So much has already been said on the topic of scarcity vs. abundance. Countless articles and books have been written elaborating on how these terms can define a particular mindset and how being in these mindsets will affect our behavior and the organizations we are a part of.
Although I certainly can’t claim to have read anywhere near all of the material on the topic, it does seem that many of the pieces share a common theme, namely that being in a scarcity mindset generally leads to suboptimal results. In the excellent book, Scarcity, the authors present a variety of positions backed by research showing how being in situations of scarcity place a tax on the mind, and simply limit the bandwidth needed for higher level thinking or long term planning.
If there a consensus on the topic, it seems to be that being in a position of scarcity is something you should attempt to address immediately, to allow your self the time and resources that come with abundance to solve your major problems and think your big thoughts.
I’ve asked a number of the companies I’m working with in the past few years how they feel they are managing their businesses along this spectrum, usually with the unspoken intention of trying to get them to optimize less for the short term, and think about their strategy and plans a little further down the road. My thinking was that after asking something in the vein of, “Do you think you are operating from a place of scarcity or abundance” they would realize that they are operating too tactically, and building a culture at their company that would not yield long term benefits.
At the same time, as an entrepreneur, I have been through so many failures that the scarcity mindset is second nature. My first priority as an operator has always been to not go out of business this month and then think about everything else. My general thinking was that if we could survive long enough, something good would inevitably break our way. I remember in the early days of AdMob we realized that we were on to something special and if we could simply stay alive and not mess things up we had a chance to build something big. We printed shirts for our small team that just had the AdMob logo and a very clear statement across the front: “Don’t choke”.
These conflicting instincts became a bit clearer when I was discussing my experience thus far as an investor with one of my partners and he asked me a simple question, “Are you focused on helping the companies we are partnered with become great, or just survive?” That question struck me because I wasn’t exactly sure… was I helping them win, or just not lose?
What mindset makes more sense for a startup? It’s totally fair to be paranoid and fearful of squandering your limited resources. It’s fair to think supplies are scarce because they actually are. It’s hard to argue you should be planning many years down the road when you have real concerns with burn today. Far too many startups become too aggressive and grow recklessly assuming the next round of financing will be easy to come by. I think many experienced CEOs, investors, and business people from across the spectrum would encourage new entrepreneurs to be humble and careful with cash and realize that they are, in fact, in a time of scarcity. They would applaud short term thinking. After all, what is the long term but a series of short terms?
At the same time, if you only focus on these issues of survival, what are your real chances of building something meaningful? Without a larger mission, and a believable but daunting set of goals, it is hard to recruit and motivate a team. It’s even harder to build a coalition of advisors, investors, and advocates to help push your company forward.
In reality, as with most things, the answer lies somewhere in the middle. It’s actually not healthy for a startup to operate purely from either mindset, as this will lead to both cultural and operational issues. At AdMob we went through periods of growth followed by periods of optimization. We would invest and spend and grow for several months as if resources were available in abundance, and then spend the following few months tightening our processes and optimizing the machinery of the business as if things were scarce. Things change as companies scale, and the goal was to pause and make sure that our business still worked as we grew. We pushed the company to cash flow breakeven roughly twice a year just to see if we could, and then returned to investing in growth.
It wasn’t just a sequential change in our behavior that helped us do this. We also had leaders in the company that were more inclined to one of these mindsets or the other, and they helped to create a healthy tension in the organization that pushed us to not think too small, or too big. This allowed us to to be thinking about scarcity and abundance at the same time. The reality is that for a small organization to break through in a competitive world a company cannot be focused only on survival OR victory. It has to be both. You have have to play offense AND defense. You have to plan to win AND not lose.
(This post was originally published on Omar's blog on Medium.)
