Why Billionaires Try To Look “Poor”

Billionaires are not like the average person, but it’s crucial for them that the public perceives them as such. In fact, some are investing millions each year in PR agencies to convey the message that they’re just regular people who drive everyday cars, dine at typical restaurants, and reside in regular homes.

However, in the era of flex culture, why are these people making such an effort to appear normal?

These people are just trying to show off as loudly as possible that they don’t care about their money or that their money hasn’t changed them. Let’s call it poverty peacocking, and it’s a great move for their personal brand and any companies they represent.

Humble CEOs are the new fashion; the world’s biggest companies are run by men who wear hoodies and turtlenecks instead of tailored suits. Other business leaders are trying to emulate that trend because investors like it. If business leaders very publicly give up flashy luxuries, it also sends the message that they will be frugal in running their business.

The data backs this up. A study conducted by the National Bureau of Economic Research in 2012 found that CEOs and CFOs who were not frugal in their own spending were more likely to have instances of insiders perpetuating fraud and were more likely to push equity-based incentives to increase their income.

The study separated personally frugal and flashy executives by looking for purchases like a personal car worth over $75,000 or a boat over 25 feet.

Billionaires and executives didn’t actually want to give up their luxuries, so they just started lying about it. Warren Buffett does own an old beat-up car, but he is usually driven around in a fleet of Suburbans with a security team. Mark Zuckerberg wears the same gray shirt every day, but they are custom-made by Brunello Cucinelli.

Elon Musk does rent a tiny home next to the SpaceX factory, but the Wall Street Journal pointed out that he spends most of his time in an 8,000 square foot $1 million mansion, and all of these men fly private. They are welcome to these luxuries; it is their money. But there are still two more reasons why they try so hard to pretend that they don’t exist.

The second reason that really wealthy people go above and beyond to look normal is because it is an effective sales tactic.

People also buy relatability. So, the clever billionaires who want to use their image to boost their own company will make sure that people can see them living lives that people can relate to and aspire to.

The New York Post recently ran an article about Warren Buffett’s wife, who was supposedly overheard complaining about how expensive a $4 cup of coffee was at the annual Allen & Company Sun Valley Conference, nicknamed the summer camp for billionaires.

This story was also picked up by publications like Business Insider, which ran it with the title “Warren just became even more relatable for a billionaire.”

If it wasn’t obvious, let me ruin the fun for you. Nobody at this conference would have passed along this kind of personal conversation to the press. You are reading about it because they want you to read about it. Buffett’s frugality is credited with his investment company’s success, so he is selling an image just as much as Trump is with his steaks and O’Leary is with his wacky pants.

For Buffett, this is a better story than a bunch of billionaires getting together to talk in private about, well, who knows. The only information that seems to leak from these events is how expensive the coffee is.

But even the billionaires paying their PR teams to get them positive media coverage about how relatable they are are still doing damage to a lot of people’s personal finances because they are reinforcing a common trope in personal finance that everybody’s financial problems are caused by them spending too much.

The lies that very wealthy people tell about their humble cars, basic homes, and average lifestyle make it easy to guilt people for enjoying little luxuries because if Warren Buffett drives an old car, why do you need a new one?

This does not excuse the reckless spending that a lot of Americans are guilty of, but it does take the attention away from their income. After a certain point, people can’t improve their personal financial situation by being more frugal; they need to increase their income.

And that’s the third reason that billionaires spend too much money on looking poor — it helps them keep their workers in line.

The accounting firm Ernst & Young, in a report, estimated that the number of family offices in the world had doubled between 2001 and 2016. Family offices are investment firms dedicated exclusively to managing the wealth of a single family.

While you and I have some shares on Robinhood or Schwab, the ultra-rich keep their money in family offices. An article by Barron’s reported that one of the fastest-growing expenses for these firms was public relations. Many of these family offices are so big that they now have as much influence as private equity firms, and with influence comes scrutiny.

Private equity firms are some of the most hated financial institutions because they have a long history of bankrupting beloved companies and laying off thousands of workers, all to try and turn a slightly better profit. That’s right.

What we’ve seen in industry after industry where private equity buys up businesses is that they’re really responsible for some of the worst, most abusive business practices in the country. The scrutiny has been very bad for private equity, but the anger is only directed towards the managing partners of these companies.

When a family office does the same thing, public outrage over job cuts would be blamed on the family, and that’s where a good PR team is employed.

It’s easy for workers to demand better wages from a company owner who is photographed lounging on a superyacht. But it’s even easier for a company owner to push back against worker demands when all of their public profile is about how they try to save every cent they can in the name of their business. But that’s just my opinion.