Low-income people spend frivolously

[Mustang01]

Description: Low-income people do not prioritize spending well, often consuming an entire income stream as it is received, spending - and even borrowing to spend - on items which will not generate wealth (or even hold value) in the future.

One mitigation has been auto-enrollment in corporate 401k plans--however, this is more likely to help middle-income earners. Date identified: 7/16/12 Tom Priority -5 to 5: 3 Dad Priority -5 to 5: 4 Conservative/Liberal/Neutral concern: Conservative (Liberals may care too but don't put much effort into this and political correctness makes them dislike even discussing it).

Reason issue is trending in the news: Article in newspaper talked about excessive spending on prom by low-income folks in Durham, NC Scope: Local/regional/national/world: World Root Cause analysis (may be an attachment, 5 whys or fishbone): Related Issues:

[Corvette01]

This one may easily yield a root cause. Why1 - Because they do not perceive that saving for the long-term is necessary, or even important. Why2 - Because they haven't become independent adults, taking responsibility for themselves. Why3 - Because they have "comfortable enough" alternatives to independence. Why4 - Because well-intended assistance has created debilitating dependency - root cause

[Mustang01]

not the only root cause--note that this occurs in situations without entitlements. If a poor person in Africa gets a temp job, earns some money, they frequently don't save it because the culture is such that you spend it immediately on family and friends, in anticipation of reciprocation. I believe this is a trait in low-income cultures and may be a contributing factor.

That said, it is an important root cause.

[Corvette01]

As I mentioned, this provoked a LOT more thought! I have tried to generalize the result as much as possible.

Why1 - Because they do not perceive that saving for the long-term is necessary, or even important.

Why2AA - Because they do not believe that they are personally responsible for assuring their own long-term well-being.

Why3AA - Because their perception of the practices of their country/state/cultural group/family gives them adequate confidence that others will provide for them at what they consider to be a satisfactory level - root cause

Why2AB = Because they do not understand that they are personally responsible for assuring their own long-term well-being

Why3ABA - Because they are mentally incapable of understanding the need (could include temporary depression/hopelessness) - root cause

Why3ABB - Because they deceive themselves as to the need (denial, succumbing to peer pressure, hedonism) - root cause

[Mustang01]

When there are branches like this, a better tool is a fishbone diagram. http://en.wikipedia.org/wiki/Ishikawa_diagram. This tool is open source, free, available for Mac, and looks like it has fishbone capabilities: http://www.xmind.net/pro/features/#link2

(btw, I find the non-stop stream of software tools overwhelming. It's almost impossible to keep up with. But, it's life).

Now I think we get into an issue about what the purpose of this analysis is. At work, it's very clear. When we do a fishbone diagram or something similar it's for the purpose of finding actionable mitigations. Thus, you keep going to further and further roots until you find something that can be acted upon by Plexus. I'm not really sure either of us is terribly interested in acting upon any of these issues, just understanding them further. If that's the case, I feel like we need some criteria to determine when to stop going down a root.

[Corvette01]

I agree that fishbone would be better, especially when one of us has a bone to pick with the other. I didn't realize there was a way to incorporate such in this format.

I believe our main purpose is to get common understandings and baseline agreements on topics important to each of us. There are (hopefully) few things which we completely disagree about, so let's find out to what level we can find agreement. Also, there is Charles Kettering's statement, “A problem well stated is a problem half solved”; although I'm afraid that applied better to the issue of how to get cars started than it does to some of our complex economic and social problems.

Anyway, do you agree with the cause chain I have proposed, or do you have additions/corrections?

[Mustang01]

ha ha. Just got a recommendation on that xmind tool from none other than Ray Froehlich, and he said he got it from another top guy in the company, so it's worth doing. My thought is that a document could be produced and then added to the repository here, then linked.

Like the Kettering statement and frankly enjoy stating problems, so I'm fine to leave it at that.

I think the cause chain needs more development. For example, 2AA seems far from the root. why do they perceive this? a cause of that is that it exists, the government does provide welfare services. Why does the gov't provide welfare services? Because citizens supported the legislation? Why did citizens support the legislation? because they felt guilty? because they feared crime? because there really was crime and this was a payoff?

I think it's worth trying a fishbone on this one.

[Corvette01]

I find myself resisting an extension of the cause chain for this one. I'm sure in your root cause exposure you have heard it said that you can go too far. I've even heard it said that you should purposely go too far and then back off one or two questions. The reason being that every study of an airplane accident will logically end with, "Because of gravity".

My point being I think we have delineated the root causes for people not saving money. What specific factors engage these root causes will depend on the person and his or her specific situation, and will often be found in some combination.

[Mustang01]

I really disagree with this. I have seen the fishbone/root cause analysis on why plexus-engineering was not hitting our numbers on conversion efficiency. There were dozens of items on it, possibly close to a hundred. Branches everywhere, varying degrees. From that came about eight different initiatives at different levels of the organization that have helped us close the gap.

Poverty is a problem that is about a thousand times more complex than that one. A root cause analysis of six total items is oversimplified. None of the root causes point to anything practical that you and I would be able to take action on, either, so the level achieved was not sufficient.

One root cause that was done was that low-income people spend on the lottery. Some nations implemented saving account plans where when someone contributed to the account, they received a ticket that looked like a lottery ticket. There was a weekly or monthly drawing then for the prize, but it was only for the interest on the money that the folks had saved, not the principal. This program proved to be highly successful; I believe it was looked at in some US states but rejected because it competed too successfully with the state lottos here. Amazingly bad.

I don't think your characterization of root causes of airplane accidents is correct either. From what I've read, it typically takes six or seven smaller factors to cause an airplane crash. slightly bad weather is actually worse than really bad weather, because the pilot isn't as alert. thrown in end of a long shift, an inexperienced copilot, cultural factors, one mistake, a second mistake, and then you have a recipe for a crash. Weather can't be mitigated, but Korean airlines had to train pilots out of their culture to mitigate the cultural factors part.

Either way, six items in a root cause for this issue does not pass the common-sense test. I'm fine with stepping away with it as a lower-priority issue, but I won't call it good :)