Value of Scarcity
When I was growing up in the USSR, the economy was managed by bureaucrats in nondescript buildings in Moscow. There was no such thing as a free-market economy. In fact, every business, without exception, from barbershops to shipping ports, was owned by the government.
For this reason, two words that you heard people say all the time were deficit and handing out. Both translate poorly from Russian to English. But I’ll try. Most goods were “in deficit” – they were scarce. Basic items like meat, eggs, and cheese were always in short supply.
Each household received vouchers per number of family members. On a bright occasion when those items mysteriously showed up in a store, after you stood in line for a few hours in the cold, you could buy them up to the limit of your vouchers. This is when you heard handing out from your neighbors or from strangers on the streets: “They are handing out chicken in store No. 13.” This is when my parents told us to drop everything, gave me and brothers money and vouchers, and sent us to the store.
Some items, like eggs, that were perpetually “in deficit” did not have vouchers, so they “handed them out” in limited quantities per person. Thus our whole family had to stay in line to buy them.
I don’t remember going hungry, but food was always “in deficit.” My parents, especially my mom, always worried about what she was going to feed her husband and three sons.
My family was one of the lucky ones. My father’s sister Lana lived in Moscow. Moscow was the capital and thus received a more abundant food supply than the rest of the country. Once a month my Moscow aunt would buy meat and take it to the train station. The Moscow–Murmansk passenger line ran to Murmansk every day. She would slip a ruble to an attendant and give her a package and tell her it would be picked up in Murmansk.
This Soviet version of UPS worked flawlessly. My aunt would call us and give us a train car number and the attendant’s name. Two days later we had a month’s supply of meat. Some of my great childhood memories are of walking to the train station with my brothers in the night-like arctic darkness, in the snow, in the cold, to pick up this package.
Come to think of it, dark, snow and cold were the constants of my life. Murmansk lies 125 miles above the Arctic Circle, and winters were long and frigid. Winter days were short (thus nights were long), and snow did not melt for months.
Today I look at those days and I see value in scarcity.
No, I am not a deep-sleeper Soviet agent coming out of a 31-year hibernation who will try to educate you to the toxicity of capitalism and the virtues of socialism. I’d rather my kids not spend hours in line to buy chicken – I’d like them to allocate this time to do their homework or play outside. I don’t want to worry about how I am going to feed them. I don’t want my wife to be stressed over whether she’ll be able to find warm boots for them to wear in the winter (this was one of my mom’s constant worries).
No, I am not craving socialism and Soviet scarcity.
Our society looks at abundance only from a positive perspective; however, it also has a very dark side. If scarcity is a disease that inflicts people in socialist countries, overabundance is a sickness prevalent in capitalist ones. Our stores are filled with cheap groceries, so much so that we throw away a third of the food we produce. Over the last 70 years, everything grew in size: our cars, our houses (2.5 times larger now than they were in the 1950s). We consume a lot more calories, which has added to our waistlines. Obesity is not just impacting humans, it has spread to our dogs and cats, too – we are overfeeding our pets. I could keep going, but bottom line; if we carefully examine our lives, it’s easy to see that today we are in the midst of a pandemic of abundance.
Our genetic programming was coded to handle scarcity, not abundance. For centuries we ate what we killed or gathered – nothing more. On days when an animal did not donate its life for the sake of our wellbeing, we went hungry. Mother Nature designed our bodies to store extra calories and fat to help us get through those difficult days. Most of us lacked the means to store food in subzero temperatures until a few hundred years ago. As a species, we have spent nearly our entire existence learning and adapting to deal with scarcity, not abundance. Abundance is a very recent challenge.
So now most of us eat too much and get heavier, which leads to a panoply of health issues. We also accumulate with ease things we don’t need and thus end up wasting the most important commodity on earth – our time. Money is a storage medium of time. We are given only so many hours on this Earth. When we work, we trade this time for money. When we frivolously spend our money, we waste our time. It gets worse – we end up accumulating all these things that we need to put somewhere, and thus we need bigger houses. Once our houses are not big enough, we rent storage units. Though we think we own these things, they own us – and we have to work longer hours to keep them.
I can keep going, but I won’t. This is not my biggest beef (or tofu, for vegan readers) with abundance, or at least it’s not what I want to focus on here.
We stop appreciating things that used to give us pleasure.
In the late 90s I dated a girl who had recently moved from Russia to the US. Her family was very wealthy. One of the expressions of their wealth showed up in their purchase of delicacies – red caviar, to be more exact. At this point I had lived in the US for seven years. Red caviar is prohibitively expensive, and thus my family bought it only on big occasions – birthdays or the New Year celebration. It was a delicacy, a treat. The few times a year I could put red caviar on a lightly buttered piece of dark bread, I enjoyed it immensely. However, after dating the girl for six months and eating red caviar several times a week, my taste buds got used to it and I stopped appreciating it – it turned into the salty, fishy stuff I put on my buttered bread. A delicacy stopped being a delicacy.
Okay, you can put this example into the weird post-Soviet Russian fetish category. Let me give you another plain vanilla one: ice cream. When I lived in Russia, buying ice cream was special. My parents occasionally bought it for me on warm, sunny days (which were not common). When we moved to the US, one of our many shocks was that we could literally buy ice cream in five-pound drums that we could store in our giant refrigerator. We ate ice cream after dinner every day, let me tell you. The first few weeks were amazing. Then it became something we simply had for dessert. Six months later I stopped caring for it – I might as well have been chewing ice. The thought that I might get used to, even get sick of, something I enjoyed so much, would have been completely foreign to me in Russia.
Humans are good at adapting, which is both a feature and a bug. It is a good thing because we learn to cope when bad things happen to us. The negative side of adapting is that we get used to good things quickly. The dopamine of happiness we receive from material possessions is fleeting to begin with; however, abundance grinds this pleasure into dust very quickly.
The pleasure we receive from meaningful relationships and experiences lasts much, much longer but dissipates as well. By simply switching our focus from material things to experiences and relationships, we increase pleasure and happiness in our lives.
But I did not drag you along for three pages to conclude with this. We need to improve the texture of our life by artificially introducing more scarcity into it. There is tremendous value in a certain amount of scarcity.
If you still think this is my socialist upbringing speaking, I’d like to mention that this concept was practiced by my fellow Stoics in ancient Greece and Rome (a few years… nineteen centuries to be exact… before Karl Marx). The abundance enjoyed by kings and emperors of that era pales in comparison with the lives enjoyed by my fellow Americans, even those in the bottom economic strata.
The Stoic philosopher Epictetus wrote, “It is better to die of hunger having lived without grief and fear, than to live with a troubled spirit, amid abundance.”
Okay, Epictetus was a slave for part of his life, so it is easy to label him a (pre-) socialist and dismiss his wisdom. But his contemporary Seneca was one of the richest men in Rome and advisor to the emperor. He was a banker, among other things, and wrote the following in his letter “On Festivals and Fasting”:
Set aside a certain number of days during which you shall be content with the scantiest and cheapest fare, with coarse and rough dress, saying to yourself the while: “Is this the condition that I feared?” … Let the pallet be a real one, and the coarse cloak; let the bread be hard and grimy. Endure all this for three or four days at a time, sometimes for more, so that it may be a test of yourself instead of a mere hobby.
Yes, Stoics artificially made their lives a bit rougher at times. They did not do it to punish themselves, but for far wiser reasons:
First, to cleanse themselves of the insatiable desire to accumulate material things. When you go back to basics, you discover how few material possessions you really need.
Second, to corral their much more limited version of abundance. The contrast created between their normal lives and temporary discomfort helped them appreciate what they had.
Third, it brought calmness to their lives. Yes, calmness. After we (temporarily) lose the material things to which we cling so dearly, we may discover that they are not as dear as we thought they were.
Finally, it made them reexamine whether these things they were really getting attached to were the right things. Seneca wrote about this:
Even Epicurus, the teacher of pleasure, used to observe stated intervals during which he satisfied his hunger in a miserly fashion; he wished to see whether he thereby fell short of full and complete happiness, and, if so, by what amount he fell short, and whether this amount was worth purchasing at the price of great effort.
I’d like to note an important nuance in the paragraph above from Seneca. He cites Epicurus, who was founder of the competing philosophy Epicureanism, whose single goal was to experience pleasure. So even the philosophy that pursued pleasure saw value in creating temporary scarcity in our lives.
In other words, if Epicurus lived in the 21st century, he’d give up his daily visit to Starbucks for a month or two, to see if the pleasure he received from a daily dose of double caramel macchiato with a side of whipped cream was worth a few thousand dollars a year. He’d do this also to discover whether, if he visited Starbucks only on a special, once a month occasion, he’d appreciate it that much more, which paradoxically would result in an overall increase in pleasure (again, Epicurus was big on that) and enormous savings.
Another, unrelated but important observation: Though Epicurus was a founder of a competing philosophy, Seneca quotes him quite often in his writing. Pushed on this fact, Seneca replied (I am paraphrasing), “Nobody has a monopoly on good ideas. It doesn’t matter where the ideas come from. Ideas should be judged on their own merits.” Such open mindedness is rare today. We often automatically dismiss ideas based on who uttered them.
Back to taming abundance.
When my older kids were young, I did not have to worry about spoiling them. Our income forced us to live on a very tight budget. (I wrote about this in the book in “Personal Finance Advice That Changed My Life.”)
My son Jonah still recalls that in the good old days when two of us went to Chipotle we’d always split a burrito. When we went skiing, my wife packed us sandwiches. The idea of buying overpriced food at the ski resort was foreign to us. Over time, as IMA grew and so did our family’s income, our budget got looser. I am no longer splitting a burrito with Jonah, though for more practical reasons – he is 21, a full-grown man who stands at 6’3. But I am not doing it with my daughters Hannah (16) and Mia Sarah (8), either. I stopped packing lunches for work, started going out to lunch more. It is fair to say there is now far less scarcity in my life.
As I am writing this, I realize that this lack of scarcity did not make me any happier. It supplanted one concern with another.
Today I have a new fear.
I am mildly haunted by the thought that I will spoil my kids. At first, I was conflicted about this. My father brought me to the US so his descendants would have a better life. But better doesn’t necessarily mean swimming in a sea of abundance. Aside from all the benefits of living in a democracy, under the rule of law, without having to constantly think about what we are going to eat, and having opportunities to pursue the careers we love, my parents wanted me and their grandkids to be productive members of society. When my kids go out into the world on their own, my parents would want them to stand on their own two feet and not rely on me and thus be handicapped by my resources that might or might not be there to help them. They’d want them to strike the right balance between the abundance offered by this world and scarcity.
At times I infuse scarcity in my life, and more importantly into my kids’ lives.
After high school, Jonah spent a gap year in Israel. He was enrolled in a program where he lived in a dorm, sharing a room with four other boys. He took classes from American Jewish University and did an internship and a tech startup four days a week. All his expenses were covered other than food.
My wife and I gave him a $100 a week allowance, which is less than $15 a day for three meals a day in a fairly expensive country. We knew that he wouldn’t starve but the money would be tight. We wanted him to learn how to budget and appreciate the value of money.
If you talk to Jonah about it today, he’ll tell you it was tough. He consumed a lot of canned black beans. There were times when his friends went out and he had to order water instead of food. But he’ll also tell you that he is so glad for this experience. He learned how to cook. He appreciated what hunger felt like (a few times). It made him value what he has a lot more. Also, since he experienced a significant lack of abundance, his experience of living in Israel removed the fear of being poor – it was not as bad as he feared.
I have started to introduce scarcity into the lives of my daughters as well. When I drive them to school I may buy them donuts, but only once a month. On the first day of each month they remind me, “Dad, it’s the first day of the month.” I know exactly what they want.
Hannah’s weekly allowance is deliberately less than what she wants and what most of her friends get. This motivated her to be enterprising – she started teaching chess. We only buy sodas for Mia Sarah when we go to the opera or symphony.
Hannah and I play chess every Thursday at Red Robin with other chess geeks. It has become our Thursday tradition, which we both treasure. Hannah, as any 16-year-old, loves milk shakes. Red Robin’s menu is full of them. However, she only gets one on the rare occasion when she beats Marven – the best player at Red Robin, who has been playing chess for 25 years.
Even before I knew how to spell Epicurus and Seneca, I inadvertently practiced their principles. As I discussed in “The 8%” chapter, I only had Pepsi once before I was 18, while growing up in Soviet Russia. I made up for that lack of consumption in my first three years in the US, when I consumed a gallon or two of Pepsi a day for three years. Then, when I was 21, while I was ordering my third refill of the magic soda, I realized that the magic was gone. I was drinking fizzy brown water. My taste buds had been desensitized.
I decided to stop drinking Pepsi on a daily basis and now drink it only on the rare occasions when I go to see a movie. I’ve been doing that for almost three decades. Aside from saving thousands of dollars (the least important benefit), I have saved my body from ingesting several hundreds of pounds of sugar and a few million calories. As importantly, every time I drink Pepsi today while in the movie theater, it tastes like magic.
As I discussed in the chapters “I Don’t Eat Desserts” and “The 8%,” while I am in my hometown of Denver I don’t eat sweets, red meat, or bread. However, when I travel my diet flies out the window. I enjoy every bite of ice cream, red juicy steak, and French baguettes that I indulge in.
I take cold showers almost every day – they infuse a light level of discomfort into my life. I discuss this in greater detail in the “Cold (and Warm) Showers” chapter; here is a short summary: I turn on the cold water, but before I step into the stream I observe my emotions (mainly fear and slight anxiety). Once I am under the stream of water, I experience only slight discomfort; however, thirty seconds later I hardly notice the coldness. This is when I compare the “pain” I feared and the actual slight discomfort I am temporarily experiencing.
Recently, I started fasting during the day on Thursdays. That lettuce-wrapped chicken sandwich I have at Red Robin on Thursday night never tasted better. I did this because I wanted to create a discomfort that would make me appreciate food more.
I can keep going, but you get the point.
Stoics would probably advise that neither abundance nor scarcity (other than at an extreme) is negative; they are neutral and often colored by our own perception. Also, what one person perceives as abundant, another may see as scarce.
Therein lies the paradox of scarcity. As Epictetus said, “Wealth consists not in having great possessions but in having few wants.” By taming the abundance thrown at us by modern life, by wanting less, we paradoxically create more abundance in our lives.
Vitaliy Katsenelson
Dubbed “the new Benjamin Graham” by Forbes, Vitaliy is the CEO of a value investing firm, author of several books, and a prolific writer on topics as diverse as investing, parenting, classical music, and self-improvement. You can read his articles at Investor.fm or listen to them on his podcast, The Intellectual Investor.
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- Fiddler on the Roof and Value Investing:
A reflection on the creative process through the story of one of my favorite value investing pieces. - On Why:
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How Hannah’s growing passion for chess has led to friendships we would have never otherwise made. - Value of Scarcity:
A practical look at how to enjoy your life more by introducing scarcity into a life of abundance.