Modern and Smart, “The Financial Lives of the Poets” Is Captivating

The Financial Lives of the Poets is the first work of fiction I’ve read that’s focused on the time period leading up to and during the 2008/2009 financial crisis. The book was written and published quickly, coming out in 2009, as the economy was continuing its downward spiral.

Typically, you’d think that literature reacting to swift societal changes would need some time and distance from the events, to process the outcomes and interpret the various causes and effects of what happened. But author Jess Walter saw the world around him shifting and, luckily for us, he didn’t wait to see how things shook out. Instead, he jumped right into the melee himself.

The book’s protagonist, 46-year old Matt Prior, is not having an easy go of things when we meet him late one night in a suburban 7-Eleven. A former business journalist, he’d quit his safe local newspaper job a few years earlier to start a website he dubbed “Poetfolio.com,” where he imagined readers flocking to read, yes, poetry based on business and financial topics. When it didn’t go as planned, he returned to his newspaper gig, only to find that the outlook for ad-based print media had weakened considerably and before long, he’s laid off.

Adding to Matt’s troubles is the sad truth that he’s days away from having his home foreclosed on, thanks to falling behind on his payments after losing his job, plus years of taking equity out of it coupled with a housing market that no longer seems to magically be going up. He lives in this house with his wife, their two sons, and his dementia-suffering father. Oh, and Matt’s also worried his wife might be carrying on an affair (or planning one via Facebook) with her old high school sweetheart.

Here’s the thing, though: this is actually a very funny book, in a dark sort of way. Matt’s resigned to calamity, it seems, and we watch him make bad decision after bad decision. Jess Walter has created a character that we can all, at least in some small way, see ourselves in while also thinking smugly, “That wouldn’t happen to me.”

This book’s astute, though, and keys in on the some of the factors at the center of the financial crisis: too many people owning more house than they could afford, too much risk-taking on Wall Street and beyond, too much credit flowing too freely, and too many overleveraged banks and financial institutions near the brink. It’s a cautionary tale for everyone that entertains as much as it illuminates.

(Originally published here: http://msbusiness.com/blog/2015/01/22/louann-lofton-funny-fictional-look-great-recession/)

Books: On Scarcity: Why Having Too Little Means So Much

The word “scarcity” in the context of economics typically calls up thoughts about how to most efficiently allocate scarce resources. Whether we’re talking about companies turning limited inputs into profitable ventures or governments choosing where best to spend tax revenue, economics is a social science dedicated to studying scarcity.

Behavioral economics professors Sendhil Mullainathan and Eldar Shafir explore this theme, but with a twist, in their book, Scarcity: Why Having Too Little Means So Much. Their focus is on what they call the “scarcity mindset,” and how operating under scarcity changes the way we think, reason, and make decisions.

The authors draw parallels throughout their book between the busy, who lack the resource of time, and the poor, who lack financial resources. In both cases, they argue, scarcity “captures the mind,” and “can help explain many of the behaviors and the consequences of scarcity.”

Think about it this way: you’re busy at work, with back-to-back meetings, several huge projects coming up, and you’re still trying to finish something that should have been completed a week ago. In this state, it’s difficult to think about anything beyond what immediately needs to be done. You may attend one of your children’s piano recitals, for instance, but your thoughts are squarely on the work waiting for you back at the office. You can’t even think ahead to the next project, so by the time you actually start on it, you’re even further behind. You’ve fallen into a scarcity trap.

The authors argue that scarcity creates a “tax” on your mental bandwidth, which can have real implications on your decision-making and impulse control. And, worse, there are actual negative cognitive effects from the scarcity mindset, especially for the poor.

Quoting from the book, “Being poor, for example, reduces a person’s cognitive capacity more than going one full night without sleep. It is not that the poor have less bandwidth as individuals. Rather it is that the experience of poverty reduces anyone’s bandwidth.”

Whether you’re operating in a scarcity mindset caused by a lack of money or a lack of time, one thing is clear: scarcity begets further scarcity. The poor borrow money to tide them over and end up further in debt, and the busy push deadlines and end up further behind.

The authors do offer sensible solutions for this problem, which in one way or another affects us all at some point. But you’ll have to carve time out of your busy schedule to read it and learn more.

(Originally published here: http://msbusiness.com/blog/2014/09/19/book-biz-novel-look-effects-scarcity-lives/)