Poor Decisions

Scarcity impinges on your mind. People behave differently when they perceive a thing to be scarce.

… Scarcity narrows your focus to your immediate lack, to the meeting that’s starting in five minutes or the bills that need to be paid tomorrow. The long-term perspective goes out the window.

… Compare it to a new computer that’s running ten heavy programs at once. It gets slower and slower, making errors, and eventually it freezes — not because it’s a bad computer, but because it has to do too much at once. Poor people have an analogous problem. They’re not making dumb decisions because they are dumb, but because they’re living in a context in which anyone would make dumb decisions.

… There’s a key distinction though between people with busy lives and those living in poverty: You can’t take a break from poverty.

… It all started a few years ago with a series of experiments conducted at a typical American mall. Shoppers were stopped to ask what they would do if they had to pay to get their car fixed. Some were presented with a $150 repair job, others with one costing $1,500. Would they pay it all in one go, get a loan, work overtime, or put off the repairs? While the mall-goers were mulling it over, they were subjected to a series of cognitive tests. In the case of the less expensive repairs, people with a low income scored about the same as those with a high income. But faced with a $1,500 repair job, poor people scored considerably lower. The mere thought of a major financial setback impaired their cognitive ability.

… in addition to measuring our gross domestic product, maybe it’s time we also started considering our gross domestic mental bandwidth.

… poverty is not a lack of character. It’s a lack of cash.

source via James Wallbank