Beyond Hype: Realistic Look at Hyper-Consumption

Imagine a situation where people keep buying and spending a lot because they think it’s making them better off. Isn’t that what’s going on? We’re going to take a closer look at hyper-consumption, understand why it happens, and see what it means. Plus, we’ll explore some smart ideas for investors who want to make the most out of these times of excitement and spending.

The Context

A society in which consumption has to be artificially stimulated to keep production going is a society founded on trash and waste, for such a society is a house built upon sand — Dorothy L. Sayers

Hyper Consumption is a machine that “feeds upon itself” and where everyone believes they are winning. What would you do as an economist to promote the immediate expansion of the national economy?

💬 Answer: Boost Consumption

What would you do as a salaried person with a lot of dreams to keep up with the Joneses (your neighbor)?

💬 Answer: Buy more and buy better

According to a study conducted by Ali Eren Alper, (a Turkish scholar) on developing countries, ‘an increase of 1 percent in consumption expenditures increases economic growth by 0.41 percent. While a 1 percent increase in investment expenditures raises economic growth by 0.25 percent.

Unexpectedly, the rise in portfolio investments has a positive, albeit modest, effect on economic growth compared to consumer spending. As a low-hanging fruit, consumption is therefore preferred to invest in order for an economy to grow and expand.

This is one of the explanations for the constant worldwide encouragement to consume finished items rather than invest in them. We hope that by this point you can see where this is going.

Let’s consider this from the viewpoint of an investor.

What Is Consumption?

Consumption, in economics, is the use of goods and services by households. Consumption is completely different from consumption expenditure, which is the purchase of essential goods and services for use by households.

Neoclassical (mainstream) economists generally consider consumption to be the final purpose of economic activity, and thus the level of consumption per person is viewed as a central measure of an economy’s productive success.

Investors always benefit from consumption, and our governments are ready to support you!

There are mainly 8 ways for governments to increase consumption:

1. Leave more disposable income in the hands of individuals (salary advances etc.)

2. Leave more investable surplus in the hands of businessmen (by meddling with tax rates)

3. Force banks to cut down interest rates

4. Infuse an economic growth stimulus

5. Offer investment allowance (tax rebates on investment)

6. Accelerate public investments in infrastructure

7. Relax foreign direct investment (FDI) rules

8. Print money (with a risk of hyperinflation)

Governments around the world are prolific marketers and advertisers.

As you must have noticed during the economic uncertainties led by the COVID pandemic, administrations around the world took multiple measures. The one that stood out the most was the decline in interest rates, which decreased the cost of borrowing (also known as Cheap money).

This is typically done to encourage individuals and businesses to borrow money, make investments, and most crucially, spend it—a sort of S.O.S. requirement for managing the economy. Most economies had a quick V-shaped rebound as a result of increased consumption.

What Is Hyper-Consumption?

When people spend more money and consume more than what they actually need, it is said to be hyper-consumption. A consumer’s mindset is all that is involved here.

The idea of “hyper-consumption” holds that one’s level of personal consumption, particularly the acquisition of material items, has a significant impact on one’s well-being and pleasure.

The idea is not simply that our well-being depends upon a standard of living above some threshold, but that at the center of happiness are consumption and material possessions. A hyper-consumerist society is one in which people devote a great deal of time, energy, resources, and thought to “consuming”. Consumption is good, and more consumption is even better, according to the prevailing perception of life in a consumerist culture.

Hyper-consumption is even better for investors as long as they don’t participate with conviction!

But how can something drive consumers to a stoned state of hyper-consumption?

By the end of 2022, spending in the Indian advertising sector is anticipated to reach up to ₹700 billion.  (Source: Tanushree, Statista). With 1.4 billion people in the country, this equates to an allotted advertising expense of about ₹500 per person.

Who claimed that India is still a developing country?

As per a market research firm Yankelovich, — the average person is now estimated to encounter between 6,000 to 10,000 advertisements every single day. This number was between 500-1600 back in the ’70s when most ads could be found on pamphlets, billboards, in newspapers, and on TV promoting the latest products.

Corporations and companies are willing to spend this awful amount of money just to grab a consumer’s attention in anticipation of driving Hyper-consumerism and consumption. The purpose of such advertisements is not only to promote essential products but a vision of seemingly “the big life” and the only means to happiness.

Shopping thus is experienced by many people as an exciting recreational activity. People usually go deeply into debt to buy things beyond fundamental necessities- a bigger house, a giant television, an elegant automobile, and absurdly expensive toys on monthly EMI.

All of these characteristics are signs of a culture where consumerism is the norm.

Sophisticated exploits

Every investor must understand that we are all animals of oblivious attitudes, beliefs, and emotions activated by stimuli and subtle cues in our surrounding environment. Although everyone is exposed to this stimulation, those who have a consumer mindset are more likely than average to react to it.

This response plays a key role in determining the fine line between normal consumption and its hyperactive form. Businesses and brands are always looking for fresh approaches to engage consumers and ultimately persuade them to purchase their goods and services.

The bakery and flower shop in the supermarket, which are both usually close to the entrance, are there for a reason. They have the nicest aromas, and the aromas make you hungry.

Supermarkets take advantage of your sense of smell by making you hungry, which leads you to overfill your cart and spend more money. Using a different supermarket as an example, where all of the necessities, such as milk, baby food, and bread, are stocked in the back of the store?

It’s not a surprise that supermarkets place those products in the rear of the shop, forcing customers to go through the aisles and pass through more enticing junk food options like chips, dips, candies, and soda to reach their desired items.

Unaware customers are constantly moving through a maze of superstores as digital catalysts are now a part of daily life. Even though so much has changed throughout the ages, archaic human behavior is still attempting to catch up. This is helping exploits that use psychological back-doors to succeed.

The Seven Sins That Lead to Excessive Consumption

What’s the problem with this?

It would be impolite to accuse someone of spending over their means or being “too engrossed in consumption”. Everyone can judge their desires and tendencies the best as an adult.

However, the diversions that come along with satisfying these anxious materialistic cravings are the causing the key problems. The only irreplaceable thing someone may possess is the power of Time, which is required for the acquisition of any possession.

The quest for material things thus frequently results in a less meaningful life that’s always short on time. On the contrary, people with an investor mindset are content when they know when to pause and turn their heads.

“This joyful lot” prefers to spend their time learning new things by absorbing other people’s experiences and generating passive income streams.

They possess the superpower of the time, which allows them to spend meaningful time with their loved ones, children, and friends.

It is to be noted that nobody ever laments their lack of toys, gizmos, and gadgets as they lay on their deathbed.

Conclusion

It’s crucial to maintain a comfortable, worthwhile existence since consumption is a necessary part of the stable economic system in which we find ourselves.

Contrarily, hyper-consumption is a hypnotic state brought on by constant external influence and recommendations. This quest finally results in a decline in our quality of life and the loss of money and time.

Chronic customers will always be present, so smart investors will continue to profit from their wise investment decisions.

A solid attitude that is motivated by alertness and understanding of our surroundings is always the foundation of a sound investing tenet. We truly hope that you will keep this article in mind before making your next unnecessary luxury purchase, whenever you’re idling at a mall or browsing odd websites.

Besides, the PlanB community is committed to helping you stay inspired and mindful.

🔔 Investing is expensive, but leaving comments on this blog is free!

Invest wisely!