Scarcity: Why Having Too Little Means So Much (26 page)

To bridge the gap between when there’s money and when fertilizer is needed, some
researchers created a simple and clever intervention
. They had the farmers prepurchase the fertilizer, buying it during harvest, when they were flush with cash, for delivery at planting time. With this simple change, the percentage of Kenyan farmers who bought and used fertilizer rose to 45 percent from 29 percent—a dramatic increase. Failure was averted by relocating an important decision from a time when the farmers were cash-poor and, more important, bandwidth-poor to a time when they were cash-rich and bandwidth-rich.

Being aware of the natural variation in
bandwidth
can also help those with busy lives. The busy often schedule their activities based on time available—a task requires a certain amount of time, and I
have that kind of time right here, Wednesday at 11 a.m. But beyond time, tasks also use bandwidth, some more, some less. Monitoring a conference call to make sure all goes as planned requires a lot less bandwidth than a tense in-person meeting with a boss or a client. Yet we often focus on available time slots without this recognition. Clearly, our bandwidth varies throughout the day. Are we allocating our tasks wisely, ensuring that high-bandwidth tasks get assigned high-bandwidth slots?

Exploiting bandwidth might include not only timing tasks and events but also setting the best order. For the longest time, as we struggled to write this book, we would put aside a block of time every morning. And we protected it ferociously, sometimes even when it was painful to do so—for example, when you’re the only one holding up the scheduling of a six-person meeting. We were not simply protecting time; we were protecting
high-bandwidth
time. But this did not work very well; our writing sessions were not particularly effective. And then we realized what we had done wrong. Before sitting down for our ferociously protected writing time, we quickly looked over e-mail, to take care of any urgent business before we withdrew. By nine o’clock we would force ourselves to quit even if sometimes this required extreme action, like turning off the wireless router! But, as it turned out, we hadn’t fully quit. One message about a delayed project highlighted how seriously behind we really were. Another would remind us about the urgent need to raise some money. We weren’t sitting down to write so quietly. We had begun a series of mental, and noisy, trains of thought. We had acted like dieters exposing themselves to donuts every morning just before sitting down to think about other things.

Many
low-income high school graduates
do not go to college. And many generous financial aid programs, driven by the assumption
that the reason is a lack of money, are geared toward helping low-income individuals. Yet these programs are severely underutilized; few applicants show up. This is surprising, so a group of researchers set out to find out why.
They divided eligible high school graduates
(and their families), who had come for help with their tax filing, into three groups and gave them all the forms needed to apply for financial aid to college. For the first group, they simply observed the tendency to apply. For the second, they tried to bridge the information gap. Perhaps eligible high school graduates didn’t know about the money they were eligible for, so the tax professionals told them. For the third group, the researchers did something inspired. Tax professionals not only told the eligible graduates what they were eligible for, but they also actually filled out the forms with them. Simply telling people the exact benefits they were eligible for had no noticeable effect. But the help filling out the forms did have a remarkable effect: not only were they more likely to apply for financial aid, they were also 29 percent more likely to enroll in college.

Having to fill out forms is a potential snag for anyone, a chance to procrastinate and to forget. But with their bandwidth taxed, and with perhaps a bit of stigma attached, it is a bigger snag for low-income people. Families with no college experience
tripled
their submission rate if they received help in filling out the forms.

There is a deeper insight here about how to manage scarcity. Misplanning, procrastination, and forgetting can turn seemingly minor steps into major stumbling blocks. Yet we overlook these snags when structuring our lives or crafting policies for others. Give someone a form to take home and she may forget it; have her fill it out on site and enrollment goes way up. Of course, filling out a form is a “minor” step, but it is also one that is too easy to stumble on, like having to compute interest or remembering to renew the registration. When our bandwidth is taxed, the simplest snags can do a lot of damage.

Those on public benefits, for example, often are required to “recertify”—to complete a series of forms—every year to show that
they are still eligible. As you might imagine, it is during these periods of recertification that people drop out of the program. And this requirement appears often to screen out the
most
needy: those who are most taxed are also those most likely to delay in recertifying and, unfortunately, the ones in greatest need of the benefit.

To see the logic of taxing bandwidth, think about it this way. Imagine we imposed a hefty financial charge to filling out applications for financial aid. We would quickly realize that this is a silly fee to impose; a program aimed at the cash stretched should not charge them much cash. Yet we frequently design programs aimed at people who are bandwidth-stretched that charge a lot in bandwidth. To use another vivid metaphor, it’s like going to a juggler who is in need of help and tossing one more ball in the air for him to juggle.

This, incidentally, is not an argument for removing all snags. Sometimes there is a reason for their existence. Financial aid forms are complex because a lot of information is needed. Recertification happens because circumstances change, and programs need to target those who are eligible. But there are alternatives: for one, many forms could be automatically filled using tax data. The mistake we make in managing scarcity is that we focus on one side of the calculus—removing snags can be costly—while we underestimate the other—the bandwidth tax. But the data suggest that this tax can be unreasonably large. Small snags can be the difference between a successful program and an unsuccessful program, between receiving benefits or not, between being and not being a college graduate.

As we contemplate the better management of scarcity, we should remember that scarcity often begins with abundance. The crunch just before a deadline often originates with ample time used ineffectively in the weeks preceding it. The months just before harvest are
particularly cash tight because money was not spent well in the easy months following last harvest.

Remember the study from
chapter 1
, where participants did better at proofreading essays when they were given tighter deadlines? Although most people realize that deadlines can help them work better, deadlines are often underappreciated. In another version of that experiment, some participants were
allowed to choose their own binding deadlines
. The option to pick a deadline helped: participants voluntarily imposed strict deadlines that helped them earn more than the no-deadline group. But their freely chosen deadlines were not as aggressive as they should have been. They earned 25 percent less than the group that had no choice, whose deadlines were imposed on them. We have seen this with our own students. In one of our classes, we let students pick their deadlines for the final paper. Some wisely chose deadlines much earlier than the end of the semester. But many did not, causing themselves to cram for this paper right when all their other papers were due.

In a world of scarcity, long deadlines are a recipe for trouble. Early abundance encourages waste, and by the time the deadline approaches, tunneling and neglect settle in. Breaking a long deadline into progressively earlier chunks can cut this arc. The same thing happens with money. A farmer paid in one lump sum is being set up on a similar cycle of early abundance followed by eventual scarcity. And as with time, dividing a payment into incremental pieces can help. What if the farmer were to get paid not in one lump sum but more regularly? The same is true of food stamps. Recall that food stamps recipients were not able to smooth out their income over the month. Lots of bandwidth must now be used to plan, remember, control, and make trade-offs. Why not pay the benefits weekly? Or, if needed, some combination: a large initial payment to take care of big monthly expenses and then smaller payments for week-to-week expenses. A way to fight the abundance-then-scarcity cycle is to even it out—to create long periods of moderation rather than spurts of abundance followed by heightened periods of scarcity.

The
reason why the abundance-then-scarcity cycle is so bad is that, as we have seen, scarcity can get us trapped. It is not merely that we fail to smooth our activities under abundance; it is that we fail to leave slack for the future. We saw with the Koyambedu vendors in
chapter 6
what having too little slack can do. When hit with a shock, they got themselves right back into a debt trap, one that could have been avoided given earlier abundance. This is the danger of not leaving enough slack, not enough buffer for potential shocks. It is not merely that the shocks hurt us but that they put us in a position for the psychology of scarcity to kick in. We begin to tunnel and to borrow, and soon we are one step behind and perpetually playing catch-up.

Yet despite this, it is striking how often we fail to build a buffer stock. While direct research on this question is scant, there are some good hints. For one, the data suggest that we tend to
underappreciate the likelihood of many low-probability events
. That’s why we underinsure for floods and earthquakes. When everything is going smoothly, we can, of course, imagine dark clouds, but we undervalue their possibility and thus do not prepare properly. And it’s a lot worse when any of many possible shocks can trip us. Technically, we are facing a disjunction of low-probability events. What could interfere with your plans are not just floods or earthquakes, but you may get sick, or a family member could get sick, or there could be a break-in, or a car theft, or a war, or the loss of a job, or a surprise wedding, or an unexpected birth. All of these, of course, are possible but highly unlikely. But the problem is that any one of these is enough to count as a shock, for which you should have built some buffer stock.

And that buffer stock needs to be built
during times of abundance
. If time is where you expect scarcity, this means leaving some extra room in your schedule, for “no good reason,” other than being able to move your many projects and obligations around at no cost. With money, it means having and building a rainy day account, even if you do not feel terribly flush. All this does not come easy, does not
feel natural, because even when you know that shocks and scarcity can happen, it doesn’t
feel
that way when there’s abundance.

The tug of scarcity can be strong. But understanding its logic can minimize its negative consequences. We can go some way toward “scarcity proofing” our environment. Like investing in a smoke alarm or setting up a college savings account for your new baby, a singular moment of insight can have lasting benefits.

As our island of knowledge grows
, so does the shore of our ignorance.

—JOHN A. WHEELER

This book offered an invitation to read about a science in the making. We hope that this first glimpse of the science of scarcity has helped to change the way you think about many things, from the occasional bouts of feeling overworked to persistent problems like loneliness and poverty.

Looking at the familiar in a new light can lead to unexpected observations, sometimes in unexpected places. The two of us often play a game on our phones called Scramble. It’s a break from work, a way to fill time, and, yes, a tool for procrastination. The game is simple, and brief, and we got pretty good at it. But while working on the book, we noticed that our Scramble scores took a precipitous drop. Tense days of writing under deadline led to remarkably weak scores. This was a vivid illustration of how pervasive the bandwidth tax can be. Even though we had conducted the studies and had seen the data, the magnitude of the drop was surprising. We had the vague sense of being “cognitively tired,” but the 30 or 40 percent drop in scores was more than we would have anticipated. And the
game was a simple and fun task. We suspected that our minds were not operating at full capacity, but we did not appreciate how taxed we were.

You might try to think of comparable moments in your experience. What activities in your life might create a large bandwidth tax? And where would these have a noticeable impact? Are you a worse driver then? You know to avoid driving when sleepy, but did it ever occur to you not to drive after a day of hard thinking at work? Are your jokes less funny then? Are you less friendly? Are you making worse decisions? Have you ever said, “I don’t want to make this important decision now; my bandwidth is taxed?”

People overlook bandwidth. When you’re busy and must decide what to do next, you might take into account the time you have and how long it will take you, but you rarely consider your bandwidth. You might say, “I only have half an hour. I will do this small task.” You rarely say, “I have little bandwidth. I will do this easier-to-accomplish task.” Of course, you sometimes do this implicitly, such as when you switch to another task when you fail to make progress. But this just means you paid a tax on an already scarce resource.

We schedule and manage our time but not our bandwidth. And it is striking how little we notice or attend to our own fluctuating cognitive capacities. Contrast this with physical capacity, where we are attuned to the potential effects of eating, sleeping, exercise. Like most workers in modern society, we use our minds to make our living, yet we know remarkably little about our minds’ daily rhythms. If our job were to move boxes from one place to another, we’d have a better sense of how best to maximize our efficiency—when to exert more effort, when to rest. But for a job focused on moving ideas rather than boxes, we know little about how to maximize our limited cognitive capacity.

And just as we as individuals know little about our own fluctuating bandwidth, we as social scientists know little about the fluctuating bandwidth of society. Scientists tend to measure what their theories tell them to measure. Social scientists therefore measure the material
dimensions of scarcity: how many people are unemployed, what was produced in a particular quarter, what earnings were, and so on.

Yet we know next to nothing about the cognitive side of the economy. Just as our own individual bandwidth appears to fluctuate, it is likely that society’s bandwidth fluctuates as well. Might we find that the economic recession in 2008 also produced a profound cognitive recession? Perhaps bandwidth dropped significantly. What if while unemployment was climbing, the quality of decisions was dropping? We do not have the data to answer these questions. And while it is too late to gauge this for 2008, it is not too late to collect these data for future booms and recessions. There has been an effort in recent years to measure societal well-being, to create a measure of Gross National Happiness to go along with Gross National Product. Why not also measure Gross National Bandwidth?

From this, we might learn not just about our country as a whole but also about how different subgroups in our country are doing. When the unemployment rate jumps from 5 percent to 10 percent, that means an additional one in twenty working-age people are now struggling financially. A look at bandwidth might suggest that the effects of this increase are more widely felt. It is possible that, in times like these, many more individuals have money on their mind as a result. Perhaps even those who have had only a small tightening of budgets have lost enough slack to be experiencing some scarcity. And perhaps those individuals who are close to the newly unemployed—friends, relatives, neighbors—are showing the effects, too. It is possible that the cognitive impact is more widespread than the financial one.

This is not just about recessions. Take productivity, a driver of economic growth. Productivity depends crucially on bandwidth. Workers must work effectively. Managers must make wise investment decisions. Students must learn in order to build human capital. All of this requires bandwidth, and it is possible that a drop in bandwidth today further reduces productivity in the future.

It is also not just about economics. Bandwidth is a core resource.
We use it in parenting, studying, getting ourselves to the gym, and navigating our interpersonal relationships. It affects the way we think and the choices we make. When the economy enters a financial recession, we can buy fewer things. When we enter a cognitive recession, all aspects of our lives can potentially be affected, from parenting and exercise to savings and divorce.

Of course, bandwidth measurements need not be confined to countries. Companies could do bandwidth inventories: how are their employees doing? Individuals can conduct their own. Perhaps before a big decision, you would want to confirm that you are functioning at full bandwidth. We have seen several related tests already, and more can be drawn on and new ones developed. Some would be focused on scarcity. How best to measure slack? How most effectively to determine whether people are engaging in trade-off thinking? But we can go further, perhaps measure fluctuating cognitive capacity more generally.

One can also use these measures to better evaluate social programs and public policies. In a program for the unemployed, we focus on reemployment. Undoubtedly, that is important. But why not also gauge its impact on bandwidth? After all, if the unemployed have greater bandwidth, the benefits will be felt more broadly. The data show that the children of parents who are unemployed do significantly worse in school. If bandwidth is the culprit and we can do something to alleviate it, then these programs may have benefits far outside their initial scope.

A focus on bandwidth leads to more than just better measurement. Take the problem of the fast-food manager from
chapter 2
, the one lamenting the time he must spend managing his underperforming employees. What might he do? Should he spend his time and energy motivating them? Should he resort to threats of firing? Greater incentives? More training? Additional conversations? The manager’s problem is not unique. Many employers of low-wage workers face problems of productivity and absenteeism. And they invariably try these assorted interventions.

But a focus on the psychology of scarcity suggests that this manager
may want to tackle a different problem. Rather than motivating or training, threatening or enticing, perhaps he can focus on increasing bandwidth. Low-wage workers have volatile financial lives. We have seen their effects. We have also seen that incentives can be less effective in circumstances like this. When you’re tunneling, many rewards can fall outside the tunnel. Why not instead think about financial products, logistical interventions, or working conditions that help workers deal with financial volatility and help clear some bandwidth?

Here is a stark example. Many workers, as we saw in
chapter 5
, resort to payday loans. Yet it’s worth observing that a payday loan is often simply a loan against work that has already been done. The worker who takes a payday loan halfway through the pay cycle has already earned half her paycheck. The need for a loan is largely due to the fact that payment happens with a delay. Why should an employer have workers taking these loans, potentially falling into scarcity traps, taxing bandwidth, and resulting in lower productivity, especially when the employer can himself give pay advances at low cost? How valuable would it be for employers to
improve productivity by offering the right financial products and creating bandwidth
?

The case of employers is just one example of how thinking about bandwidth may prompt us to ask different questions and solve problems in different ways. Take the simple example of adherence: the poor, more than others, fail to take their medication as prescribed. We could say, “This is a fact of life,” and move on, no longer trusting the poor to do what’s required. Or we could build a product like
GlowCaps
. This pill bottle kicks into action whenever it has not been opened the right number of times that day. It starts by glowing, and if it still hasn’t been opened, it beeps, eventually sending text messages to the user’s phone. Little by little, it makes its annoyance known, preventing the neglect that comes with tunneling. With GlowCaps the poor have been shown to adhere to their medication schedules at dramatically higher rates. Similar products and interventions can solve adherence and other problems through an understanding of the psychology of scarcity. GlowCaps illustrates
how cheaply, unobtrusively, and effectively we can use technology to address problems created by bandwidth. Naturally, similar insights are bound to prove equally dramatic in other places.

When we think about increasing farm productivity around the world, perhaps we should focus not on new crops or farmer training. Perhaps we should be thinking about how to get the farmers to do those small activities, such as weeding, which they surely already know about but so often remain outside their tunnel. What should be the farmers’ GlowCaps, to remind them about weeding or about pest control?

In thinking about scarcity, we have encountered several new puzzles. This book, for example, was not completed on time. Why? Besides all the obvious reasons, two stand out as we reflect on the last few years. First, some of the work was done when we were facing a sharp deadline. And when we wrote against a sharp deadline, we experienced scarcity. On many days we benefited from this, as our theory suggests. We were focused and more efficient.

But much of the time was not spent feeling as if we had a sharp deadline. During long periods, we worked with the feeling that we had plenty of time. And during those periods, predictably, time was frittered away. Not wasted exactly, but the per day productivity—say measured in words written—was far from where it could have been. You could say we were suffering from not having scarcity. But is that all? Or was it something about the psychology of abundance?

We have treated abundance as merely what happens when scarcity is absent, as if that’s the “standard” state, when all is fine. But introspection tells us that there have been periods when we felt real abundance and that those periods feel distinct, not only from scarcity but from other, less marked times. There are times when a psychology of abundance kicks in. And what makes the psychology of
abundance so intriguing is that it seems to have in it the seeds of eventual scarcity.

Many of us end up tight for time right before a deadline because we wasted the preceding period of abundance. Our students inevitably write their papers in the two days (or in many cases one night) before the papers are due, and this is often preceded by weeks when time was abundant. This was not their intention going into the semester; their last-minute scrambling is a microcosm of the time-management problems experienced by executives who live the good life just before they end up firefighting or by vacationers who don’t know where the day went.

The experience of scarcity near the deadline often emerges because of how time was managed during abundance. This intimate link between scarcity and abundance repeats itself in many places. The farmer is strapped for cash before harvest because of how he spent his previous harvest’s proceeds. How he behaved during abundance contributes to his eventual scarcity. We fail to save when cash is plentiful. We loll around when the deadline is far away.

Consider the financial crisis of 2008. Many have speculated that one reason for this crisis was a cognitive blind spot. Housing prices were rising throughout the late 1990s and early 2000s. During these boom times, a sudden fall in house prices seemed a remote possibility, difficult to imagine, and hardly worth the concern. This belief affected a great many choices. If house prices were destined to keep going up (or at least not tank), highly leveraged transactions seemed sensible, mortgages with high loan-to-value ratios seemed safer. Of course, prices did fall—dramatically, in some cases. And all of the investment decisions predicated on the assumption that they would not fall led to a financial cascade that nearly brought down the global financial system. In this case as well, the acute scarcity of the financial crisis had its roots in the lax behavior that characterized those preceding years of abundance.

Of course, we could write off all of those as merely the usual behaviors. People waste time. They are overconfident. But the good
times and the abundance before the financial crisis magnified these tendencies—they boosted overconfidence, and reinforced complacency.

Follow the thread of scarcity far enough and it leads back to abundance: the recession that is caused by our behavior during the boom; the last-minute cramming that can be blamed on our inaction in the weeks prior. While scarcity plays a starring role in many important problems, abundance sets the stage for it.

Just as with scarcity, could there also be a common logic to abundance, one that operates across these diverse problems?