The Law of Scarcity

A man said to a Dervish: “Why do I not see you more often?” The Dervish replied, “Because the words ‘Why have you not been to see me?’ are sweeter to my ear than the words ‘Why have you come again?”’

– Mulla jami, quoted in ldries Shah’s Caravan of Dreams

The Assyrians commanded upper Asia for hundreds of years. The people of Medea (north western Iran) rebelled against them and broke free. The Medes had to form a government and wanted to avoid dictatorships. They feared making one man too powerful. But without a leader, Medea was in chaos. There was constant fighting between the villages. But one man, Deioces, who lived in one of these villages was building a reputation as a fair arbiter of disputes. As the Medeans relied on him more, he became more powerful.

Deioces was overwhelmed with how much work he had to do. He stopped to tend to personal affairs. But his absence brought about chaos once again, and the Medeans quickly learned about the value of the arbitrator. They asked him for help and he agreed, but under strict conditions. He was not to be approached directly, but through messengers, and he had a palace built for him in the capital city. Everyone worked according to his schedule.

The Medes gave him everything he asked for, and he ruled for 53 years. His reign brought peace and prosperity. His grandson Cyrus inherited this power and developed Medea into the Persian empire. This is a story that Greene cites in The 48 Laws of Power; the lesson from this is that Deioces became powerful only after his absence was felt. Before he went to tend to his personal matters, the Medeans took him for granted. The law of scarcity in economics also makes this point. When something is withdrawn from the market, it increases in value. In seventeenth-century Holland, the elites wanted to make the tulip the most valuable flower, and they wanted it to be a status symbol. They pulled the tulips from the market and this sparked tulipomania – the flower multiplied in value.

Use absence to create respect and esteem. If presence diminishes fame, absence augments it. A man who when absent is regarded as a lion becomes when present something common and ridiculous. Talents lose their luster if we become too familiar with them, for the outer shell of the mind is more readily seen than its rich inner kernel. Even the outstanding genius makes use of retirement so that men may honor him and so that the yearning aroused by his absence may cause him to be esteemed.

– Baltasar Gracián

Abundance breeds complacency. Marketers never tell their potential customers that the reduced prices will remain low, or that they will never run out of stock – it’s always ‘only 1 left!’ and ‘limited time offer’. It is human nature to take things for granted. When things are going right, when supplies are plentiful, and when time is abundant, you will not feel compelled to change your behavior.

People become addicted to gambling because of the existence of intermittent rewards. A reward can motivate behavior, but a normal reward is not as powerful as an intermittent reward.

The gap between getting the reward and waiting for another one is the element of scarcity that gets people hooked. The same is true for social media. An example is notifications. Users get notified of ‘likes’ and ‘replies’ after variable time intervals. When 10 people like your post, you won’t get notified of about this as it happens, but you will get delayed notifications of the likes over the course of the day.

In his book Influence, Cialdini tells us the story of a Native American jewelry store catering to travellers to Arizona. The owner of the store noticed that her turquoise jewelry was not moving, so she moved them to a different location. But the change of location didn’t help. One day, she was leaving on a business trip and left a note that instructed her employee to halve the price of the jewelry display. Her employee misread the “1/2”, she thought it said “2” – so she doubled the price instead. When the owner returned, all the turquoise jewelry had been sold.

The perception of customers changed. When they saw that the jewelry was expensive, they figured that it must be valuable.

Going back to the example of scarcity. When an object is rare, it becomes expensive – as the laws of supply and demand dictate. And when something is expensive, it is valuable in the eyes of the people.

The implication isn’t that anyone can be absent and make their absence felt. It is only after that person has created value in a tangible way, that he is missed when he is not present. But after your value has been established, even if taken for granted, your absence will interrupt a pattern of automatic behavior that depended on you.

The Medeans automatically went to Deioses for help, but when he wasn’t there to settle their disputes, this pattern of behavior was interrupted. The trigger in this scenario is the dispute, without which, people would have forgotten about Deioses.

In the jewelry store, the trigger was the increase in price. Usually, things that are more expensive are higher in quality. This correlation has developed into a mental heuristic or rule of thumb. People will assume that anything that is expensive must also be high in quality. Of course, this isn’t necessarily true, but such a simplification of reality can save a lot of time and energy.

The lesson is that we are victims of our previous patterns of behavior. We look for practical shortcuts, even if imperfect. We will trust the rule that expensive is good, and we will give Deoices whatever he wants if he resolves our disputes. It is easier to rely on Deoices than to find a more sustainable long-term solution. This isn’t always bad. There are cases when using shortcuts is wiser than over-deliberating. But becoming aware of how scarcity appeals to the lazy part of our psyche is important to avoid being deceived.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s