The concept of overcommitment in the personal and banking sectors draws parallels with ‘fractional reserve banking’. It likens the feeling of being overwhelmed by multiple commitments and the subsequent burnout to how banks operate, issuing more promises (loans, for instance) than they can handle at any given point. The author uses examples like personal relationships, gym memberships, and ticket sales to explain how a fractional reserve system works, and how it can lead to problems when overextended.
Key Points:
- The principle of ‘fractional reserve’ is likened to the dynamics of personal relationships, where the total amount of commitments made to friends, family, and work are more than the individual’s energy reserves. When multiple commitments are demanded at once, this can lead to feelings of stress and burnout.
- Fractional reserve is also illustrated using a gym membership scenario, where more memberships are sold than the gym can accommodate at once, assuming not all members will use the gym simultaneously. This can lead to an issue if an unexpectedly high number of members show up at once.
- Full-reserve examples, such as a theatre or a casino, contrast the fractional reserve concept. In these examples, each promise (ticket or casino chip) is backed by a tangible resource (a seat or cash). In such businesses, overcommitment can cause significant problems.
- The concept of overcommitment in personal relationships is likened to banking practices, where banks knowingly overcommit by issuing loans and other financial promises more than their immediate cash reserves.
- While fractional reserve systems work most of the time, they can fail during unexpected surges in demand, as seen in the healthcare sector during the early stages of the COVID-19 pandemic. Balancing the system to avoid burnout (in individuals) or collapse (in systems) is crucial.
Source: https://alteredstatesof.money/fractional-reserve-emotion/
