How poverty changes your mindset
review.chicagobooth.edu
How poverty changes your mindset
1–10 of 559 posts
Re: How poverty changes your mindset
#2> That’s the correct financial decision, according to traditional economics—to drive the extra distance no matter the original cost. Saving $50 is the same regardless of the amount of the item in question. But wealthier participants saw the savings in relative terms, noticing the percentage savings. By contrast, poorer participants thought in absolute terms. To them, $50 saved was $50 to spend on groceries or the electric bill.
Then traditional economics is a fool. Rich people value their time and their headspace. I’ve seen this again and again with someone close to me: they assign the same priority to tiny financial decisions as to big ones. They do make very optimized decisions but it is within a very small context. In the meantime they don’t realise the world of opportunity they are not seeing because of their obsessive focus on small items.
Re: How poverty changes your mindset
#3This is not the first time this article has come up, and as usual I'll give my 2c.
What qualifies me to talk about this issue? I was raised in the UK on income support, single mother, social housing, low income city etc;
Now the situation has changed somewhat in the UK; back then in the UK it was possible to get by without going into debt if you were smart about things and I believe this no longer to be the case, but I am no longer in this system and; to qualify my statement further: it was not possible to be poorer than my mother was. No family and no registered father on record. (He would have had to pay child maintenance if he was on record, the state does not supply this if there is an absence)
What I found to be true is that my mother will buy the cheapest thing that will do the job, she will treat her time as unlimited in finding similar quality goods for less money. She still trawls second-hand stores and will not buy anything that needs maintenance.
Her cars tend to be 1-step from the junk-yard (even though she has a steady well paying job now).
For myself, I select heavily for things that require less maintenance too. I buy extremely high quality things because I assume that my job is temporary and that I will once-again be plunged into poverty, and if anything needs to be replaced in that time I may not have the financial freedom to do so. I do not have anything that requires recurring costs (no netflix, no apple music.. I will not subscribe to anything that is not a utility), I do not take long-term contracts (if there is a choice between 12months at a cheaper rate or month-to-month for 10% more I will pay the 10% more not to be tied).
This is my anecdatum, of my mother who grew up working class and became poor through choice, and for me, who grew up poor and became middle-class.
Re: How poverty changes your mindset
#4> That’s the correct financial decision, according to traditional economics—to drive the extra distance no matter the original cost. Saving $50 is the same regardless of the amount of the item in question. But wealthier participants saw the savings in relative terms, noticing the percentage savings. By contrast, poorer participants thought in absolute terms. To them, $50 saved was $50 to spend on groceries or the ele…
It’s a lot harder to quantify and value headspace. Is there a way? I was expecting the article to quantify it in reduced IQ, but it went the other way.
Re: How poverty changes your mindset
#5If you are poor you cannot shop sales the same what you can if you have money. Stocking up on items is not really an option.
Re: How poverty changes your mindset
#6> That’s the correct financial decision, according to traditional economics—to drive the extra distance no matter the original cost. Saving $50 is the same regardless of the amount of the item in question. But wealthier participants saw the savings in relative terms, noticing the percentage savings. By contrast, poorer participants thought in absolute terms. To them, $50 saved was $50 to spend on groceries or the ele…
[deleted]
Re: How poverty changes your mindset
#7It's not poverty. It's stress. Poverty is very stressful. Any kind of stress stops people from acting the way they normally would be inclined to act. It takes a lot of conditioning and practice to deal with stress without having it impact you and your performance.
Take a little stress off your staff, and instantly everyone starts making better decisions, their work seems more focused. As a manager, the best thing I can do for my team is try and shield them from scope creep, angry clients, and unreasonable deadlines. And make sure everyone has time off when they need it.
Take care of your team, team will take care of the work.
Re: How poverty changes your mindset
#8Shafir and Mullainathan wrote a book called "Scarcity" that articulates an expanded version of this idea. Highly recommended.
Re: How poverty changes your mindset
#9> That’s the correct financial decision, according to traditional economics—to drive the extra distance no matter the original cost. Saving $50 is the same regardless of the amount of the item in question. But wealthier participants saw the savings in relative terms, noticing the percentage savings. By contrast, poorer participants thought in absolute terms. To them, $50 saved was $50 to spend on groceries or the ele…
You're misunderstanding the question they've posed people.
In either situation, the question is "is half an hour of transit worth $50 to you." Whether it's $50 saved on a $300 item or a $1000 item has no impact on the $ saved per minute.
Re: How poverty changes your mindset
#10This is not the first time this article has come up, and as usual I'll give my 2c. What qualifies me to talk about this issue? I was raised in the UK on income support, single mother, social housing, low income city etc; Now the situation has changed somewhat in the UK; back then in the UK it was possible to get by without going into debt if you were smart about things and I believe this no longer to be the case, but…
I grew up relatively poor in the U.S. under wildly different family circumstances, but I felt myself nodding to the solutions and approaches of both your mother and yourself -- some out of recognition, some out of familiarity.
I've found it almost impossible to enumerate the ways in which growing up poor wildly alters your mindset about money. It's literally mind altering and often nonsensical or hard to explain to people who haven't been through it.
My wife, who grew up in a fairly wealthy household (to parents who themselves escaped crushing poverty), has tried to train me to avoid many of those instincts now that I myself am in good financial status. But I still take a weird kind of comfort at least browsing local thrift stores, figuring out what we'd absolutely need in case of a major bankruptcy or working over scenarios on how to survive and get housing if we lost everything.
The industries that prey on the poor basically exist because they've managed to use these instincts against the poor rather than trying to get people out of poverty. They've always been there, but I'm afraid that they've become much more sophisticated at extracting pennies from people with mere dollars.