Scarcity: Why Having Less Is Having More

Scarcity works much the same in economics as it does in social psychology. It refers to how people meet their unlimited wants and needs with resources that are limited. Humans value things that are scarce higher, things that are abundant lower.

The idea of scarcity is deeply embedded in marketing and advertising gimmicks. Products that are sold out or are about to be, products that are limited edition, and similar instances drive people to consider them scarce and thus more valuable. An instance was the COVID-19 pandemic: due to the anticipated scarcity of toilet paper and masks, buyers hoarded shelves. In addition to hoarding behavior, scarcity can trigger impulse purchases and even anti-social behavior.

Scarcity takes over when there is too little of a given product, a product is rare or has unique properties, and/or a product is available for a limited amount of time. An instance of the first is your favorite pair of jeans, since no manufacturer can replace them exactly as they are; a rare product is a Pokemon or baseball card, and limited time offers are pretty much everywhere you look.

Scarcity may be further amplified by competition. Where others are directly competing for analogical resources, the value you assign to “scarce” objects is inflated further. Advertisers thus label products as “hot” or “popular” or “about to be sold out” to tap into this.

Those with a “scarcity mentality” have an affected frontal lobe. The frontal lobe is the decision-making part of the brain. This affects how they think and feel, with significant negative repercussions for life. Those who were raised in scarce environments might experience this, manifest as impulse purchasing, lower cognitive performance, and more forgetful behavior.

Therefore scarcity has benefits and risks. The upsides: scarcity forces prioritization, directing us to what really matters; scarcity may stimulate creative problem-solving; scarcity has us recognize the value in limited opportunities and resources; scarcity can motivate us to act quickly and decisively. The risks: scarcity can make you narrow-minded, blind to bigger opportunities; scarcity can result in chronic stress when overdone; scarcity may inaugurate impulsive short-term decision-making.

Here are a few instances of scarcity in real-life situations:

• Time: limited time sharpens focus on key tasks;

• Personal productivity: artificial constraints like deadlines enhance efficiency;

• Business: limited-edition products and/or services trigger urgency in your audience;

• Budgeting: constrained budgets forces disciplined spending and priority-setting;

• Relationships: time-scarce environments make interactions with loved ones more meaningful;

• Innovation: resource-scarce environments turn us to creative problem-solving and may spark groundbreaking inventions;

• Travel: scarce vacation days and budgets can make us see destinations in a different light.

How to apply scarcity as a mental model: (1) identify your constraints—time, money, opportunities, resources; (2) reframe the constraints as opportunities for creativity and innovation; (3) prioritize using the scarcity lens, valuing your finite resources; (4) leverage perceived scarcity—using tools like deadlines and time constraints. Do not, however, fall for: (1) the scarcity trap, where you emphasize short-term fixes over long-term solutions; (2) counterproductive constraints, where you over-utilize scarcity and just stress yourself out.

A few thought-provoking insights. “Necessity is the mother of invention.” This highlights the importance of scarcity in creativity. “You don’t know the value of water until the well runs dry.” This underscores how scarcity increases appreciation. Thus scarcity is a double-edged blade. It can spur focus and efficiency, and it can cause burnout and missed opportunities. Employ the lens carefully.

Questions to reflect on:

1. How does the perception of limited resources shape decision-making in personal and professional undertakings?

2. In what ways might a scarcity mindset restrict creative thinking?

3. What tradeoffs would be made due to the belief that there isn't sufficient time, money, or material?

4. In what instances has the assumption of scarcity driven you to be more focused and disciplined?

5. How can acknowledging scarcity result in more efficient use of available resources?

Quotes that encompass the model:

1. "Necessity is the mother of invention." - A traditional proverb.

2. "Scarcity isn't a weakness, but a call to innovate." - Unknown author.

3. "Constraints reveal possibilities that abundance keeps hidden." - Unknown author.

Example use cases:

1. Budgeting: allocating limited financial resources to core business activities while eliminating non-essential expenses.

2. Time management: prioritizing tasks by recognizing how scare time is, ensuring that high-impact projects receive the necessary focus and energy.

3. Project: managing a team or project with limited manpower by carefully scheduling tasks and sticking to lean methodologies for maximal efficiency.

4. Creative: turning material constraints into catalysts for innovation, such as by seeking out novel solutions when faced with limited tools or information.