Scarcity: Why Having Too Little Means So Much (5 page)

We saw the focus dividend in the Angry Blueberries experiment. And in the lab we can also see the negative consequences of tunneling. If scarcity-induced neglect is insensitive to the weighing of costs and benefits, we ought to see scarcity creating neglect even when it is detrimental to the person’s outcomes. To test for this, we ran another study with Anuj Shah, in which we gave participants simple memory tasks, each containing four items, such as this one:

Precision Graphics

Subjects memorized these pictures and were later asked to reconstruct them. They were given one of the four items and asked to recall the other three. For example, after seeing the picture above, they might be asked:

Reconstruct the scene that contained:

Click here if you want to move on to a new round.

Precision Graphics

Subjects had to retrieve from memory
which of the other objects—a food, a vehicle, and a monument—went along with the spider in the original picture. They got points for correct responses, and they could take as long as they wanted. There was no time scarcity. But there was guess scarcity. They only had a fixed number of guesses they were allowed to make. As before, we created the guess poor and the guess rich.

To measure the cost of tunneling, we added a wrinkle. We had participants play two such games side by side. They were given two pictures to memorize and to reconstruct. And we made them poor (few guesses) in one game and rich (many guesses) in the other. So they experienced scarcity in trying to reconstruct one picture but not the other. Their total earnings depended on their performance on both games: they had to maximize total points earned. Think of it as having two projects, one with a deadline tomorrow and the other a week later. If people were to tunnel, then what they gain in one picture would be offset by worse performance on the other.

Consistent with the focus dividend, people were more effective guessers on the picture they were poor on. But they also tunneled: they neglected the other picture. And this was not efficient. They performed so much worse on the neglected picture that they earned, overall, fewer points than subjects who were poor on
both pictures
.
They earned less even though they had more total guesses
. A scarcity of guesses in both games meant they could not neglect either one, whereas abundance in one game led them to neglect that game in favor of the one they felt poor on. And they overfocused. Had the shift in focus to the poor game been deliberate, they would not have taken it to such an extreme. Clearly they did not gauge the costs and benefits of tunneling. They simply tunneled, and in this environment it hurt them.

We will call these negative consequences the
tunneling tax
. Naturally, whether this tax dominates the focus dividend is a matter of context and of payoffs. Change the game a bit and the dividend wins out. The point of the study was not to show that the costs of tunneling always dominate the benefits of focusing. Rather, what the study
shows is that cost-benefit considerations do not determine whether we tunnel. Scarcity captures our minds automatically. And when it does, we do not make trade-offs using a careful cost-benefit calculus. We tunnel on managing scarcity both to our benefit and to our detriment.

I took a speed-reading course
and read
War and

Peace
in twenty minutes. It involved Russia.

—WOODY ALLEN

Since the examples above are abstract, we close with a few intuitive vignettes of how the tunneling tax can play out in daily life. These illustrate not necessarily how people might be mistaken but how tunneling can lead us to overlook certain considerations. First, some advice from the
Wall Street Journal
on how to save money.

OK.
So you want to save an extra $10,000
by next Thanksgiving. How can you do it? You’ve heard the usual finger-wagging frugality lessons over and over. And you already do the obvious things, like cutting back on lattes,
raising your insurance deductibles
[emphasis added] and steering clear of expensive stores.

Is raising deductibles a good idea? For someone on a tight budget this is a hard question to answer. Yes, it saves money, but it comes at a cost. You may save money up front, but you run the risk of having to pay more of the cost in case of an accident. A reasoned choice about the deductible would trade off such considerations. But within the tunnel, one consideration looms large: the need to save money right now. Raising deductibles—like cutting back on lattes or on movies—saves money now and is firmly in the tunnel. The other concern—how to pay for repairs in case the car breaks down—falls outside the tunnel.

This
can lead people not just to raise deductibles but to forgo insurance altogether. Researchers in poor countries have found it hard to get poor farmers to take up many kinds of insurance,
from health insurance to crop insurance
. Rainfall insurance, for example, would protect these farmers from the havoc that low (or very heavy) rainfall could do to their livelihood. Even with extremely large subsidies, most (in some cases
more than 90 percent of farmers
) do not insure.
The same is true of health insurance
. When asked why they are uninsured, the poor often explain they cannot afford insurance. This is ironic since you might think the exact opposite: that they cannot afford
not
to be insured. Here, insurance is a casualty of tunneling. To a farmer who is struggling to find enough money for food and vital expenses this week, the threat of low rainfall or medical expenses next season seems abstract. And it falls clearly outside the tunnel. Insurance does not deal with any of the needs—food, rent, school fees—that are pressing against the mind right now. Instead, it exacerbates them—one more strain on an already strained budget.

Another manifestation of tunneling is the decision to multitask. We may check e-mail while “listening in” on a conference call, or squeeze in a bit more e-mail on the cell phone over dinner. This has the benefit of saving time, but it comes at a cost: missing something on the call or at dinner or writing a sloppy e-mail. These costs are notorious when we drive. When you think about the multitasking driver, you think of the driver who is talking on a cell phone. Indeed, studies have shown that talking on a (non-handheld) cell phone while you drive can be
worse than driving at above legal alcohol levels
. But you might also want to think about that driver eating a sandwich. Studies show that
eating while driving can be as big a danger
. And it is a very common practice: one study found that
41 percent of Americans
have eaten a full meal—breakfast, lunch, or dinner—while driving. Eating while driving saves you a bit of time, but you run the risk of staining your upholstery, having an accident, and increasing the chances of a different kind of spare tire:
people consume more calories when they are distracted
. Tunneling promotes
multitasking because the time saving it allows is within the tunnel whereas the problems it creates often fall outside.

Sometimes when we tunnel, we neglect other things completely. When we are busy with a pressing project, we skimp on time with our family, put off getting our finances in order, or defer a regular medical checkup. When you are extremely rushed for time, it is easier to say, “I can spend time with the kids next week,” rather than, “Actually, the kids really need me. When exactly will I really have time next?” Things outside the tunnel are harder to see clearly, easier to undervalue, and more likely to get left out.

Companies are not immune to the psychology of scarcity. For example, during lean times, many firms slash their marketing budgets. Some experts believe that this is not a sound business decision. In fact, it looks a lot like tunneling. As one adviser for small businesses puts it:

In lean times, many small businesses
make the mistake of cutting their marketing budget to the bone or even eliminating it entirely. But lean times are exactly the times your small business most needs marketing. Consumers are restless and looking to make changes in their buying decisions. You need to help them find your products and services and choose them rather than others by getting your name out there. So don’t quit marketing. In fact, if possible, step up your marketing efforts.

Settling this debate—whether cutting marketing expenses during recessions is efficient—would require a great deal of empirical work. What we can say is that the benefits of marketing look a lot like the kind of thing you would neglect in the tunnel, when you are focused on trimming your budget this quarter. Marketing—like the insurance policy—has a cost that falls inside the tunnel while its benefits fall outside.

In many of these examples, one can fairly question whether the choices made are bad. How do we know that the time saved eating
while driving is not worth the increased accident risk? It is always a challenge to decide whether a particular choice was wrong. If by focusing on a deadline you neglect your kids, was that a bad choice? Who is to say? It depends on the consequences of performing poorly at work, the impact of your absence on your children, and even what you want out of life. An outside observer would need to struggle to untangle these considerations. But by exposing
how
tunneling operates, how some considerations are often ignored, the scarcity mindset can shed light on the issue even without settling these debates.

It tells us, for example, that we should be cautious about inferring preferences from behavior. We might see the busy person neglect his children and conclude that he does not care as much about his kids as he does about his work. But that may be wrong, much as it would be wrong to conclude that the uninsured farmer does not particularly care about the loss of his crop to the rains. The busy person may be tunneling. He may value his time with his children greatly, but the project he is rushing to finish pushes all that outside the tunnel. He may look back later in life and report a great deal of anguish about not having spent more time with his children. This is genuine anguish and not merely compliance with a social norm. It is the predictable disappointment of anyone who tunnels. Projects must be finished now; the children will be there tomorrow. Looking back at how our time or money was spent during moments of scarcity, we are bound to be disappointed. Immediate scarcity looms large, and important things unrelated to it will be neglected. When we experience scarcity again and again, these omissions can add up. This should not be confused with a lack of interest; after all,
the person himself regrets it
.

We started this chapter by showing how scarcity captures our attention. We see now that this primitive mechanism compounds into something much larger. Scarcity alters how we look at things; it makes us choose differently. This creates benefits: we are more effective in the moment. But it also comes at a cost: our single-mindedness leads us to neglect things we actually value.