In 1987, Peter Kuhn was working as a postman in a small Massachusetts town when he won $2.8 million in the state lottery. Within six months of his windfall being announced in the local newspaper, something remarkable happened in his neighbourhood. In his latest column, Leif Stromnes, global CSO and award-winning strategy leader, unpacks what it tells us about the way people think.
Despite having no additional income themselves, his immediate neighbours began spending significantly more money. New cars appeared in driveways. Home renovations commenced. Luxury purchases that had been “someday” dreams suddenly became “today” realities.
The neighbours weren’t sharing in Peter’s winnings. They were simply keeping up.
This phenomenon is what economists call the “lottery neighbour effect,” and it reveals one of the most powerful yet invisible forces driving human spending behaviour: relative status anxiety.
When your neighbour wins the lottery, they don’t just gain money, they gain status. And in the intricate social mathematics that governs our daily lives, their gain feels like your loss.
Humans are extraordinarily sensitive to their position in social hierarchies. This isn’t vanity or shallow materialism, it’s evolutionary programming. For most of human history, your relative status within your group determined access to resources, mating partners, and survival itself.
Today, we no longer compete for mammoth meat or cave real estate, but the ancient circuitry remains. We instinctively monitor where we stand compared to those around us, especially those in our immediate social circle.
Psychologist Leon Festinger called this “social comparison theory.” We evaluate ourselves not in absolute terms, but relative to others. A $100,000 salary feels generous until you discover your colleague earns $125,000. Suddenly, your financial satisfaction plummets despite nothing changing about your actual circumstances.
This isn’t rational. But it’s human.
The 20th-century journalist and social satirist H.L. Mencken once quipped that a wealthy man is one who earns $100 a year more than his wife’s sister’s husband.
The lottery neighbour effect demonstrates this principle in its purest form. When someone in your social proximity experiences a dramatic status elevation, it triggers positional concern and an urgent need to restore the perceived balance.
Research by economists David Card and Gordon Dahl tracked lottery winners and their neighbours across multiple US states over a decade. They found that for every dollar a lottery winner spent on visible goods – cars, home improvements, boats – neighbours increased their own spending on similar items by approximately 25 cents.
This isn’t conscious scheming. Most people experiencing lottery neighbour syndrome don’t wake up thinking, “I must outspend Peter to maintain my social standing.” Instead, they find themselves suddenly dissatisfied with possessions that seemed perfectly adequate the week before.
Their car, once reliable transportation, now feels embarrassingly modest. Their kitchen, previously functional, appears dated. The vacation they’d planned to the coast seems insufficient when compared to their neighbour’s new ability to holiday in Tuscany.
Marketers have long understood the power of social comparison, though they rarely call it by name. “Keeping up with the Joneses” campaigns work precisely because they tap into our fundamental need to maintain relative status.
Luxury brands particularly excel at this, creating artificial scarcity and exclusivity that transforms products into status signals. The handbag isn’t just leather and craftsmanship, it’s a public declaration of where you stand in the social hierarchy.
American Express built an empire on this insight with their famous tagline “Membership has its privileges.” The card wasn’t sold on its practical benefits like interest rates or reward points. Instead, it was positioned as a symbol of social status that would elevate you above your peers. The unspoken promise was simple; carry this card and people will know you’ve made it.
The strategy worked spectacularly. Despite charging higher fees than competitors, American Express became synonymous with affluence and success, with cardholders proudly displaying their platinum and black cards as badges of social superiority.
Mercedes-Benz took a similar approach with their “The best or nothing” campaign.
The cars weren’t marketed on fuel efficiency or safety ratings, but on their ability to signal wealth and success to others. Every Mercedes in a driveway became a statement about the owner’s place in the social hierarchy.
Similarly, Qantas created the exclusive Chairman’s Lounge to act as the ultimate marker of prestige and status and to signal that the airline is the preferred choice of the captains of industry (including the captain of Australia, the Prime Minister, his partner and his son).
You cannot join the Chairman’s Lounge, you have to be invited, and all the signals and codes – the exclusive card, the mysterious door that leads to the club and the lack of knowledge from the general public about what lies within – create a powerful attraction for anyone considering flying Qantas.
This status is further enhanced with the famous Qantas pyjamas that act as a visible symbol that someone has the money to fly business or first class. These pyjamas are often taken home, photographed for social media or worn or re-gifted as a social status ritual.
These ideas work by first making you dissatisfied with your current position relative to others, then offering the brand as the solution to climb the social ladder. The message is clear: buy this, and you’ll finally be ahead of your peers.
Social media has amplified this dynamic exponentially. Where once you compared yourself primarily to immediate neighbours and colleagues, platforms like Instagram expose you to the curated highlight reels of hundreds of connections.
Every vacation photo, every restaurant check-in, every new purchase shared online becomes a potential trigger for positional spending. The neighbourhood has expanded from a few dozen households to potentially thousands of social connections.
This constant stream creates comparison and despair cycles, where people make purchasing decisions not based on their actual needs or financial capacity, but on their desire to match or exceed the lifestyle signals they see from others.
The fact that many of these are from influencers paid by the brands, makes no difference. The brands understand that they’re not only selling products, they’re also selling social positioning. They’re offering customers the tools to win the comparison game that plays out in their heads every time they see their friends’ new purchase.
As Festinger discovered nearly 70 years ago, our sense of wealth isn’t absolute; it’s relative. And in the grand theatre of social media feeds, your friends and peers have unwittingly become the leading protagonists in your personal financial drama.
The next time you find yourself coveting their latest purchases or feeling inadequate about your own financial situation, remember, they are probably looking at someone else’s purchases and feeling exactly the same way.
