Scarcity and Perceived Value

And how our behavior can be irrationally impacted by abundance

The principles that govern success, individual, leadership, and organizational greatness

Scarcity drives our
perception of value

The principle of scarcity is simple. We tend to place the highest value on things that are rare. Gold, diamonds, vacations, winning the lottery, you get the idea.

We tend to see far less value in things that are more common, or that seem readily available, but that may actually be substantially more valuable, especially in aggregate.

This is a principle that ranges from economics and business, to philosophy, religion, and literature, even across culture.

What’s worse, is that it tends to have serious impact on our behavior, causing us to act unconsciously in ways that hurt us, and often others too.

By way of
illustration

Henry David Thoreau, in his book Walden, said that it’s silence that ennobles conversation. If conversation is scarce, then the value of conversation is high.

In Aesop’s fables, the story of the fox and the lion, we read that familiarity breeds contempt. Because when accessibility to someone (familiarity) is high, their perceived value is low.

In 1602, the Poetical Rhapsody writes famously that distance makes the heart grow fonder. When accessibility is low (distance), then perceived value is high.

Even Jesus taught in Mark 6:4 that a prophet is not without honor save in his own country.

Again, where access is high, perceived value is low.

It’s why products, or services, or anything we consume in high supply, are of necessity of low price and low value. So the key is that if you want to increase the value of something, impose a little scarcity on it. Because in abundance, there is less value.

The truth could be summed up like this:

It’s the absence of something, that gives its presence value.

This is a powerful principle that has many implications.

An important
distinction

The first is recognizing that the absence of something is what tends to drive perceived value, not actual value.

That’s an important distinction, because there are many things in life that, because of their abundance, we tend to treat as though they have lesser value. Even though when held out objectively, or when asked to analyze, we would say they’re of high value, but when it comes down to day-to-day living, we “act” like we don’t value these things as much.

Our in-the-moment perception of abundance causes us to act as though something is less valuable. Like when you’re sitting around the dinner table looking at your device, instead of your partner or your family. Or like when you keep putting off that thing you’ve been meaning to do, because there’s always tomorrow.

Or like how you keep avoiding that apology, or that act of service, because of the perceived abundance of tomorrows.

It’s the relationship you fail to invest in, even though, truth be told, you know it’s the most important thing in your life, but there’s the irrational perception of “they’re always going to be there”.

It’s the goal or change you keep putting off because you think the opportunity will always be there. And then a day becomes a week becomes a year becomes a lifetime, and there you are at the end, wishing you could have it all back and do it all over.

One of the difficulties of being human, but that great people force themselves to do, is to perceive the value of things that aren’t scarce.

Scarcity and
identity

One of the ways this works against us, is in our ability to acknowledge our own strengths.

See, we’re not good at recognizing the magic that others see in us. We’re not good at recognizing our strengths as actual strengths. This is because to us, that’s an abundant resource. We’ve always been good at that. It’s not something we had to work for, therefore it can’t be of much value.

Even while others look at us in awe and say “wow, that is magic”. We dismiss it and say “no, that’s just normal”. It’s normal to you, because you’re used to it. It’s just you. You were likely always that way. But that doesn’t mean it isn’t magic to someone else.

But our inability to perceive that magic in ourselves results in an often catastrophic hit to our identity.

We think we are less valuable, or of less worth, or less talented, or just… well, less than everybody else. Not because it’s true, but because we simply fail to value the talents we have, because to us, they’re an abundant resource.

Recent research has shown that people often fail to progress in their careers (and, I think, in life) because when they try to decide what value to build within themselves, they focus on the strengths they see in others that is unique to them, and scarce within themselves. They then try to replicate that, instead of focusing on their own strengths… the things they are uniquely suited to succeed at. And so they spend their lives in pursuit of a set of talents that are not innate to them. Then when they experience only limited success, which is often, because it’s not their core strength, instead of recognizing that, they blame themselves. They use it as evidence that they were right, that they are less… less talented, less capable, less worthy…. just less.

It leads to a critical identity failure called Imposter Syndrome, another principle in the knowledge base which you can read about here.

We have to learn to recognize the value of our talents, even when to us, they’re an abundant resource.

Scarcity and
happiness

Because of the impact of scarcity on perceived value, we often ascribe “happiness” to our achieving something that is unavailable, something that is difficult to achieve, something that is scarce.

People with the highest sense of internal drive often suffer from this. In our efforts to achieve excellence, to accomplish our goals, to push ourselves to be better (all of which are of great value), we must be very careful to not forget the value of the things right in front of us.

Very often a more sound appreciation of what we already have, is a faster path to happiness than trying to acquire something more. Happiness is not on the other side of today. Happiness is enjoying the journey. It’s not the pursuit of happiness. It’s that the pursuit is happiness.

Reverse Engineering
scarcity

The idea of Life Engineering is not to just understand the principles that govern our world, our lives, and our behavior, but to know how to appropriately leverage them at the right moment to achieve some worthy objective.

The value in understanding the principle of scarcity is both in knowing how it can subtly sabotage our behavior (as described above), but also in knowing how to use it to increase peoples perception of value in things that are important.

Remember the phrase “distance makes the heart grow fonder”? Scarcity. It’s because sometimes relationships really do benefit from from a little “time off”. Like going to bed and continuing the conversation in the morning, when your head is clear.

Have you ever had a friend that felt like they could call you at any time, talk for as long as they’d like, and sometimes take an excruciatingly long time getting to the point. Try introducing scarcity into the system. Sometimes don’t be available, or when you are, let them know you’d love to talk, and have 15 minutes free right now before you have to go. You’ll find that they not only get to the point, but they suddenly appreciate those 15 minutes, because they know free-time must be scarce for you right now. Interestingly, you both come away happier.

A while back there was a psychological experiment at Harvard University where they had two photography classes.

In each class, students were required to take pictures of campus. They’d then submit three of them, which would be blown up into gorgeous, huge photographs, all paid for by the school.

Both classes were told that they could keep one of their finished photos, of their choosing, but that the other two would be sent away. One class was told that they had however much time to decide which one to keep, and if they changed their mind, it didn’t matter, they could swap at any time. The other class was told they had to decide immediately, and could not change their mind.

Interestingly, when polled afterward, the latter class, the one with fewer options, expressed far more enjoyment in the class, than the first group. Fewer choices led to more happiness.

An entire book was written on the correlation between scarcity of options and our state of happiness. It’s called The Paradox of Choice. What it shows, empirically, is that imposing scarcity into a system can actually increase the happiness outcome of that system.

The key is, if you find something that people should appreciate, but they don’t, try taking it away (at least for a while), or make it harder to come by. You’ll find their appreciation for whatever it is will skyrocket, because of the law of scarcity.

How to
apply the principle

Click each icon below to see how this applies.

The pertinent questions are

  • What am I undervaluing in my behavior, because of a perceived abundance of supply?
  • Where can I impose scarcity, to create a healthy increase in perceived value?

There are so many applications of this, and you’ll likely come up with those that are best for you, but here are a few to get you thinking.

Be deliberate

Knowing this propensity we have to devalue things we have in apparent abundance, we need to be deliberate about what we invest in (our time, our money, our attention, our efforts), to be sure that investment allocation matches actual value, not perceived value.

That requires being a little bit more deliberate about designating the things we care the most about (we call these “critical contexts”), and creating a plan for those context which insures they evolve in careful, deliberate ways.

One of the most important of which is the urgency we all have to find and fulfill our mission. It’s easy to put it off. To “figure it out later”. To make the change next year. A lifetime can slip away and the world needs the magic that is in you. Make it happen, and start today.

Say no

One of the best ways to leverage scarcity is to get comfortable saying no. We don’t have to be held hostage to the barrage of requests that we get every day. There’s a bestselling business book that was written recently called Essentialism: The disciplined pursuit of less.

In it, author Greg Mckeown talks about how we often get held back from delivering our highest contribution because we just constantly take on more. We take on more and more and more until we’re trying to do so many things that we can’t do anything well. In business, this is called “The suck threshold”. Where over enough time, the value you add starts to “suck”, not because you’re not doing enough, but because you’re trying to do too much.

Learn to say no, and learn to be comfortable (and graceful) doing it. It takes practice, but the practice is good for you.

When you start to say no to more things, the things you say yes to become much more meaningful. That’s when you can truly start to focus in.

In order to pursue excellence as individuals, we have to create space. The only way to create space is to start saying no.

The pertinent questions are

  • What am I undervaluing in my behavior, because of a perceived abundance of supply?
  • Where can I impose scarcity, to create a healthy increase in perceived value?

There are so many applications of this, and you’ll likely come up with those that are best for you, but here are a few to get you thinking.

Let them be little

The most obvious application is just this… your kids won’t be kids for very long. It’s a terribly sad thought, but one day you will put them down, and never pick them back up again. The “can you play with me” will stop. The opportunity to create memories, to influence them, to hold them, to enjoy their profound sense of wonder and awe and amazement at new things… it all goes away.

It’s just so easy for us to assume abundance… that they’ll always be there, because from day to day, that’s where they are. But imposing the perspective of scarcity can substantially change our behavior, and in ways that are hugely healthy both for them, and for us.

Screen time

Technology is wonderful. But there’s a propensity to devalue it, and to not recognize the overwhelming impact it has on us. There’s value in imposing scarcity on screen time for our kids. It helps them appreciate what is there when they use it, and it helps them appreciate all the other amazing things in life as well.

There’s so many other applications than just screen time, but it’s perhaps the most timely illustration. The same is true though for games, television, and even time with friends. When we force moderation in all things, we increase the health of everything.

The pertinent questions are

  • What am I undervaluing in my behavior, because of a perceived abundance of supply?
  • Where can I impose scarcity, to create a healthy increase in perceived value?

There are so many applications of this, and you’ll likely come up with those that are best for you, but here are a few to get you thinking.

As a leader, increase respect and influence by imposing scarcity on your time

Leaders who work closely with teams often find that their constant availability and presence in and amongst their teams can create a tremendous camaraderie, a sense of “being in the trenches” that builds respect. To a point. But then, all of a sudden that familiarity “breeds contempt”. Their presence and availability is taken for granted. And all-too-soon, the leaders input and time actually decreases in perceived value, even to the point where it can harm the respect they have for you. Their familiarity makes you seem too human, too similar to them, and in our leaders, we like to feel like they are slightly outside of our reach. Creating distance by being unavailable can help them wake up to the value you bring, and make them regain an appreciation for the time you’ve spent together, even longing for that again.

Improve meeting quality, and decrease meeting time, by making them scarce.

We all know how easy it is for meetings to get out of hand. Because there’s no (or little) barrier to setting up a meeting, and because they’re viewed as an unlimited resource, we tend to take them for granted. We come unprepared, we don’t optimize that time, wasting much of it in idle chatter or unfocused discussion, after all, we can always hold another one. But by imposing some scarcity on meetings, by having only certain times of day, or certain days of the week, or only a certain frequency during the week, it manufactures a newfound respect for that time, because now it’s scarce. All of a sudden we realize that we need to be prepared, we need to be focused, and we need to make the most of it.

Reduce email volume by imposing scarcity on your replies.

Email can quickly sabotage the best of us by it’s sheer volume alone. What’s more, the more attentive we are to our email, the more out of hand it tends to get. When people realize that you “always read and answer your email”, sometimes very quickly, then they begin to take advantage of that channel for communication. It feels like there’s an “unlimited supply” of your attention when communication happens through email. And without constraints on that supply, the channel gets taken advantage of, and volume increases. But by imposing a little scarcity (or a lot, as the case may be) on how many emails you answer, or how often you answer them, suddenly people become more deliberate and thoughtful and selective about what they send you by email, and simply by reducing how much you use that channel (supply), you increase the perceived value of when you do reply, and put natural constraints on demand (how many emails are sent to you).

Create scarcity in project requests to improve a team’s internal reputation.

When anyone can make a recommendation from a team to produce work, and all the work is expected to be complete, suddenly an overwhelmed department can begin to build a negative internal reputation. But under the same circumstances, a team can benefit greatly by communicating limits to supply (how much work that team can reasonably produce in a period of time) and by imposing scarcity on how many requests can be made. Suddenly that team can begin to radically transform its internally perceived value. This is why engineering teams determine a certain number of “story points” (a somewhat random ascription of how much work can be done) to a given sprint (a given period of time). Now a product manager, whose job it is to introduce stories to a sprint now has to be very selective. That scarcity makes the product manager appreciate more the work that is done and the value of the time spent doing it, and makes them more attentive to the work they choose to prioritize for a sprint.

The pertinent questions are

  • What am I undervaluing in my behavior, because of a perceived abundance of supply?
  • Where can I impose scarcity, to create a healthy increase in perceived value?

There are so many applications of this, and you’ll likely come up with those that are best for you, but here are a few to get you thinking.

Reduce financial waste by imposing scarcity on budget.

It sounds bizarre to many of us, but the lack of oversight and control that sometimes surrounds corporate spend or credit card use can create huge amounts of financial waste. Unregulated expenses create a feeling that “there’s always money to spend”, and so money just gets spent.

But by imposing scarcity on budget, or by imposing rules on how that budget is accounted for, or by imposing a little pain on spending money (creating a non-financial cost in the form of an expense report) suddenly makes us more aware of the money we’re spending. Without scarcity, there’s no perception of its value.

Increase the market-value of your product by limiting supply

Apple does this exceptionally well. When it releases an update to one of it’s products, or a whole new product altogether, it does two things in concert with each other. On the one hand, it’s marketing engines kick into hyper-drive, building demand. On the other hand, it limits supply of that product during the first few months on the market. This one-two punch ends up creating a frenzy in the market that increases the perceived value of the product beyond what it would be with just marketing alone. We tend to interpret the unavailability of something to mean it’s in high demand, and that scarcity makes us value it even more.

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Life Engineering is dedicated to helping individuals, parents, leaders, and organizations achieve excellence. We provide the tools and the training, the motivation and the methodology to move beyond where you’ve been, to go farther than you thought you could… to achieve more, to become more. It’s about more than just success.

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