Rich: Three Ways

Photo Courtesy of Alice Popkorn

Photo Courtesy of Alice Popkorn

Oh to be a winner in the ovarian lottery. (It’s a term coined by Warren Buffett. And, yes, I’ll be referring to him a lot in this blog. Get used to it.)

Being born into wealth brings many obvious benefits. But there are also equally powerful, though less obvious boons, like greater time and cognitive bandwidth which lead to better decision-making. In contrast, the poor suffer from a deficit of all three: Cash, Time, Bandwidth. And, like high-interest loans, these compound in negative and painful ways.

Ah, compounding, it’s also known as “Time Value of Money”. Say you covet one of those Waiting-List Only Hermes Kelly bags and decide to splurge on it. Paying $10,000, that entry-level bag is actually costing you more than $43,000, assuming a 5% return on the original sum compounded over 30 years. (Admittedly 30 years is a long time to wait, better get the bag now. There won’t be any room in the walker.)

But what about the “Time Value of Time“? In the book “Scarcity: Why Having Too Little Means So Much”, the authors, a Harvard economist and Princeton psychologist,  argue that time poverty can be equally debilitating.

True, the wealthy may also feel time-poor but they can readjust their work-life balance by going on vacation or being more flexible in when and where they work. The real poor, say the co-authors, cannot take a vacation from their poverty. In other words, they are always drawing down their cognitive and physical resources to stay afloat. They’re spending their energy and racking up debts all the time.

This leads to the third deficit: bandwidth poverty. Having time to reflect leads to better decision-making. The rich can make extra time for themselves by hiring people to clean, cook, babysit, lawyer, etc. By contrast, the poor are constantly multi-tasking and the physical and mental exhaustion creates a maxed-out nervous system that looks for cognitive shortcuts to problem-solving. Hence, instead of comparison shopping for loans or services, the poor grab the closest thing, even when it’s more costly or of poorer quality.

How can these deficits be turned into assets? First, the growing disparity between the rich and poor must be arrested. (No room to get into that here. Later.) Second, rich and poor alike, but especially the poor, must become more conscious about how they invest their time. The rich can afford to be disorganized procrastinating dilettantes, the poor cannot. Third, to increase cognitive bandwidth we must find ways to rejuvenate ourselves. This can be done through a daily meditation practice, gentle stretching or periods of silence, as well as taking mini-breaks from the electronic leash of social media.

Cash is only one face of wealth—though it’s the one that gets the most air-time. Breathing space. Thinking space. Non-thinking space. These bring benefits that compound too. And the dividend payout is immediate.






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