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What is the "poverty trap"?

2024-08-22

Poverty Trap

Let's start with a picture:

 

This image is from the author's book. If it's not very clear, that's normal. I won't follow the image to explain, as it's dull and awkward. Everyone can forget about this picture, and I'll explain it in a more common language.

The meaning of the picture is that, theoretically, today's and tomorrow's income should be the same. But, people have dreams, right? You can't spend all of today's money on consumption, can you? You have to save some, right? You have to do some self-improvement every day, right? Since you focus on self-improvement, you have to get promoted and get a raise, so tomorrow's salary is generally higher than today's.

This is also the view of traditional economics. Economists believe that wages are increasing in the long term, but the rate of increase is gradually decreasing, and eventually, it stops increasing. Finally, they retire, which is in line with our cognition.

According to this logic, it seems that everyone's income can slowly increase in the long term, become wealthy, and reach the peak of life.

Moreover, this logic believes that "the extra part of life's money" is the key to increasing income. This theory has also formed a new global idea for poverty alleviation, believing that as long as the poor have extra money in their lives, they will invest in themselves to increase their income. So, countries are giving money to Africa, hoping they can increase their income.

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How is the effect?

It's not very good. Most parts of Africa are still the same, and the poor continue to be poor after spending the money given by the United Nations Relief Agency, with little change.Moreover, everyone should have sensed that what economics says seems quite different from our reality. After all, our intuition tells us that the notion of "ever-rising income" only applies to a portion of the population, and it is often those in economically prosperous areas. In the vast majority of places, not only does income not increase, but it may even regress. Currently, many countries and regions have seen their incomes stagnate, which then leads to unrest.

What is the problem?

The young friends who won the Nobel Prize this year demonstrated their determination and will to serve the people without fear of hard work. They ventured into the poorest places in the world and conducted careful research and investigation. In the end, they discovered a conclusion: these poor people spend all the extra money in their lives indiscriminately and are unable to save it to improve their lives.

In other words, not only are the poor not good at making money, but they are also good at wasting money. Moreover, through careful calculations, it has been found that the proportion of poor people's spending on luxury goods is far higher than that of the rich.

This coincides with some of our common sense in life. In recent years, I have seen too many people doing this.

For example, many people have not improved their ability to make money, but they have acquired a lot of new skills in small loans. It is also very common for people with an income of less than ten thousand to owe hundreds of thousands in loans.

This is in line with what the big drug lord said in "Breaking Bad" before, "Being poor is something anyone can do," because you can easily become poor by following your heart.

So, the question arises, why do they do this?

There are mainly two issues: cortisol and luxury goods. Let's talk about them one by one, starting with cortisol.Everyone should know that the substance controlling the human reward mechanism is called "dopamine." This stuff has two obvious effects: one is to make you happy, like the pleasure you feel when placing an order on Taobao; the other is to increase urination, where you might feel the urge to urinate when you are happy, but you might not notice it because you are too joyful.

Here's a question: what controls the unpleasant emotions in the human body?

There are several, but cortisol is one of the most critical.

Cortisol is similar to histamine (which is related to the swelling caused by a mosquito bite). It was originally evolved to increase our chances of survival, but now it's a nuisance.

For example, suppose you are a primitive person who is not yet fully evolved, walking in the forest with your friends, carrying a rabbit and singing a song, and suddenly a spotted little tiger appears. What would you do? There are generally three possibilities.

The first is to think that this XXL cat is very cute, go up and touch it, and then die. This gene that is full of curiosity about unknown spotted things has basically become extinct. Please note that humans have an instinctive fear of things they have never seen with spots, and most people are even a bit afraid of spotted butterflies.

The second is to be so scared by the tiger that you can't take care of yourself, and you wait for the little tiger to have a meal, and this gene is gone too.

The third is that some people accidentally evolved "cortisol," which allows you to run away or pick up a stick and fight the tiger in a crisis, even though you may not be able to run away, but you still have two companions, one goes up to touch the big cat, and the other has been paralyzed, the tiger will be having a meal for a long time, and your chances of escape are still very high. As you joyfully escape, the cortisol gene also runs out with you and has been inherited.

Although cortisol can prevent you from being paralyzed in a dangerous situation and improve survival efficiency, it has obvious side effects.

Some common problems in modern people include:No matter how much rest I get, I still feel tired and don't want to do anything. Everything seems annoying, and I can't focus on tasks that require calmness and concentration.

I've already gained a lot of weight, but I still have an insatiable appetite. Even after eating, I still want to eat more. Trying to lose weight can lead to overeating as a form of retaliation.

I feel emotionally down and only want to do things that don't require much effort, like sitting and watching TV.

The most critical issue is the weakening of the "delayed gratification" ability. For example, if you unexpectedly earn 5,000 yuan today, you can choose to go for a sauna and have Japanese cuisine tonight. If there's any money left, you can also enjoy some street food. In this way, you gain immediate satisfaction, but the resources are gone.

Another option is to save this money and accumulate enough to open a store. After the store starts making money, you can enjoy it. This is what "Rich Dad, Poor Dad" says: the poor spend their hard-earned money, while the rich spend the money earned from their assets. However, in this process, you have to save money and not spend it, delaying gratification. It may take ten or twenty years to enjoy the meal you could have had tonight. Can you endure it?

Cortisol can also reduce the ability to delay gratification, which is understandable. When feeling down, people often resort to shopping to alleviate their emotions, as many girls know.

Foreigners generally refer to these negative states as "stress," but if you stay abroad for a while, you'll realize that their definition of "stress" is much broader than ours. They attribute almost all negative emotions to stress.

Generally speaking, all your emotions are the external manifestations of several neurotransmitters and hormones in your body. People with more dopamine tend to have better moods, while those with less are prone to depression. If there's even less, they are at risk of developing Alzheimer's disease.

The same goes for cortisol. If it's a dangerous situation, without it, you might be in trouble. However, in normal circumstances, an excess of this substance can also lead to depression and persistent low mood.

At this point, you might wonder, what does this have to do with today's topic, blogger?The author of "Poor Economics" must have gone to those impoverished areas to draw blood for measurements and found that the cortisol levels in the poor are much higher than the normal state.

Why is it higher? Because the lives of the poor are filled with troubles, they are constantly struggling to survive, and the mental pain is much higher than that of normal people, which leads to their cortisol levels being much higher than those of normal people.

As we just mentioned, this substance is responsible for controlling negative emotions. When cortisol levels are high, people are prone to be negative and lack the will to fight, only wanting to do something easy and pleasant. In fashionable terms, the mentality is broken. If you can't feel what this state is like, just think about the time when you were not in a good state and you will understand.

In this state, it is likely to continue being negative. Forget about long-term planning, you might not even want to think about tomorrow's affairs.

If you graduate from university and have a stable job, and your mental state continues to be poor, at worst, your work performance will not improve and you won't get a raise. But if you are poor, then it's troublesome because you are locked in that state.

This is also a clear phenomenon I have discovered over the years. Many people would rather complain about themselves than struggle, and they complain all day long.

I used to think that those who complain about themselves have a problem with their mentality. Now it seems that it is very likely that their cortisol levels are a bit high, and hormones affect thinking. Their mental state is always in a state of high depression, and naturally, they can't be positive and can't delay gratification.

In general, people who are busy with life are tormented by life and naturally have high cortisol levels. This substance will make people's mental state even worse, making them more depressed, more likely to escape, and more unwilling to plan for the long term, and the more they fall into the abyss.

Speaking of this, everyone may ask, is there a cure?

To be honest, it's not easy to solve. The most difficult thing in life is to fall into a "negative feedback" pit, and the more you fall, the harder it is to get out.If it's a short-term high cortisol level, this is not difficult to solve. Eating more bananas and exercising more can quickly improve the condition. What's more crucial is that when you are in an abnormal mental state, you can recognize that this state is not normal and seek change as soon as possible, rather than letting it continue to deteriorate.

3. Luxury Goods

What else affects poverty alleviation? Luxury goods. Let's talk about this topic next.

Luxury goods have three types of positioning:

Let's talk about the first one first.

In the Reader's Digest era, there was often a joke that public intellectuals particularly liked. It has been popular since 2003 and was still circulating online a few days ago, trying to say that Americans are more simple, and Chinese people are more extravagant, as follows:

Of course, this joke is made up. The picture above is a British female celebrity. The real life of Gates' daughter is like this below, similar to her father.

Here is a question, what is the real life of the real Gates' daughter?This has also been reported, saying that Gai Qianjin likes to eat the Supreme Pizza from Pizza Hut, which is just a level of pancake fruit in the United States, and she has said many times that she loves hamburgers. It does seem quite simple and unpretentious.

In addition, she also likes the top Japanese steak that costs two thousand dollars a piece, which is not something ordinary people can afford.

Moreover, she likes to wear Under Armour, which is similar to Li Ning in the United States, and at the same time, Hermes has specially designed a riding suit for her, which is a limited edition, not only can ordinary people not afford it, but they can't buy it.

In addition, she is also a horse riding enthusiast, with several top Arabian horses and at least five pieces of land for horse farms, as well as supporting training and horse-raising professionals, everyone should pay attention, this kind of horse is outrageously expensive, and picky about food and the environment, each horse needs a group of people to raise, much more difficult to raise than a sports car. Occasionally, she drives a Smart car, but on weekends, she takes her own private Gulfstream plane back to Seattle.

American reporters summarize that overall, Gai Qianjin is neither extravagant nor simple, because she has no concept of price, and in her eyes, there is no difference between luxury goods and ordinary goods. This also represents the attitude of the real upper class towards luxury goods, which is no attitude, just like you riding an electric motorcycle and someone passing by praises your motorcycle is cool, you have no feeling.

The second use of luxury goods:

There is a buddy who follows me who does second-hand Porsche, he has no store, and his usual work is to sell Porsche to WeChat business people, because WeChat business people need this to support their front, in order to buy this thing, they often need to apply for several credit cards to get it done. With a Porsche, you can pretend to be a successful person to preach to others, and develop the next line, and everyone usually follows him because he is doing well, and at this time, Porsche is very effective.

I asked him, I said those people who buy Porsche can make money?

He said it's similar to stock trading, often 7 people lose, 1 person makes money, and the remaining two neither lose nor make money. Those 7 people who lose will sell the second-hand Porsche back to him in the future, and he will continue to sell it to others. However, people generally can only see the people who make money, so there is always imitation, so he always has business.

Here, luxury goods have become a kind of "ticket" to imply one's social status to others.Luxury goods also have a third use.

This is the most common use, similar to inflatable dolls, a thing for self-entertainment, this is not what the blogger said, but a consensus in academia.

A long time ago, psychologists have written relevant papers and found that people's love for luxury goods is not innate, but formed through education, a bit like religion, yes, the worship of material goods.

For example, if you explain to your 14 or 15-year-old niece that the price difference between a brand-name bag and an almost identical high imitation is a hundred times, the little girl will definitely find it very hard to accept. It's not that the reason is too complicated for her to understand, but that the reason is too counter-intuitive, just like you explain to a non-believer that Jesus and his father are the same person, the price of luxury goods is also a belief, not logic, it's normal for normal people not to understand, and if they understand it at once, it means there is something wrong with their mind.

But when this girl goes to college, she will gradually understand.

In the middle of these years is the "brainwashing time", which requires commercial advertisements and consumer culture to bombard in turn to cultivate the successors of "the worship of material goods" slowly.

This is also why many people are puzzled that the luxury goods industry is basically a huge profit, but many luxury goods companies are now facing the problem of going bankrupt, the main reason is here, brainwashing everyone does not need cost, all need to spend money, and the cost is high enough to drag them down.

It is this long-term brainwashing that has made some people believe in luxury goods, so when they spend a lot of money to buy, they can get that huge sense of happiness and pleasure, feeling that the whole person has been sublimated.

Why do we spend a lot of time talking about luxury goods?

Because the book "The Essence of Poverty" repeatedly emphasizes the need to reduce the consumption of luxury goods, as we have said above, the luxury goods in the eyes of the truly rich are the electric motorcycles that cost 2,000 yuan in your eyes.Only those who want to cheat money and those who have been brainwashed would have a particular interest in that thing, and would pay a high premium for it. If you are already wealthy, it doesn't matter, but if you need resources to improve yourself and then you get involved with that thing, your brain is flooded.

Moreover, both the East and the West have seen an interesting trend. At the beginning of development, there is a tendency to rush towards luxury consumption. In the early years of the United States, they wanted to replicate all the good things from Europe in the United States. However, when American soldiers went to Europe to participate in "World War II" and found that Europe was in ruins, they completely "dispelled the charm" when they returned to the United States.

Japan is the same. In the early days, girls would sell their bodies to buy a famous brand bag. In recent years, it has become obvious that they have started to "get rid of material desires." The "support trade to buy bags" from a few years ago came from Japan. Now, the trend of "minimalism" that throws away all the things at home and only keeps a few necessities is also from Japan. I went to Japan last year and found that many girls only carry a large cloth bag without a trademark. This was very rare ten years ago, and this trend is becoming more and more obvious in China.

The worship of luxury goods is a cultural worship. When you are completely confident in your culture, you no longer believe in those "craftsmanship" and "hundred-year-old royal family" feudal remnants, and those things will no longer attract you. You will care more about functionality rather than the brand, and you will no longer force yourself to pay a high premium for the brand.

4 What is the "Poverty Trap"

As we said in the previous article, there is almost no new content in the entire "The Essence of Poverty". It is all a field verification of some old concepts, and the verification results are almost "the old concepts are all correct", such as:

Save more money, improve your situation by saving money;

Those who have a constant property have a constant heart;

Education is very important;

... ... ... ... ... ...If there is a core idea that runs through the entire book, it is undoubtedly that "whether you can save money is the key to whether you can get out of the pit." Note that what is being referred to here is saving money, which is an internal skill, a part of your own abilities. If the money is not saved by you but is directly distributed by poverty alleviation or won in a lottery, it is highly likely to be squandered quickly. Haven't there been sayings these days, "Money earned by luck will be lost by strength."

In addition to this, the experience of reading the whole book is that many of the traditional Chinese virtues we have been taught since childhood are correct, such as frugality and living within one's means, and these are not outdated just because we have entered modern society. On the contrary, those who are too trendy in their concepts are often killed by small loans.

Back to our title, it talks about "what is the poverty trap." After reading this article, everyone should have understood:

Unrealistic luxury consumption is the poverty trap, which prevents you from saving money and leads to a difficult life. A poor state of life, without savings, will lead to an increase in cortisol and mental problems, making it even more difficult to concentrate and delay gratification. This is a downward spiral. This view applies to people of all classes.

A few days ago, I saw a post saying that a big shot is very optimistic about the overall situation in the next few years, and the comment area is full of sarcasm.

Let me share a feeling I've had over the years. Great people are basically optimistic about the future, but they always manage the present as if it were a crisis period, controlling cash flow, preparing for winter food, and being cautious in every step. On the contrary, some people are just the opposite, being pessimistic about the future while being extravagant, not saving money, and indulging in various consumption in advance. You say, don't you want to shock such people and wait for the New Year?

In addition, this morning I saw a sentence in Teacher Jiangnan's circle of friends, which is very inspiring, and I share it with you:

Simple desires only need indulgence to be realized, while high-level desires cannot be achieved by indulgence, what is needed is self-discipline and restraint.

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