The Biltmore Estate and Spending Traps
In 1889, George Washington Vanderbilt II, grandson of Cornelius Vanderbilt, began construction on the largest private house in the United States. Modeled after European chateaus and completed in 1895, the house – originally intended to be a small summer home – required its own brick kiln, woodworking factory, and railroad to be constructed.
The estate had over 250 rooms, extravagant gardens, a village, and over 125,000 acres of land. Upon its opening in 1895, Vanderbilt hosted a lavish Christmas party, which included a 40-foot-tall Douglas fir Christmas tree.
The house cost over $5 million to construct – over $150 million in today’s dollars. The place was off the chain.
Where it all went wrong
In 1909, disaster struck. Congress passed the 16th amendment which allowed the government to levy an income tax, and by 1913, they began doing so.
Under the crushing maintenance costs and new tax obligations (in the biz we call this taxation risk), the property came under severe financial stress. Originally intended to be self-sustaining, the property was quickly running out of financial runway. In 1914, George initiated a sale of over 87,000 acres of land to the federal government (which is now Pisgah National Forest), which his wife completed after his death.
Overwhelmed by running the estate, George’s wife Edith Vanderbilt sold off Biltmore Estate Industries in 1917 and Biltmore Village in 1921. Starting in 1924, the home was occupied by George and Edith’s daughter, Cornelia, and her husband. In 1930, under financial pressure due to the Great Depression, the family opened the home to tourists.
Today, the property hosts weddings and corporate retreats, and anyone with $69 to spare can visit the home.
So, what was the point?
The Biltmore Estate was massive and required an absurd amount of upkeep. When the property was occupied, it took over 40 servants to maintain the home, property, and stables.
Most of the time, the property functioned more like a luxury hotel than a home, with guests coming and going throughout the year. Eventually, the expense required to maintain the property was its downfall, and the family was no longer able to use it as a residence.
One might wonder why someone would spend such an exorbitant amount of money to have a nice summer home in the mountains. Surely, it could have been achieved for far less than one-hundred-and-fifty-million dollars (7 zeros). The most expensive home currently listed in the Asheville, NC area is a comparatively modest $12.5 million – and it’s nice.
Despite the availability of more reasonable options, the Vanderbilt family's motivation for building the Biltmore Estate was not to have a nice summer home in the mountains. It was to showcase their wealth and status.
The estate was designed to require a large staff of servants, and the property spanned 125,000 acres, requiring significant upkeep. The Vanderbilt family wanted guests to marvel at the estate's grandeur and think “wow, this must be expensive to maintain.”
In this way, the estate served as a way for the family to flaunt their ability to afford such an expensive enterprise.
However, according to Vanderbilt, the property was “utterly unaddressed to any arrangement of life” and he ended up spending little time at the property that nearly bankrupted his family.
If the Vanderbilts existed on a deserted island without millions of other people they felt the need to impress, and were tasked with building a home - they would’ve built something more reasonable. I’ve never had servants, but I imagine the marginal utility begins to go down after two or three of them. They certainly would not have built a home that required over 40 servants to operate.
Tastes change over time — the modern-day mega-rich probably cringe at the idea of having a servant help them change into a bathing suit, or wash their hands for them like the Vanderbilts had their servants do. But they don’t cringe at the idea of building a home with more rooms than they can possibly use. Or buying a yacht with space for more people than they could possibly spend time with.
But it’s not only the mega-rich that fall into this trap of buying things for other people.
Spending traps for the rest of us
The most commonly sold car in the United States is the Ford F150. The vehicle has over 3000 lbs of payload capacity and can tow over 12,000 pounds, and is sold for an average price exceeding $50,000. Meanwhile, 75% of truck owners use their trucks to tow one time per year or less. 70% never go off-road and 35% never even use the truck bed.
So, why are people buying these cars?
Because of what they say to other people (or rather, what people think they say to other people). Because of the status they infer. They are the middle-class answer to mega yachts.
But trucks aren’t the only vehicle for the middle class to showcase their ability to spend – homes that are too big, watches that go unworn, top-tier kitchen appliances that sit unused while their owner Doordashes dinner for the fourth time that week all serve this purpose as well.
Status games are an inevitable part of the human experience. We're all playing them – from the clothes we wear to the books we leave on the coffee table when we’re expecting guests.
But we can be intentional about the money we spend playing these games and make sure we get maximum utility from our limited resources. The Vanderbilts spent $150,000,000 building a mountain estate they barely used and nearly went bankrupt.
I know people who can’t achieve their financial goals because they’re being swallowed by a payment for a car they rarely use. I also know people with expensive vehicles who get a ton of utility out of them by taking them off-road or to a race track.
Since we’re all playing these status games (attempting to opt out is a form of playing too!), it’s important to make sure we recognize the times we’re tempted to spend in a way that doesn’t benefit us. We can do this by ensuring our purchases bring us joy and utility — and by making sure we don’t end up in financial holes that we didn’t even have any fun digging ourselves into.