Scarcity and What We Can Do About It (Part 1)

We talk a lot about the scarcity mindset in nonprofits. It is that belief that nonprofits let limitations define them. They don’t have money, time, energy, knowledge, you name it. It is a wonder that they get anything done. We try to administer the antidote to the scarcity mindset: a mindset centered on abundance and gratitude. We offer webinars, workshops, keynote speeches, and blog posts on ways to defeat the scarcity scourge.

But we don’t systematically bring research about scarcity into our work making nonprofits strong. We don’t draw on behavioral economics and psychology in constructing programs designed to change the ecosystem in which they work. We celebrate nonprofits for their vital role in community and society, but we leave the science of scarcity to global NGOs and domestic poverty fighters. We don’t connect what we know about poor individuals and their behavior to poor organizations and the decisions they make.

Imagine if we did. What if we took what the best minds teach us about human behavior and applied it to the people doing really important work. What if we took the practices that nonprofits are using with the poor and used them on the nonprofits themselves.

From Scarcity Mindset to Scarcity Trap

As much as people talk about nonprofits having a scarcity mindset, in reality most of them exist within a scarcity trap. A scarcity mindset is a way of thinking. But when thoughts lead to actions repeated over and over—and many minds repeat similar actions across a community—a scarcity trap takes shape. A self-defeating behavior increasingly narrows options to break free. The word “trap” conjures up the image of a mechanism that snaps shut and holds its victim fest. Sure—you can change your way of thinking and break free. But it is hard when outside forces keep you in place.

When you’re really desperate for something, you can focus on it so obsessively there’s no room for anything else. The time-starved spend much of their mental energy juggling time. People with little money worry constantly about making ends meet.

Scarcity takes a huge toll. It robs people of insight. And it helps to explain why, when we’re in a hole, we sometimes dig ourselves even deeper.

Hidden Brain’s Shankar Vendantam introducing
The Scarcity Trap: Why We Keep Digging When We’re Stuck In A Hole
by Sendhil Mullainathan and Eldar Shafir

The scarcity being discussed here involves poor people. But they might as well be describing the people I work with—the leaders and volunteers of small nonprofits, desperate for funding, starved of time, and worried about making ends meet. Their success is limited—or at least they perceive it to be limited—by the resources they have around them.

3 Characteristics of Scarcity Traps

Mullainathan and Shafir describe three characteristics of scarcity traps:

1. Tunneling: Individuals have limited focus on the current challenge or problem. They show an inability to see broadly and into the distance. They see what is right in front of them.
2. Slack: Individuals have little to no margin for change or recovery. They lack time to accommodate shifts in schedules or new opportunities.
3. Bandwidth: Individuals can only handle so much brain effort. They experience a reduced ability to process information.

These sound so familiar to those of us working with small nonprofits. Ask almost any small nonprofit what they need, and they will answer money. If you want them to attend a training on pretty much anything, you say it is about raising money. The day-to-day reality of raising money and running programs with a minimal or all volunteer staff makes planning, reflection, and investment in systems a luxury. They have little margin around the edges to try something new, make mistakes, or take time to learn.

Just as society tends to blame poor people for their plight, we get frustrated that nonprofits underperform. We give them poor grades for board performance. I’m still cranky about the oft repeated “Nothing against nonprofits, but” refrain heard at a recent philanthropy conference. What if we reframed the question from “what is wrong with them” to “what can we do differently.” By “we” I mean all of us focused on nonprofit success: capacity building organizations and consultants, government agencies, philanthropy and communities.

A few questions to consider:

• What about the situation in which they work contributes to their underperformance?
• How will we change our behavior to reduce their perception of scarcity?
• How can we design programs that respond to tunneling, that put information right in front of them when they need it?
• How can we design programs that recognize the real limits on their time?
• How can we reduce the bandwidth taken up by tasks outside of their core interest?

Read more: Part 2 of the Scarcity Mindset