What Easter Island Can Teach Us About Money

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“A fool and his money are soon parted.” That was a favorite quote of my late grandfather, who, by all accounts, was not a terribly genial man (although he loved timeless, biting quotes). We probably all know at least a few people who struggle to manage their money. In fact, most of us fall into this trap ourselves at some point in our lives, left scratching our heads and wondering just what the heck happened to that paycheck. But I’m not convinced this tendency toward overspending can be written off as easily as my grandfather’s quip implies. After all, the majority of U.S. households carry some debt; on average, it’s about 115% of disposable income. Even the government is in over its head. So what exactly is going on here? Are we all just foolish with our money? (See also: The Many Reasons to Make Do With Less)

The Spectre of Prosperity

I recently read the book Collapse: How Societies Choose to Fail or Succeed by Jared Diamond. It tells the story of the Polynesian people who colonized Easter Island, one of the most remote bits of habitable land on the planet. And while you might think that these people are about as far from the complications of modern finance as you can imagine, I found myself thinking about how people often behave when it comes to their financial lives — and how they manage to raze a perfectly fruitful financial life, time and time again.

According to Diamond, when Polynesians first landed on Easter Island in about 700 A.D., it was a lush paradise; by the time European settlers arrived in 1722, it was a wasteland. The islanders had cut down each and every tree on the island to fuel their fires, build their cities, and erect the giant stone statues that still stand there today. It’s a story that’s often used to point out humans’ tendency to build their lives on the present, without any thought about the future. It all boils down to the human tendency to procrastinate, to defer, to say “I’ll deal with it later.” Whether we’re talking about politicians, subprime homebuyers, or credit card junkies, the result is the same — a spectre of prosperity that’s haunted by its long-term consequences.

To me, the Easter Island people are a lot like those who cling to huge homes they can barely afford to pay for, or those who spend like there’s no tomorrow and are unable to retire. Why do we do this? It seems that for both the people of Easter Island and many people today, there’s at least one thing that’s a lot stronger than self-preservation — pride.

Building an Illusion

When I think about Easter Island and how each every tree was felled one by one, I wonder who was charged with cutting down that very last tree. It's easy to wonder what they were thinking. After all, they must have known they were cutting down the future of their society in pursuit of a life that just wasn’t sustainable. In the end, their society went from a thriving island of thousands to just hundreds of islanders with little food to sustain them and no wood to build homes or fishing boats. Their beautiful stone statues were the trappings of wealth, and these statues grew larger and larger over time. But just like going into debt to build a beautiful house and live a certain life, what many people — past and present — work so hard to build is an illusion, and one with disastrous consequences.

What Are You Building?

If you visit Easter Island now, you’ll still see its famous statues — hundreds of them, some standing more than 30 feet tall. The largest of all stand abandoned, unfinished. Presumably, the resources to quarry the stone and transport it across the island had run out, as had much of the food required to sustain the workers.

The consequences of building a life on money that is not your own are much less dramatic than the situation on Easter Island. But think of those statues looking out over the barren landscape of Easter Island and the vast ocean that surrounds it. At one time, they were emblems of prosperity and power. Now they are a sad curiosity, and the society they represented long gone. What they say about that society, however, hasn’t changed. So ask yourself this — are you erecting a monument to the present or building a life for the future? The problem with the Easter Islanders is that they chose not to change course. Will you?