The Psychology of Money

To understand the psychology of the modern consumer and to grasp where they might be

heading next, you have to know how they got here.

How we all got here.

If you fell asleep in 1945 and woke up in 2020 you would not recognize the world around

you.

The amount of economic growth that took place during that period is virtually

unprecedented. If you saw the level of wealth in New York and San Francisco, you’d be

shocked. If you compared it to the poverty of Detroit, you’d be shocked. If you saw the price

of homes, college tuition, and health care, you’d be shocked. If you saw how average

Americans think about savings and spending in general, you’d be shocked. And if you tried

to think of a reasonable narrative of how it all happened, my guess is you’d be totally

wrong. Because it isn’t intuitive, and it wasn’t foreseeable.

What happened in America since the end of World War II is the story of the American

consumer. It’s a story that helps explain why people think about money the way they do

today.

The short story is this: Things were very uncertain, then they were very good, then pretty

bad, then really good, then really bad, and now here we are. And there is, I think, a

narrative that links all those events together. Not a detailed account. But a story of how

things fit together.

Since this is an attempt to link the big events together, it leaves out many details of what

happened during this period. I’m likely to agree with anyone who points out what I’ve

missed. The goal here is not to describe every play; it’s to look at how one game influenced

the next.

Here’s how the modern consumer got here.