**spoiler alert** [you will have to go to my blog to see the illustrations, including Venn Diagrams, that accompany this review]
Scarcity: Why Having T**spoiler alert** [you will have to go to my blog to see the illustrations, including Venn Diagrams, that accompany this review]
Scarcity: Why Having Too Little Means So Much by Sendhil Mullianathan and Eldar Shafir Times Books 2013 ISBN: 978-0-8050-9264-6
Men of Principle
On a dirty, noisy corner in a sun-seared Indian city, the authors Sendhil and Eldar were sweating away waiting for a bike cab to come along. After about 10 minutes a driver pulled up but immediately added a 50% markup to the regular rate. The driver expected the obvious –and hopefully oblivious– American passenger, Eldar, would gladly pay the inflated price. Sendhil wasn’t so keen. He insisted on waiting yet another 10 minutes on the hot, grimy street to catch a more reasonable driver. What did Sendhil and Eldar save by doing this? Less than 40 cents.
Looking at that negligible amount, Eldar wondered if the added uncomfortable time waiting and sweating was worth it. Sendhil didn't budge. Despite the driver’s protest that 40 cents is “nothing” for Americans, a 50% markup based on race or nationality just simply wasn’t acceptable to Sendhil. It wasn’t the money; it was the principle of the thing.
We all make these kinds of “principled” moves, especially when it comes to dumping our hard-earned cash into a seemingly unfair venture. As Duke University researcher Dan Ariely points out, ours aren’t the most rational of decisions when it comes to principles or costs of things.
A Little Voice of "Reason"
Historically, economists theorized that we made money choices rationally. A “Homo Economicus” voice in our heads would tell us which is the better economic deal. Unfortunately for economists, humans aren’t all dollars and cents. Behavioral economics research studies show we make decisions based more heavily on context than Homo Economicus would like. In fact, it seems that we humans can only base our decisions on context (including moral belief systems). Refusing the bike cab driver’s blatant exploitation was worth more to Sendhil than getting off that hot street corner.
These findings have upended traditional economics. Ariely contends we may be irrational beings in light of Homo Economicus, but actually we are quite predictable in our irrational ways. We all tend to make the same kinds of decisions in similar situations (especially within cultures). Most Americans tend to make the same type of decision Sendhil made, albeit in different contexts.
Self Help for the Irrational
The book Scarcity: Why Having Too Little Means So Much by Sendhil Mullianathan and Eldar Shafir examines decisions made whilst suffering from diminishing resources. The authors outline 3 elements that are at the base of logic for our choices in this resource-strapped context: Scarcity; Bandwidth; and Tunneling.
Scarcity, Bandwidth and Tunneling are three states of capacity that influence choices. Opposite of scarcity is abundance, opposite of tunneling is wide and long-term focusing, and the opposite of bandwidth is no capacity to make decisions (e.g. states of extreme stress).
To put it simply, one must have a lot of bandwidth and little-to-no financial scarcity to think about saving for college or retirement. The peace-of-mind expendable income brings allows a person to think about and build up rainy-day savings. The poor are too busy putting out budgetary fires to think about retirement. They have too little bandwidth, or "slack," in their minds and their budgets to entertain such a long-term idea. They are worrying about rent and car repairs. Their tunnel-focus on those immediate costs render the poor unable to look far ahead or plan for the future. Anything that lies "outside the tunnel," as the authors say, gets ignored.
Scarcity, despite its overarching depressing theme of what separates the poor from the privileged, is a fun read. There are the classic behavioral economics studies cited as well as the authors’ own research. By the end of the book we’re armed with new information about how humans make decisions in times of both feast and famine. What the book doesn’t supply, though, is a self-help manual. There are no self-assessments, Likert rating scales, or pop psych quizzes to assist you in determining whether or not you are stuck in what the authors call a “Scarcity Trap” (a bandwidth-absent treadmill of debt-to-loan-to-more-debt that’s all but impossible to escape).
If I’m being honest, I must admit I was hoping for something along the typical self-help lines. I’m working on a fiction novel. Days go by where I don’t write a single word. I have no deadlines, no agent, no publisher. Scarcity showed me the lack of externally-imposed deadlines the dearth of allotted time I give to the novel rings the death knell for my novel. (Self-imposed deadlines, as the authors note, don’t work well because we negotiate ourselves out of them!) Would it have been so hard for the authors to add a “How to get yourself out of a Scarcity Trap” section?
Life in a [Deflating] Bubble
Alas, Sendhil and Eldar are economists after all; we know what helpful and empathetic joys they are to be around. To help us understand the concepts in the book and help me understand where my lack of novel-writing sits in this equation, I’ve made a Venn Diagram of the three decision-making states of scarcity, bandwidth and tunneling:
In the first circle on the left is Scarcity. It overlaps with the Bandwidth circle on the right and the Tunneling circle on the bottom. Scarcity overlaps with Tunneling, Scarcity overlaps with Bandwidth, Bandwidth overlaps with Tunneling. In the exact middle, the 3 areas overlap with each other. That makes 7 separate sections. Let’s look at each one.
Scarcity + Tunneling = Scarcity Trap
Scarcity Venn2Illustrating this classic scarcity trap is the main point of the book. The authors outline this state of being between scarcity and tunneling. An example in the book is “payday loans” (the poor get a small, extremely short-term loan at ridiculously high interest. The interest plus fees on that small loan puts them into further debt, causing them to loan more to repay the original debt). The cash-strapped can’t think of anything else but paying the immediate bills in any way necessary. They can’t absorb the reality of debilitating interest rates when they have no bandwidth to think of such things.
When I began to think about it, though, I realized that Tunneling, Bandwidth and Scarcity interact in our lives and in our organizations in different ways. Here is where I begin to ad-lib off the concepts covered in the book. These concepts can be applied to both individuals and industry.
Bandwidth + Tunneling = Obsession
If a person has “too much time on one’s hands” –as the phrase goes– , she is focused intently on one activity, like a pro golfer would concentrate on golf. The pro golfer would exist in the convergence of Bandwidth and Tunneling. Pro golfers don’t spend their time thinking on things like bills or dinner or medical care. A single mother holding three part-time jobs has a lot more trade-off decisions to make than a pro golfer. What pro golfers do have is time to spend on golf. For lack of a better word, I’ve called this “obsession.” It could be called “passion” or “focus” but I’m thinking of how this state would look for us regular people. A teen in her parents’ basement playing WoW 50 hours a week would also fall into this area: a young adult with no bills, no obligations, and all-encompassing preoccupation with MMORPGs would be a more familiar example of someone existing in the obsession state.
A company can exist in this Obsession area if they have a lot resources allocated to a singular product or goal. The goal may never be attained because the lack of time or money isn’t felt (Scarcity). No motivation exists to complete the project and no other demands are being met. I’m thinking about my novel all the time. I read writing manuals. I meet with other writers. I don’t write enough words. A little scarcity might move me along.
Bandwidth + Scarcity = Simple Living Movement
We’ve all met these types of “bare bones” people. Perhaps they are Thoreau fans that don’t own TVs or live “off-grid.” Perhaps they are an elderly couple who live in a basic apartment with few possessions. Whether the scarcity is self-imposed or is economically created, a person who has a minimalist lifestyle would fall in the Simple Living area. They have the peace-of-mind to deal with the lack of things others deem essential. They accept that scarcity and move on.
Scarcity + Bandwidth + Tunneling = Crisis Management and Prevention
The Red Cross organization not only deals with immediate crises but also plan for and try to sidestep future disasters. Unpredictable events are in fact predictable in their inevitability, and the Red Cross squirrels away money for future use. (In fact, they are rightly criticized for withholding too much money and distributing too little to present-day disaster victims).
I suppose the authors would suggest that individuals and organizations aim for this stasis of Scarcity+Bandwidth+Tunneling. While we are appreciating scarcity of resources (knowing the value of a dollar as well as the worth of our time and moral norms), we have the energy to also look long and hard at savings for the future while concentrating steadily on day-to-day projects. With the right dose of Scarcity, Bandwidth can be loaned to one immediate project in the Tunnel. With the right dose of Bandwidth, Scarcity can be managed calmly in a very temporary Tunnel. With the right dose of Tunnel vision, Bandwidth can laser-focus on the issue of Scarcity.
“You Only Live Once” is a common mantra that’s taken a dangerous hold of young hip-hop culture. Instagram, Facebook, and Twitter are awash with #YOLO-tagged photos of young people engaging in risky behaviors. Economist and other academic researchers aren’t in the mood to party with them though; the increasing level of risk in young people’s decision-making can mean there is a compounding –and shared– feeling of hopelessness and malaise in that generation. By seemingly doing nothing but partying and posting on Facebook, young Millennials are living a dark minimalist life. With no jobs, no money and no hope, this new lost generation fills their lives with social risk, claiming there is only time now to do crazy things before they need to truly face the reality of a life of struggle or total ruin. This is that bad state of "having too much time on one’s hands": loads of time, a dearth of hope, and total absence of focus. We need solutions to keep our youth engaged and invested while they wait for their turn on the world stage.
DSL, FiOS or Dial-Up?
The book tunnels in on how the poor get stuck in the Scarcity Trap, but lends no bandwidth to the questions “bandwidth” itself generates. My Venn model may break down a bit here too, because Bandwidth and Scarcity can come in many different forms. The typical ideas would be between time and money: Lots of time? No money; Lots of money? No time. But what kind of bandwidth do people need to deal with which kind of scarcity? What should we focus on, and when? Many more thought experiments are needed to test the strength of the Scarcity Venn, and a whole other book is needed to teach us how to deal with our varying states of living.
For now, I’ll try to bribe some friends into generating some hard deadlines for my novel.
Got Bandwidth to lend to this? Not many of my questions are rhetorical. Please comment.
Photo Credit: Book Cover and Venn Diagrams: Christine Cavalier...more
I “cheat” on crosswords. I don’t cheat, exactly. I don’t look at the answer key; THAT would be Cheating, with a capital C. Instead, I cheat with a lower case c; I Google or Wiki the subject of the difficult clues online. This only works for clues with keywords like an author’s name or a movie title, but the answers I find give me enough forward motion to continue solving the puzzle. If I get stumped again, I scan the clues for more keywords again.
I don’t consider this letter-of-the-law Cheating, because I am working to find the solutions instead of just getting them from the answer key. You may be a crossword purist who is appalled at my lack of morals. You’d be making a mistake, though, to think my morals (when it comes to crosswords) are based on the same assumptions you hold.
It all comes down to why I do crossword puzzles in the first place. You, M. Purist, may crave the challenge and the self-esteem boost when successfully completing a NYT Friday entry. I, on the other hand, find it relaxing to lazily Internet-search trivia and methodically fill in the tiny squares with the gems I find, while learning a bit in the process.
Am I cheating myself? I don’t think so. After all, I’m learning things and relaxing. I’m not entering any crossword competitions. I’m not even going for bragging rights. For me, crosswords are a rote exercise. My methods work for me. In fact, M. Purist, I think your snobby morality about how crosswords should be done is elitist and exclusionary. Upon hearing my theories, one crossword-abandoning friend of mine lit up with discovery. She had stopped doing the puzzles because their difficulty proved unsurmountable, but when we talked she realized she’d been cheating herself out of a fun pasttime because of her overblown sense of “what’s right” in crossworddom. Call us cheater-mcgeeters if you must, but my friend and I are happily googling away our grids. Duke researcher and EBE (Economic Behaviorist Extraordinaire) Dan Ariely may side with the crossword purists on this one. In his latest book, The (Honest) Truth About Dishonesty: How We Lie to Everyone–Especially Ourselves (THTAD), Dr. Ariely cites his own research and research of close colleagues on the subject of cheating. From “Fun with Fudging” and the “What the Hell Factor,” Ariely examines many different ways we cheat consciously and unconsciously. His clever experiments are great at catching unwitting people at the pervasive self-deception that none of us seem to be able to resist.
The book is probably his toughest read yet. I found Predictably Irrational to be a fun and delightful read. The Upside of Irrationality was a tiny bit more challenging. THTAD is by far the most research and dilemma-heavy of the 3. Perhaps it is the subject matter and being faced with my own shortcomings, but it seems this book had the least amount of engaging anecdotal evidence of Ariely’s signature storytelling charm. While reading THTAD, many times I found myself fading, in that reading-college-textbooks-at-midnight way. I don’t recall this feeling with the other two books.
My meandering could be the disgust factor at work. Ariely mentions Enron and Bernie Madoff, as well as Wall Street and the 2008 crash, then goes on to explain how cheating can be social and become contagious. It’s hardly light fare, despite Ariely’s attempts to soften the blow with his self-deprecating and at times mischievous humor.
Nonetheless, I read the book carefully in its entirety, even though I’d have to backtrack often to where my mind checked out and begin again; Ariely’s insights into human behavior are useful in life and in business. In this book, I learned why I shouldn’t trust the car repair guy I’ve known forever, why I should draw pictures of eyes and hang them on the snack cabinet, why a stack of dollar bills are more likely to stay in tact than my lunch in the work fridge, and why, as a creative person, I may have less gray matter in my brain than you dull types out there.
Where the book falls short, besides the lack of Ariely’s personal stories, is in the area of some needed philosophical talk about morals. Ariely hints at the possibility of varying moral codes when he talks briefly about the perception of cheating in different cultures, but he fails to lay down a common compass from which we all discern our moral directions. Ariely assumes we’re all following a letter-of-the-law approach to Cheating, and that his experiments’ subjects could only be following that same (supposedly Judeo-Christian) approach. But I think Ariely would’ve done well to take a paragraph or two to lay out his assumptions/biases. We can surely infer the basic Western moral sense, but if Ariely took some time to lay out what exactly he thinks is the official definition of “Cheating”, even if only within the confines of his own experiments, his assertions about how we all unconsciously cheat would hold all the more punch. Although his matrices experiment designs seem pretty rock solid, there is a possibility that Ariely may have missed two totally different motivations behind cheating: etiquette and convenience.
In Chapter 9: Collaborative Cheating: Why Two Heads Aren’t Necessarily Better than One, Dr. Ariely presents some findings that suggest we cheat more with others and/or for others’ benefit (“altruistic cheating”). Earlier in the book, he also cites “karma” as a way we justify taking a few extra pens from work when they failed to give us our yearly bonus. But I think this is where Ariely missed an opportunity to explore the finer-tuned aspect of cultural etiquette and convenience. Sometimes certain behaviors are expected for reasons unknown to us, but we’re savvy enough to pick up on signals sent by those around us. For example, in Ariely’s bad-actor experiment (the actor David portrayed “bad” decisions, not that David was poorly skilled at theatrical arts). When David asked whether or not he should cheat, the researcher said, “You can do what you want.” David then obviously cheated and was not rebuked. This is such an odd occurrence in life, it’s possible that the real subjects in the experiment may have surmised that the researcher actually preferred (for whatever mysterious reason) that the subjects cheated. Perhaps it would get her the results she wanted. Who would deny her? It would be more polite, then, to do what is expected and cheat like David (or find a moral middle ground and cheat a little more than normal, which is what the subjects did).
Another experiment Ariely cited was done in a coffee shop. Customers were handed too much change, and Ariely wanted to see how many people would return the excess, and how much of it they'd return. I’m deeply familiar with this very scenario, because I’ve experienced it more than once with my fanatically scrupulous father, who has been known to get into restaurant-silencing arguments over bills for being undercharged. Those cringe-worthy moments of my youth taught me that it’s better etiquette to leave a heftier tip in case the waitstaff notices the error later than to argue that we need to pay more. Perhaps Ariely would just call this "picking-up-on-signals" the collaborative effect, but I find it slightly different than what he describes as “group cheating” in the book.
I run into a collaborative effect everyday here in the suburbs, but again, it isn’t group cheating as much as it is a cultural norm. Take the library loans of music, for example. I am under the impression that if I check out Nicki Minaj’s lastest CD, I am to listen to it but not download it. If I download it to be able to listen to it, I should delete the album when I return the CD to the library. My father and my brother (also a stickler) would delete the files. They would also argue (probably loudly) with people on the street about how everyone should delete any music not bought through legitimate outlets. But if word got out around my town that I was making my tween delete the music she borrowed from the library, I’d get the reputation of an overly strict, trifling and somewhat-crazy parent. Put simply, it would be just plain weird.
Another example of this peer-pressure-to-accept-certain-rules is living in an organized-crime dominant area, which I did growing up. I dare not talk about it too much (for obvious reasons), but I will say that our views on the definitions of “crime” and “wrong” didn’t necessarily match up to say, a nice Midwestern Mayberry-type town’s views. We thought of ourselves as looking more at the big picture: The police? They weren’t the most “upstanding” group. Electronics companies? What, the ones with the child labor in Indonesia? Bankers? Don’t get me started! We were keeping a whole region of the state, thousands of families, afloat, mostly via legitimate means. What were all those people doing for anybody? Who wants a stickler around, anyway? Rule-followers, pencil-pushers, Miss Manners, they only see right in front of their own noses. Where I come from that’s a very immature (and definitely no-fun!) way to be.
Ariely does mention the social aspect behind cheating, as I said. And I may just be lying to myself, as he would say. But I do believe there are subtle signals we send to each other that tell us how we are expected to behave, and I wonder if any of those signals came into play in Ariely’s experiments. This isn’t the strongest of criticisms, of course. It’s a trifling point, a fixation on minutiae, a party-pooper whine. But I guess, like my father, I’m set to be the one that messes up everyone’s good time.
________________ Tomorrow I’ll be sitting in on a conference with Dan Ariely. I’ll let you know how it goes. In the meantime, let me know if you have any questions for him.
Any thoughts? Have you read the book? What did you think?...more
I found this book to be entertaining and informative. It's halfway in between anything Malcolm Gladwell writes and Dan Ariely's Predictably IrrationalI found this book to be entertaining and informative. It's halfway in between anything Malcolm Gladwell writes and Dan Ariely's Predictably Irrational book: a fun read with just the right combination of real science so as not to make your head spin. This book is for a wide audience, but mostly is for those who are interested in workplace behaviors, behaviorist psychology and motivation theory.
Please check out my podcast where Daniel Pink and I talk about why businesses are "stuck in the 50's" and can't see how their antiquated reward-and-punishment system of motivation is sinking them.
Don't bother with this book unless: 1. you are a Baby Boomer who is feeling overwhelmed with the web, and would like to commiserate with one of your oDon't bother with this book unless: 1. you are a Baby Boomer who is feeling overwhelmed with the web, and would like to commiserate with one of your own. 2. If you are internet addicted and in turn socially inept (there are a few pages of self-help advice).
Interspersed in all of this split personality pages are a few references to fMRI studies of which areas of the brain light up when we are completing internet tasks. You won't be able to pinpoint the studies, though, because the author doesn't use notations. No footnotes, no endnotes, just a list of references in the back of the book. He lists his references but we have no idea which studies go to which fleeting mention.
The book is ok, but it can't decide which way it wants to go. As someone who is under 40 (Generation X) and considers herself a digital native (I had a computer in my house in the late 70's), I found this book at times to be downright offensive. The anecdotal examples were inane and sensationalistic with fear. It's the typical refrain we hear from the stereotypically selfish and self-focused "me" generation of Baby Boomers.
Unless you are in said state of panic about the internet and its implications, skip this book. The small self-help parts aren't going to help you. Dr. Smalls probably meant for you to read them to your WoW addicted daughter. ...more