How Poverty Taxes the Brain • Hacker News Board

Re: How Poverty Taxes the Brain

#31

Post by msandford » Fri, Aug 30, 2013, 3:40 PM UTC

ritchiea wrote: post #14

I can speak to this. For a while in 2010 I was completely broke after leaving my first job out of college, which I hated, and having some other employment opportunities fall through. Having that little money changes your decision making process about absolutely everything. Obviously every financial decision is effected, even the tiniest purchases weigh into bigger questions like "will I have enough money in my bank a…

I agree with a lot of what you're saying but one thing that's always bugged me is how we account for sub-optimal decisions.

What I mean is that if I make 60k per year and I choose to spend very little of it by driving an un-fancy car and cooking all my meals at home and living in a small apartment (perhaps with a roommate) I might be able to save half my net income. Or I could spend nearly all of that income on a bigger place, nicer car and meals out. And then I would potentially be in the exact same mental place as the person in poverty.

What if that gets scaled down to 20k instead of 60k? Is there still nothing I can do to figure out a way to save money? Even if my cognitive load is high due to being poor, which way does causation go? Maybe I consciously decided to live in a bigger place and eat more meals out and as a result I now have more financial worry.

I guess what I'm asking is which way does the causation go? Does being in poverty cause you to become overloaded or does the inability to prioritize well or think under stress cause the poverty? To me this question is neigh impossible to answer because you can't look at a single decision or experiment to determine the outcome.

My naive thinking about this kind of thing is that it's like a betting game. With 50/50 odds you might be up some or down some but in the long run little changes. A hundred $1 bets on a coin toss should leave you with just as much money as you started with. But if the odds change, even just a tiny bit, the outcome of a hundred bets gets really different. Having a slight edge on the house, 51% instead of 50%, can cause you to slowly but surely come ahead of the house. And similarly, going from 50% to 49% can cause you to slowly bleed to death.

Now some math. A 50% chance of winning is the same as a 100% payout. For each win you double your money, for each loss you get nothing. 51% is a 102% payout. 49% is a 98% payout. We'll neglect the notion of a finite bankroll since these are small bets; our bankroll is the full $100.

With 50% odds:

1^100 = 1 so you never make or lose money

With 51% odds:

1.02^100 = 7.24

With 49% odds:

0.98^100 = 0.133

Now of course I don't know how this game would scale to real life. Would a person have only a few chances in a lifetime to make these kinds of "bets" or do you get these chances several times a day? And what is the quantity of the bet? Is it how much I spend, or how much I choose to spend versus my other options of how much to spend?

For example if I feel thirsty I could choose to drink water from a drinking fountain (free) or buy a soda ($2). Is the bet quantity $2 (how much I spend or don't spend) or is it $1 because I either "double my money" (which is to say, I don't spend the $2) or I "lose that bet" buy the soda and spend the $2. I would tend to think it's a $1 bet.

Anyhow I'd love getting some kind of real feedback on the math here rather than just "you're an asshole for not thinking those in poverty are victims"

Re: How Poverty Taxes the Brain

#32

Post by alanctgardner2 » Fri, Aug 30, 2013, 3:45 PM UTC

astine wrote: post #6

This is a very interesting article, but the experiment, as described, doesn't seem to back up the thesis. They show that people who have less money are more taxed by financial questions, but that could just as easily be a cause not an effect of poverty. (ie, it could back the notion that it's trying to refute.) The article did mention a similar study in India where they tested people who were seasonally poor, but it…

It totally does mention that their scores changed after they got the harvest... they went up, presumably because the cognitive burden was gone. Similarly, the experiment with car repairs of different expenses showed that the cognitive impact is correlated to how 'bearable' an expense was: rich people weren't impacted by a thousand dollar repair, but poor people suffered an impairment that wasn't there when the repair was only $100. This is pretty clear evidence that they didn't just pick a bunch of dumb poor people: the poor people started performing worse when there was financial pressure. This could probably be extended to test the impact of financial pressure on 'rich' people: propose they're hypothetically unemployed, or disabled and see if this has a cognitive impact. The problem is that rich people don't deal with that kind of problem with any regularity, so they might be able to shrug off a hypothetical situation.

Re: How Poverty Taxes the Brain

#33

Post by BetaCygni » Fri, Aug 30, 2013, 3:57 PM UTC

Doesn't the fact that they scored the same on the first tests actually prove that being rich or poor doesn't matter in practice?

If you give someone a problem to solve and then another one of course he will still be busy with the first. For rich people it's a simpler problem so they solve it quicker.

Of course it's possible to end up in a negative spiral. It's up to society to provide for people on a sufficient level that they can lift themselves up if they are able to.

Re: How Poverty Taxes the Brain

#34

Post by 3825 » Fri, Aug 30, 2013, 3:59 PM UTC

angersock wrote: post #19

ritchiea wrote: post #14

I can speak to this. For a while in 2010 I was completely broke after leaving my first job out of college, which I hated, and having some other employment opportunities fall through. Having that little money changes your decision making process about absolutely everything. Obviously every financial decision is effected, even the tiniest purchases weigh into bigger questions like "will I have enough money in my bank a…

"If you're financially stable you are like someone programming in a high level language who has tedious tasks like memory management taken care of for you. " This is exactly the correct metaphor. I had to, at one point, stop using my coworking space and start working from home because I couldn't deal with the occasional overhead of "Huh, shit, I forget to bring lunch--can I afford to eat out today? Do I have enough g…

This is why you don't need to pay your programmers too much but you do need to pay them enough that they can focus more on their job and not on trivial items.

In hindsight, nicely presented lunches, gym (and perhaps babysitting?) on campus apparently serve a very real purpose. It makes sense that they are minimizing distractions. (When you think of it this way, employees should not have to pay income tax for free lunch at work but that's a different conversation.)

However, your parent comment made me think a little:

>It can reach a point where you can barely purchase a soda without any stress over spending money.

Do people with money not stress about spending money? I mean sure, I have a decent wage rate. According to the New York Times[0], a little more than half of Americans make less money than I do. However, it is difficult to shake the fear. I am by no means wealthy and I have no alternate source of income. If I am out of the work force for a few months, I will have to take shelter with my (retired) parents. I am by no means the most frugal person in the world. I have a nice Nexus 4 phone and I make whimsical purchases like going to the water park ($40+ for about three hours) and I eat out and stuff a few times a week. However, there is that fear in the back of my head that says what happens tomorrow? I would like to go to grad school. Will I be able to afford it?

The article makes me feel like the wealthy people don't have worries like that. I kind of envy that.

[0] http://www.nytimes.com/interactive/2012/01/15/business/one-p...

Re: How Poverty Taxes the Brain

#35

Post by floobynewb » Fri, Aug 30, 2013, 4:00 PM UTC

Sagat wrote: post #7

victoriap wrote: post #3

>>low-income people who were primed to think about financial problems performed poorly on a series of cognition tests Wouldn't highly busy people with a lot of stuff to worry about such as startup entrepreneurs, chief level executives also perform poorly on cognition tests? Doesn't that prove that when your mind is busy at any level of Maslow pyramid, cognition tests and other games become trivia to ignore? So IMO, t…

One (admittedly cynical and disrespectful) hypothesis could be that some of the low-income people are low-income precisely because they disliked abstract reasoning in the first place, thus making them less likely to pursue their education. To be honest, there are dozens of different ways to interpret this data.

There really isn't. You're letting your bias influence your opinion. Read the paper, draw your conclusions carefully, I wager you will have to change them.

Re: How Poverty Taxes the Brain

#36

Post by floobynewb » Fri, Aug 30, 2013, 4:03 PM UTC

crusso wrote: post #2

It's odd how HN upvotes both articles about learning how to think as well as articles that claim that people are doomed to their financial circumstances because of externalities. It's a strange schizophrenia in a community pursuing entrepreneurialism.

Where you say schizophrenia you probably mean split personality disorder. I am not even bothering to re-read your first sentence because of your perpetuation of this horrendous misuse of language.

Re: How Poverty Taxes the Brain

#37

Post by bartonfink » Fri, Aug 30, 2013, 4:15 PM UTC

3825 wrote: post #34

angersock wrote: post #19

Earlier quoted context omitted.

"If you're financially stable you are like someone programming in a high level language who has tedious tasks like memory management taken care of for you. " This is exactly the correct metaphor. I had to, at one point, stop using my coworking space and start working from home because I couldn't deal with the occasional overhead of "Huh, shit, I forget to bring lunch--can I afford to eat out today? Do I have enough g…

This is why you don't need to pay your programmers too much but you do need to pay them enough that they can focus more on their job and not on trivial items. In hindsight, nicely presented lunches, gym (and perhaps babysitting?) on campus apparently serve a very real purpose. It makes sense that they are minimizing distractions. (When you think of it this way, employees should not have to pay income tax for free lun…

I don't think it's that people with money NEVER stress about spending money - it's a matter of degree. Most software engineers are good earners by US standards, and as such, going to the water park for $40 doesn't really register. Buying a $1 soda isn't even worth thinking about. However, buying a $20,000 car would certainly lead to some thoughts like "Can I afford this? What won't I be buying because of this car?" The advantage that a good income provides is that you're not stressing about daily purchases - not that you stress about nothing at all.

Re: How Poverty Taxes the Brain

#38

Post by Retric » Fri, Aug 30, 2013, 4:15 PM UTC

msandford wrote: post #31

ritchiea wrote: post #14

I can speak to this. For a while in 2010 I was completely broke after leaving my first job out of college, which I hated, and having some other employment opportunities fall through. Having that little money changes your decision making process about absolutely everything. Obviously every financial decision is effected, even the tiniest purchases weigh into bigger questions like "will I have enough money in my bank a…

I agree with a lot of what you're saying but one thing that's always bugged me is how we account for sub-optimal decisions. What I mean is that if I make 60k per year and I choose to spend very little of it by driving an un-fancy car and cooking all my meals at home and living in a small apartment (perhaps with a roommate) I might be able to save half my net income. Or I could spend nearly all of that income on a big…

Your thinking at to low a level, the choices that have real impact are things like:

  Where should I live? (Buy? Roommates?)
  What kind of car should I get? (Make? Age?)
  Sould I learn? (To cook, draw, lisp?)
  What kind of Heath insurance do I get? (none?) 
  What cellphone plan do I get.
  What do I do for entertainment?
  Should I start packing lunch?

Each of these can be with 100,000+$ at retirement should I get a soda while at I get gass may be habit forming, but it's got little long term impact. Edit: Getting a Starbucks coffie every day or bringing from home is also one of the 100,000+$ choices but only in terms of the habit not crap I forgot to buy beans what do I do?

Re: How Poverty Taxes the Brain

#39

Post by ritchiea » Fri, Aug 30, 2013, 4:21 PM UTC

bartonfink wrote: post #37

3825 wrote: post #34

Earlier quoted context omitted.

This is why you don't need to pay your programmers too much but you do need to pay them enough that they can focus more on their job and not on trivial items. In hindsight, nicely presented lunches, gym (and perhaps babysitting?) on campus apparently serve a very real purpose. It makes sense that they are minimizing distractions. (When you think of it this way, employees should not have to pay income tax for free lun…

I don't think it's that people with money NEVER stress about spending money - it's a matter of degree. Most software engineers are good earners by US standards, and as such, going to the water park for $40 doesn't really register. Buying a $1 soda isn't even worth thinking about. However, buying a $20,000 car would certainly lead to some thoughts like "Can I afford this? What won't I be buying because of this car?" T…

This is exactly it. Practically everyone has some legitimate financial concerns but when your financial concerns get to the point that every single purchase feels like it's effecting your bottom line in a meaningful way is when there's an extra layer of stress on your day-to-day thinking.

Re: How Poverty Taxes the Brain

#40

Post by kstenerud » Fri, Aug 30, 2013, 4:22 PM UTC

angersock wrote: post #18

victoriap wrote: post #3

>>low-income people who were primed to think about financial problems performed poorly on a series of cognition tests Wouldn't highly busy people with a lot of stuff to worry about such as startup entrepreneurs, chief level executives also perform poorly on cognition tests? Doesn't that prove that when your mind is busy at any level of Maslow pyramid, cognition tests and other games become trivia to ignore? So IMO, t…

Have you ever tried to push code after not eating for three days because paying taxes wiped you out? It's a very different sort of distraction.

As a matter of fact, I have. Except that I still owed the taxman a lot of money, and was hitting up everyone I knew for loans to keep him off my back just a bit longer, all while working 16+ hour days, 7 days a week in an incubator, trying to get a new business off the ground so that I could get some money coming in and eventually pay everyone back. I learned a LOT of lessons in frugality, and as of last year I'm finally in the clear, hopefully forever this time.

It's a shitty situation, but it's not an insurmountable problem. Life ain't fair and nobody owes you shit. You may not be responsible for the situation you're in, but nobody's going to drag you out, so you have to drag yourself out. Or just sit there and die. Your choice.