What is the Poverty Trap
There was an ugly duckling with a dream. She did not only save extra money but also improved herself every day. As time went by, she was promoted and paid more.
Therefore, a person’s salary tomorrow is generally increased than today’s salary, which is the view of traditional economics. They believe all people’s income can rise slowly in a long term. As long as the poor have the extra wealth, and then deposit it or invest in themselves to become passive income, the poor finally get rid of poverty and achieve the peak of their lives.
Therefore, developed countries gave money to Africa, hoping they could continuously increase their income, but the effect was not good. Most of Africa remained the same, after the poor consumed the money given by the United Nations Relief Agency, they were still poor, and no fundamental changes have taken place.
What economists say is different from real life. We find that “increasing income all the time” refers to some people, but the income of most people is declining.
Now the economic development of many countries is stagnant, so what is the problem? In 2019, the Nobel Prize winner went into the poorest places in the world and finally came to the conclusion that most of the poor squandered the extra money in their lives and didn’t accumulate it to do more valuable things to improve their lives.
In other words, the poor are not good at making money but are good at wasting money. According to the survey, the desire of the poor to buy luxury goods is much higher than the rich. This is similar to many phenomena in our life, just like the saying in Breaking Bad, to be poor anyone can manage. You can be poor if you follow your desires. When you don’t reflect and overcome your own problems, it’s easy to become poor.
There are two reasons
The substance that controls the reward mechanism of the human body is dopamine. It makes you happy. When you place an order on Amazon, the pleasure you feel is the result of the release of this substance.
Contrary to the action of dopamine, what substance controls people’s depression? There are many substances, and cortisol is the most critical.
Cortisol was originally evolved to improve the survival probability of human beings, but it also has obvious side effects. The common health problems of modern people are closely related to it, such as insomnia, fatigue, nothing want to do, being bored with everything, can NOT focus…
Cortisol controls negative emotions. If its content is high, people tend to be negative, do anything without motivation, and just want to do something relaxing and pleasant.
Generally speaking, people who live at the bottom of society and are busy with survival are very upset by life, and their cortisol content will be high, which will make people’s mental state more depressed, easier to escape, and more reluctant to make long-term plans.
It is difficult to solve the problem caused by high cortisol. The hardest thing in life is to fall into a “Negative Feedback” pit and get deeper and deeper. If you find that your mental state is abnormal, you should seek to change it immediately.
Luxury goods have different uses in different groups.
Among the rich, they have no special feeling for luxury goods.
According to the report, Bill Gates’ daughter likes Pizza Hut’s pizza. It looks simple, but she also likes to eat top-class Japanese steak for $2,000, something that ordinary people can NOT afford.
Bill Gates’ daughter occasionally drives Smart, but on weekends she flies back to Seattle by her own private jet.
That is to say, the rich don’t care about price. In their eyes, luxury goods are not much different from ordinary goods.
For businessmen and senior managers, the use of luxury goods is a status symbol. Luxury goods here are something like approval certificates, through which they can indicate their social status to others.
It is a consensus that the third use of luxury goods is to satisfy vanity, the most common use of 80% of people.
People’s interest in luxury goods is not innate but acquired.
If you tell a 10-year-old boy that the price difference between luxury bags and ordinary bags of the same quality is 100 times, it will be difficult for him to accept the fact. The price of luxury goods is a belief, not a logic, so the boy can’t understand it. But when he graduates from college, he will probably be able to accept this phenomenon, after long-term brainwashing of advertising and consumer culture in the years of his growth.
What is a poverty trap?
All unrealistic consumption is a poverty trap. This will lead to your inability to accumulate wealth, so that you have a hard life, no money, and no skills reserve, and then lead to elevated cortisol, inability to concentrate, inability to delay gratification, do NOT linger your desires. It is more difficult to make money and accumulate wealth. This statement applies to people of all classes.
Simple desires can be realized only by indulgence.
However, top desire can’t be done, it needs self-discipline and restraint.