Summary:
I still remember my terror when I did not have enough change for bus rides during my college years. I was using subsidized bus tickets (for college students) and cash infusion was not an issue. It usually happened when I had just finished a task that needed complete focus, prior to getting on the bus. That led me to not counting the change properly. I have always wondered why I put myself in those situations when a moment's forethought would have saved me a lot of heartburn. Reading this book puts my behavior into perspective. It provides some much needed context for the behavior of people short on time, money, food and social relationships. It also explains why it is difficult for poor people (in time, money, food and social relationships) to catch up once they fall into scarcity in these dimensions. The description of the experiments are good and illustrate the effect of scarcity on them. Maybe because one of the authors happens to be an Indian, the amount of experiments conducted in India are far more numerous than other books (which, to me, is a good thing). The authors do pitch the scarcity approach as something that can be a burgeoning area of future study.
I am reminded on a daily basis that I get impacted by the scarcity approach (Leaving home to catch my bus, I left my packet of fruits for breakfast at home because I happened to put it on a table nearby the shoe stand instead of on my bag (which is where I usually put it when I am not under time duress) and only realized my mistake halfway to the bus. By the time I realized my missing fruit packet, it was too late as coming back would have meant missing my bus and going to office late). It is very nice to read a book that explains why we do the things we do in spite of our damnedest efforts to improve.
Analysis:
Once in a while, we come across an idea that sounds so true (based on our experience) that we start looking at every problem through that lens (pretty similar to 'If all you have is a hammer, everything looks like a nail'). This book details how paucity of time, money, food and social relationships impact people on a daily basis. Scarcity in this book is defined as 'having less than you feel you need'. Once in a while, the book does feel as if the authors are stretching to apply the scarcity approach to problems across varied domains. They are, however, upfront about their desire to establish the science of scarcity as a major factor in analyzing people's day to day problems - loneliness, poverty, obesity etc.,. Economists make their living applying scarcity constraints to real world situations. This book focuses on how scarcity in time, money, food and social situations affects a person's mental makeup (and their subsequent decisions). While economists focus on effects of scarcity at a physical level (impact of having less money or small car on spending habits, for example), this book is far more ambitious in sketching out how a person's worldview itself changes when facing scarcity in any one of the dimensions - time, money, food and social relationships. They do consider poverty (scarcity of money) to be the most serious among the 4 in its impact on a person's life. People with money can address scarcity in other dimensions (time, food and social relationships) by throwing money at those problems (an example would be escaping scarcity in time by hiring a cook). On the other hand, lack of money usually results in a host of unhealthy decisions that affects the person and their family - unhealthy food, lack of medical care, lack of consistent parenting etc.,.
The discussion of scarcity approach starts with the discussion of an experiment conducted after World War II at University of Minnesota to study the effect of providing food to people at the edge of starvation for a long time (even though the experiment's authors could have asked British about it considering the amount of starvation British (and Europeans in general) visited on their colonies but it would not have passed scientific muster). The study showed that scarcity captures the mind of the person undergoing starvation. Even when the participant did not intend to spend all their waking moments addressing scarcity of food, their mind repeatedly focused on it against their will. Follow on studies in recent years have solidified those results.
The authors clarify that the study subjects did not make a conscious decision to let hunger dictate their choices. The responses in the subjects' minds happened at a subconscious level. People who focus on scarcity (of time, money, food and social relationships), have less amount of spare mental capacity to devote to other parts of their life. Most of the time, scarcity begets scarcity - the person does not have enough spare mental capacity to address the scarcity and the problem grows bigger and the person falls back on commitments in other parts of their life and they worry about scarcity even more and so on. The benefit, if it can be called one, is that it focuses the person relentlessly on solving that particular scarcity to the exclusion of everything else in their life (which is not a desired outcome as well).
Research has shown the benefits of tight deadlines (scarcity of time) on productivity - College students seem to enjoy more of the reminder of their time in college when the time left to graduate is framed as portion of the year left as opposed to describing the same duration in absolute numbers (hours, for example), Customers routinely forget to use coupons of larger values that have no expiration dates on them as opposed to coupons of smaller values that do. Scarcity's consequence of focusing a person on the task at hand is called the focus dividend. Scarcity and focus dividend apply to people irrespective of their station in life. The downside of focusing on the task at hand to the exclusion of everything else (also called as tunneling) is that the person does not have enough spare mental capacity to focus on other things (if they are able to focus on other things, it means they are multi tasking which humans are terrible at as well as research has shown). The reason tunneling blocks out other avenues of thought is because of goal inhibition - focusing on one thing makes a person less able to think about other things the person cares about. Things that are within the tunnel (pertinent to the task at hand) get completed. Things that are outside the tunnel (that are as important to the person but not pertinent to the task at hand) get dropped. Tunneling on a specific task does not involve cost benefit analysis on the part of the person suffering scarcity - because scarcity captures their mind, they do not usually evaluate the upside of focus dividend with the downside of tunneling and arrive at the most beneficial approach to them. The impact of tunneling is called tunneling tax - when people try to work while listening to a conference call, the outcome is usually less participation in the conference call and shoddy work product (going back to humans inability to multi task effectively). This also helps explain why a person with scarcity of time (busy person) sometimes looks like they are neglecting their children when in actuality the task at hand they are focused on causes them to tunnel pushing everything that is not relevant to that task (example, playing with their children) out of that tunnel.
To analyze the consequences of focus dividend and tunneling, the authors utilize the concept of bandwidth - defined as the overall computational capacity of a person at a point in time (analogous to Random Access Memory (RAM) of a computer). By using up the existing capacity, scarcity reduces the capacity available to focus on other things in life - similar to how a processor slows down when they are multiple programs running at the same time. A person's bandwidth comprises of cognitive capacity (ability to solve problems, retain information, engage in logical reasoning etc.,.) and executive control (Planning, attention, initiating actions, inhibiting actions, controlling impulses etc.,.). The fascinating observation about these experiments is that the effect of scarcity on a person's spare mental capacity occurs even if the person does not face scarcity (in time, money, food or social relationships) in their real life, that is if the mind is primed into thinking about scarcity for the duration of the experiment. There are lots of experiments from India on the effect of scarcity of money on decision making - an example is using sugarcane farmers to test out the hypothesis on bandwidth, over the course of a year. They use these experiments to show how scarcity of money for poor people imposes itself on their minds and makes their poverty worse (and not because poor are inherently less capable of addressing their poverty). They also introduce the concept of slack - defined as the available bandwidth for regular tasks that the person is engaged in. During a time of scarcity (on any one of the dimensions), a person does not have enough slack left to complete their regular activities - prior to suffering scarcity, they would not even have noticed how many activities were on their plate because of slack. As a result of reduced slack, a person is forced to tunnel and complete the tasks that has captured their mind, inevitably neglecting other important activities (which subsequently capture their mind). In this manner, scarcity begets more scarcity, in a vicious cycle. The presence of slack does not draw attention till scarcity captures a person's mind. When slack is available, a person does not usually make choices to save on time, money, food and social relationships. Having more slack allows a person to fail, pick themselves up and try again. On the contrary, for a person with less slack, failure to complete the task puts them in an even more precarious position than when they started (Slack provides a possible reason for the difference between education systems of India and the US. For most of the 20th century, American economy grew at a steady clip and that provided Americans with more slack when it came to their choices in education. Someone could drop out of college and still be assured of a decent middle class life. They could also afford to focus on arts and sports in addition to education. When the US economy took a nosedive with the 2008 recession, jobs dried up and a bachelors degree almost became the minimum threshold for lucrative jobs. Because US encouraged its citizens to be consumers, Americans were not encouraged to save (as it would put a scrimp on the consumption economy) and when the 2008 downturn came, people were put in a precarious economic position. With college costs rising at a fast clip, getting a bachelors degree meant going into debt which would be in addition to the consumer debt they were already carrying. In contrast, Indian economy trundled along at a glacial pace throughout 20th century, partly due to its socialist policies. The amount of jobs available were always less than the working population and it led people to focus on getting a college education as a way of positioning themselves for the available jobs. As a result, education pretty much crowded out focus on arts and sports as they were not considered to be remunerative).Slack in time, money, food and social relationships allows a person to escape from any dire consequences of their mistakes (whether due to improper or impulsive planning or lack of skill). With less slack in those dimensions, the consequences of those same mistakes become magnified. Having more slack also allows a person to overlook the granularity of components when planning - when money is scarce (usually towards the end of the month), a smart TV purchase feels expensive whereas it feels like a deserved reward when money is not scarce (right after getting a paycheck).
People who face scarcity in time, money, food and social relationships become experts in information that will alleviate their scarcity if they had the slack to put their plans in place. People who do not face scarcity in time, money, food and social relationships do not value that advantage and do not know its value till it is frittered away (at which point scarcity penalizes them for not being informed). The result of this is that poor people (in time, money, food and social relationships), behave more like rational economic actors that conventional economists assume in their theories whereas rich people (in time, money, food and social relationships) behave more like irrational economic actors that behavioral economists assume in their theories. The lack of information that rich people have, (in time, money, food and social relationships) is reflected in the types of fund raising campaigns that marketing companies and non profit organizations run (an example would be the public radio pledge drives that ask the listeners to donate 1 dollar a day instead of asking for an annual donation of 365 dollars). While people who choose to be frugal (in time money, food and social relationships) do so as a matter of choice (a good one at that), poor people (in time, money, food and social relationships) are forced to be that way. Even in frugal people, scarcity approach is reflected in their reactions - an example would be a frugal person opting for lower grade of gasoline for their car when the price of gasoline increases even though cutting down on other discretionary purchases (example, ice cream) would more than cover for the increase in gasoline expenditure.
Poor people (in time, money, food and social relationships) usually complete the tunneling tasks by borrowing from their future which usually has a fee associated with it (in case of scarcity of money, interest rates on usurious loans for example). When poor people borrow, they make progress towards the completion of their tunneling task which is inside their tunnel. The lack of slack in future that has now been created by the borrowing lies outside the tunnel and so, they do not dwell on it till it comes due (in the future). In some cases, borrowing is an eminently sensible strategy - if someone is going to lose their home, it pays to borrow from future. However, it does mean that the person will be stuck in scarcity for the foreseeable future (this could explain why Indian education system in the 20th century was woeful - India's socialist policies meant interest rates for loans for education (and for anything else) were prohibitive and as a result, people chose to forego their education in favor of their survival needs. When the Indian economy opened up in 1990's, the availability of loans also increased allowing people to at least access this funding stream for their education. It still mattered that the education had to end in a job so those loans could be repaid but at least now there was an opportunity to access education where there was none before).
The scarcity approach also undercuts popular explanations of why people who are poor in time, money, food and social relationships stay poor in those dimensions. Popular explanations range from they are short sighted and impulsive to it is innate in poor people to they are ignorant of the concepts underlying frugality and wealth creation. Generally, people under scarcity put off things that are outside the tunnel and that do not have an immediate deadline. Scarcity also pushes people into scarcity trap - the person's behavior further exacerbates the scarcity. It usually arises because the person under scarcity misuses the assets in a less than optimal way with the end result being they are effectively shorthanded. Someone who has scarcity in money borrows to meet their needs. The revenues they currently have goes towards servicing the interest rates on those loans (being in scarcity means they would have gone for a loan with much more punitive terms than those available to someone with no scarcity of money). This results in the person having much less to spend (analogous to why people in US look rich but do not feel rich. They are usually juggling debts from multiple directions to be able to make a significant dent in any one of them). Tunneling also leads to poor people (in time, money, food and social relationships) juggling their priorities as each of them move up higher in the list. Because they are juggling, what is a routine event to someone without scarcity, becomes a shock to a person with scarcity. As long as the person with scarcity can put in place a plan for their expenditures and implement it without any deviation (which is next to impossible as there will always be unforeseen demands on time, money, food and social relationships), they are usually able to (barely) keep their head above water and not sink. Better still, if the person can build a buffer (of time, money, food and social relationships) against sudden shocks, it puts them in a better position to counter the shocks when they happen. Usually, during periods of abundance, people should plan their expenditure (in time, money, food and social relationships) so that they are able to build enough slack during times of scarcity. However, most people are also good at procrastination which results in most people putting off their planning in the future and by the time they get around to it, scarcity is already upon them.
Because context plays such a crucial role in explaining why poor people (in time, money, food and social relationships) stay poor, it also provides us with ways to mitigate the impact of scarcity and slack. Looking at poverty, the authors recommend taking a look at the design of anti poverty programs. When anti poverty programs do not work, poor people are usually blamed for it (an example is the Republican party's heartless obsession with welfare reform in the US that assumes people in poverty are innately looking for a free ride and proceeds to put in place hurdles for them to access monetary benefits unless they show that they are not looking for a free ride). That has also resulted in governments working harder to educate poor people about those programs without understanding how the design of these programs could serve as an inhibiting factor for someone facing scarcity of money. One alternative the authors suggest is designing the educational programs in a modular manner so that if a poor person misses a class (because of low bandwidth from scarcity), they do not automatically fall behind in the class schedule and can take the missed module later while they attend the classes for other modules.
Designing a program better does not obviate the need for personal responsibility. It only ensures that when a poor person wants to address their scarcity, they should be provided opportunities to do so instead of fitting them inside a straitjacket(that does not provide an allowance for scarcity approach). Programs for poor people (in time, money, food and social relationships) should be designed so any reminders to the participants falls inside their tunnel where they will be focused and not outside the tunnel (An example would be sending reminders on a frequent basis instead of one time prior to the due date or providing food incentives immediately instead of promising them in the future. This might explain why populist programs (free bicycles, computers) instituted in Tamil Nadu have such potency. Critics might claim it is a frivolous waste of tax payer money targeted for votes but if those items address a scarcity that poor people are having and does so immediately, that program is going to succeed and people are going to be grateful for the assistance). When it comes to poverty (scarcity of money), the authors suggest looking at the lack of affordable banking options for the poor. Banks are built on a model of gathering steady revenue stream from modest to large amounts of money provided judiciously and slowly. That leaves people in poverty out of banking (and also kneecaps them from building a financial against future money shocks). Micro Finance does address some of it by providing small loans but they are primarily meant for investing. A lending model that provides small amounts of money at a moments' notice would help (which is what the local pawn shop or payday loan is meant to address but the usurious rates they charge for the loans pretty much ensures the poor person in stuck in an endless vicious loop of interest payments with the principal not getting any reduction).
The book also provides alternatives in other settings where building up slack provided beneficial results. An example is a hospital that was facing long waiting times for its regular patients. With help of a consultant, the hospital assigned a room specifically for emergency surgery. Even though the total number of available rooms was lesser, it allowed the hospital to streamline the regular patients while directing the emergency patients (because emergency patients arrive at irregular rate, it was serving as a sudden shock to the hospital scheduling system) to the emergency room. Having too much slack can cause bloat (which is why organizations sometimes cut too much thinking they are getting rid of the fat and go from having inefficiency because of bloat to lower performance because of scarcity). In early 1900's, Henry Ford understood the importance of having slack in his workers' lives to ensure optimum productivity in his automobile factories. He pushed for 40 hour work week to allow workers some slack in their time instead of overworking them in the interests of productivity (overworking them also led to mistakes that then served as a drain on productivity). Major consulting companies that provide strategic consulting services (a.k.a "Fluff") still manage their employees productivity by hours billed. As a result, employees focus on maximizing their billable time that then leads to mistakes (due to scarcity in time) which then leads to longer hours to resolve those issues and so on. On a personal level, they suggest focusing on influencing what is inside the tunnel. In case of meeting hell (meetings that routinely overrun their allotted time and bleed into other meetings), they suggest having someone remind the meeting participants about time left (say, 5 minutes) and then have someone remind the meeting participants at the end of the allotted time about their subsequent commitments.Automated processes (bill payments, toll payments, reminders) are another way to combat lack of bandwidth and tunneling. For interest rates on loans, the authors suggest using absolute numbers instead of percentages - after the Dodd Frank reforms, credit card companies in US have to provide an explanation of how much loan balance is left and the amount of time it will take to pay it off completely in absolute number of years. People are more comfortable dealing with absolute numbers than percentages. They do not suggest coming down heavily on loan products, just that the information in it be made clear to a person with low bandwidth (which is also good for a person with high bandwidth as it sets them thinking about how to get their house in order for the future).
I still remember my terror when I did not have enough change for bus rides during my college years. I was using subsidized bus tickets (for college students) and cash infusion was not an issue. It usually happened when I had just finished a task that needed complete focus, prior to getting on the bus. That led me to not counting the change properly. I have always wondered why I put myself in those situations when a moment's forethought would have saved me a lot of heartburn. Reading this book puts my behavior into perspective. It provides some much needed context for the behavior of people short on time, money, food and social relationships. It also explains why it is difficult for poor people (in time, money, food and social relationships) to catch up once they fall into scarcity in these dimensions. The description of the experiments are good and illustrate the effect of scarcity on them. Maybe because one of the authors happens to be an Indian, the amount of experiments conducted in India are far more numerous than other books (which, to me, is a good thing). The authors do pitch the scarcity approach as something that can be a burgeoning area of future study.
I am reminded on a daily basis that I get impacted by the scarcity approach (Leaving home to catch my bus, I left my packet of fruits for breakfast at home because I happened to put it on a table nearby the shoe stand instead of on my bag (which is where I usually put it when I am not under time duress) and only realized my mistake halfway to the bus. By the time I realized my missing fruit packet, it was too late as coming back would have meant missing my bus and going to office late). It is very nice to read a book that explains why we do the things we do in spite of our damnedest efforts to improve.
Analysis:
Once in a while, we come across an idea that sounds so true (based on our experience) that we start looking at every problem through that lens (pretty similar to 'If all you have is a hammer, everything looks like a nail'). This book details how paucity of time, money, food and social relationships impact people on a daily basis. Scarcity in this book is defined as 'having less than you feel you need'. Once in a while, the book does feel as if the authors are stretching to apply the scarcity approach to problems across varied domains. They are, however, upfront about their desire to establish the science of scarcity as a major factor in analyzing people's day to day problems - loneliness, poverty, obesity etc.,. Economists make their living applying scarcity constraints to real world situations. This book focuses on how scarcity in time, money, food and social situations affects a person's mental makeup (and their subsequent decisions). While economists focus on effects of scarcity at a physical level (impact of having less money or small car on spending habits, for example), this book is far more ambitious in sketching out how a person's worldview itself changes when facing scarcity in any one of the dimensions - time, money, food and social relationships. They do consider poverty (scarcity of money) to be the most serious among the 4 in its impact on a person's life. People with money can address scarcity in other dimensions (time, food and social relationships) by throwing money at those problems (an example would be escaping scarcity in time by hiring a cook). On the other hand, lack of money usually results in a host of unhealthy decisions that affects the person and their family - unhealthy food, lack of medical care, lack of consistent parenting etc.,.
The discussion of scarcity approach starts with the discussion of an experiment conducted after World War II at University of Minnesota to study the effect of providing food to people at the edge of starvation for a long time (even though the experiment's authors could have asked British about it considering the amount of starvation British (and Europeans in general) visited on their colonies but it would not have passed scientific muster). The study showed that scarcity captures the mind of the person undergoing starvation. Even when the participant did not intend to spend all their waking moments addressing scarcity of food, their mind repeatedly focused on it against their will. Follow on studies in recent years have solidified those results.
The authors clarify that the study subjects did not make a conscious decision to let hunger dictate their choices. The responses in the subjects' minds happened at a subconscious level. People who focus on scarcity (of time, money, food and social relationships), have less amount of spare mental capacity to devote to other parts of their life. Most of the time, scarcity begets scarcity - the person does not have enough spare mental capacity to address the scarcity and the problem grows bigger and the person falls back on commitments in other parts of their life and they worry about scarcity even more and so on. The benefit, if it can be called one, is that it focuses the person relentlessly on solving that particular scarcity to the exclusion of everything else in their life (which is not a desired outcome as well).
Research has shown the benefits of tight deadlines (scarcity of time) on productivity - College students seem to enjoy more of the reminder of their time in college when the time left to graduate is framed as portion of the year left as opposed to describing the same duration in absolute numbers (hours, for example), Customers routinely forget to use coupons of larger values that have no expiration dates on them as opposed to coupons of smaller values that do. Scarcity's consequence of focusing a person on the task at hand is called the focus dividend. Scarcity and focus dividend apply to people irrespective of their station in life. The downside of focusing on the task at hand to the exclusion of everything else (also called as tunneling) is that the person does not have enough spare mental capacity to focus on other things (if they are able to focus on other things, it means they are multi tasking which humans are terrible at as well as research has shown). The reason tunneling blocks out other avenues of thought is because of goal inhibition - focusing on one thing makes a person less able to think about other things the person cares about. Things that are within the tunnel (pertinent to the task at hand) get completed. Things that are outside the tunnel (that are as important to the person but not pertinent to the task at hand) get dropped. Tunneling on a specific task does not involve cost benefit analysis on the part of the person suffering scarcity - because scarcity captures their mind, they do not usually evaluate the upside of focus dividend with the downside of tunneling and arrive at the most beneficial approach to them. The impact of tunneling is called tunneling tax - when people try to work while listening to a conference call, the outcome is usually less participation in the conference call and shoddy work product (going back to humans inability to multi task effectively). This also helps explain why a person with scarcity of time (busy person) sometimes looks like they are neglecting their children when in actuality the task at hand they are focused on causes them to tunnel pushing everything that is not relevant to that task (example, playing with their children) out of that tunnel.
To analyze the consequences of focus dividend and tunneling, the authors utilize the concept of bandwidth - defined as the overall computational capacity of a person at a point in time (analogous to Random Access Memory (RAM) of a computer). By using up the existing capacity, scarcity reduces the capacity available to focus on other things in life - similar to how a processor slows down when they are multiple programs running at the same time. A person's bandwidth comprises of cognitive capacity (ability to solve problems, retain information, engage in logical reasoning etc.,.) and executive control (Planning, attention, initiating actions, inhibiting actions, controlling impulses etc.,.). The fascinating observation about these experiments is that the effect of scarcity on a person's spare mental capacity occurs even if the person does not face scarcity (in time, money, food or social relationships) in their real life, that is if the mind is primed into thinking about scarcity for the duration of the experiment. There are lots of experiments from India on the effect of scarcity of money on decision making - an example is using sugarcane farmers to test out the hypothesis on bandwidth, over the course of a year. They use these experiments to show how scarcity of money for poor people imposes itself on their minds and makes their poverty worse (and not because poor are inherently less capable of addressing their poverty). They also introduce the concept of slack - defined as the available bandwidth for regular tasks that the person is engaged in. During a time of scarcity (on any one of the dimensions), a person does not have enough slack left to complete their regular activities - prior to suffering scarcity, they would not even have noticed how many activities were on their plate because of slack. As a result of reduced slack, a person is forced to tunnel and complete the tasks that has captured their mind, inevitably neglecting other important activities (which subsequently capture their mind). In this manner, scarcity begets more scarcity, in a vicious cycle. The presence of slack does not draw attention till scarcity captures a person's mind. When slack is available, a person does not usually make choices to save on time, money, food and social relationships. Having more slack allows a person to fail, pick themselves up and try again. On the contrary, for a person with less slack, failure to complete the task puts them in an even more precarious position than when they started (Slack provides a possible reason for the difference between education systems of India and the US. For most of the 20th century, American economy grew at a steady clip and that provided Americans with more slack when it came to their choices in education. Someone could drop out of college and still be assured of a decent middle class life. They could also afford to focus on arts and sports in addition to education. When the US economy took a nosedive with the 2008 recession, jobs dried up and a bachelors degree almost became the minimum threshold for lucrative jobs. Because US encouraged its citizens to be consumers, Americans were not encouraged to save (as it would put a scrimp on the consumption economy) and when the 2008 downturn came, people were put in a precarious economic position. With college costs rising at a fast clip, getting a bachelors degree meant going into debt which would be in addition to the consumer debt they were already carrying. In contrast, Indian economy trundled along at a glacial pace throughout 20th century, partly due to its socialist policies. The amount of jobs available were always less than the working population and it led people to focus on getting a college education as a way of positioning themselves for the available jobs. As a result, education pretty much crowded out focus on arts and sports as they were not considered to be remunerative).Slack in time, money, food and social relationships allows a person to escape from any dire consequences of their mistakes (whether due to improper or impulsive planning or lack of skill). With less slack in those dimensions, the consequences of those same mistakes become magnified. Having more slack also allows a person to overlook the granularity of components when planning - when money is scarce (usually towards the end of the month), a smart TV purchase feels expensive whereas it feels like a deserved reward when money is not scarce (right after getting a paycheck).
People who face scarcity in time, money, food and social relationships become experts in information that will alleviate their scarcity if they had the slack to put their plans in place. People who do not face scarcity in time, money, food and social relationships do not value that advantage and do not know its value till it is frittered away (at which point scarcity penalizes them for not being informed). The result of this is that poor people (in time, money, food and social relationships), behave more like rational economic actors that conventional economists assume in their theories whereas rich people (in time, money, food and social relationships) behave more like irrational economic actors that behavioral economists assume in their theories. The lack of information that rich people have, (in time, money, food and social relationships) is reflected in the types of fund raising campaigns that marketing companies and non profit organizations run (an example would be the public radio pledge drives that ask the listeners to donate 1 dollar a day instead of asking for an annual donation of 365 dollars). While people who choose to be frugal (in time money, food and social relationships) do so as a matter of choice (a good one at that), poor people (in time, money, food and social relationships) are forced to be that way. Even in frugal people, scarcity approach is reflected in their reactions - an example would be a frugal person opting for lower grade of gasoline for their car when the price of gasoline increases even though cutting down on other discretionary purchases (example, ice cream) would more than cover for the increase in gasoline expenditure.
Poor people (in time, money, food and social relationships) usually complete the tunneling tasks by borrowing from their future which usually has a fee associated with it (in case of scarcity of money, interest rates on usurious loans for example). When poor people borrow, they make progress towards the completion of their tunneling task which is inside their tunnel. The lack of slack in future that has now been created by the borrowing lies outside the tunnel and so, they do not dwell on it till it comes due (in the future). In some cases, borrowing is an eminently sensible strategy - if someone is going to lose their home, it pays to borrow from future. However, it does mean that the person will be stuck in scarcity for the foreseeable future (this could explain why Indian education system in the 20th century was woeful - India's socialist policies meant interest rates for loans for education (and for anything else) were prohibitive and as a result, people chose to forego their education in favor of their survival needs. When the Indian economy opened up in 1990's, the availability of loans also increased allowing people to at least access this funding stream for their education. It still mattered that the education had to end in a job so those loans could be repaid but at least now there was an opportunity to access education where there was none before).
The scarcity approach also undercuts popular explanations of why people who are poor in time, money, food and social relationships stay poor in those dimensions. Popular explanations range from they are short sighted and impulsive to it is innate in poor people to they are ignorant of the concepts underlying frugality and wealth creation. Generally, people under scarcity put off things that are outside the tunnel and that do not have an immediate deadline. Scarcity also pushes people into scarcity trap - the person's behavior further exacerbates the scarcity. It usually arises because the person under scarcity misuses the assets in a less than optimal way with the end result being they are effectively shorthanded. Someone who has scarcity in money borrows to meet their needs. The revenues they currently have goes towards servicing the interest rates on those loans (being in scarcity means they would have gone for a loan with much more punitive terms than those available to someone with no scarcity of money). This results in the person having much less to spend (analogous to why people in US look rich but do not feel rich. They are usually juggling debts from multiple directions to be able to make a significant dent in any one of them). Tunneling also leads to poor people (in time, money, food and social relationships) juggling their priorities as each of them move up higher in the list. Because they are juggling, what is a routine event to someone without scarcity, becomes a shock to a person with scarcity. As long as the person with scarcity can put in place a plan for their expenditures and implement it without any deviation (which is next to impossible as there will always be unforeseen demands on time, money, food and social relationships), they are usually able to (barely) keep their head above water and not sink. Better still, if the person can build a buffer (of time, money, food and social relationships) against sudden shocks, it puts them in a better position to counter the shocks when they happen. Usually, during periods of abundance, people should plan their expenditure (in time, money, food and social relationships) so that they are able to build enough slack during times of scarcity. However, most people are also good at procrastination which results in most people putting off their planning in the future and by the time they get around to it, scarcity is already upon them.
Because context plays such a crucial role in explaining why poor people (in time, money, food and social relationships) stay poor, it also provides us with ways to mitigate the impact of scarcity and slack. Looking at poverty, the authors recommend taking a look at the design of anti poverty programs. When anti poverty programs do not work, poor people are usually blamed for it (an example is the Republican party's heartless obsession with welfare reform in the US that assumes people in poverty are innately looking for a free ride and proceeds to put in place hurdles for them to access monetary benefits unless they show that they are not looking for a free ride). That has also resulted in governments working harder to educate poor people about those programs without understanding how the design of these programs could serve as an inhibiting factor for someone facing scarcity of money. One alternative the authors suggest is designing the educational programs in a modular manner so that if a poor person misses a class (because of low bandwidth from scarcity), they do not automatically fall behind in the class schedule and can take the missed module later while they attend the classes for other modules.
Designing a program better does not obviate the need for personal responsibility. It only ensures that when a poor person wants to address their scarcity, they should be provided opportunities to do so instead of fitting them inside a straitjacket(that does not provide an allowance for scarcity approach). Programs for poor people (in time, money, food and social relationships) should be designed so any reminders to the participants falls inside their tunnel where they will be focused and not outside the tunnel (An example would be sending reminders on a frequent basis instead of one time prior to the due date or providing food incentives immediately instead of promising them in the future. This might explain why populist programs (free bicycles, computers) instituted in Tamil Nadu have such potency. Critics might claim it is a frivolous waste of tax payer money targeted for votes but if those items address a scarcity that poor people are having and does so immediately, that program is going to succeed and people are going to be grateful for the assistance). When it comes to poverty (scarcity of money), the authors suggest looking at the lack of affordable banking options for the poor. Banks are built on a model of gathering steady revenue stream from modest to large amounts of money provided judiciously and slowly. That leaves people in poverty out of banking (and also kneecaps them from building a financial against future money shocks). Micro Finance does address some of it by providing small loans but they are primarily meant for investing. A lending model that provides small amounts of money at a moments' notice would help (which is what the local pawn shop or payday loan is meant to address but the usurious rates they charge for the loans pretty much ensures the poor person in stuck in an endless vicious loop of interest payments with the principal not getting any reduction).
The book also provides alternatives in other settings where building up slack provided beneficial results. An example is a hospital that was facing long waiting times for its regular patients. With help of a consultant, the hospital assigned a room specifically for emergency surgery. Even though the total number of available rooms was lesser, it allowed the hospital to streamline the regular patients while directing the emergency patients (because emergency patients arrive at irregular rate, it was serving as a sudden shock to the hospital scheduling system) to the emergency room. Having too much slack can cause bloat (which is why organizations sometimes cut too much thinking they are getting rid of the fat and go from having inefficiency because of bloat to lower performance because of scarcity). In early 1900's, Henry Ford understood the importance of having slack in his workers' lives to ensure optimum productivity in his automobile factories. He pushed for 40 hour work week to allow workers some slack in their time instead of overworking them in the interests of productivity (overworking them also led to mistakes that then served as a drain on productivity). Major consulting companies that provide strategic consulting services (a.k.a "Fluff") still manage their employees productivity by hours billed. As a result, employees focus on maximizing their billable time that then leads to mistakes (due to scarcity in time) which then leads to longer hours to resolve those issues and so on. On a personal level, they suggest focusing on influencing what is inside the tunnel. In case of meeting hell (meetings that routinely overrun their allotted time and bleed into other meetings), they suggest having someone remind the meeting participants about time left (say, 5 minutes) and then have someone remind the meeting participants at the end of the allotted time about their subsequent commitments.Automated processes (bill payments, toll payments, reminders) are another way to combat lack of bandwidth and tunneling. For interest rates on loans, the authors suggest using absolute numbers instead of percentages - after the Dodd Frank reforms, credit card companies in US have to provide an explanation of how much loan balance is left and the amount of time it will take to pay it off completely in absolute number of years. People are more comfortable dealing with absolute numbers than percentages. They do not suggest coming down heavily on loan products, just that the information in it be made clear to a person with low bandwidth (which is also good for a person with high bandwidth as it sets them thinking about how to get their house in order for the future).
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