Wealth and poverty lies in your mindset… and your circumstances too

Researchers Send­hil Mullainathan (Harvard University) and Eldar Shafir (Princeton University) have shown that the key to breaking out of one’s poverty is to firstly breakout of a scarcity mindset.

Otherwise known as poverty thinking, this mindset is shown to “promote tunnel vision, helping us focus on the crisis at hand but making us “less insightful, less forward-thinking, less controlled”. However, it is not just the mindset that sets the pace, but also the circumstances which one is in that reinforces poverty. In other words, the poor will continue digging a deeper hole for themselves. Poverty as a matter of circumstance has an effect that imposes huge costs on one’s thinking and reduces the mental bandwidth that distorts decision making.

Interestingly, this mindset is not just about money. It affects areas like time and other resources. For example, a chronically busy person who feels a scarcity of time will make self-defeating choices ranging from unproductive multi-tasking (since he feels the need to juggle more tasks in the same time in order to compensate for lost time) to neglecting his family. Another example lies in loneliness, where a lonely person can be focused on his loneliness that he will act in ways that makes his lack of social contact worse.

How can people get out of such cycles and mindsets? Well, for a start, they will need a helping hand. Systemic changes could be implemented with the change in policies, argue Mullainathana and Shafir. They will then have to cooperate with these systemic changes by rethinking critical choices that affect them in the long-term.

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