The difference between a poverty and scarcity mindset

A few years ago there was a Forbes post entitled “If I were a poor black kid.”

In it, the author (who is not poor, black, or a kid) imagines some ways disenfranchised children might use technology to get ahead, including via tools like Skype, Google Scholar, and Evernote. You can get a deeper look at his views via comments on this NPR response to the column.

The question that struck me while reading it isn’t whether or not he wants to be helpful (I think he clearly does), it’s that he wrote a piece from the perspective of someone he didn’t understand, whose experience he only casually related to. 

More plainly, he wanted to solve a problem without first understanding the person having it. 

This type of thinking comes up frequently when people talk about poverty who have not themselves experienced its’ paralyzing effects…

“If you’d just listen I can tell you how to fix your problem.”
“You’re getting caught up in things that don’t matter.”
“Why can’t you follow advice from [person from adverse background who made it]?”

If you've been minimized, hushed up, or disenfranchised in your life in some way this probably sounds familiar.

I was reminded of this while reading something else recently. A reporter in New Mexico (my home state) used the term “poverty mentality” to describe problems in the region.

The phrase is troubling (though perhaps not for the reasons the reporter intended), and contains meaning that ripples beyond journalism into startups / entrepreneurship, public policy, success vs. failure, and how we create ecosystems. 

It also suggests another phrase, that of “scarcity thinking.” But they are not the same thing, and the difference matters. 

Poverty mindset

Many people in New Mexico struggle with a poverty mindset. 

The state is consistently ranked last in the nation in education, and overall health indicators like children living in poverty, graduation rates, and drug related deaths are not much better

If you've never been subject to the effects of poverty or it has been a long time, this mindset can be difficult to relate to. 

Questions like “Why don’t people below the poverty line eat better?” lack the understanding of what it’s like to be mired in poverty without access to a basic level of stability. To be able to ask that question is to be privileged enough not to have the problem. 

A couple of blocks from where I used to live in Albuquerque is a corner store called the Country Club Market. The store sells, among other things, cigarettes, soda, some household goods, and those little rolls of chocolate and powdered donuts for $1.39. 

The neighborhood is a mix of working class, below poverty, and upscale, and every Saturday there is a farmers market just a few blocks from the corner store where you can buy fresh fruits and vegetables that would be better for you, and cheaper. But many people in the neighborhood don’t do this.

I know this because I’ve seen it, and because I’ve been there. 

I grew up on section 8 housing and commodity food. Until midway through high school we were under the federally defined poverty threshold each year (I believe originally it was around $11k in the late 80s, somewhere up to $15/18k later, for a family of five). 

To understand why people make unhealthy, illogical decisions when dealing with poverty, you have to first relate to what it feels like in a deep way. 

When you are forced to choose between paying a gas bill to keep the heat on in the cold and buying food that you desperately need, you don’t think very far ahead. It feels like your basic humanity is being questioned by the universe. 

  • “What kind of parent can’t afford to keep their kids both warm and not hungry?”
  • “I’m trying to focus on learning long division but I can’t carry the damn 1 because I am so hungry”
  • “People are ashamed to be seen with me, they must think I am lazy and unable to help myself”
  • “I make so many bad financial decisions that I must be an awful, stupid person” 
  • “Whatever system there is doesn’t want me to be able to live, doesn’t care about me, will crush me without a second thought just because it can”

Even if you are not personally affected by poverty you can probably relate to these things in some way. Perhaps you’ve been embarrassed at your workplace, in an unhealthy relationship, or said something you regretted during a pickup soccer game. 

To truly understand a poverty mindset, you have to experience what it feels like to have your entire existence threatened, to be semi-regularly hassled by police or other public officials that are overworked and (sometimes) poorly trained, to be denied basic healthcare, to constantly wonder where your next meal is coming from. 

One University of New Mexico student did exactly that in place of spring break a couple of months ago:

The whole piece is worth watching — but there’s a moment in particular that struck me as revealing. 

A few days in, Michael, the student, is tired, hungry, and on the phone with someone who posted an ad on Craigslist. The person asks if he has an ID and address, and he admits that he does not have an address. Now, many enterprising people with a bit of grit and hustle probably would lie in that moment, or perhaps use a fake address. But he didn’t. It’s just a small moment, but it illustrates something bigger. 

That’s what poverty does to you. It destroys your creativity. 

You start calling Craigslist ads and having desperate conversations because you don’t have basic needs met. You do stupid things that aren’t very good for you, like buying two rolls of powdered donuts for $2.78 instead of a bag of fruit, fresh vegetables, or a burrito that are available just a few blocks away. And other, much worse things. 

Scarcity mindset

On the other hand, scarcity thinking doesn’t actually depend on a lack of resources. 

The key component of a scarcity mindset is that it requires you to believe that there’s only so much to go around, that there have to be winners and losers, and the smart, good people end up winners. It’s a zero sum game. 

In this mindset you will tend to see the world as a pie chart. You get half of the pie, that means someone else gets the other half. If someone else gets the full pie, then you get nothing.

Oddly enough, scarcity thinking tends to show up in people who already have a lot of resources. Fortune 500s are some of the organizations most entrenched in this mindset (more on the blindsides of that later) and you see the competitive aspect of scarcity thinking in many ultra wealthy people. 

It’s also at least partially an psychological condition, and not just an economic rationale. 

Khalil Gibran illustrates this in a more graceful & philosophical way in his book, The Prophet, when he talks about giving… 

“Then said a rich man, Speak to us of Giving.
And he answered: 
You give but little when you give of your possessions. 
It is when you give of yourself that you truly give. 
For what are your possessions but things you keep and guard for fear you may need them tomorrow?
And tomorrow, what shall tomorrow bring to the overprudent dog burying bones in the trackless sand as he follows the pilgrims to the holy city? 
And what is fear of need but need itself? 
Is not dread of thirst when your well is full, the thirst that is unquenchable? 

Control is essential to this mindset. People who are engaged in a scarcity mindset believe they can see and control the entirety of every situation, and will do whatever it takes to win, at any physical, moral, or ethical cost.

It’s easier of course if the other side is people you don’t know or don’t have to connect to, but the scarcity mindset will justify inhumanity of any kind as the cost of doing business in a world where there is only so much to go around.

Often, that cost is what destroys the core product, service, and/or value that an individual or company contains. 

So what does all this have to do with startups, and entrepreneurs?

As it turns out recognizing the difference between a poverty and scarcity mindset is critical. 

Paul Graham famously said “Statups = Growth” a few years ago and people have been hung up on that line ever since. But few read between the lines carefully enough to understand that growth isn’t the primary expression of a company, it’s the primary expression of humans, sometimes individually but usually together. 

Startups and entrepreneurship are at heart about building an ecosystem, one where creativity and empathy are your most valuable qualities. 

If you’re stuck in a poverty mindset (again, this is not something you typically choose but it is something you can be aware of and work against) it’s going to be very, very difficult for you. 

You’re going to have to work twice as hard to get half as far as someone like Gene Marks, the author of that Forbes article. This can be a tremendous struggle if you’re a poor black American, first generation immigrant, transgender individual or another member of society that doesn’t receive a lot of support or resources. 

It has some converse potential— it does require hustle, and you are forced to do creative thinking to some extent. But the longer you are in poverty, the more it becomes a slow drip that destroys your creativity, will, and belief in yourself. And often the best you can do is acknowledge it. 

A scarcity mindset is equally dangerous. It closes you off to possibilities, to change, to deep growth. If you believe there is only so much to go around, you’ll be less likely to take worthwhile risks and to learn from your mistakes. It also has powerful connotations for your emotional and intellectual health.

While some degree of scarcity thinking is manageable, trying to control what you perceive as a fixed market / supply of ideas and approaches is ultimately unsustainable. You can’t control an ecosystem. 

Knowing this and recognizing the difference between poverty and scarcity mindsets will go a long way to helping you build an ecosystem that grows itself rapidly and with trade-offs worth making.