An incentive is the result that a system is optimizing for. The behavior of a system can be explained by its underlying incentives - it always acts in accordance with them. Like gravity on physical objects, incentives are a universal force that act on systems. They are invisible yet omnipresent, constantly influencing our surroundings.
It’s important to consider the interaction effect of incentives. When they are aligned, it results in synergy. When they aren’t, it creates a conflict of interest. Unfortunately, it’s often the latter - products that seem valuable on the surface can work against you in subtle ways. Here are some examples of corrupt incentives and their consequences.
The business model of gyms contradicts their goal to get you healthy. They generate revenue through memberships, but have limited actual capacity. They certainly don’t have enough to accommodate all the members. To maximize profit, they are incentivized to increase paying non-attendees. In other words, they don’t want you to come. What if you want to cancel because you don’t use it? Good luck - they make it notoriously difficult. Does this sound like a service that will help you get fit?
Meta’s mission of connecting the world is at odds with its ad-based revenue stream. To maximize profit, they are incentivized to increase engagement. What drives engagement? Clickbait content that incites fear and sparks outrage. You tell me - does that bring people closer together or divide them?
Accountability platforms want you to succeed, but they generate revenue from failed commitments. You set a penalty for your goal and pay if you don’t achieve it. Since your stake is their income, they are incentivized for you to fail. If that conflict exists, will they go the extra mile to support and motivate you?
Incentives don’t always have to be in conflict with the customer. Vipassana is my favorite example. The 10-day residential meditation course is free, from lodging to meals to instruction. None of the teachers or organizers receive payment for their service. Donations are optional and only accepted from those who have completed a course, found it valuable and wish to share the benefits with others. By eliminating any profit motive, the organization ensured that it only survives if students continue to benefit from the discipline.
I was so inspired by this model that I adapted it for my own business: an accountability platform. Users can set a penalty, but it goes to charity if they miss their goal. I don’t profit off their failure. If they hit their goal, they can pay me what it was worth to them. By aligning our incentives, I can go the extra mile to support and motivate them. Their success is in both of our best interests.
Next time you use a product or service, ask yourself what their incentives are. Follow the money - see their business model. Is it aligned with your goals? If not, maybe it’s time to pursue an alternative… or create one!
P.S: You can find more of my thoughts on Twitter @_suketk.