The Scarcity Trap: Borrowing from Tomorrow

The scarcity mindset makes us shortsighted and prone to costly errors, particularly when it comes to borrowing. When we tunnel on immediate needs, we neglect the future consequences, leading to self-perpetuating cycles of scarcity.

The Fatal Attraction of the High-Interest Loan

For someone cash-strapped, a payday loan offers immediate relief—its benefits fall directly inside the tunnel. The steep costs, such as high interest rates and fees, fall outside the tunnel and are obscured. This leads to an observable bias toward borrowing, even when it is economically unsound in the long run.

In a controlled experiment based on the game Family Feud, “poor” participants (those with less time to play) borrowed virtual seconds much more often than “rich” participants, despite the high interest rate. When allowed to borrow, the poor participants ultimately earned significantly fewer points because their time was devoted to paying off earlier loans plus interest, illustrating a self-imposed trap.

Patching: The Borrowing of Time and Quality

Borrowing isn’t just financial. When we rush to meet a tight deadline, we often “patch” or cut corners, focusing on the quick fix that saves time now.

For example, maintenance engineers responding to breakdowns might apply a quick fix to restore machine uptime immediately. The long-term cost—the machine breaking down again later, requiring more expensive or complex intervention—is neglected because it falls outside the immediate “fire” they are fighting. This behavior is called the firefighting trap, where time is spent on urgent problems, resulting in important non-urgent tasks being put off, which ensures that the amount of work to be done cascades and grows.

Why We Stay Trapped

Escaping a scarcity trap is difficult because it requires planning (which is important but not urgent) and bandwidth (which scarcity taxes heavily). Furthermore, a lack of slack means that even a single lapse—an impulse purchase or an unexpected event (a “shock”)—can undo weeks of hard-earned progress, pushing the individual right back into debt or missed deadlines.