Often we are shown the differences between how rich and poor people think, act, and react to certain life events and situations. “Wealthy people think… while poor people think…” etc.
In an NPR interview last week Sendhil Mullainathan begins to look at some of the ways we think alike.
[Mullainathan], A Harvard economist finds there are psychological connections between the bad financial planning of many poor people and the poor time management of busy professionals. In both cases, he finds the experience of scarcity causes biases in the mind that exacerbate problems.
According to Mullainathan a lack of time or money creates scarcity and causes the mind to focus on immediate needs over long term strategies. He uses his annual auto inspection renewal as an example of a simple task that consistently gets shoved to the following day until the task becomes a relative emergency and has taken up far more resources than were necessary.
Scarcity, whether of time or money, tends to focus the mind on immediate challenges. You stretch your budget to make ends meet. People in the grip of scarcity are tightly focused on meeting their urgent needs, but that focus comes at a price. Important things on the periphery get ignored.
I have been guilty of this way of thought at different times in my own life. Tight business cash flow has lead to poor choices the same way a very busy project cycle can lead to mini disasters if you put off important yet non-urgent tasks.
Listen to the entire story here.