Think Like a Freak

Knowing what to measure, and how to measure it, can make a complicated world less so.

The conventional wisdom is often wrong

Why is “I don’t know” so hard to say? . . . Sure, kids make up answers but why do we? . .

If asked how we’d behave in a situation that pits a private benefit against the greater good, most of us won’t admit to favoring the private benefit. But as history clearly shows, most people, whether because of nature or nurture, generally put their own interests ahead of others’. This doesn’t make them bad people; it just makes them human.

gobbling up huge swaths

hemmed, we hawed, we rationalized;

in half a million non-terrorists on terrorism charges?

communal grazing meadow.

So while designing the right incentive scheme certainly isn’t easy, here’s a simple set of rules that usually point us in the right direction:

1. Figure out what people really care about, not what they say they care about.

2. Incentivize them on the dimensions that are valuable to them but cheap for you to provide.

3. Pay attention to how people respond; if their response surprises or frustrates you, learn from it and try something different.

4. Whenever possible, create incentives that switch the frame from adversarial to cooperative.

5. Never, ever think that people will do something just because it is the “right” thing to do.

6. Know that some people will do everything they can to game the system, finding ways to win that you never could have imagined. If only to keep yourself sane, try to applaud their ingenuity rather than curse their greed.

The problem is that while some incentives are obvious, many aren’t. And simply asking people what they want or need doesn’t necessarily work. Let’s face it: human beings aren’t the most candid animals on the planet. We’ll often say one thing and do another—or, more precisely, we’ll say what we think other people want to hear and then, in private, do what we want. In economics, these are known as declared preferences and revealed preferences, and there is often a hefty gap between the two.