In the financial world–and life in general–there are a lot of fears to be grappled with.
Some fears are obvious like losing money, running out of money, or simply not having enough. Those fears spawn other fears such as being afraid to take risks, fear of losing a job, or fear of inflation (the loss of purchasing power as price levels increase).
There are also less obvious fears like FOMO (the fear of missing out), imposter syndrome (the fear of incompetence), or procrastination (the fear of starting and/or finishing something).
Regardless of how blatant they are, most fears are rooted in something larger and more deeply embedded in our human psyche. Fears are based on a mindset of scarcity.
Earlier this year, I discovered this profound dynamic between fear and scarcity from watching the Lord of the Rings. In it, mythical creatures called Orcs were bred to fight against men and elves. The multitudes of Orcs born in Middle Earth were a neverending army of henchmen ready for destruction. As soon as the good guys killed an Orc, there was one right behind it.
Fears are like Orcs. They’re monstrous and highly prolific. They’re almost impossible to destroy because new fears are spawned every day.
However, there’s a higher force influencing our fears. Just like how the Orcs were controlled by Sauron, the great evil villain of LOTR, our fears are controlled by a scarcity mindset. So our real enemy is not fear. It’s scarcity.Our fears are controlled by a scarcity mindset. So our real enemy is not fear. It’s scarcity. Click To Tweet
Until we address the problem of scarcity in our lives, we’ll keep having fears, even if we manage to overcome some of them. We’ll continue to face toxic fears that keep us from experiencing peace, security, and contentment.
Absolute scarcity
Scarcity is pervasive. It’s not just financial scarcity or the lack of money. We experience scarcity in all sorts of ways including scarcity of time, relationships, knowledge, health, etc. Every time we perceive limited availability in anything of value to us, we’re prone to foster fears in relation to that valued resource.
Scarcity is so prevalent in life that there’s a whole academic discipline focused on it. Economics teaches that the world is made up of scarce resources. Due to overwhelming demand for a limited supply of resources, there is competition. Thus, people have to trade one resource to gain another.
How much something costs depends on how scarce it is in relation to another resource. This is known as price driven by supply and demand.
So, back to scarcity. There are physical limitations on how much we have of certain things. We’re all subject to limited supplies of money, time, network, health, etc. I call this absolute scarcity.
Relative scarcity
However, I believe there is also a perceived form of scarcity that governs our decision making. Often times, this perception of scarcity has little to do with the actual amount of something available to us. It has more to do with how much we have in comparison to the amount we want to have, and our prospects of getting it in the future. I call this relative scarcity.
Logically, absolute scarcity drives market prices. When there’s more apples, farmers charge less for them. When an early frost kills half the crop, a farmer will charge a lot more for the smaller harvest.
Relative scarcity, on the other hand, is less rational. This is when price becomes subjective. Sellers can get away with charging more for something if they can convince you that there’s a limited supply (even if there’s not). Buyers will pay more for something if they believe it’ll run out (even if it won’t).
This is the basic tactic used in Black Friday sales. While we may know that there will be more X-Boxes manufactured and shelves restocked after Black Friday, we’re enticed into buying because it’s offered at a low price for a LIMITED TIME.
Retailers can manipulate pricing and the timing of sales to induce a perception of scarcity and therefore entice people to make purchases.
Personal effects
Scarcity also affects how we feel and perform. In the book Scarcity: Why Having Too Little Means So Much, economist Sendhil Mullainathan and psychologist Eldar Shafir discuss the effects of scarcity mindset on our ability to think clearly and make informed decisions.
In the introduction, they write, “Scarcity captures the mind…when we experience scarcity of any kind, we become absorbed by it. The mind orients automatically, powerfully, toward unfulfilled needs. Scarcity is more than just the displeasure of having very little. It changes how we think. It imposes itself on our minds.”
They discuss how our minds function differently under scarcity. In some cases like limited time due to a pressing deadline, we’re pushed into hyperfocus and can actually perform really well. Sendhil and Eldar call this the ‘focus dividend’.
But in other instances–and perhaps more frequently–our cognitive ability is impaired by what they refer to as the ‘bandwidth tax’.
“The same automatic capture that helps us focus becomes a burden…Because we are preoccupied by scarcity, because our minds constantly return to it, we have less mind to give to the rest of life. [Scarcity] makes us less insightful, less forward-thinking, less controlled.”
They argue that scarcity forces us to focus on the short-term, often at the expense of the long-term. This creates a myopic (nearsighted) view of our circumstances. Since immediate needs and deficiencies demand the bulk of our attention, we tend to neglect making the kinds of investments necessary for future success and happiness. Sendhil and Eldar conclude that this is why poor people stay poor and busy people stay busy.
Social effects
Beyond mere psychology, scarcity mindset has broader, societal implications. In The Soul of Money, author and nonprofit fundraiser Lynne Twist asserts that scarcity mindset is the reason behind a variety of social problems like war, corruption, pollution, greed, and excessive consumerism. On the most drastic scale, scarcity is at the root of world hunger.
In support of my theory of relative scarcity mentioned above, Lynne found that wherever she went, whether it be the desperately impoverished conditions of third world countries or the brimming overabundance of developed countries, scarcity mindset prevailed.
“No matter who we are or what our circumstances, we swim in conversations about what there isn’t enough of,” she writes. “In the mindset of scarcity, even too much is not enough.”
My experience
If you’re like me, you can relate to the intimate relationship with scarcity–both absolute and relative. I was born in the jungles of Laos at a time of massive, absolute scarcity. Children starved. Family members died. Entire villages were murdered at once.
Of course, I was too young to remember any of it. But my parents do. Growing up, they were quite frugal. We didn’t have much so they worked hard and spent their money judiciously.
When I got older, my family no longer struggled financially. In many ways, we became accustomed to abundance.
I eventually got married, went to college, and got a job. Then my husband and I moved and our circumstances changed dramatically. We were on one income and had to downsize a lot. I encountered a new kind of scarcity and this time, I was the adult responsible.
Looking back, those years were really depressing. I wouldn’t say we necessarily struggled with absolute scarcity as one income on my husband’s computer engineering degree was still more than what both of my parents could earn when I was little.
But I realized I experienced a lot of relative scarcity. I was unhappy with where I was in life and the circumstances immediately before me. I hated feeling limited and being broke. And since I had small children at home, there was little I could do about my situation.
A lot has progressed since then but even now, I can’t say I’m immune to scarcity mindset. Since becoming an independent contractor and blogger, my income is varied and nothing is guaranteed. There are no benefits, no paid vacation. The lure of a secure job and steady income becomes tempting. And it’s often lonely as many days, it’s just me and my computer.
When things feel scarce, blogging into the endless void of the internet with no promise of success or income seems like a risky pursuit. But I do it because I have faith that some day, it’ll pay off. And even if it doesn’t, I’m learning invaluable things in the process.
The quest for abundance
So instead of throwing in the towel, I’m on a quest for contentment and growing an abundance mindset. While there may be some absolute scarcity in my life, I’m determined to not succumb to relative scarcity.
I started this month with a focus on gratitude. Thanksgiving is around the corner and I figured it’s a good time to reflect on the immense blessings in my life.
Specifically, I decided to write a thank you letter everyday for the entire month of November to someone that impacted me and encouraged me throughout my journey so far. A friend also recently advised me to write a letter to myself from 5 years ago, so I started with that.
Here’s what I wrote:
Dear Maui From 5 Years Ago,
What you’re doing matters. It may not feel like it right now, but it does.
I know you’re struggling to make it through this season in life. I remember the late nights of caring for babies. The lonely days of being stuck at home with little ones when Xam was out of town for work with the only car. The defeated feeling of not having a job and being in debt. I know you feel inadequate and insecure.
But you are enough. You’re hirable. You’re marketable. You’re talented and driven. You’ll have more opportunity than you ever imagined–you’ll actually have to start turning away opportunities to focus on what’s most important.
You’ll have to decide, every day, what matters most and commit yourself to those things. Some days you’ll choose the right thing. Some days you won’t. But you’ll learn from your mistakes and failures.
You’ll experience rejection. You won’t always get what you want. But you’ll get up every day and make the crucial choice to keep going because you believe. Because you’re not in it for yourself. Because in the end, it’s not about you.
You’ll find great friends and cross paths with awesome people. You’ll meet others who dream with you and share your same passion. You’ll find satisfaction in serving and meeting needs.
You’ll also learn discipline and timeliness and endurance. You’ll persevere. You won’t quit. When the world seems hopeless and things start to crumble, you’ll find a way to stick around.
Thank you for not giving up. Thank you for enduring through the valleys and being willing to climb the mountains before you.
Thank you for staying authentic and not selling out. Thank you for keeping your motives pure.
Thank you for your patience, your generosity. For giving when you had little to give.
Thank you, most of all, for believing.
I want to to assure you that things will be OK. No, you won’t have everything you ever wanted. You won’t be rich or even financially secure. Life will still be scary and uncertain. Things won’t get easier.
But, it will all be worth it.
Love,
Future You
I have a quote displayed on my Facebook page that says, “Abundance is not a number. It’s a choice.”
I hope you’ll choose abundance.
