable.

The sum of these findings can begin to explain the troubled circumstances of those lowest in status.  Ongoing efforts to maintain a positive view of oneself despite economic and social hardships can engage psychological defense mechanisms that are ultimately self-defeating.  Instead of ingratiating themselves to those around them – this is the successful strategy for status attainment – low-status individuals may be more prone to bullying and hostile behavior, especially when provoked.  Research identifying factors that lead to successful status-seeking provides some optimism, though.  Individuals capable of signaling their worth to others rather than being preoccupied with signaling their worth to themselves may be able to break the self-defeating cycle of low-status behavior.

Click Here To Read: The Psychology of Social Status

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