The ironic part about get-rich-quick schemes is that the people who buy into them invest many years trying to get rich “quick.” But why are they so attractive?
It could have something to do with “loss aversion” – the idea that people prefer to avoid losing 100 dollars than gain 100 dollars even if there was a slightly higher probability that they would gain 100 dollars.
When I read behavioral economists discuss this concept, they usually refer to money as the “thing to be lost or gained or lost.” But loss aversion doesn’t need to be limited to money.
There are many reasons why shortcuts are attractive, that don’t need you to scratch your head for too long. Time is limited, constant dissatisfaction (the hedonic treadmill), the need for security, mimetic tendencies, laziness and neuroticism to name a few. But I will focus on the limitedness in time, and connect it with our tendency for loss aversion. Again, loss aversion isn’t a magical idea – it’s common sense. As Kahneman, the co-author of prospect theory (and loss aversion) says in Thinking: Fast and Slow, he used to joke that he spent his entire life figuring out something that his grandmother already knew.
In this case, the aversion is to loss of time. The part that is salient in “get rich quick” is the the word “quick.” Not many people care about getting rich if they have to wait for 50 years to get there.
In The Rational Optimist, Matt Ridley starts his book by painting a very desperate picture of a typical family living in the United States prior to the Industrial Revolution. This fictional family resides in a farm, and has little access to the things modern people take for granted – sanitation, convenience, security, nutrition, variety, and entertainment.
The modern person may complain about his current circumstances, like Henry David Thoreau once did (he thought it was better to live like a secluded life in nature that be part of a busy and dirty city).
But the reality is that the economic engine that currently powers society has removed culture from the clutches of a hellish existence, and we should be very grateful that we are part of this world and not a past world.
The greatest benefit from modern industrial society is time.
To see why, let’s look at Ridley’s premises.
Ridley explains that the four most basic human needs – food, clothing, fuel and shelter – have grown much cheaper during the past two hundred years.
If basic needs have got cheaper, then there is more disposable income to spend on luxuries. Artificial light lies on the border between necessity and luxury. In monetary terms, the same amount of artificial lighting cost 20,000 times as much in England in the year 1300 as it does today.
Matt Ridley, The Rational Optimist
A more precise way of measuring such an improvement would be to calculate how much artificial light you earn with one hour of work at the average wage. This amount was 24 lumen hours in 1750 BC (sesame oil lamp) to 186 in 1800 (tallow candle) to 4,400 in 1880 (kerosene lamp) to 531,000 in 1950 (incandescent light bulb) to 8.4 million lumen-hours today (compact fluorescent bulb).
In simpler terms, an hour of work today earns you 300 days’ worth of reading light, an hour of work in 1800 earned you ten minutes of reading light. The argument is that the same amount of work today earns you much more light, and thus much more free time.
Returning to the person who is sucked into get-rich-quick schemes is simply a product of the spirit of modernity: the urge to extend idle time taken to the extreme. Or, in other words, an intense aversion to lost time in the future.