How the scarcity model affects business

The term ‘scarcity model’ is a well defined one in the sphere of economic theory. According to Wikipedia, “Scarcity [model] is the fundamental economic assumption of having seemingly unlimited human needs and wants in a world of limited resources. It states that society has insufficient productive resources to fulfill all human wants and needs”.

Whether this is true or not is contestable. Marxists would say that “scarcity is said to be peripheral. Human wants in practice are not assumed to be infinite, but variable and ultimately conditioned”. Obviously, human wants are finite since there is, at any one time, a finite number of human beings, none of whom can consume more than a finite quantity of resources.

The point, however, is that this theory is talking about resources that are raw materials—food, energy, stuff to makes things out of, and so on. If poorer people perceive a very real scarcity, it is as much, say Marxists, to do with the richer people creaming off a disproportionate share of the resources. X amount of wheat can only go so far, and the scarcity, for the poor, is a real one.

How we use the scarcity model

We aren’t talking about resources in this sense: things that can be found or grown or dug up or made.

As developed in the articles cited at the foot of the page, we are talking about emotions and beliefs. In common with widespread thinking, we consider that a scarcity model, as opposed to an abundance model, is a belief that there is not enough happiness, not enough recognition, not enough love, to go around and that we will lose if we don’t fight for everything. That “not enough” refers to anything the individual believes they are short of.

Most people running a scarcity model look for some way to acquire that which they believe they lack. . This can be political power, or power in some other sphere. (Of course people who seek political power—and particularly those who get it—do so for a variety of reasons.)

A scarcity model fosters spurious competition in which time, energy and resources are spent competing instead of working towards the growth of the business.

But, overwhelmingly, the unit used to substitute for a lack of something emotional, something deeper, is money. Whether as an employee, as a specialist in a financial are (see my blog about Warren Buffett) or as a business owner or director, it is money which becomes the focus of the individual’s scarcity model. And this is good—according to western business culture; the acquisition of a money is, per se, a good thing apparently (“[I am] intensely relaxed about people getting filthy rich as long as they pay their taxes”—Peter Mandelson, supposedly socialist business secretary, 1998).

It is unsurprising that, if a large number of people are running the same model of life, they collude with each other to maintain social and business structures which enable the model to be validated.

So, put simply, a scarcity model often uses money as a substitute for something else in the belief that acquisition of money is an acceptable substitute for the acquisition of that something else.

Scripts

“Scripts” were developed, as a psychological concept, and popularised by Eric Berne in his transactional analysis (TA) model. I guess that TA had the same impact on mainstream life in the seventies that EI had twenty, thirty years later.

Berne believed that “from the early transactions between mother, father, and child, a life plan evolves. This is called the script…or unconscious life plan”. The assumption is that a person’s behaviour is partly determined by the script, “the life plan set down in early life. Fortunately, scripts can be changed, since they are not inborn, but learned”. This article is worth reading.

The scarcity model is one such script.

Some people talk of an “abundance model”: the opposite concept. I don’t know whether this stems for a liking for symmetry or actual observation. Certainly, according to TA, there is no reason why an abundance model couldn’t be learned, if it wasn’t embedded at a very early age.

We can make some points about the prevalence of the scarcity model:

  • the abundance and scarcity models are mutually exclusive:  noone can hold both sets of beliefs about themselves simultaneously
  • some people may not be running either model
  • life being what it is, it seems sadly the case that the scarcity model is more popular than the abundance model
  • given the purpose that many people ascribe to business (“to make money”) and given, at least in the UK and US, a company’s first legal obligation, which is to its shareholders, it seems plausible that the number of people running a scarcity model is a higher proportion of those who also run businesses than it is a proportion of the population as a whole.

Wider view

It seems reasonable, therefore, to assume that maybe 40-60% of business owners and directors are running a scarcity model of some degree of severity or other.

From that, it seems likely that, in those businesses where enough influential people are individually running a scarcity model, the whole business comes to run such a model.

We can all instantly name corporations wellknown for their pennypinching attitude to customer service, product quality and business practices. Well, why would they be doing these things if they didn’t have a corporate view that they had to retain as much of their income as possible?

Those people in the business who may be running an abundance model are, no doubt, looking on in bemusement, wisely not trying to shift the beliefs of anyone else, but suffering, like everyone in the business from this impoverishment of vision, of energy, and, in truth, of success.

So, now, if there are sufficient influential businesses each running a scarcity model then the whole society, or the whole economy, is likely to be dragged into this negative set of beliefs.

Effects of the scarcity model on business

A scarcity model fosters spurious competition in which time, energy and resources are spent competing instead of working towards the growth of the business. People’s behaviour can be seen to be either exacerbating the effects of the belief in scarcity or endorsing it—people essentially subconsciously colluding in keeping the business less than optimally successful in order to demonstrate to themselves the truth of their beliefs.

The trouble is, if a service provider is running this model, they will find it hard not to communicate their beliefs subconsciously to a prospect (or anyone else). This can often be experienced by others as neediness, which is very unattractive and offputting. Alternatively, someone running a scarcity model can be experienced as making demands—again, offputting. The fact that both parties are unaware of these communications (because they are subconscious) does not mean they aren’t going on.

This is an edited extract from Network better, by Jeremy Marchant, edited 30 april 2019
© 2019 Jeremy Marchant Limited . image: Free images

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