Designing Incentives

There are those who believe that people’s attitudes “are-what-they-are” and can’t be changed. Then, there are those, like me, that believe attitudes can be changed. I’m not claiming it’s easy.

But, I’m a big believer in the proposition that we are products of the combined influences of nature and nurture. And, with the proper tweaking of both, a person’s previously-held attitudes may be revised.

freak - attitudes

freak - attitudes

A simple model that undergirds the way I think about these influences in action is the one in the figure.

Attitudes are most often formed and reinforced by behaviors.

Call them habits, daily routines, spiritual or work practices…whatever.

Behaviors, in turn, are formed and reinforced by structures. Call these the incentives, group norms, and other environmental factors, e.g., geographic location, architecture, apparel, and the like. If you want to change attitudes, change the structures.

This model was reinforced by a quick read of a book that’s been out for a bit called Think Like a Freak, by the authors of the similarly titled Freakonomics, Levitt Dubner.

Much of the book addresses the discipline of designing the right incentive scheme to change behavior (and ergo, attitudes). Incentives, to my thinking, are powerful environmental “tools” that can be manipulated.

motivation carrot

motivation carrot

Some of the pearls of wisdom that Levitt & Dubner offer about incentives include:

  • Figure out what people really care about, not what they say they care about
  • Incentivize them on the dimensions that are valuable to them but cheap for you to provide
  • Pay attention to how people respond; if their response surprises or frustrates you, learn from it and try something different
  • Whenever possible, create incentives that switch the frame from adversarial to cooperative
  • Never, ever think that people will do something just because it is the “right” thing to do

One pearl that particularly spoke to my personal experience had to do with “gaming the system.” This was a constant problem for Appconomy, a venture-backed startup largely based in China in which I’m a founding shareholder.

Levitt & Dubner’s advice is to know that some people will do everything they can to game the system, finding ways to win that you could never have imagined. Thus, if only to keep yourself sane, try to applaud their ingenuity rather than curse their greed. To which I say “Amen!”

freak - book

freak - book

Think Like a Freak closes with an instructive, albeit clear-eyed, section on the subject of “How to persuade people who don’t want to be persuaded.” In a nutshell, here are the six most important points they say to keep in mind:

  1. First, understand how hard persuasion is.
  2. Make clear, it’s not about me; it’s about you.
  3. Don’t pretend your argument is perfect.
  4. Acknowledge the strengths of your opponent’s argument.
  5. Keep the insults to yourself.
  6. Tell stories, they capture our attention, making them great for teaching.

I like the story-telling advice. It’s an emotional buddy to the logical tool of incentive design…the nature “yin” to the nurture “yang.”

So, the next time you are thinking deeply about how to incentivize some sort of change – whether it’s with your teenager or a customer call-to-action – make sure to spend at least an equal amount of time on the storytelling part as the incentive design part. Good luck!