Book Notes: Scarcity: Why having too little means so much

Introduction

  • “Illusion is the first of all pleasures.” ~Voltaire
  • “Scarcity – having less than you feel you need.”
  • Scarcity forms a common chord to many problems
  • Scarcity captures the mind – changes how we think
  • Economics studies scarcity. Physical scarcity is ubiquitous. The feeling of scarcity is not.
  • Time is always scarce – same 24 hours – but sometimes “pressed” for time, others not
  • When we have less than we want, we are unhappy
  • Scarcity is not just a constraint but a mindset that captures our attention, changes our thinking
  • Scarcity makes us more attentive & efficient
    • minds riveted, less prone to error
    • but cannot control when we are riveted
  • many behaviors/problems are scarcity problems

CH1 FOCUSING & TUNNELING

  • creative bursts build on months/years of experience & hard work,
    condensing what we’ve learned into output.
  • remarkable things done when we had less/were constrained
  • deadlines create scarcity, focus the mind
  • we cannot fake a deadline. imagined deadlines do not capture the mind.
  • but if a focus-dividend, also a tunneling penalty
  • tunneling – single-minded focus on scarcity at hand, neglecting other things (seat belts)
  • tunneling changes what comes to mind
  • when we experience repeated scarcity, more important things can be repeatedly neglected

CH2 THE BANDWIDTH TAX

  • bandwidth tax: focus on scarcity impedes our ability to focus on other things = “less mind”
  • concept = computational capacity – able to make good decisions, stick with plans
  • noise, distraction, can hurt concentration/performance
  • noisy thought trains are just as distracting as real trains
  • noisy thoughts are noisy because they are important to us
  • top-down (intentional) vs bottom-up (distracted) thinking
  • mental distraction – “attentional bias”
  • your body is at the meeting but your mind is elsewhere. can impair:
    • cognitive capacity – problem solving, etc.
    • executive control – planning, attention, impulse control
  • “a little tickle can raise a racket in the brain”
  • we can become cognitively impaired by distractions of bandwidth
  • Marshmallow Study – “willpower is just a matter of learning how to control your attention & thoughts – and can be increased”
  • Bandwidth tax makes it hard to control impulses
  • easy to confuse a mind loaded with scarcity for one inherently less capable

CH3 PACKING & SLACK

  • metaphor of big/small suitcase we pack our time, expenses, etc. into
  • we don’t ask “if I buy this, what will I not buy instead” – trade-off thinking
  • pack big suitcase – do I want this?
    pack small suitcase – what must I take out to make room
  • big suitcases have slack – we don’t pack every nook and cranny
    Slack <> scarcity
  • 15 minutes between meetings “like loose change lying around the house”
  • Slack is not intentional margin. It is the by-product of abundance.
  • diminishing marginal utility – the more you have, the less each additional item is worth
    (to increase worth of individual items, cut down the overall # of items owned)
  • packing a small suitcase causes tunneling because the items left out matter.
    • not enough room for everything
  • slack in the pantry – cabinet castaways
    • self storage, $12 billion = 3x music purchases (2013)
    • USA, 2bln sq ft self-storage space
    • “Every American could stand, all at the same time, under canopy of self storage”
  • With slack, we do not question usefulness
  • Slack provides an easy way to avoid burden of choosing – we go with default –
    we choose not to choose
  • Slack leaves room to experiment, run risk of failure
  • “Temptation tax” – buy something we don’t need – hits the poor harder
  • What are purchase errors for the poor are affordable luxuries for those with slack
  • Having slack allows us the mental luxury of the feeling of abundance
    luxury of packing poorly, not having to think, not minding mistakes
  • “A man is rich in proportion to the number of things he can let alone.” ~Thoreau

CH4 EXPERTISE & TRADEOFFS

  • People act, at least at times, as if the small amounts mean a lot
  • We pinch pennies on small items & blow dollars on large one
    “the bigger the price, not worth the effort”
  • “behavioral economics” – incorporate psychology into economic models
  • But not so with people at soup kitchens – % who would travel to save money is
    the same regardless of $ amount
  • “psycho-physics of perception”
  • “perception is relative – light in cave vs sunny day”
  • experience/expertise allow us to transcend relative perception
  • Scarcity makes us “excellent packers” – without luxury of slack, understand value of each inch of space
  • Putting things on a bean burrito scale – or a book scale – or iPad – illuminates the tradeoff
    “this is worth 20 bean burritos” or “this is worth 2 books”
  • limits of the scale, tho: you wouldn’t buy 20 bean burritos or 5 ipads.
    what would you spend it on? if you don’t know what you are giving up, hard to know if it’s worth it
  • if you had $20 more what would you buy that you haven’t got already?
    no sense of what $10 or $20 is worth.
  • ambiguity is open to manipulation – what we compare something to can make it seem a pittance or an expensive luxury.
  • frugality – principled conscientiousness – not the same as scarcity
    scarcity – vigilant about tradeoffs
    frugal – is the price good? scarcity – what would i give up?
    frugality is about consistency/fairness of price

CH5 BORROWING & MYOPIA

  • borrowing goes hand in hand with scarcity
  • we borrow because we tunnel. scarcity today creates more scarcity tomorrow
  • we borrow time. we do not ask how we will make time for this later
    the perpetually busy are perpetually short on time
  • you feel tomorrow’s scarcity only abstractly
    like an imagined deadline, it doesn’t capture attention
  • bias toward the here & now – “hyperbolic bias” or “present bias”
  • “patching is a lot like borrowing” – failure to invest & commit resources to do the job right
  • we tend to put off the important-but-not-urgent
  • planning is a problem for everyone; scarcity makes it worse
  • no matter who, scarcity itself causes tunneling that leads to short-sightedness

CH6 THE SCARCITY TRAP

  • scarcity traps are caused mostly by geography, partly by our behavior
  • scarcity generates, perpetuates, amplifies scarcity behavior
  • juggling – we tunnel on the balls in the air, on the ones about to drop
  • getting out of scarcity trap requires planning, which is hard while tunneling
  • getting out requires implementing plan – bandwidth – which scarcity saps (“cares of this world”)
  • making plans is complicated – easier to default to default option
  • juggling makes plan implementation an order of magnitude harder
  • people with 1-time infusion of cash slowly fall back into debt because of lack of slack
    (example of near absolute poverty)
  • “not just slack on average. days of scarcity matter. shocks there lead to instability, debt that compounds”
  • scarcity is not more desires than resources
    it is shocks/needs the exceed resources
  • periods of abundance punctuated by moments of scarcity lead to debt snowballs that quickly become perpetual scarcity
  • wealth to weather all shocks is not necessarily the answer. instruments that buffer may be.

CH7 POVERTY

  • scarcity driven by tunneling, borrowing, lack of slack, bandwidth tax
  • those in poverty – especially absolute poverty – often (always?) have little (no?) choice
  • poverty – cases of economic scarcity where changing what you want, or think you need, is not viable
  • “freedom of mind is a luxury the poor do not have”
  • “so many of our behaviors rely on bandwidth”
  • overtaxed bandwidth = greater propensity to forget
  • absorbing new information requires working memory
  • “under the conditions of poverty we all would have failed”

CH8 IMPROVING THE LIVES OF THE POOR

  • no matter how well picked or trained, people make mistakes, especially if you put them in confounding contexts
  • make programs more fault tolerant
  • incentives, limits, etc. must be “inside the tunnel” to be seen
  • we treat education as a least-invasive solution–but with limited bandwidth, its not true
  • bandwidth consumption is a high cost

CH9 MANAGING SCARCITY IN ORGS

  • “Leave one operating room unused” – all O/Rs were planned. Unplanned surgeries upended schedule
    an empty slot for the unplanned let plans run efficiently
  • lack of rooms = lack of slack
  • standard impulse is to pack time tightly and efficiently. but this eradicates slack & leads to traffic jams.
  • hard to separate true waste from useful slack
  • 60 hour work weeks are less productive than 40 hour work weeks
  • lack of slack = lack of sleep = more prone to err

CH10 SCARCITY IN EVERY DAY LIFE

  • alert near end of meetings = rumble strip on highway
  • reminders bring items into the tunnels
  • prompts – what’s next to the checkout counter
  • defaults set once help fight neglect
  • convert vigilance into one-time actions wherever possible
  • rules (like Sabbath) = decisions pre-made, no thought required
  • scarcity often begins with abundance used ineffectively
  • long deadlines are a recipe for trouble
    early abundance encourages waste
    deadline approaches but tunneling/neglect have set in