The Pitfalls of Scarcity-Based Thinking in Leadership

“The best defense is a good offense, and I intend to start offending right now.” -- Captain James T. Kirk, Star Trek

For millennia, leaders have known that the best defense is a good offense. Among others, these sentiments have been attributed to George Washington, Sun Tzu, Machiavelli, and Mao Zedong, each of whom certainly knew his way around a war.

Yet in business and in life it’s surprisingly easy to default to a defensive mindset, despite the fact we know playing too conservatively can undermine our achievements. For instance, when you worry about limited resources or a general lack of something you need, it’s almost impossible to make the hard, right decisions to advance because everything feels too risky.

Psychologists call this state of mind scarcity-based thinking. We develop a scarcity mindset when we focus on what we lack—or think we’ll be lacking. This can include time, money, relationships, or just about any other resource. Due to its ubiquity and damaging impact, scarcity is one of the “big three” fears I addressed in my first book, Activators: A CEO’s Guide to Clearer Thinking and Getting Things Done .?

We develop a scarcity mindset when we focus on what we lack—or think we’ll be lacking.

A scarcity mindset served humans well when our day-to-day survival was less assured than it is today. We’re much less concerned now about starving or lacking shelter, but the wiring remains in our brains. For instance, politicians manipulate this instinct by invoking fear via scarcity thinking to rally voters against their rivals.

Fear is a tremendous driver of human behavior and chances are somehow, somewhere, scarcity-based thinking is influencing your decision-making as a leader. Here are four pitfalls of scarcity-based thinking in leadership and three tools to help overcome them.

Scarcity Thinking Undermines Right People, Right Seats

As a leader, the most critical question you can ask is who? Putting the Right People in the Right Seats is the most fundamental, critical ongoing decision process any leader will ever face. But scarcity-based thinking can prevent us from making hard, right choices around people.

Let’s say you have an employee who’s a good producer, but they’re a poor cultural fit and toxic to your team. You know you should show them the door, but you worry about the loss of revenue (or profit) that would result from their dismissal, or the time and resources required to find, hire, and train their replacement. And even then, what if the new hire doesn’t work out?

The fear of lacking resources in this all-too-common scenario causes even the most seasoned leaders to take pause—or even justify retaining a problematic person who is likely making their coworkers miserable most days of the week.

On the other hand, I’ve never had a business leader fire a problem employee and say, “You know, we should have kept them on for another six months.” Rather, they usually come to me with a sheepish look on their face and say, “I should have done that a year ago.”

Key Question for Leaders: Are you justifying your staffing choices with what if scenarios or making the hard, right decisions to build your team?

Scarcity Thinking Prolongs Unprofitable Relationships

Similar to its effect on Right People, Right Seats decision making, scarcity-based thinking also affects relationships in other areas of your business.

I periodically challenge my coaching clients to examine their relationships with clients, suppliers, partners, etc. and ask who they’d like to “fire.” Most leaders easily identify these unprofitable and/or energy sapping relationships, but when it comes to actually cutting the ties, they balk.

Here again, we observe the scarcity mindset hard at work. Leaders rationalize maintaining those relationships because they worry about the consequences of lack. Yes, they acknowledge that Client A is borderline abusive to their employees and a huge time suck, but how will they replace their revenue? Or yes, they acknowledge Supplier B has a quality problem that costs time and money, but how much time will it take to bring a new supplier online?

Avoiding those hard, right actions out of fear drains time, profits, and positive emotions from your firm. Just like firing a problematic employee, you’ll never look back and wish you’d held onto an unprofitable relationship for longer.

Key Question for Leaders: Which client/supplier/partner relationships should you upgrade and replace to improve your business?

Scarcity Thinking Nullifies Prioritization

Scarcity-based thinking also diminishes leadership efficacy in prioritization. A small number of thoughtfully conceived priorities informs resource allocation. Put another way, your priorities guide what you and your team should say “yes” and “no” to, improving your firm’s focus and accelerating the accomplishment of “most important” things.

But with a scarcity mindset, leaders tend to worry that the priorities they selected aren’t the right ones or that by defining explicit and precise priorities they might miss opportunities that fall just outside of their chosen path. The scarcity fear here manifests as classic FOMO—the Fear of Missing Out.

This FOMO causes leaders to chase other ventures or projects that don’t align with their focus. They effectively say “yes” to things beyond the bounds of their agreed upon priorities and justify this “shiny object syndrome” as a way to mitigate the risk of losing out.

Key Question for Leaders: What “shiny objects” are distracting you and your team due to your FOMO?

Scarcity Thinking Promotes Underinvestment in Growth

Whether you’re a leader with a big plan or an entrepreneur aiming to scale your business, you have to take smart risks to get there. I’m not talking about betting everything, but rather a willingness to make investments likely to pay off with growth.

Growth-minded leaders take calculated risks because they understand that growing requires a certain amount of risk and associated discomfort. But as I mentioned earlier, scarcity-based thinkers tend to be risk averse for fear of losing or not being able to replace resources.

Studies show that leaders with a scarcity mindset make choices based solely on the potential of catastrophe—no matter how unlikely. In other words, they habitually overestimate risk.

As a result, they underinvest, pinch pennies, and stretch their existing resources—including people—to the limit. It’s the exact opposite of the success formula for growth!

Key Question for Leaders: What calculated risks are you avoiding due to a fear of lack?

Three Tools (and a Bonus Strategy!) to Reduce Scarcity-Based Thinking

Here’s the good news: You can actively combat a scarcity mindset and shift your thinking from fear (moving away from what you don’t want) to inspiration (moving toward what you want). Here are a handful of easy-to-use tools to help get you there:

Fear Reduction Tool

The Fear Reduction Tool will help you reduce the emotion that fuels scarcity-based thinking while also increasing the logic supporting something you’d like to accomplish. Access the Fear Reduction Tool here.

Know Your Why Tool

Increasing inspiration is an analogous but inverted process to reducing fear, and it is of equal importance. Here, we’re looking to increase emotional involvement and decrease logical thinking to inspire action. Access the Know Your Why Tool here.

New Neighborhood Tool

When was the last time you deliberately put yourself in a position to be challenged by others more accomplished than you??

The people with whom you surround yourself—your neighborhood—have a massive impact on your mindset. If you spend most of your time with others who are at or below your current level of success, odds are they share many of your fears, biases, and blindspots. Accordingly, although knowing that others have the same issues as you can be comforting, they’re not the right people to challenge your motivators, habits, and beliefs! The New Neighborhood Tool helps you identify those best positioned to help you stretch, learn, grow, plan, and execute in your business. Access the New Neighborhood Tool here .

Bonus Strategy: Lean Into Gratitude

By definition, a scarcity-based mindset focuses on lack—what you don’t have. Gratitude, on the other hand, highlights what you already have. This isn’t “woo woo” stuff, so stick with me here—the brain science supporting gratitude is rock solid . Over time, focusing on gratitude puts your mind into a place where you have a firmer foundation and it helps you become more willing to take the right kind of risks.

Here’s the simple, time-efficient way I help my clients lean into gratitude: They begin every weekly leadership team meeting with a round of appreciation. Every team member states one personal and one professional thing they have appreciation for. Try it and stick with it. You’ll be amazed at how it improves relationships on your teams and the results of your time together.

Conclusion

“What drives innovation is abundance and ease, not the pressure of scarcity.” -- Adam Gopnik?

The desire to get more of something “good” or less of something “bad” lies at the root of every human thought and behavior. The “good” includes thoughts about expansion, abundance, growth, and possibility. This is inspiration. The “bad” encompasses anxieties about contraction, scarcity, and the urge to protect ourselves. This is fear.

Evaluate your default leadership mindset with the following questions:

• How often do I tend to move away from loss rather than toward gains?
• How often do I procrastinate on making good, hard decisions for fear of their consequences?
• How often do I flip-flop on decisions after being swayed by outside influences?
• How often do I choose to give up potential good things in order to maintain what I have—even if there are significant downsides?

With your answers and the tools outlined above, you have a much better chance of reducing the costly impact of scarcity-based thinking on your leadership and your results. You’ll move from defense to offense more often, which will accelerate progress toward your aspirations.

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