Thread by @sajithpai

Thread.

Just wrapped up this fascinating book abt the economic lives of the extremely poor, and how they make economic decisions. Lots of learnings. Sharing a few.

1/13

Living below 1$/day means living with severe access to info. Also living in a world whose institutions are not built for them. For us well off, we hv institutions which do our thinking for us (chlorinated water, forced savings via PF etc). For poor, everything is a decision! 2/

This means severe attention fatigue. And then their stressful lives, which release cortisol, imparing effective decision-making. Then there is the absence of a steady income and the ability to visualize the future as we can. 3/13

These 3 - lack of access to info, attention fatigue, inability to visualize the future lead to several surprising decisions. Let us look at some of these. 4/13

TIL that when poor get a chance to spend a bit more on food, they dont spend to maximize calorie or micronutrient intake but instead better-tasting more expensive calories. 5/13

Often the poor starve but spend money on TV, festivals, weddings. About 42% of the world’s population lives without a toilet. But only 33% live without a mobile phone. Village life can be boring and dull. Entertainment matters. 6/13

When you have more households w mobiles (and cheap data) than with toilets you get this.

h/t @nehadixit123

7/13

TIL in rural India, girls don’t marry in the their village (to reduce crop failure risk) but in a designated set of villages closeby. When there is economic growth in those nearby villages, making the girl’s marriage prospects brighter, girl mortality in the village reduces. 8/

When however there is growth in the village, the value of investing in boys increases (as they stay at home), leading to a widening of mortality gap between boys and girls. 9/13

Poor find many ingenious ways to save - chit funds / selfhelp groups etc. Sometimes they even borrow to save so that they have the money when they need it. The poor look for savings models inbuilt self-controls. @kaleidofin is doing some stellar work in this space. 10/13

Most common dream of the poor is their children become govt workers. Stability of employment and income (seen with govt jobs is highly desired), and this is one of the distinguishing features of the middle class. Middle class more likely to have permanent (monthly sal) jobs. 11/

A stable job can by itself change people’s outlook on life in decisive ways, incl higher spending on education & health. The sense of control that there is an assured income coming in every month - not income itself - is what allows them to focus on investing in their kids. 12/

"The difference between the poor and the middle class is this idea that there is a future."

There is lots more in the book apart from the above. Encourage you all to buy it & read it.

13/13. End.