|Scarcity: Why Having Too Little Means So Much review
||[Oct. 6th, 2013|10:17 pm]
Scarcity: Why Having Too Little Means So Much by Sendhil Mullainathan
My rating: 4 of 5 stars
A fascinating book about how scarcity (especially in money or time) changes you. Some highlights:
- One experiment was run on people during World War II (conscientious objectors, apparently) where they ate very few calories for weeks. The point of the study was to figure out how to safely start feeding them normal amounts again, but during the experiment they had some personality changes - they became obsessed with cookbooks and menus, and focused on the scenes in movies where characters ate.
- Scarcity makes you tunnel on what you're lacking, at the cost of more long-term thinking.
- A school next to a loud railroad line showed that students nearest the noise were a full grade level behind those farthest away from the noise. Installing noise dampening pads caught them back up.
- Scarcity reduces your mental bandwidth (which the book defines as some combination of cognitive capacity and executive control)
- They were able to trigger scarcity by asking people to imagine they needed to make a $3000 car repair. After doing this, the lower-income people did significantly worse on a test of cognitive capacity, while the higher-income people didn't see such an effect. (the control was asking people to imagine they needed a $300 car repair, which didn't affect either group) This was even bigger than the effect on people who were forced to pull an all-nighter!
- Scarcity means you have to think of everything in terms of trade-offs - if I buy this $10 cocktail, that's $10 I don't have to buy something else. When you're not suffering from scarcity you don't tend to think that way as much.
- They looked at street vendors in India who have to borrow money at the beginning of the day to buy items to sell, and then pay back the daylong loan at the end of the day with the money they make during the day. This happens every day, and the interest rate they pay is 5% a day, which is of course really really high. So they ran an experiment where they gave a collection of vendors enough money to buy out their debt, so they wouldn't have to borrow every day. They wanted to see if the vendors would be able to not fall into the "scarcity trap" again (having to borrow every day). The result was interesting - the vendors didn't waste the money and were able to stay out of debt for a few months, but then one by one they all fell back into the scarcity trap. The reason was that while the vendors weren't in debt anymore, they had no slack in their budget, and so the first time they had an unexpected expense they would fall back into debt.
Anyway, while the book gets a bit repetitive in its second half, I still enjoyed it a lot and it's definitely worth a read. The biggest takeaway: scarcity is bad, but slack can defeat it!
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