Leverage also had an effect because of the psychology of scarcity. Companies became “lean and mean” in part for the same reason deadlines produce greater productivity, and low-income passengers know the price of cabs. Being a hypervigilant manager who keeps costs low can require a great deal of cognitive effort. You must negotiate diligently with suppliers and scrutinize every line item to decide if an expense is necessary. This kind of focus is easier to come by under scarcity and harder to come by under abundance. Even private companies, where managers are spending their own money, start
...more
