Scarcity Bias

No, I am not referring to that 1998 action movie with Tia Carrere.  More to situations where you spend a month researching the best flat screen TV, then invested twice as much money in a penny stock based solely on a hot tip from someoneyou don’t know and shouldn’t trustbecause he was wearing sneakers without socks, a blue shirt with a white collar, suspenders, and assured you that he shared this tip only with you.  This rarely ends well.

Scarcity not only raises the costs of error; it also provides more opportunity to err, to make misguided choices.

Scarcity Bias 2014-09-26_094021

Don’t let your clear thinking lapse when you see “signboards” like “Limited Stocks” or “Today Only” or “Exclusively for You” or “50% off”.  Those are pure marketing scams.  With those claims, retailers are trying to threaten your freedom—to make up your  mind—to own their products.  Instead, assess the products, investments, and services solely on the base of their prices and benefits.  Like the TV you researched so thoroughly on.

Escaping the scarcity trap does not merely require an occasional act of vigilance, but requires constant everlasting vigilance instead.  The bad news is that almost all temptations must be resisted almost all of the time and processed by your friendly analytical brain first.

Many bad behaviors need only to be acted once to cause pain: Borrowing, taking an ill-advised investment, or making an unwise purchase.  You splurge or take a loan—just once—and you have dug yourself a hole for the extended future, a hole that will require lots of efforts climbing out.

In the long run, it might generally be beneficial for you to never buy anything from someone who is out of breath.

And never—repeat never—make any investment based on an unsolicited phone call (hang up) or E-mail (delete).

“There are two times in a man’s life when he should not speculate: when he can’t afford it, and when he can.”— Mark Twain

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