Evive Book Club Report: The Broken Ladder

 In Thinking

bookclub

When we create anything at Evive, whether it’s a tool to guide people toward in-network healthcare providers, a behaviorally driven nudge to encourage them to save for retirement, or a chatbot to help them quit smoking, we’re creating it for millions of people.

Our products need to resonate with people who spend their workdays behind desks, registers, counters, and wheels, and on factory and sales floors. We’re constantly motivated to put ourselves in other people’s shoes (whether steel-toed or patent-leather) because if we don’t, our messaging could fall flat.

So a lot of us at the Chicago office recently took the opportunity to read psychologist Keith Payne’s 2017 book, The Broken Ladder. It’s an engrossing examination of how income inequality, particularly in the U.S., affects the way people make decisions, including those that affect their physical, mental, and financial health.

Our top takeaway

One of the findings we found most fascinating was Payne’s “nothing to lose” theory, which posits that as a person’s neediness increases, so does their willingness to take risks.

To illustrate a possible evolutionary basis for the “nothing to lose” theory, Payne draws on an example from the animal kingdom, describing a study of the behavior of wild bumblebees on a Canadian island. Researchers found that these bees get most of their nourishment from two types of flowers: seablush and dwarf huckleberry. And while well-fed bumblebees tend to go for seablush, those closer to starvation gravitate toward dwarf huckleberry.

And there’s a reason for that, the researchers say: Each seablush flower contains a predictable amount of nectar. Dwarf huckleberry, on the other hand, is hit or miss: some flowers have no nectar at all, while others contain a windfall. It’s like the lottery ticket of the botanical world.

A person who’s more financially secure might see a lottery ticket as a waste of time and money, knowing the odds. But for a person perpetually struggling to meet basic needs, that lottery ticket is their dwarf huckleberry—one way of securing a future. It’s risky, but the potential rewards are immense.

To paint a clearer picture of the “nothing to lose” theory, Payne presents a thought experiment: “Imagine what you would do if you owed a thousand dollars in rent that was due today or you would lose your home. In a gamble, would you take the 90% chance of winning $500, or the 40% chance of winning $1,000?”

Most people would take the 40% chance. When times are tough, meeting basic needs is more important than being prudent—one of many possible explanations for the fact that most Americans making $40,000 or less per year have no retirement savings.

How we can fix it

In a country where 44% of households don’t have $400 in savings to cover an emergency expense, what can employers do to make low-risk saving and retirement planning easier for their employees, putting financial security (and its attendant health benefits, such as reduced stress) within their reach?

Providing affordable health insurance, offering 401(k) or other retirement benefits, and, if possible, matching a portion of contributions to retirement accounts are just three ways that companies can lay a foundation for their employees’ financial security.

Evive takes pride in helping employees to seamlessly engage with benefits like these, improving their health, wealth, and well-being along the way. With Evive on their side, more employees are empowered to live for the long term—and start going to the seablush for nourishment.

 

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