Ignorance rears its head in subtle ways. A recent video from automotive YouTube channel VINwiki lends insight into just one such example of this truth.
On this particular episode of VINwiki, a man's son chronicles his father's early years when his own father bought him a brand new Lamborghini Miura P400 at the age of sixteen. He would later sell the Lamborghini Miura P400 for a new Lamborghini Miura S, and then another Miura S. In 1972, he would travel from Massachusetts to the Big Apple to attend the New York City Auto Show, one of the most prestigious auto shows in the country at the time.
As he wandered around the show floor, he would eventually see a black 1972 Lamborghini Miura SV on display. According to the video, "It wasn't just any Miura SV." It had a number of special features and a unique interior tailored specifically for the auto show.
As it turns out, the young nineteen-year-old Lamborghini owner refused to leave the auto show without having purchased that very vehicle on display. He just had to have it, because his $13,000 Miura S was apparently inadequate, and he wanted, or perhaps even needed, to have the best and flashiest Lamborghini on display. So the young man promptly sold his Lamborghini and later returned to buy the $20,000 Lamborghini and drove it right off the display at the New York Auto Show. For perspective, $20,000 was just short of the median home price in the United States at the time, when the average new car price was roughly $3,500.
But even this wasn't enough for the young man. He was determined to have it all, so "he filled up his friend's Cadillac, or whatever it was, with spare parts and actually went to Modena Racing, which was located in New York City, and said, 'I want spare parts. I want extra this. I want this.'" According to the video, the man still owns the car to this day, and not only is the car in pristine condition, but he has received numerous offers, from prospective buyers, measuring in the millions of dollars. However, his son contends, “My dad’s not a rich man by any means.” Of course, this is a laughable comment by someone lacking both perspective and understanding about what it means to be "rich".
While “rich” is certainly a relative term, anyone who’s worked for a living knows the difference between having little and having a lot. Once you’ve emerged from having little, you will always feel rich. The fact that his son describes him this way suggests that their family hasn’t struggled financially for a long time — no doubt, they earned it, but anyone with any memory of the prior struggle, whether his own or that of a prior generation, would recognize just how “rich” or “wealthy” he truly is.
Whether relative to the people of the Third World, most of whom will never even lay their eyes on a Lamborghini, or those of the most developed economies in our midst, generally only the richest of people in the world will ever have the privilege of driving a Lamborghini, let alone the privilege of owning one.
This is not to take away from the fact that people have earned that privilege, but to remind them that they are unimaginably "rich" in comparison to the rest of the world. Indeed, it is only by comparison to other "rich" people that one could even begin to underestimate wealth in the first place.
Of course, members of the developed world tend to radically underestimate their welfare compared to their counterparts across the globe. According to the 2018 Global Wealth Report from the Credit Suisse Research Institute, a net worth of $871,320 qualifies for the top-1% globally. Credit Suisse defines net worth, or “wealth,” as “the value of financial assets plus real assets owned by households, minus their debts.”
Reportedly, more than 19 million Americans are in the top 1 percent worldwide, far more than from any other country. Meanwhile, “China is now clearly established in second place in the world wealth hierarchy,” with 4.2 million citizens among the world’s top 1 percent.
To be among the top 10 percent worldwide, a net worth of $93,170 will suffice. And even if you have just $4,210 to your name, you’re still richer than half of the world’s residents.
Needless to say, a collectible Lamborghini valued in the millions of dollars, even if this is one's only asset, is enough to qualify the owner as "rich".
It appears the truth, however, isn't enough to convince many in the audience, as the comments section for this video is rife with justifications and excuses pinned to subjective opinion or inflation-adjusted comparisons. Quite simply, subjective opinion is indeterminate, just as inflation-adjusted values are irrelevant.
The boy's father didn’t buy the consumer price index (CPI); he bought a collectible Lamborghini whose value has far outpaced the CPI. What’s more, the auto market is very different today, with financing more accessible and annual percentage rates (APRs) far lower than in the 1970s, when the market was determined more purely by cash buyers instead of debtors.
Whereas the average American household today could theoretically finance a $120,000 BMW, most would be ill-advised to make this purchase. Simply put, there is a stark distinction between “affordability” in the 1970s and that in the modern age.
What the average person finds “affordable” today would have been decidedly unaffordable for the American family of yesteryear; it’s not just that financing wasn’t as widely available, but that Americans used to save at a much higher rate.
Today, Americans are debtors more willing to take on debt and forego savings. They ordinarily think they can “afford” something even if it depletes their savings, or if they can just meet the monthly payments. Formerly, however, Americans accounted for savings before deciding whether they could “afford” a purchase, and they generally paid in full.
Finally, given the faulty nature of the CPI, we can index to hard money, gold, for a better gauge of true dollar depreciation since 1972; with this comparison, $20,000 in 1972 equates to more than $600,000 in 2021; incidentally, this is nearly identical to the price of a new, fully-loaded Lamborghini Aventador SVJ.
The moral of the story: perspective matters.