by Andrew Yang
Entrepreneurs have among the most powerful mindsets of abundance of anyone. Silicon Valley, TED, the Aspen Institute—they’re uplifting places because the people in attendance believe that all things are possible, often because they’ve made unlikely things happen for themselves. You can say something about starting a new company or organization, and people simply nod at you and think, “Of course.” It’s like there’s more oxygen for ideas, along with more money.
I attended TED last year, perhaps the most exclusive conference in the world. I got invited through a friend and paid $8,500 for admission, not including travel expenses. When I got there, there was a meditation tent. My friend wanted to try it, so we sat down and each listened to a peaceful podcast. As I sat down, the attendant gave each of us a small black envelope. Within was a $150 gift card to Lululemon, the tent’s sponsor. My mood improved significantly, and I wasn’t sure if it was because I’d meditated or because someone gave me a $150 gift card right as I sat down.
That’s an environment of abundance. Money comes to you and good things happen to you seemingly for no reason, though the real reason is where you happen to be sitting.
SCARCITY MAKES YOU THINK DIFFERENTLY
Contrast the above with the lived experience of normal Americans, who operate in a perpetual state of scarcity. The average American lurches from paycheck to paycheck with no financial cushion, spending significant bandwidth scrambling to stay one step ahead of their bills and borrowing from Peter to pay Paul.
Their paychecks are not only modest but highly variable due to unpredictable shifts and being paid cash fees for hourly work like manual labor and babysitting. A study of tens of thousands of JPMorgan Chase customers saw average monthly income volatility of 30–40 percent per month for customers with annual incomes of $35,000 and even higher swings for people making less than that. They might make $2,000 one month, $3,000 the next, $1,800 the one after that, and so on. “Since the 1970s, steady work that pays a predictable and living wage has become increasingly difficult to find,” said Jonathan Morduch, a director of the U.S. Financial Diaries project, an in-depth study of 235 low-and moderate-income households. “This shift has left many more families vulnerable to income volatility.” The JPMorgan Chase study showed that roughly 80 percent of customers had insufficient cash to manage the differences in monthly income and expenses, and any unexpected expense like health care or car repairs would wreck the family’s picture for the year. They observed the income level at which point income volatility stopped being a problem at about $105,000 per year, a level far out of reach for most families.
Often people are unable to plan or budget effectively because they don’t know how many hours they will receive at their store, restaurant, or construction site. Forty-one percent of hourly workers say they are not given more than a week’s notice of their schedule, and many say that if they turn down a shift it will mean fewer hours the following month. They thus live in a perpetual state of both scheduling and income uncertainty. The average worker dreads schedule volatility so much that they’re willing to sacrifice 20 percent of their income for predictability, according to one study.
Scarcity has a profound impact on one’s worldview. Eldar Shafir, a Princeton psychologist, and Sendhil Mullainathan, a Harvard economist, conducted a series of studies on the effects of various forms of scarcity on the poor. They found that poor people and well-off people perform very similarly on tests of fluid intelligence, a generalized measurement that corresponds to IQ. But if each group was forced to consider how to pay an unexpected car repair bill of $3,000 just before taking the test, the poor group would underperform by the equivalent of 13 IQ points, almost one full standard deviation. Just having to think about how to pay a hypothetical expense was enough to derail their performance on a general IQ test and send them from “superior” to “average” or from “average” to “borderline deficient.” Activating scarcity through a hypothetical expense was also found to reduce correct responses on a self-control test from 83 to 63 percent among the less well-off participants, with no effect on the well-off.
A mindset of scarcity is more than just “stress”—it actually makes one less rational and more impulsive by consuming bandwidth. In another study, Shafir and Mullainathan asked two groups to memorize either a two-digit number or an eight-digit number. They then presented the groups with both cake and fruit. The people who were preoccupied trying to memorize the eight-digit number ate cake much more often. When an ethnic person served the study participants a repulsive traditional dish, the preoccupied group was more likely to be rude or make a racially insensitive comment. The group with the easy mental task had the bandwidth to restrain their reaction and maintain decorum.
We all respond poorly to scarcity. Imagine yourself sitting peacefully at your desk in your office. Someone rushes in to tell you that you forgot about a meeting that starts in five minutes and you’ll have to hurry across town to get there. All of a sudden you burst into action. You hurriedly think about what, if anything, you have to prepare. You might be prone to forget your keys or some other belonging on the way out the door. Getting detailed directions to where you’re going seems like it will take too much time, so you just head off in the general direction. You frantically text or email the person: “On my way, will be a bit late.” Some part of you wonders how you forgot about this meeting and if it’s someone else’s fault. You may become agitated and need to settle yourself down before you actually enter the meeting, taking a couple deep breaths to try to compose yourself to make yourself presentable.
Or imagine a particularly busy day when you are forced to skip lunch. By the afternoon you are fiending for something to eat, but you’re in back-to-back meetings. Pretty soon you are distracted and just thinking about whether anyone has a granola bar or if there’s a vending machine nearby instead of listening to what people are saying. Studies show that people on a diet are continuously distracted and fare worse on various mental tasks. The same goes for sleep-deprived people, lonely people, people with their phone on the table in front of them, and poor people who are asked to think about money.
Different forms of scarcity are often tied together. For example, if someone lacks the ability to pay for their car repair, they may have to figure out another way to get to work via public transportation, and then figure out if they will make it back in time to pick up their child from school, and whether that means they’ll need to arrange child care, and so forth. When you’re poor, these many choices define your waking hours and become almost existential and all-consuming. Any money you choose to spend means that you’ll have less money to spend elsewhere, making every decision and calculation both important and taxing.
Shafir, the Princeton psychologist, observed, “There’s a very large proportion of Americans who are concerned and struggling financially and therefore possibly lacking in bandwidth. Each time new issues raise their ugly heads, we lose cognitive abilities elsewhere. These findings may even suggest that after the… financial crisis, America may have lost a lot of fluid intelligence… they don’t have room for things on the periphery.”
One of the things that has struck me about the age of the Internet is that having the world’s information at our disposal does not seem to have made us any smarter. If anything, it’s kind of the opposite. Most of us find ourselves struggling with scarcity of time, money, empathy, attention, or bandwidth in some combination. It is one of the great perversions of automation that just when advancing technology should be creating more of a feeling of abundance for us all, it is instead activating economic insecurity in most of the population. It’s quite plausible that as steady and predictable work and income become more and more rare, our culture is becoming dumber, more impulsive, and even more racist and misogynist due to an increased bandwidth tax as people jump from island to island trying to stay one step ahead of the economic tide. One could argue that it is essential for any democracy to do all it can to keep its population free of a mindset of scarcity in
order to make better decisions.
A culture of scarcity is a culture of negativity. People think about what can go wrong. They attack each other. Tribalism and divisiveness go way up. Reason starts to lose ground. Decision-making gets systematically worse. Acts of sustained optimism—getting married, starting a business, moving for a new job—all go down. If this seems familiar, this is exactly what we’re seeing by the numbers here in America. We are quickly transitioning from the land of plenty to the land of “you get yours, I get mine.”
A mindset of abundance or scarcity is tied closely to what part of the country you live in. Different regions are now experiencing such different levels of economic dynamism that they often have utterly different notions of what the future holds. One’s way of life is largely a product of where you happen to live.
ELEVEN
GEOGRAPHY IS DESTINY
WHERE JOBS DISAPPEAR
When jobs leave a city or region, things go downhill pretty fast.
Youngstown, Ohio, immortalized in the Bruce Springsteen song, is a poster child for postindustrial cities hit by job loss. The city rose to prominence as a hub of steel manufacturing in the early to mid-twentieth century. Youngstown Sheet and Tube, US Steel, and Republic Steel each built major steel mills in the city that supported thousands of workers. The population of the city grew from 33,000 in 1890 to 170,000 in 1930 as the industry boomed. Good jobs were so abundant that Youngstown had one of the highest median incomes in the country and was fifth in the nation in its rate of home ownership—it was known as the “city of homes.” The city’s steel industry was considered pivotal to national security; when union workers threatened to strike during the Korean War in 1952, President Truman ordered the Youngstown Sheet and Tube mills in Chicago and Youngstown seized by the government to keep production high.
For most of the twentieth century, Youngstown’s culture was proud and vibrant. Two major department stores occupied downtown, as did four upscale movie theatres that showed the latest films. There was also a public library, an art museum, and two large, elaborate public auditoriums. The city organized an annual “community chest” to help the needy. Steelwork was central to the city’s identity—a local church featured an image of a mill worker with the quote “The voice of the Lord is mighty in operation.”
The steel industry began to face global competition throughout the 1960s and 1970s. Youngstown Sheet and Tube merged with Lykes Corporation, a steamship company based in New Orleans, in 1969. The mills were not reinvested in as corporate ownership left the city—the workers knew that their mills were not state-of-the-art and continuously agitated for more investment. Then, on “Black Monday,” September 19, 1977, Youngstown Sheet and Tube announced that it was closing its large local mill. Republic Steel and US Steel followed suit. Within five years, the city lost 50,000 jobs and $1.3 billion in manufacturing wages. Economists coined the term “regional depression” to describe what occurred in Youngstown and the surrounding area.
Local church and union leaders organized in response to the mill closings, forming a coalition that included national outreach, a legislative agenda, and occupying corporate headquarters in protest. They succeeded in prompting Congress to pass a law saying that plant shutdowns should have more notice. They tried to engineer a worker takeover of one of the mills. Government loan programs made it possible for some ex-steelworkers to attend Youngstown State University to retrain.
These efforts were largely futile at preserving residents’ way of life. The mills stayed closed and local unemployment surged to Depression-era levels of 24.9 percent by 1983. A record number of bankruptcies and foreclosures followed, as property values plummeted. Arson became commonplace, with an average of two houses per day lit on fire through the early 1980s, in part by homeowners trying to collect on insurance policies. The city was transformed by a psychological and cultural breakdown. Depression, child and spousal abuse, drug and alcohol abuse, divorces, and suicide all became much more prevalent; the caseload of the area’s mental health center tripled within a decade. During the 1990s, Youngstown’s murder rate was eight times the national average, six times higher than New York’s, four and a half times that of Los Angeles, and twice as high as Chicago’s.
Through the 1990s, local political and business leaders kept seeking new opportunities for economic development. First it was warehouses. Then telemarketing. Then minor league sports. Then prisons—four were built in the region, which added 1,600 jobs but brought other issues. Many residents were concerned about the perception of Youngstown as a “penal colony.” One prison run by a private corporation was so lax that six prisoners, including five convicted murderers, escaped at midday in July 1998 and the officials didn’t notice until notified by other inmates. National press descended on Youngstown, and the prison company apologized and paid the city $1 million to account for police overtime capturing the escapees. Another prison run by the county was forced to release several hundred prisoners early in 1999 because of inadequate staffing and budget shortfalls. In 1999, a 20-year investigation convicted over 70 local officials of corruption, including the chief of police, the sheriff, the county engineer, and a U.S. congressman.
In 2011, the Brookings Institution found that Youngstown had the highest percentage of its citizens living in concentrated poverty out of the top 100 metropolitan areas in the country. In 2002, the city unveiled the “Youngstown 2010” plan. The 2010 plan was an attempt at “smart shrinkage” through targeted investment and relocating people from low-occupancy areas to more viable neighborhoods. The national media touted the 2010 plan as a blueprint for postindustrial cities, and the mayor toured the country to promote it. I love the realism behind the 2010 plan. Yet, it proved to be hard to execute—the city did not succeed in meaningfully relocating citizens from low-occupancy areas and failed to complete its demolition plan.
Youngstown has been the fastest-shrinking city in the U.S. on a percentage basis since 1980. The population was down to 82,000 in 2000. Today it’s about 64,000. Its largest employer now is the local university. “Youngstown’s story is America’s story, because it shows that when jobs go away, the cultural cohesion of a place is destroyed. The cultural breakdown matters even more than the economic breakdown,” said John Russo, professor of labor studies at Youngstown State University. Echoed journalist Chris Hedges in 2010, “Youngstown, like many postindustrial pockets in America, is a deserted wreck plagued by crime and the attendant psychological and criminal problems that come when communities physically break down.”
Many young people left Youngstown to look for better opportunities elsewhere. One of those who stayed around, Dawn Griffin, single mother of three, struggles to find employment. Although attached to her hometown, she is also planning on moving away in the next couple of years, because there are no opportunities for her and her children in the area. Nostalgic, she remembers the better years of her childhood when her father was working at the steel mills: “I thought we were rich.” She still wonders what is going to happen to her hometown: “There is nothing but concrete left here.”
The patterns one sees in Youngstown with the decimation of jobs—increased social disintegration, criminality, public corruption, desperate attempts at economic development, human capital flight—are not unique. They apply in other cities that have seen similar loss of industry.
Gary, Indiana, is another steel town that lost jobs when the mills closed. It was the hometown of Michael Jackson and Janet Jackson back in the 1960s and many locals describe growing up there as ideal. After its decline, it became known as a murder capital, reaching number one in per capita homicide rate in the United States in 1993. In 1992, 20 local police officers were indicted on federal charges of racketeering and drug distribution. In 1996, in a bid for new jobs, the city welcomed two casino boats and legalized gambling on the shore of Lake Michigan. In 2003, the city invested $45 million in a minor league baseball stadium meant to revitalize the economy, to disappointing results. In 2014, a serial kill
er confessed to killing at least seven people in Gary and depositing bodies in abandoned houses. Today almost 40 percent of residents live in poverty, and more than 25 percent of the city’s 40,000 homes are abandoned. The city lacks the money to demolish derelict properties and is considering cutting off services to many neighborhoods. Its population peaked at 173,320 in 1960 and is down to about 77,000 as of 2016.
Ruben Roy, an 85-year-old former steelworker, recalled how beautiful Gary used to be and how easy it was to get a job when he started. “I started off working with a shovel and pick, shoveling and picking at things, but those jobs are gone. They got machines to shovel and pick now. The world has changed. Back in my day you needed a strong back and a weak mind to get a job. Now you need a weak back and a strong mind. I would tell the kids to leave. Go get an education and go to where the jobs and opportunities are. They are not here in Gary any more.”
Said Imani Powell, a 23-year-old server at the local Buffalo Wild Wings who returned to Gary after one year in college in Arizona to be close to her mom and sister, “I really would like to move someplace more beautiful, where you don’t have to worry about abandoned buildings. There are just so many here. It scares me to walk by them; I don’t want to end up a body lost in one of them. It is complicated for people who live in Gary. They don’t want to move because this is what they are used to. Do you want to go and do your own thing, or be with your family? They say places are what you make of them, but it’s hard to make something beautiful when it is shit.”
