A core belief I have when trying to understand and explain human behavior is that we are all basically driven by the fear of not being enough, and the fear of not having enough.
I’ve discussed many times how one’s fear of not being enough can often lead people to make unwise financial decisions, but something I’ve not written about as much is how the fear of not having enough can be equally powerful. This past weekend I witnessed two examples of how this fear of a short supply can cause rational people to do very irrational things.
Being the bargain hunter that I am, Black Friday is something I look forward to every year. I’m almost embarrassed to say I will go and join the melee even if I don’t have anything I wish to buy. This year, one of Walmart’s big doorbuster deals was a 65-inch 4k smart TV for less than $400. People skipped Thanksgiving dinner with family to line up hours prior to the store opening in the hopes of obtaining one of these deals.
As is always the case, there was a limited supply of these must-have items, which retailers know will spark an emotional reaction and cause you spend more than you otherwise would. To witness this reaction first hand, all you have to do is search on YouTube for Black Friday chaos. There, you will find dozens of videos of people literally reverting to animalistic behavior over toys and electronics. The question of why seemingly normal people lose their minds on Black Friday has always intrigued me.
According to a study in the Journal of Marketing Research, the feeling of scarcity, even artificial scarcity, can cause portions of the brain to revert back to instinctual, even primal behaviors. In other words, the fear of not being able to get something, even if it’s something you don’t need, is a powerful one.
That’s why it didn’t shock me when the next morning, the very same TV was for sale at the very same price, at the very same Walmart, and yet hundreds of people walked by it without even giving it a second look. I commented to one of the cashiers that I was surprised to see they had so many leftover TVs she laughed and said, “It’s like this every year. When the doors first open people grab everything they can, but then after that initial frenzy, those same items can be put out and nobody cares.”
I saw this same phenomenon on a much smaller scale the following Sunday morning before the storm hit. I had decided a nice homemade pot pie would be a great way to use up what was left of my Thanksgiving turkey. Upon pulling into the grocery store parking lot to get a couple of missing ingredients, I realized I had made a mistake. As I maneuvered through the crowded store I couldn’t help but shake my head as I went down the bread aisle to find the shelves bare.
In an article about the psychology of stockpiling, psychologist Lisa Brateman explains that “the action or compulsion of going out and getting bread or milk before a storm is caused by the desire to feel in control, and buying things you might throw out still gives the person a sense of control in an uncontrollable situation."
That’s the trouble with fear. It’s often irrational. We meet with clients all the time who are fearful they will not have enough in retirement. That fear, if not properly controlled, can cause people to do things financially that are devastating. If you don’t believe, me ask someone who got out of the market at its very bottom in 2008.
As financial advisers one of the most valuable services we provide is to calm our clients when they are afraid. By developing a financial plan with them, we are able to account for the things they are most afraid of and set them on a course to be successful. If the peace of mind that comes from working with a financial adviser is something that you have never experienced consider setting up an appointment. Nothing is worse than living in fear.
(Past performance is no guarantee of future results. Advice is intended to be general in nature.)
Luke Davis is the director of operations and compliance at Stewardship Capital in Independence.