Financial Myths: If You Have to Ask...

Michael McTague |

ohn Pierpont "J. P." Morgan“If you have to ask how much it costs, you can’t afford it.”

In this piece, the Myth Buster looks at this iconic statement by JP Morgan. Maybe he was right at the time, but what about now? Morgan lived from 1837 to 1913. Does his quip still retain its power?

After gaining headwind for a decade or more, even through the recession, high ticket alternatives are exploding. Take golf, long a symbol of wealth. The US now boasts more than 16,000 courses and Americans play more than 600 million rounds of golf a year. In China, whose GDP is ballooning, golf courses tripled in five years. Looking back at the holidays, many of us felt inundated with new brands of luxury candy, all wrapped nicely in gold, silver and red. The unquenched luxury appetite implies two things about the Morgan quotation. More people enjoy wealth and do not have to worry about how much something costs. It also means that wealth and luxury are not viewed the same way they were when the great financier strutted around lower Manhattan with a top hat, vest, gold pocket watch and spats.

Let’s examine the second possibility first, that our basic outlook on wealth  does not conform to yesteryear. A few years ago, the author was invited by a few friends to the Bull and Bear, a fancy bar in Manhattan. He noticed a gentleman with a waxed, handlebar moustache, wearing an Armani silk suit, sipping Crème de Menthe while chatting with a much younger women. The patron stood out – as much as JP Morgan himself might if he stepped into a modern JP Morgan Chase board meeting.

Nowadays, one may wonder if it was a true Armani suit. Alongside high priced items, clever luxury knockoffs are exploding, naturally at much lower prices and for a far wider audience. Faux Mont Blanc pens were given to high achievers at a company a few years ago. The only way to tell the difference from the real thing is to write something. Pens, suits, liquor, paintings, college degrees – everyone has to become a Sherlock Holmes to spot the fakes.

The appetite for ringers is widespread and the craft of the substitute makers amazes. A website offers fake college diplomas starting at $99.99; the price starts at to $149.00 if you also need a transcript. Even Christie’s has been tagged with selling fake art – by accident, of course. The makers of stand ins have also gained spirit. A website boldly offers luxury items with a painless price tag. You can find Gucci, Prada and Armani. You don’t even have to ask how much it costs; the price is conveniently shown under the item.

Affordable Luxury

We live in an age of “affordable luxury.” Have we reached the point of gaining sustenance from oxymorons? How about jumbo shrimp, the walking dead (a popular TV show) and budget deficit. Yet, the idea calls up buried desires to possess the financially unattainable. The ubiquitous Wikipedia carries an entry on “Affordable luxuries.” In their entry, Armani is joined by Dom Perignon. (This might makes you wonder about the gentleman in the Bull and Bear. No single-malt Scotch or Dom Perignon. Maybe the Crème de Menthe was merely to please the lady!)

The idea of affordability runs even more deeply into contemporary life. Shouldn’t everything be affordable? Aren’t we bombarded with promises that everything can be affordable? Alongside the rise of the luxury substitutes anything people desire is said to be within their financial reach. At a recent meeting, speakers reeled off a series of great things about their organization. They said alternately and repeatedly that they were “affordable” and that they offered “quality.” If luxury – the perfect example of quality – can be affordable, maybe everything can be paid for easily.

Has the government caught on to this trend? Fannie Mae and Freddie Mac offered affordable sub-prime mortgages. The US government now assists future students through a tool called the College Affordability and Transparency Center, an effort to reveal the “true costs” of going to college. How affordable is college? According to CNN, the average college graduate in New York carries $27,000 of student loan debt. That debt covers the cost of education not paid even after billions of dollars of federal and state funding. Most of the $27,000 derives from low interest loans, some of which are subsidized by taxpayers. So, as far as the affordability part goes, a college education fits if plenty of tax money builds a foundation and if the student and his or her family are willing to take on some debt.

The first implication identified above was that more people may enjoy wealth and do not have to worry about asking how much something costs. That only covers a handful of people. We also live in an age of “affordable quality.” This stretches to homes, automobiles, mortgages, college education, luxury products and most recently health care. (Note the official name of the law.)

So, in conclusion, JP Morgan was right for the nineteenth century. In the twenty-first century, we are closer to a quip by Henny Youngman: “When I told my doctor I couldn’t afford an operation, he offered to touch up my X-rays.”

Next month another myth will be busted. Please comment on this myth and let us know which myths need exposure.


Michael McTague, Ph.D. is Executive Senior Vice President at Able Global Partners in New York.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:


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