Scarcity: Why Having Too Little Means So Much

by Sendhil Mullainathan

It is not that the poor have less bandwidth as individuals. Rather, it is that the experience of poverty reduces anyone’s bandwidth.

Scarcity captures our attention, and this provides a narrow benefit: we do a better job of managing pressing needs. But more broadly, it costs us: we neglect other concerns, and we become less effective in the rest of life.

The focus dividend—heightened productivity when facing a deadline

Focusing on something that matters to you makes you less able to think about other things you care about. Psychologists call this goal inhibition.

We would argue that the poor do have lower effective capacity than those who are well off. This is not because they are less capable, but rather because part of their mind is captured by scarcity.

Choking is the tip of a much broader phenomenon. Psychologists have found across a wide variety of tasks that performance and attention, or arousal, are linked by an inverted U-curve. Too little attention and performance is weak. Too much attention and the excessive arousal worsens performance again.

When Microsoft shipped its Windows 2000 software, it went out with 28,000 known bugs. The project team knew they were shipping a product with lots of problems, but they were already behind the deadline. As a result, they immediately began working on a first patch, which was to fix all the bugs they knew they had shipped out.

What appears to be theater at Benihana was really a very clever solution to scarcity. The chef’s production involves people sitting at communal tables. And communal tables of eight mean a much more efficient packing of customers. No more waiting for two tables of two to open up side by side so you can seat a party of four. At communal tables you simply fill up the tables as people come in. A table of four merely means four chairs at the table. But even better, the tables turn over much faster. The chef cooks theatrically—and quickly—in front of you. You sit, the chef is there, the menu is small, and the time to order is limited. The chef then festively paces the meal for you. The food is tossed onto your plate, and you eat quickly because you can see the following course is about to be tossed next.