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Why we’re obsessed with rich people

Rich people news headlines get me every time. The rich are getting richer. More people are getting rich. North America reclaims its top spot globally with the most millionaires last year and the world's wealth levels rose to a record high, was the latest to grab my attention.

So I began to question why. Why are many of us obsessed with stories and lifestyles of the rich and famous, especially when we're often reluctant to talk openly about our own personal finances. It's a complex and emotional behavior that was summed up by a quote attributed to John Steinbeck: Socialism never took root in America because the poor see themselves not as an exploited proletariat but as temporarily embarrassed millionaires.

We are very interested in money for good reason. It is necessary for buying food, houses, paying bills, sending kids to school, retiring and so on. But we care about money not just for consumption, but also for status. And that's when it often gets uncomfortable.

As a temporarily embarrassed millionaire, we believe one day we'll belong to the rich club. That's why the World Wealth Report, published Tuesday by RBC Wealth Management and Capgemini Global Financial Services, is enticing. It shows that last year there were more people in North America with at least US$1-million in investable assets than there are in the Asia-Pacific region.

The report also shows the combined wealth of the world’s millionaires rose 10 per cent to a record $46.2-trillion last year. That North America remained the richest region with $12.7-trillion of high-net-worth assets.

The world wants the American Dream

"The idea of social mobility, and especially upward social mobility, has deep roots in Western culture. This really is at the heart of Western capitalism," says Jacob Hirsh, a professor of organizational behavior at the University of Toronto's Rotman School of Management.

"It's embodied most clearly in the American dream: that any one of us could make it to the top. That's the whole point. That's why we're so willing to invest in it."

There is an entire cottage industry of books that help us emulate the rich, adds Hirsh, noting the key people are most interested in how to possess similar character traits, lifestyles; how to do exactly what they're doing in order to make our way up the ladder.

Now that he mentions it, there were surely times when I have tried to mimic the rich. I might not have even been aware of it.

So, in this context, it's no surprise it is taboo to talk about our own personal financial situations because it exposes socio-economic inequalities.

"Status has to do with relative wealth and relative position. We want to know where we stand," says Meir Statman, a professor of finance at Santa Clara University and author of What Investors Really Want: Know What Drives Investor Behavior and Make Smarter Financial Decisions.

"The moment you start to disclose income, we are in fact, kind of saying I am above you or you are above me. One of us is going to be injured in that conversation; one of us is going to feel like a loser."

For those who can't buy their way out of life's stresses, talking about money can also bring up a whole pile of personal strife. Crushing debt loads, relationship problems due to a lack of money? It's in the numbers. Canadian household debt levels are at record highs so why would people want to talk about their personal finances. What a downer.

Curiously, at the same time, many rich people don't want to flaunt their wealth either because they, too, want to belong, identify in a group for fear of being ostracized. "Status displays are complicated by our desire to obscure them," Statman writes in his book.

"We might want to mention our investments in hedge funds, knowing that hedge funds signal high status. But a loud expression of status, like a display of an oversized logo on a Gucci bag, can bring embarrassment rather than esteem."

These are the little mind games we play. We might envy the ones that are ahead of us and strive to reach them, but at the same time we're likely afraid those behind us catching up.

So, RBC and Capgemini, you are keeping the American dream alive. As humans we naturally compare ourselves to others. It's natural to be intrigued by rich people, but let us obsess knowing the reality is the gap between richest and poorer is pretty wide.

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