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Mixed Signals: How Incentives Really Work
An informative and entertaining account of how actions send signals that shape behaviors and how to design better incentives for better results in our life, our work, and our world
“Getting [an] incentives balance right can be complicated. But Gneezy hopes his book provides insights that help people feel prepared to take on the concept and design better incentives.”— Financial Times
“If you think you understand how incentives work, think again. A pioneering behavioral economist reveals how we can create reward systems that minimize unintended consequences and maximize happiness, health, wealth, and success.”—Adam Grant, Granted (blog)
Incentives send powerful signals that aim to influence behavior. But often there is a conflict between what we say and what we do in response to these incentives. The mixed signals.
Consider the CEO who urges teamwork but designs incentives for individual success, who invites innovation but punishes failure, who emphasizes quality but pays for quantity. Employing real-world scenarios just like this to illustrate this everyday phenomenon, behavioral economist Uri Gneezy explains why incentives often fail and demonstrates how the right incentives can change behavior by aligning with signals for better results.
Drawing on behavioral economics, game theory, psychology, and fieldwork, Gneezy outlines how to be incentive smart, designing rewards that are simple and effective. He highlights how the right combination of economic and psychological incentives can encourage people to drive more fuel-efficient cars, be more innovative at work, and even get to the gym. “Incentives send a signal,” Gneezy writes, “and your objective is to make sure this signal is aligned with your goals.”
“Getting [an] incentives balance right can be complicated. But Gneezy hopes his book provides insights that help people feel prepared to take on the concept and design better incentives.”— Financial Times
“If you think you understand how incentives work, think again. A pioneering behavioral economist reveals how we can create reward systems that minimize unintended consequences and maximize happiness, health, wealth, and success.”—Adam Grant, Granted (blog)
Incentives send powerful signals that aim to influence behavior. But often there is a conflict between what we say and what we do in response to these incentives. The mixed signals.
Consider the CEO who urges teamwork but designs incentives for individual success, who invites innovation but punishes failure, who emphasizes quality but pays for quantity. Employing real-world scenarios just like this to illustrate this everyday phenomenon, behavioral economist Uri Gneezy explains why incentives often fail and demonstrates how the right incentives can change behavior by aligning with signals for better results.
Drawing on behavioral economics, game theory, psychology, and fieldwork, Gneezy outlines how to be incentive smart, designing rewards that are simple and effective. He highlights how the right combination of economic and psychological incentives can encourage people to drive more fuel-efficient cars, be more innovative at work, and even get to the gym. “Incentives send a signal,” Gneezy writes, “and your objective is to make sure this signal is aligned with your goals.”
320 pages, Hardcover
Published March 21, 2023
100 people are currently reading
2276 people want to read
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Displaying 1 - 30 of 50 reviews
February 22, 2023
I came into this book truly not knowing what to expect. I felt like I already had, at the minimum, a decent understanding of incentives and the way they work. Combined with the premise of mixed signals some incentives provide, it was interesting enough for me to pick this up.
You can truly tell that Uri Gneezy has put sincere thought into his work. Countless examples from subjects everyone is familiar with - TV shows like Seinfeld , well-known CEOs, vehicle advertising, tattooing, business folks, and more provide ample evidence and examples within his work. Not only does he provide everyday examples, he further presents them in a way that's easy to understand, and is backed up with explanations from students, researchers, and his own studies from behavioral economics.
I can confidently say that while I came in expecting this book to be a drag - it was actually a pleasant read. It wasn't like reading a scholarly article, with complicated psychological explanations. It had charts, graphs, and more to aid the reader further in understanding the topic as a whole. It was relatively easy to digest but definitely took me a few sittings to read through.
My only criticism of this book overall would be that some of the explanations were long-winded, and took me a while to get through. They weren't hard to understand but rather felt redundant to read. While it didn't necessarily subtract from the overall premise of the book, it knocked a star off for me because of some of the redundancies.
Moreso, the confidence in my own knowledge that I had prior to this dropped significantly after reading this. It's not a bad thing - rather, it was my own personal example of the Dunning-Kreuger effect. I'm glad that I had the opportunity to read this, and would recommend this to those not only interested in learning the ins and outs of incentives and mixed signals, but learning how it impacts everyday life. Whether that be through economics, marketing, the grocery store, television shows, choices about tattoos, and future outcomes, this book has a little bit of knowledge in multiple aspects for anyone who gives a moment to read it.
A solid 4/5 for an engaging, and good explanation of the topic and its concepts and applications.
*I received this book from NetGalley in exchange for a fair, unbiased review*
You can truly tell that Uri Gneezy has put sincere thought into his work. Countless examples from subjects everyone is familiar with - TV shows like Seinfeld , well-known CEOs, vehicle advertising, tattooing, business folks, and more provide ample evidence and examples within his work. Not only does he provide everyday examples, he further presents them in a way that's easy to understand, and is backed up with explanations from students, researchers, and his own studies from behavioral economics.
I can confidently say that while I came in expecting this book to be a drag - it was actually a pleasant read. It wasn't like reading a scholarly article, with complicated psychological explanations. It had charts, graphs, and more to aid the reader further in understanding the topic as a whole. It was relatively easy to digest but definitely took me a few sittings to read through.
My only criticism of this book overall would be that some of the explanations were long-winded, and took me a while to get through. They weren't hard to understand but rather felt redundant to read. While it didn't necessarily subtract from the overall premise of the book, it knocked a star off for me because of some of the redundancies.
Moreso, the confidence in my own knowledge that I had prior to this dropped significantly after reading this. It's not a bad thing - rather, it was my own personal example of the Dunning-Kreuger effect. I'm glad that I had the opportunity to read this, and would recommend this to those not only interested in learning the ins and outs of incentives and mixed signals, but learning how it impacts everyday life. Whether that be through economics, marketing, the grocery store, television shows, choices about tattoos, and future outcomes, this book has a little bit of knowledge in multiple aspects for anyone who gives a moment to read it.
A solid 4/5 for an engaging, and good explanation of the topic and its concepts and applications.
*I received this book from NetGalley in exchange for a fair, unbiased review*
June 5, 2023
It’s fine, and maybe even good for people who are new to behavioral science and don’t have much of a research background. Structurally, it’s the same as the vast majority of other behavioral science books: if you’ve read the first third of it, you’ve read the whole book. Even the individual chapters have a predictably repetitive structure:
- 1) here’s an interesting question/problem that seems like it would have an obvious answer/solution
- 2) here’s another way of looking at that question/a counterintuitive solution to that problem
- 3) we designed a study to test 2) and we were right
It’s interesting in parts, but only useful to the extent that you put a lot of stock in the generalizability of social science research findings.
- 1) here’s an interesting question/problem that seems like it would have an obvious answer/solution
- 2) here’s another way of looking at that question/a counterintuitive solution to that problem
- 3) we designed a study to test 2) and we were right
It’s interesting in parts, but only useful to the extent that you put a lot of stock in the generalizability of social science research findings.
June 29, 2023
Make better decisions by understanding how incentives shape our behavior
Imagine this: $100 today or $110 tomorrow. What's your choice?
Most people say they’ll wait a day for the extra $10 – but research shows that they usually do the opposite.
Too often our behavior goes against our best intentions, even when the incentives – like an additional 10 percent for just a bit of patience – are solid. But why?
The field of behavioral economics sheds a lot of light on irrational human behavior, bridging the gap between actual actions and logical decisions. It dives into the psychology, environment, culture, and circumstance behind our choices. The aim? To create better decision-making strategies.
In this book to Mixed Signals, you’ll discover why incentives often fail, despite seeming foolproof. You’ll learn about the impact of social norms and self-perception on decisions, and explore common workplace conflicts. You can harness this knowledge to navigate behavior and problem-solving.
So stay tuned as we break down the basics of mixed signals – making sense of the irrational.
-
Money isn’t a universal motivator
Incentives play a major role in how we make choices – but our responses to incentives aren’t simple, especially when they come into contact with biases.
Consider the $100 offer again and how people don’t go for the additional $10. What’s happening here is called the “present bias” in which immediate satisfaction usually trumps a delayed gain, especially if that gain is relatively small. The incentive – an extra $10 – just isn’t strong enough when held up against having to wait another day.
There are many more biases and emotions that affect our perception of money as incentives, too. While money can be a powerful motivator, it doesn't always lead to better performance or outcomes. The evidence of this can be seen in professional sports where teams reward players with contracts that include big bonuses tied to what that player does individually. Consider an example from the NFL in which Baltimore Ravens player Terrell Suggs had a contract rewarding him with $5.5 million once he reached a goal of sacks for the year. While Suggs reached his goal, the team overall didn’t finish the season well. While that’s not necessarily his fault, his individual incentive didn’t seem to help the team’s outcome.
Sometimes, using money as an incentive backfires if you set the amount too low. Consider the case of daycares charging parents whenever they’re late picking up their kids. Gneezy began to study this after his own experience. He describes one instance of being late and the embarrassment he felt. The daycare wasn’t yet charging fees, and he felt bad enough already to make sure not to repeat the offense. When the daycare started a fee system, it announced the fee would be about $3 for anyone arriving late by ten or more minutes. Now with a relatively low price tied to being late, parents got the message that it’s not that big a deal – a much smaller deal than they’d originally thought. The fine was so low that the number of late pickups actually increased.
Gneezy also researched other daycares around the world and found that fine structures can work, but the fine must cause a bigger financial hit. Some daycares charge parents $5 for every minute they’re late. Another charges a $20 flat late pickup fee, then tacks on larger amounts in half-hour increments.
Using money as an incentive is tricky in the case of blood donation, too. In his book, The Gift Relationship, Richard Titmuss contrasts how in 1979 people were paid for blood donation in the US versus not receiving compensation in the UK. His research showed that the money-motivated donors were more likely to be drug addicts seeking cash, and therefore the quality of blood collected had a greater likelihood of being infected with hepatitis B. Today, over 75 percent of blood collected in wealthy countries worldwide comes strictly from volunteers. Research has also shown these types of donors are more motivated by things besides money — even something as small as a logo pen.
So why would anyone want a cheap pen over cash? We’ll look at that next.
-
Social norms, status, and self-perception matter
Now you see how money isn’t always the best incentive to inspire people to take action. In some cases, it has the opposite effect or results in other outcomes you didn’t want. If you set a late fee too low, you’re sending the message that being late isn’t so bad. Some people are more motivated by altruism than cash.
These points are true because of what Gneezy terms “social signals” and “self-signals,” which are messages you send to others and yourself based on social norms.
Take the case of blood donors again. Research shows that most blood donors do it because they like the feeling of giving, which is a satisfying self-signal of being a thoughtful, caring person. A couple of effective campaigns rewarded people with noncash incentives, like recognizing them in the local newspaper and giving away special pens to show they gave. The media shout-out sent a positive social signal, while the pens allowed people to signal to others and themselves about their good deeds each time they used them.
Now imagine if a cash reward was also attached in these instances. Do you think the donors would be as proud to be in the paper or as likely to use their pens? It might contradict their desire to be perceived as purely altruistic. It would also weaken the self-signal, lessening the feeling of having done something solely to help people.
It’s human nature to care how we perceive ourselves in the world and how others see us, too. Take another example based on recycling. Consider you have a neighbor who’s always picking up cans around the neighborhood and dutifully taking them to the recycling center. If the recycling center doesn’t pay for the cans, you probably assume they’re a thoughtful environmentalist acting from the goodness of their heart. If the center pays a lot of money for each load, you may question your neighbor’s motives. Maybe they’re struggling for money or just a bit of a cheapskate. They likely care about the impression, too. Just as most people do, they weigh how much they care about what you think against their own motivation for recycling. That balance affects whether they do it at all.
Gneezy explains how social signaling paved the way for Toyota to dominate the hybrid car market in the first decade of the twenty-first century. Toyota’s Prius became the runaway choice over Honda’s Insight. The biggest difference? Unlike the Insight, the Prius looked totally different from every other car on the road. Totally different as in, not cool looking at all. So uncool that people made jokes about it.
Yet because the Prius was so noticeable, there was no mistaking it – and the social signal its drivers wanted to send loudly, which was “I care about the environment.” A 2007 study confirmed that a whopping 57 percent of Prius buyers said they’d bought the car for the message it sends, ranking higher than those who said they’d chosen it for fuel economy or low emissions.
We make choices based on what we value – whether that’s money, our social status, or how we feel about ourselves. Most often it’s a combination. Next up, we’ll look at what happens when we send unintended messages about what we value and how to correct it.
-
Clear up mixed signals in the workplace
Let’s say you’re hired at a large bank that’s respected for being ethical. It even proudly proclaims itself as such. You’re then told your main goal is to sell eight products to each customer, and hitting that goal is how you’ll be judged and rewarded. You quickly see that this goal is much easier said than done, and you get discouraged quickly. The threat of losing your job looms. Other people seem to be hitting the goal just fine, but nothing you do seems to work. Then you ask around and are let in on a little secret: you can inflate your numbers by setting up fake accounts. Maybe your ethics alarm goes off, but you’re assured that everyone’s been doing it for years with no trouble. Meanwhile, you hear of a few people who tried to report it and were sent packing pretty quickly. You might conclude it’s an accepted practice up the chain of command, so why not give it a go?
That scenario gives a glimpse into what played out for Wells Fargo in the years leading up to 2016 when it was revealed employees had opened thousands of fake accounts totaling $3.5 million, and 5,300 employees were fired as a result. At the root of the problem? An overly simplified incentive that emphasized quantity over quality. The company claimed strong ethics as a top value yet incentivized employees to hit a number at all costs – and many of them did exactly that.
The quantity-versus-quality conflict is just one of four typical disconnects between values and incentives often seen in the workplace. Others include telling people you value fresh ideas while not allowing room for error and setting long-term goals but giving greater rewards for short-term wins. Another, emphasizing individual performance while saying you value teamwork, is one we’ve covered in the story of the star football player getting a big bonus that didn’t benefit the team.
In a work environment, balancing individual aspirations with teamwork comes up often and companies must decide which they truly value most. Consider a race where people are divided into teams and the way to win is for one member to cross the finish line first. The teams will structure around that incentive, choosing their strongest runner. Now, if the winning metric is changed to where every team member must cross, the focus shifts to helping the slowest runner improve.
In the workplace, you can structure incentives to help you avoid everything from common friction to potentially massive embarrassment. Start by making sure your stated values actually match what you’re asking of people. Think carefully about what you call a win and how you want your teams to operate to get it.
Next, we’ll look at what to consider as you do that.
-
Find the sweet spot in designing incentives
The final element to using incentives to achieve results is knowing your audience and situation thoroughly, then customizing your approach accordingly. Aim for the crossroads of simplicity and thoughtful complexity.
The signal must be clear and easy to follow while taking into account the motivations and pain points of people you want to influence, including yourself. If an incentive is too simple, people will find workarounds that bring unintended outcomes, like in the case of Wells Fargo. One thing history has shown is that the simpler an incentive is, the easier it is for people to game the system to their advantage.
Gneezy gives a couple of examples of this in describing how incentives and behavioral economics impacted centuries-old architecture in Europe. He describes the odd-shaped “trulli” buildings in Puglia, Italy, which originated in the early fourteenth century. The buildings are shaped like cones and constructed so their roofs would collapse easily after removing just one stone. Why would anyone do this? At the time, taxes were assessed based on what a building was used for, and the tax for homes was high. The king defined a home as anything with a roof.
Getting the picture? No roof? Not a home. No tax. For the poor peasants who lived in the trulli, it was less expensive to drop the roofs and rebuild them than to pay the taxes.
Similarly, several centuries later, England introduced a property tax attempting to increase liability on the wealthy. Their measure? Count the windows of a structure to estimate its size and increase the tax by the total number of windows. Many people got around it by simply bricking up windows to meet a lower bracket. The uberrich responded by building in more windows.
Meanwhile, if you send conflicting signals, you’re going to see results that are just as conflicting or at best, inconclusive. Again, consider your audiences and their motivations. In cases where you can’t appeal to every one of them, identify your top-priority audience and go from there. This played out in the rollout of COVID-19 vaccinations, where many governments, businesses, and public figures put forward many incentives encouraging people to get vaccinated. But heavy incentives from so many sources may have further deepened the convictions of vaccine skeptics, who weren’t likely to be swayed by any incentive to start with. Cash incentives probably didn’t motivate those who chose to be vaccinated for the public good. The incentives did serve to sway the people who were on the fence, and by that measure were effective.
There are always many parts to the puzzle when considering how incentives impact your own behavior as well as when designing them for others. Examining each piece carefully will help you arrive at the picture you want to see.
-
Incentives can be incredibly powerful in motivating people and understanding them will help you make better decisions for yourself and others. Accounting for complex reactions and behaviors will help you avoid undesired consequences and achieve desired outcomes. Remember, money isn’t always the solution, often falling far behind other motivators, such as how we feel about ourselves and what others think of us.
You can avoid unwanted friction by making sure your stated values actually match what you’re asking of people. And finally, you must always customize your incentives to your audience and situation. People will find workarounds when incentives are too simple, and overly complex incentives may bring conflicting results. Now you’re on your way to finding that balance.
Imagine this: $100 today or $110 tomorrow. What's your choice?
Most people say they’ll wait a day for the extra $10 – but research shows that they usually do the opposite.
Too often our behavior goes against our best intentions, even when the incentives – like an additional 10 percent for just a bit of patience – are solid. But why?
The field of behavioral economics sheds a lot of light on irrational human behavior, bridging the gap between actual actions and logical decisions. It dives into the psychology, environment, culture, and circumstance behind our choices. The aim? To create better decision-making strategies.
In this book to Mixed Signals, you’ll discover why incentives often fail, despite seeming foolproof. You’ll learn about the impact of social norms and self-perception on decisions, and explore common workplace conflicts. You can harness this knowledge to navigate behavior and problem-solving.
So stay tuned as we break down the basics of mixed signals – making sense of the irrational.
-
Money isn’t a universal motivator
Incentives play a major role in how we make choices – but our responses to incentives aren’t simple, especially when they come into contact with biases.
Consider the $100 offer again and how people don’t go for the additional $10. What’s happening here is called the “present bias” in which immediate satisfaction usually trumps a delayed gain, especially if that gain is relatively small. The incentive – an extra $10 – just isn’t strong enough when held up against having to wait another day.
There are many more biases and emotions that affect our perception of money as incentives, too. While money can be a powerful motivator, it doesn't always lead to better performance or outcomes. The evidence of this can be seen in professional sports where teams reward players with contracts that include big bonuses tied to what that player does individually. Consider an example from the NFL in which Baltimore Ravens player Terrell Suggs had a contract rewarding him with $5.5 million once he reached a goal of sacks for the year. While Suggs reached his goal, the team overall didn’t finish the season well. While that’s not necessarily his fault, his individual incentive didn’t seem to help the team’s outcome.
Sometimes, using money as an incentive backfires if you set the amount too low. Consider the case of daycares charging parents whenever they’re late picking up their kids. Gneezy began to study this after his own experience. He describes one instance of being late and the embarrassment he felt. The daycare wasn’t yet charging fees, and he felt bad enough already to make sure not to repeat the offense. When the daycare started a fee system, it announced the fee would be about $3 for anyone arriving late by ten or more minutes. Now with a relatively low price tied to being late, parents got the message that it’s not that big a deal – a much smaller deal than they’d originally thought. The fine was so low that the number of late pickups actually increased.
Gneezy also researched other daycares around the world and found that fine structures can work, but the fine must cause a bigger financial hit. Some daycares charge parents $5 for every minute they’re late. Another charges a $20 flat late pickup fee, then tacks on larger amounts in half-hour increments.
Using money as an incentive is tricky in the case of blood donation, too. In his book, The Gift Relationship, Richard Titmuss contrasts how in 1979 people were paid for blood donation in the US versus not receiving compensation in the UK. His research showed that the money-motivated donors were more likely to be drug addicts seeking cash, and therefore the quality of blood collected had a greater likelihood of being infected with hepatitis B. Today, over 75 percent of blood collected in wealthy countries worldwide comes strictly from volunteers. Research has also shown these types of donors are more motivated by things besides money — even something as small as a logo pen.
So why would anyone want a cheap pen over cash? We’ll look at that next.
-
Social norms, status, and self-perception matter
Now you see how money isn’t always the best incentive to inspire people to take action. In some cases, it has the opposite effect or results in other outcomes you didn’t want. If you set a late fee too low, you’re sending the message that being late isn’t so bad. Some people are more motivated by altruism than cash.
These points are true because of what Gneezy terms “social signals” and “self-signals,” which are messages you send to others and yourself based on social norms.
Take the case of blood donors again. Research shows that most blood donors do it because they like the feeling of giving, which is a satisfying self-signal of being a thoughtful, caring person. A couple of effective campaigns rewarded people with noncash incentives, like recognizing them in the local newspaper and giving away special pens to show they gave. The media shout-out sent a positive social signal, while the pens allowed people to signal to others and themselves about their good deeds each time they used them.
Now imagine if a cash reward was also attached in these instances. Do you think the donors would be as proud to be in the paper or as likely to use their pens? It might contradict their desire to be perceived as purely altruistic. It would also weaken the self-signal, lessening the feeling of having done something solely to help people.
It’s human nature to care how we perceive ourselves in the world and how others see us, too. Take another example based on recycling. Consider you have a neighbor who’s always picking up cans around the neighborhood and dutifully taking them to the recycling center. If the recycling center doesn’t pay for the cans, you probably assume they’re a thoughtful environmentalist acting from the goodness of their heart. If the center pays a lot of money for each load, you may question your neighbor’s motives. Maybe they’re struggling for money or just a bit of a cheapskate. They likely care about the impression, too. Just as most people do, they weigh how much they care about what you think against their own motivation for recycling. That balance affects whether they do it at all.
Gneezy explains how social signaling paved the way for Toyota to dominate the hybrid car market in the first decade of the twenty-first century. Toyota’s Prius became the runaway choice over Honda’s Insight. The biggest difference? Unlike the Insight, the Prius looked totally different from every other car on the road. Totally different as in, not cool looking at all. So uncool that people made jokes about it.
Yet because the Prius was so noticeable, there was no mistaking it – and the social signal its drivers wanted to send loudly, which was “I care about the environment.” A 2007 study confirmed that a whopping 57 percent of Prius buyers said they’d bought the car for the message it sends, ranking higher than those who said they’d chosen it for fuel economy or low emissions.
We make choices based on what we value – whether that’s money, our social status, or how we feel about ourselves. Most often it’s a combination. Next up, we’ll look at what happens when we send unintended messages about what we value and how to correct it.
-
Clear up mixed signals in the workplace
Let’s say you’re hired at a large bank that’s respected for being ethical. It even proudly proclaims itself as such. You’re then told your main goal is to sell eight products to each customer, and hitting that goal is how you’ll be judged and rewarded. You quickly see that this goal is much easier said than done, and you get discouraged quickly. The threat of losing your job looms. Other people seem to be hitting the goal just fine, but nothing you do seems to work. Then you ask around and are let in on a little secret: you can inflate your numbers by setting up fake accounts. Maybe your ethics alarm goes off, but you’re assured that everyone’s been doing it for years with no trouble. Meanwhile, you hear of a few people who tried to report it and were sent packing pretty quickly. You might conclude it’s an accepted practice up the chain of command, so why not give it a go?
That scenario gives a glimpse into what played out for Wells Fargo in the years leading up to 2016 when it was revealed employees had opened thousands of fake accounts totaling $3.5 million, and 5,300 employees were fired as a result. At the root of the problem? An overly simplified incentive that emphasized quantity over quality. The company claimed strong ethics as a top value yet incentivized employees to hit a number at all costs – and many of them did exactly that.
The quantity-versus-quality conflict is just one of four typical disconnects between values and incentives often seen in the workplace. Others include telling people you value fresh ideas while not allowing room for error and setting long-term goals but giving greater rewards for short-term wins. Another, emphasizing individual performance while saying you value teamwork, is one we’ve covered in the story of the star football player getting a big bonus that didn’t benefit the team.
In a work environment, balancing individual aspirations with teamwork comes up often and companies must decide which they truly value most. Consider a race where people are divided into teams and the way to win is for one member to cross the finish line first. The teams will structure around that incentive, choosing their strongest runner. Now, if the winning metric is changed to where every team member must cross, the focus shifts to helping the slowest runner improve.
In the workplace, you can structure incentives to help you avoid everything from common friction to potentially massive embarrassment. Start by making sure your stated values actually match what you’re asking of people. Think carefully about what you call a win and how you want your teams to operate to get it.
Next, we’ll look at what to consider as you do that.
-
Find the sweet spot in designing incentives
The final element to using incentives to achieve results is knowing your audience and situation thoroughly, then customizing your approach accordingly. Aim for the crossroads of simplicity and thoughtful complexity.
The signal must be clear and easy to follow while taking into account the motivations and pain points of people you want to influence, including yourself. If an incentive is too simple, people will find workarounds that bring unintended outcomes, like in the case of Wells Fargo. One thing history has shown is that the simpler an incentive is, the easier it is for people to game the system to their advantage.
Gneezy gives a couple of examples of this in describing how incentives and behavioral economics impacted centuries-old architecture in Europe. He describes the odd-shaped “trulli” buildings in Puglia, Italy, which originated in the early fourteenth century. The buildings are shaped like cones and constructed so their roofs would collapse easily after removing just one stone. Why would anyone do this? At the time, taxes were assessed based on what a building was used for, and the tax for homes was high. The king defined a home as anything with a roof.
Getting the picture? No roof? Not a home. No tax. For the poor peasants who lived in the trulli, it was less expensive to drop the roofs and rebuild them than to pay the taxes.
Similarly, several centuries later, England introduced a property tax attempting to increase liability on the wealthy. Their measure? Count the windows of a structure to estimate its size and increase the tax by the total number of windows. Many people got around it by simply bricking up windows to meet a lower bracket. The uberrich responded by building in more windows.
Meanwhile, if you send conflicting signals, you’re going to see results that are just as conflicting or at best, inconclusive. Again, consider your audiences and their motivations. In cases where you can’t appeal to every one of them, identify your top-priority audience and go from there. This played out in the rollout of COVID-19 vaccinations, where many governments, businesses, and public figures put forward many incentives encouraging people to get vaccinated. But heavy incentives from so many sources may have further deepened the convictions of vaccine skeptics, who weren’t likely to be swayed by any incentive to start with. Cash incentives probably didn’t motivate those who chose to be vaccinated for the public good. The incentives did serve to sway the people who were on the fence, and by that measure were effective.
There are always many parts to the puzzle when considering how incentives impact your own behavior as well as when designing them for others. Examining each piece carefully will help you arrive at the picture you want to see.
-
Incentives can be incredibly powerful in motivating people and understanding them will help you make better decisions for yourself and others. Accounting for complex reactions and behaviors will help you avoid undesired consequences and achieve desired outcomes. Remember, money isn’t always the solution, often falling far behind other motivators, such as how we feel about ourselves and what others think of us.
You can avoid unwanted friction by making sure your stated values actually match what you’re asking of people. And finally, you must always customize your incentives to your audience and situation. People will find workarounds when incentives are too simple, and overly complex incentives may bring conflicting results. Now you’re on your way to finding that balance.
April 24, 2023
As Stevo’s Novel Ideas, I am a long-time book reviewer, member of the media, an Influencer, and a content provider. I received this book as a free review copy from either the publisher, a publicist, or the author, and have not been otherwise compensated for reviewing or recommending it. As an Amazon Associate I earn from qualifying purchases.
This book is Stevo's Business Book of the Week for the week of 4/23. Incentives send powerful signals that aim to influence behavior. But often there is a conflict between what we say and what we do in response to these incentives.
How many places you have worked where incentives, in the form of recognition, bonuses, gifts, etc., are not in line with company policies? Where the value of teamwork is stressed but only certain members of the team are rewarded? Or where management targets quality over quantity, but you are rewarded only if you hit productivity targets? These "mixed signals" create frustration, conflict, and increasing disengagement.
Incentives are created by others to reward us for engaging in a behavior we otherwise wouldn't do. The rewards, as described by behavioral economist Uri Gneezy in his book "Mixed Signals," can be direct (as in saving or receiving money), or indirect, as in rewards that increase our worth in the eyes of others (social signaling) or to ourselves (self signaling).
These effects come into play as we create internal stories with very incentive we encounter, as in being rewarded for recycling a soda can, i.e. with no reward we view ourselves as altruistic and with one we are cheap. Incentives themselves aren't inherently good or bad. What's important is how they influence our stories.
In this readable and relatable volume, using many examples that are both funny (the price of Coke on hot days) and tragic (COVID vaccines), Gneezy shows us how the best incentives send signals that create stories in others that are aligned with our goals.
Find more Business Books of the Week on my Goodreads Listopia page at https://www.goodreads.com/list/show/9..., and find many more reviewed and recommended books and products by searching for me on Google.
This book is Stevo's Business Book of the Week for the week of 4/23. Incentives send powerful signals that aim to influence behavior. But often there is a conflict between what we say and what we do in response to these incentives.
How many places you have worked where incentives, in the form of recognition, bonuses, gifts, etc., are not in line with company policies? Where the value of teamwork is stressed but only certain members of the team are rewarded? Or where management targets quality over quantity, but you are rewarded only if you hit productivity targets? These "mixed signals" create frustration, conflict, and increasing disengagement.
Incentives are created by others to reward us for engaging in a behavior we otherwise wouldn't do. The rewards, as described by behavioral economist Uri Gneezy in his book "Mixed Signals," can be direct (as in saving or receiving money), or indirect, as in rewards that increase our worth in the eyes of others (social signaling) or to ourselves (self signaling).
These effects come into play as we create internal stories with very incentive we encounter, as in being rewarded for recycling a soda can, i.e. with no reward we view ourselves as altruistic and with one we are cheap. Incentives themselves aren't inherently good or bad. What's important is how they influence our stories.
In this readable and relatable volume, using many examples that are both funny (the price of Coke on hot days) and tragic (COVID vaccines), Gneezy shows us how the best incentives send signals that create stories in others that are aligned with our goals.
Find more Business Books of the Week on my Goodreads Listopia page at https://www.goodreads.com/list/show/9..., and find many more reviewed and recommended books and products by searching for me on Google.
May 1, 2023
This was an absolutely amazing book, and I’m so glad I randomly came across it. Uri Gneezy researches incentives and what motivates people. There’s a ton of discussion of how companies and various cultures create incentives in the wrong way, and it also helps the reader see what motivates them and why. What I really loved about this book is how much it discusses status signaling and how we want to appear to others, but in addition to that, the author also discusses how we participate in behaviors to try and live up to how we perceive ourselves.
Aside from all of the awesome research and psychology discussed in this book, it ends with some phenomenal chapters on how Gneezy and others are trying to use this science to influence change around the world for the better. I loved this book so much and can’t wait to read it again in the future.
Aside from all of the awesome research and psychology discussed in this book, it ends with some phenomenal chapters on how Gneezy and others are trying to use this science to influence change around the world for the better. I loved this book so much and can’t wait to read it again in the future.
Want to read
April 15, 2023NATURE's short review:
"Incentives come in many guises. In Ohio in 2021, people were bribed to get COVID-19 vaccinations with tickets for a US$1-million lottery. In New Jersey, the prize was dinner with the governor. [!!] Behavioural economist Uri Gneezy thinks the latter “better and smarter”, despite attracting less press, because it signalled that the governor cared about vaccination. Other “mixed signals” in this stimulating book range from family life to politics. Gneezy argues that for an incentive to be effective, its signal must align with the sender’s goal."
Publishes March 21, 2023. Not at our libraries, 4/15/23. Maybe?
"Incentives come in many guises. In Ohio in 2021, people were bribed to get COVID-19 vaccinations with tickets for a US$1-million lottery. In New Jersey, the prize was dinner with the governor. [!!] Behavioural economist Uri Gneezy thinks the latter “better and smarter”, despite attracting less press, because it signalled that the governor cared about vaccination. Other “mixed signals” in this stimulating book range from family life to politics. Gneezy argues that for an incentive to be effective, its signal must align with the sender’s goal."
Publishes March 21, 2023. Not at our libraries, 4/15/23. Maybe?
February 25, 2024
I really enjoyed this book. I love when science authors describe the studies and how they interpreted them. I learned a lot about incentives. I think I am almost ready to relisten already. It's fascinating to see how incentives actually work and how they can go wrong. Definitely worth the effort to read.
Update: I've already relistened to this book. The author is so engaging and the reader is amazing. At the end of each chapter there is a brief recap on how to apply what we learned. I really need to figure out how to apply these principles both at work and at home. Definitely worth the reread.
Update: I've already relistened to this book. The author is so engaging and the reader is amazing. At the end of each chapter there is a brief recap on how to apply what we learned. I really need to figure out how to apply these principles both at work and at home. Definitely worth the reread.
July 20, 2023
In theory an interesting book but it felt like it wasn’t telling you anything new and was a lot of common knowledge that people knew around loss aversion and the value of having positive incentives.
It felt long and repetitive without anything new
It felt long and repetitive without anything new
August 20, 2025
“Under three years old: Free. Th ree and older: $117.” When it was our time to pay, the smiling cashier asked me how old Ron was, and I replied, “Almost three.” Technically I wasn’t lying: he was almost three, but from the wrong side; his third birthday was a couple of months earlier.
I’m not the only one who “rounds down” the age of their kids.
Imagine a CEO who tells her employees how important it is to work as a team, but the incentives she designs for success are based on an individual’s work.
Examples of such mixed signals include the following:
• Encouraging teamwork but incentivizing individual success
• Encouraging long-term goals but incentivizing short-term success
• Inspiring innovation and risk-taking but punishing failure
• Emphasizing the importance of quality but paying for quantity
dynamic pricing isn’t unusual—we see it in airlines, hotels
temperature-controlled pricing
Douglas Ivester, CEO of Coca-Cola, who in 1999 met with a Brazilian newspaper and discussed an incentive idea. Th e idea involved new technology in vending machines that automatically detected temperature
On a regular day, the price would be, say, $1.00. On a hot day, the vending machine would react and raise the price to $1.50
It’s hard to imagine that giving incentives in the form of a discount on a cold day would meet a consumer pushback.
The Coca-Cola mistake shows how important it is to control the story and how incentives and their signals often do exactly that.
Th ink about a lion in Tanzania hunting zebras. Th e lion needs to remain downwind in order to surprise the zebra.
An important instrument in the functioning of markets was the creation of money. (Imagine that you had to pay for this book with a chicken!)
the more you would pay me to do something, the more likely I would be to do it.
Consider the following scenario: On a freezing December morning, you see your neighbor Sara carrying a large bag full of cans to the recycling center. You observe Sara’s behavior and create a narrative: “Wow, Sara is awesome! She cares about the environment and is willing to sacrifi ce time and expend eff ort to help protect it.” Sara socially signals to others that she is environmentally conscious.
Now, consider the same scenario, only this time there’s an incentive program aimed at encouraging people to recycle soda cans: for each soda can Sara recycles, she will receive five cents.
Does your original narrative that Sara is awesome still work?
an incentive is a tool used to motivate people to do something they would not do otherwise.
Sometimes incentives send mixed signals and achieve the opposite of what they were designed for.
Michael Spence created a seminal model about signaling in such jobmarket situations in 1973, and it landed him the Nobel Prize. Spence’s model showed that an applicant can resolve asymmetric information, in which they know how good they are, but the potential employer doesn’t, by using costly signals that reveal important information about themselves in a credible way.
At that time, the US blood banks paid donors for their blood, whereas the UK ones didn’t. Th e result was that the blood donated in the US, where many donors were drug addicts who needed money, was of a lower quality, with a higher chance of being infected with hepatitis B.
However, countries that don’t allow cash incentives for blood donations have shown that small noncash incentives may work
to move people who are “almost there” to join the donors.
One study used medals and social rewards (in the form of recognition in the local newspaper in an Italian town). Another gave Australian Jane-type blood donors “Blood Service pens.
reminded every time she picks up her pen just how good of a person she is.
Some are easy and fast, while others are longer and harder to deal with. If paid by the number of calls, Jack receives a signal that, for example, it is fi ne to “accidentally” drop calls that he considers as getting too complicated. This would not be benefi cial to the customer or for the center.
paleontologists in China recruited local peasants to help fi nd fossils at a dig site. They motivated the peasants by paying a reward per fossil fragment submitted. Th ey incentivized quantity, and that’s exactly what they got: the wily peasants smashed the bones they found, which signifi cantly increased their earnings but of course decreased the scientifi c value of the artifacts.
In Tel Aviv, you can observe a similar phenomenon as in Chile, but the problem with a simple pay-per-passenger incentive becomes more apparent. On some of the busier routes, minibuses, which are operated by private drivers who pocket the passenger fees, compete with regular buses operated by drivers who are paid by the hour. I love riding these minibuses when I’m in Tel Aviv because I get to observe strategic behavior in the wild. T h e minibus drivers are always strategizing with their friends over the radio, planning where to go based on which locations have a larger number of potential passengers. Th ey keep track of the bus schedule as well and try to always be seconds ahead of the bus, so they can pick up the passengers who are waiting at the bus stops.
Chilean study found that when bus drivers are incentivized to be fast and increase the number of passengers they pick up, they are also involved in a greater number of accidents, and passengers report a less pleasant riding experience.
When choosing how to pay the drivers, the company needs to consider what’s more important: effi ciency or safety and comfort? After deciding the relative importance, the company can choose the incentives that align its goals with that of the driver and avoid sending mixed signals. Alternatively, you can fi nd some creative solutions to tackle the quality dimension at the same time.
Uber drivers are at the other extreme: they are paid per ride, and they keep their earnings minus the percentage they pay to the Uber platform. Hence, Kate’s earnings depend on how much she drives: drive more, earn more.
add another incentive dimension, namely, allow passengers to rate drivers. At the end of your Uber ride, you can rate the driver on a scale of one to fi ve stars. When you order a ride, the accumulated rating of the driver over many passengers is displayed on your screen. If the rating is low, you may choose to book a diff erent driver. Moreover, if you choose to give your driver a low rating, you are prompted to indicate why: safety, cleanliness, politeness, and the like. The stakes are high: Uber’s algorithm monitors these ratings, and drivers who don’t meet a certain threshold can no longer drive for the company.
In a 2015 survey, out of the 435 ER physicians asked about the tests they order, more than 85 percent admitted that they call for too many tests despite knowing that the results won’t aid their decision in choosing treatments. Why do doctors often order a surplus of unnecessary tests and treatments? It’s because they are incentivized to do so by the fee-for-service (FFS) system, under which health-care providers are paid according to the service they provide, not based on outcomes. Th e more tests, surgeries, and scanning a patient undergoes, the more providers are paid. Under such a system, doctors are incentivized to overprescribe treatments and services even if they are not helpful.
Th is incentive structure is one of the reasons that US per capita health-care spending is almost twice the average of other wealthy countries, yet this astronomical spending comes with poorer outcomes. Th e quantity is there, but the quality isn’t.
the physician concludes that the fetal heart tracing shows possible abnormality, thus strongly recommending that Jane undergo a C-section. fetal heart tracing examination to see if the baby is safe for natural labor.
health-care providers have no incentives to invest in the prevention of illness or injury. We know that investing in prevention has a much higher return-on-investment rate.
there is a lot of money in treating us when we’re sick!
One of the biggest impediments to faster and cheaper failures is that once people have made a public commitment to some course of action and have devoted a lot of time and energy to it, they become convinced that what they are doing is valuable independently of the facts. . . . One antidote to such misguided commitment is to provide people with incentives for pulling the plug as early as possible on failing projects.
he introduced a “kill fee” to the pharmaceuticals company.
Teams kill their ideas as soon as the evidence is on the table because they’re rewarded for it. They get applause from their peers, hugs and high-fi ves from their managers, too, and me in particular. Th ey get promoted for killing fast. We have bonused every single person on teams that ended their projects
Executive rewards should be generally commensurate with long-term return
Finnish teachers can customize their lesson plans and select their own textbooks. Th ey have plenty of creative freedom because they aren’t required to administer standardized tests. Without the enforcement of standardized tests and tying teachers’ paychecks to students’ performance, Finland consistently places at the top of the Programme for International Student Assessment (PISA), an international test administered to high school students in fi fty-seven developed countries, while American students constantly struggle to achieve high placements on this assessment
When asked why he paid so much, Zuckerberg said, “Someone who is exceptional in their role is not just a little better than someone who is pretty good. . . . Th ey are 100 times better.”
Marc Andreessen said: “The gap between what a highly productive person can do and what an average person can do is getting bigger and bigger. Five great programmers can completely outperform 1,000 mediocre programmers.”
Now, consider instead an obstacle race in which in order to win, the entire team must cross the line fi rst. In this case, it all depends on the slowest person on the team. Th e whole team competes, but the team’s success depends on whether its slowest runner fi nishes faster than the slowest runner on the other team. Th is kind of competition calls for very different incentives, ones that drive the entire team toward helping the slowest rather than the fastest member.
I have a strange hobby: collecting stories on incentives gone wrong.
I designed a fi eld experiment to test the eff ect of fi nes in day cares on late parent pickups. the average number of parents who were late doubled! Th e fi ne, originally introduced to discourage parents from being late, actually promoted late pickups.
they were only getting fi ned a mere $3. Th e fi ne allowed them to arrive late while avoiding the feeling of guilt.
Before treatments were developed, contracting AIDS was a death sentence, and people were extremely careful about its spread. Now that AIDS has a treatment and is viewed as a chronic disease rather than a death sentence, people f i nd it less threatening and take more risks, such as having unprotected sex, thereby increasing the number of infected people. Th e availability of the new treatments reduced the incentive to be careful.
T h e houses along Amsterdam’s canals are yet another example of this dynamic. Built on naturally soft soil, the foundation of houses in the Netherlands needed the help of large, load-bearing stakes that were pushed deep into the ground. To cover the cost of this new labor, the government introduced a tax based on the width of the house that was built (wider houses required more stakes).
Th e city welcomed this new campus, but there were worries regarding the impact that the campus—which had a capacity of more than a thousand employees—might have on traffi c in the area. To reduce this negative impact, I was told, the foundation introduced some incentives for its employees to reduce car use. Specifi cally, it provided free access to public transportation and made employees pay $9 a day for parking if they chose to park in the foundation’s facility.
One additional element of this incentive really interested me: employees were paid an extra $3 for every day they came to work without their car. Since approximately fi ve hundred employees a day didn’t use the parking garage when they came to work, the $3 incentive cost to the foundation adds up to about $1,500 a day.
the foundation asked me, could it design a more eff ective incentive scheme and either spend less money for the same participation or use the same budget and get more people to switch to public transportation?
Leveraging the power of regret, I did off er a diff erent way of using the $1,500 incentives: have a “regret lottery” that pays $1,500 every afternoon. T h e lottery will randomly pick one name in a little ceremony broadcast on the internal net. Th e lottery will pick a name, the name will be announced, and then the system will check whether the employee parked their car in th e parking facility that day. If not, we have a winner. The people whose name were drawn but who parked their car would regret driving immensely. T h is should create a buzz in the office!
As expected, the $500 lottery did better. It reduced parking by 18 percent relative to control, with a lower cost.
67 percent of all the fi refi ghters (1.11 million) in the US in 2018 were volunteers. 100 percent of fi refi ghters in Chile and Peru are unpaid.
I’m not the only one who “rounds down” the age of their kids.
Imagine a CEO who tells her employees how important it is to work as a team, but the incentives she designs for success are based on an individual’s work.
Examples of such mixed signals include the following:
• Encouraging teamwork but incentivizing individual success
• Encouraging long-term goals but incentivizing short-term success
• Inspiring innovation and risk-taking but punishing failure
• Emphasizing the importance of quality but paying for quantity
dynamic pricing isn’t unusual—we see it in airlines, hotels
temperature-controlled pricing
Douglas Ivester, CEO of Coca-Cola, who in 1999 met with a Brazilian newspaper and discussed an incentive idea. Th e idea involved new technology in vending machines that automatically detected temperature
On a regular day, the price would be, say, $1.00. On a hot day, the vending machine would react and raise the price to $1.50
It’s hard to imagine that giving incentives in the form of a discount on a cold day would meet a consumer pushback.
The Coca-Cola mistake shows how important it is to control the story and how incentives and their signals often do exactly that.
Th ink about a lion in Tanzania hunting zebras. Th e lion needs to remain downwind in order to surprise the zebra.
An important instrument in the functioning of markets was the creation of money. (Imagine that you had to pay for this book with a chicken!)
the more you would pay me to do something, the more likely I would be to do it.
Consider the following scenario: On a freezing December morning, you see your neighbor Sara carrying a large bag full of cans to the recycling center. You observe Sara’s behavior and create a narrative: “Wow, Sara is awesome! She cares about the environment and is willing to sacrifi ce time and expend eff ort to help protect it.” Sara socially signals to others that she is environmentally conscious.
Now, consider the same scenario, only this time there’s an incentive program aimed at encouraging people to recycle soda cans: for each soda can Sara recycles, she will receive five cents.
Does your original narrative that Sara is awesome still work?
an incentive is a tool used to motivate people to do something they would not do otherwise.
Sometimes incentives send mixed signals and achieve the opposite of what they were designed for.
Michael Spence created a seminal model about signaling in such jobmarket situations in 1973, and it landed him the Nobel Prize. Spence’s model showed that an applicant can resolve asymmetric information, in which they know how good they are, but the potential employer doesn’t, by using costly signals that reveal important information about themselves in a credible way.
At that time, the US blood banks paid donors for their blood, whereas the UK ones didn’t. Th e result was that the blood donated in the US, where many donors were drug addicts who needed money, was of a lower quality, with a higher chance of being infected with hepatitis B.
However, countries that don’t allow cash incentives for blood donations have shown that small noncash incentives may work
to move people who are “almost there” to join the donors.
One study used medals and social rewards (in the form of recognition in the local newspaper in an Italian town). Another gave Australian Jane-type blood donors “Blood Service pens.
reminded every time she picks up her pen just how good of a person she is.
Some are easy and fast, while others are longer and harder to deal with. If paid by the number of calls, Jack receives a signal that, for example, it is fi ne to “accidentally” drop calls that he considers as getting too complicated. This would not be benefi cial to the customer or for the center.
paleontologists in China recruited local peasants to help fi nd fossils at a dig site. They motivated the peasants by paying a reward per fossil fragment submitted. Th ey incentivized quantity, and that’s exactly what they got: the wily peasants smashed the bones they found, which signifi cantly increased their earnings but of course decreased the scientifi c value of the artifacts.
In Tel Aviv, you can observe a similar phenomenon as in Chile, but the problem with a simple pay-per-passenger incentive becomes more apparent. On some of the busier routes, minibuses, which are operated by private drivers who pocket the passenger fees, compete with regular buses operated by drivers who are paid by the hour. I love riding these minibuses when I’m in Tel Aviv because I get to observe strategic behavior in the wild. T h e minibus drivers are always strategizing with their friends over the radio, planning where to go based on which locations have a larger number of potential passengers. Th ey keep track of the bus schedule as well and try to always be seconds ahead of the bus, so they can pick up the passengers who are waiting at the bus stops.
Chilean study found that when bus drivers are incentivized to be fast and increase the number of passengers they pick up, they are also involved in a greater number of accidents, and passengers report a less pleasant riding experience.
When choosing how to pay the drivers, the company needs to consider what’s more important: effi ciency or safety and comfort? After deciding the relative importance, the company can choose the incentives that align its goals with that of the driver and avoid sending mixed signals. Alternatively, you can fi nd some creative solutions to tackle the quality dimension at the same time.
Uber drivers are at the other extreme: they are paid per ride, and they keep their earnings minus the percentage they pay to the Uber platform. Hence, Kate’s earnings depend on how much she drives: drive more, earn more.
add another incentive dimension, namely, allow passengers to rate drivers. At the end of your Uber ride, you can rate the driver on a scale of one to fi ve stars. When you order a ride, the accumulated rating of the driver over many passengers is displayed on your screen. If the rating is low, you may choose to book a diff erent driver. Moreover, if you choose to give your driver a low rating, you are prompted to indicate why: safety, cleanliness, politeness, and the like. The stakes are high: Uber’s algorithm monitors these ratings, and drivers who don’t meet a certain threshold can no longer drive for the company.
In a 2015 survey, out of the 435 ER physicians asked about the tests they order, more than 85 percent admitted that they call for too many tests despite knowing that the results won’t aid their decision in choosing treatments. Why do doctors often order a surplus of unnecessary tests and treatments? It’s because they are incentivized to do so by the fee-for-service (FFS) system, under which health-care providers are paid according to the service they provide, not based on outcomes. Th e more tests, surgeries, and scanning a patient undergoes, the more providers are paid. Under such a system, doctors are incentivized to overprescribe treatments and services even if they are not helpful.
Th is incentive structure is one of the reasons that US per capita health-care spending is almost twice the average of other wealthy countries, yet this astronomical spending comes with poorer outcomes. Th e quantity is there, but the quality isn’t.
the physician concludes that the fetal heart tracing shows possible abnormality, thus strongly recommending that Jane undergo a C-section. fetal heart tracing examination to see if the baby is safe for natural labor.
health-care providers have no incentives to invest in the prevention of illness or injury. We know that investing in prevention has a much higher return-on-investment rate.
there is a lot of money in treating us when we’re sick!
One of the biggest impediments to faster and cheaper failures is that once people have made a public commitment to some course of action and have devoted a lot of time and energy to it, they become convinced that what they are doing is valuable independently of the facts. . . . One antidote to such misguided commitment is to provide people with incentives for pulling the plug as early as possible on failing projects.
he introduced a “kill fee” to the pharmaceuticals company.
Teams kill their ideas as soon as the evidence is on the table because they’re rewarded for it. They get applause from their peers, hugs and high-fi ves from their managers, too, and me in particular. Th ey get promoted for killing fast. We have bonused every single person on teams that ended their projects
Executive rewards should be generally commensurate with long-term return
Finnish teachers can customize their lesson plans and select their own textbooks. Th ey have plenty of creative freedom because they aren’t required to administer standardized tests. Without the enforcement of standardized tests and tying teachers’ paychecks to students’ performance, Finland consistently places at the top of the Programme for International Student Assessment (PISA), an international test administered to high school students in fi fty-seven developed countries, while American students constantly struggle to achieve high placements on this assessment
When asked why he paid so much, Zuckerberg said, “Someone who is exceptional in their role is not just a little better than someone who is pretty good. . . . Th ey are 100 times better.”
Marc Andreessen said: “The gap between what a highly productive person can do and what an average person can do is getting bigger and bigger. Five great programmers can completely outperform 1,000 mediocre programmers.”
Now, consider instead an obstacle race in which in order to win, the entire team must cross the line fi rst. In this case, it all depends on the slowest person on the team. Th e whole team competes, but the team’s success depends on whether its slowest runner fi nishes faster than the slowest runner on the other team. Th is kind of competition calls for very different incentives, ones that drive the entire team toward helping the slowest rather than the fastest member.
I have a strange hobby: collecting stories on incentives gone wrong.
I designed a fi eld experiment to test the eff ect of fi nes in day cares on late parent pickups. the average number of parents who were late doubled! Th e fi ne, originally introduced to discourage parents from being late, actually promoted late pickups.
they were only getting fi ned a mere $3. Th e fi ne allowed them to arrive late while avoiding the feeling of guilt.
Before treatments were developed, contracting AIDS was a death sentence, and people were extremely careful about its spread. Now that AIDS has a treatment and is viewed as a chronic disease rather than a death sentence, people f i nd it less threatening and take more risks, such as having unprotected sex, thereby increasing the number of infected people. Th e availability of the new treatments reduced the incentive to be careful.
T h e houses along Amsterdam’s canals are yet another example of this dynamic. Built on naturally soft soil, the foundation of houses in the Netherlands needed the help of large, load-bearing stakes that were pushed deep into the ground. To cover the cost of this new labor, the government introduced a tax based on the width of the house that was built (wider houses required more stakes).
Th e city welcomed this new campus, but there were worries regarding the impact that the campus—which had a capacity of more than a thousand employees—might have on traffi c in the area. To reduce this negative impact, I was told, the foundation introduced some incentives for its employees to reduce car use. Specifi cally, it provided free access to public transportation and made employees pay $9 a day for parking if they chose to park in the foundation’s facility.
One additional element of this incentive really interested me: employees were paid an extra $3 for every day they came to work without their car. Since approximately fi ve hundred employees a day didn’t use the parking garage when they came to work, the $3 incentive cost to the foundation adds up to about $1,500 a day.
the foundation asked me, could it design a more eff ective incentive scheme and either spend less money for the same participation or use the same budget and get more people to switch to public transportation?
Leveraging the power of regret, I did off er a diff erent way of using the $1,500 incentives: have a “regret lottery” that pays $1,500 every afternoon. T h e lottery will randomly pick one name in a little ceremony broadcast on the internal net. Th e lottery will pick a name, the name will be announced, and then the system will check whether the employee parked their car in th e parking facility that day. If not, we have a winner. The people whose name were drawn but who parked their car would regret driving immensely. T h is should create a buzz in the office!
As expected, the $500 lottery did better. It reduced parking by 18 percent relative to control, with a lower cost.
67 percent of all the fi refi ghters (1.11 million) in the US in 2018 were volunteers. 100 percent of fi refi ghters in Chile and Peru are unpaid.
March 21, 2023
Mixed Signals is an accessible and informative exploration of incentives and the messages they end up sending. The book is full of illustrations and anecdotes that illuminate the points made throughout and almost every chapter ends with a handy takeaway point. The lessons are applicable to both personal and professional situations. I recommend it to anyone leading teams and wondering how to motivate them, or anyone curious to learning more about behavior change and how to design incentives that promote positive/desired changes.
Thank you to Yale University Press and NetGalley for the opportunity to read an advance copy.
Thank you to Yale University Press and NetGalley for the opportunity to read an advance copy.
August 17, 2024
I really liked how incentives send signals and shape our view and you must align it to our goals, but most of the book is based on common sense examples. Enjoyable but probably you could explain this subject with less pages.
October 17, 2024
I actually met Uri Gneezy in person after reading this book. He's a kind and genuine man with a sharp, deadpan sense of humor, and he's really trying to help people however he can. I believe his wit comes across in the book, though I can't imagine the little comics were his idea.
Despite my personal affinity for the man, I'm afraid his book comes across as a bit listless. Gneezy's overarching point could not be any more clear: if what you say and what you incentivize are different, this is a mixed signal, and people will tend to follow the incentive.
What's missing is some veteran insight into the nuances of this conflict. Gneezy discusses many instances in which systems have two incentives: say recycling and plastic bags. People who recycle get a warm glow of saving the planet, but when they're paid 5¢ per can, the signal becomes mixed and they actually recycle less. Got it — don't mix the signals. But then what about this? People use plastic bags at the grocery store until they have to pay 5¢ for one; then, people adopt the eco-friendly gesture of reusable bags in droves. The signal is mixed, what gives? Why did mixing signals work in one circumstance and not in the other?
The recycling vs. plastic bag paradox is not the only one presented in the book, just the most obvious. So, I kept asking myself this question, "What gives?" throughout reading the book, hoping there would be a chapter at the end clarifying it all. But there wasn't. And I put down the book at the end feeling wanting.
This book has a lot of great research condensed into a format that is accessible to non-researchers. If you're a student or casually interested in incentive research, it's great. But if you're looking for answers, real answers to the tough question of when mixed signals work and when they don't, you'll have to do your own study. Because I don't think that we, humanity, know the answer to that right now.
Despite my personal affinity for the man, I'm afraid his book comes across as a bit listless. Gneezy's overarching point could not be any more clear: if what you say and what you incentivize are different, this is a mixed signal, and people will tend to follow the incentive.
What's missing is some veteran insight into the nuances of this conflict. Gneezy discusses many instances in which systems have two incentives: say recycling and plastic bags. People who recycle get a warm glow of saving the planet, but when they're paid 5¢ per can, the signal becomes mixed and they actually recycle less. Got it — don't mix the signals. But then what about this? People use plastic bags at the grocery store until they have to pay 5¢ for one; then, people adopt the eco-friendly gesture of reusable bags in droves. The signal is mixed, what gives? Why did mixing signals work in one circumstance and not in the other?
The recycling vs. plastic bag paradox is not the only one presented in the book, just the most obvious. So, I kept asking myself this question, "What gives?" throughout reading the book, hoping there would be a chapter at the end clarifying it all. But there wasn't. And I put down the book at the end feeling wanting.
This book has a lot of great research condensed into a format that is accessible to non-researchers. If you're a student or casually interested in incentive research, it's great. But if you're looking for answers, real answers to the tough question of when mixed signals work and when they don't, you'll have to do your own study. Because I don't think that we, humanity, know the answer to that right now.
June 11, 2024
This is an excellent starter on incentives and behavioural economics.
An incentive "is a tool used to motivate people to do something they would not do otherwise." This definition deserves an update in light of the spread of dark patterns and deceptive design strategies across digital media the world over, but it'll do as a valence-free operationalization. On that note, a new term I found compelling was "information asymmetry," where consumers "have limited knowledge and often rely on experts' advice and recommendations to make decision. These recommendations, however, aren't always the best for us. (...) trust is an important component of such relationships. [between consumer and provider]."
I was also drawn to the ideas around making use of cognitive biases like loss aversion to motivate in a positive direction. Loss aversion is the phenomenon where people don't like to lose things, even if they don't mind not getting equal things. Yup, we do that. This is a kind of framing effect: how we present the information determines how we react to it. Glass half full, half empty, perhaps.
I'm looking forward to the results on the female genital mutilation project, which aims to change the value system in certain African cultures. Families who allow their daughters to finish their education and not subject her to FGM receive a high dowry plus the high status of an educated daughter who will likely get a good job. This is a long game, a child's lifetime. I hope incentives are the answer to this hellish problem.
Thank you to NetGalley and Yale University Press for the advance copy.
An incentive "is a tool used to motivate people to do something they would not do otherwise." This definition deserves an update in light of the spread of dark patterns and deceptive design strategies across digital media the world over, but it'll do as a valence-free operationalization. On that note, a new term I found compelling was "information asymmetry," where consumers "have limited knowledge and often rely on experts' advice and recommendations to make decision. These recommendations, however, aren't always the best for us. (...) trust is an important component of such relationships. [between consumer and provider]."
I was also drawn to the ideas around making use of cognitive biases like loss aversion to motivate in a positive direction. Loss aversion is the phenomenon where people don't like to lose things, even if they don't mind not getting equal things. Yup, we do that. This is a kind of framing effect: how we present the information determines how we react to it. Glass half full, half empty, perhaps.
I'm looking forward to the results on the female genital mutilation project, which aims to change the value system in certain African cultures. Families who allow their daughters to finish their education and not subject her to FGM receive a high dowry plus the high status of an educated daughter who will likely get a good job. This is a long game, a child's lifetime. I hope incentives are the answer to this hellish problem.
Thank you to NetGalley and Yale University Press for the advance copy.
December 26, 2024
Uri Gneezy has written a very understandable and readable guide to incentives. While his training is in behavioral economics, this isn't a behavioral economics textbook. It's more a grounded exploration of why people make decisions, and how incentives influence those decisions.
The most interesting thing, as usual for me, are all the counterintuitive ways incentives can backfire if established incorrectly. I am particularly interested in this because of several criticisms of the field of behavioral economics that suggest it is going through its own replication crisis as well as the fact that it could be utilized as a tool for toxic manipulation. Overall though, incentive/psychology based economics makes more sense as a paradigm for the field than historic assumptions that humans are perfectly rational and perfectly greedy and perfectly operational.
A high recommend for me as an introduction to incentives, psychology, and behavioral economics!
The most interesting thing, as usual for me, are all the counterintuitive ways incentives can backfire if established incorrectly. I am particularly interested in this because of several criticisms of the field of behavioral economics that suggest it is going through its own replication crisis as well as the fact that it could be utilized as a tool for toxic manipulation. Overall though, incentive/psychology based economics makes more sense as a paradigm for the field than historic assumptions that humans are perfectly rational and perfectly greedy and perfectly operational.
A high recommend for me as an introduction to incentives, psychology, and behavioral economics!
April 25, 2023
What a brilliant book!
I've seen Uri Gneezy's research referenced in several books I've read and it's great that he has put those and more in this very informative work.
Incentives play a central role in influencing behavior. Hence, the need to understand how they work so that we can shape them to best send the right signals.
This book comprises of short easy-to-read chapters citing research/studies that highlight an important takeaway that is summarized in a single sentence at the end.
In this book, you will learn how:
- Signaling Wins Markets
- To Avoid Mixed Signals
- Incentives Shape The Story
- To Use Incentives To Identify The Problem
- Incentives Lead To Behavior Change
- To Help Communities Change Harmful Cultural Practices
- To Put Incentives To Work At The Negotiation Table
I've seen Uri Gneezy's research referenced in several books I've read and it's great that he has put those and more in this very informative work.
Incentives play a central role in influencing behavior. Hence, the need to understand how they work so that we can shape them to best send the right signals.
This book comprises of short easy-to-read chapters citing research/studies that highlight an important takeaway that is summarized in a single sentence at the end.
In this book, you will learn how:
- Signaling Wins Markets
- To Avoid Mixed Signals
- Incentives Shape The Story
- To Use Incentives To Identify The Problem
- Incentives Lead To Behavior Change
- To Help Communities Change Harmful Cultural Practices
- To Put Incentives To Work At The Negotiation Table
June 6, 2023
It’s obvious to anyone who picks up this book that Gneezy knows his stuff. Examples on examples backed by one scientific study after another are the building blocks of this great introduction to incentives. I say introduction even though this book presents varied and complex situations in which incentives are implemented because Gneezy’s clear comfort with the material suggests that he is just presenting the tip of the iceberg for the general reader. Even considering all the nuances Gneezy may have left out makes me look forward to whatever he writes next! While I would have preferred more contextual narrative to support some of the longer stage setting, this is a fascinating book for anyone who is impacted by incentives (psst, that’s you).
Thank you to NetGalley, Uri Gneezy, and Yale University Press for providing me with an ARC in exchange for an honest review!
Thank you to NetGalley, Uri Gneezy, and Yale University Press for providing me with an ARC in exchange for an honest review!
June 29, 2023
Incentives can be incredibly powerful in motivating people and understanding them will help you make better decisions for yourself and others. Accounting for complex reactions and behaviors will help you avoid undesired consequences and achieve desired outcomes. Remember, money isn’t always the solution, often falling far behind other motivators, such as how we feel about ourselves and what others think of us.
You can avoid unwanted friction by making sure your stated values actually match what you’re asking of people. And finally, you must always customize your incentives to your audience and situation. People will find workarounds when incentives are too simple, and overly complex incentives may bring conflicting results.
You can avoid unwanted friction by making sure your stated values actually match what you’re asking of people. And finally, you must always customize your incentives to your audience and situation. People will find workarounds when incentives are too simple, and overly complex incentives may bring conflicting results.
This entire review has been hidden because of spoilers.
November 2, 2023
Uri's 'Mixed Signals' offers a profound and illuminating exploration of the captivating realm of incentives. With meticulous research, Uri dismantles the pervasive myth surrounding their efficacy for sustained benefits, shedding light on why they yield success in some scenarios while faltering in others. The captivating case studies, notably those concerning the aborigines, leave me yearning for more insight in his upcoming work. The book's concluding chapter strikes a resonant chord within, equipping me with invaluable negotiation skills. Uri's authorial finesse is a delightful blend of brevity and clarity, making the message profoundly impactful. Dive into the pages of this book and uncover the enchanting world of incentives!
July 21, 2024
This was a good summary of the power of incentives--both when they work and when they don't.
The author is a professor of behavioral economics, running studies to see what incentives actually change behavior as intended.
It didn't offer many new things for me, but that's not because the stories and studies weren't good or interesting. It's just that I've been reading books on this topic for years.
But the stories were well told, the principles clearly explained, and if you're starting this topic, you will get a lot out of this book.
The author is a professor of behavioral economics, running studies to see what incentives actually change behavior as intended.
It didn't offer many new things for me, but that's not because the stories and studies weren't good or interesting. It's just that I've been reading books on this topic for years.
But the stories were well told, the principles clearly explained, and if you're starting this topic, you will get a lot out of this book.
February 16, 2024
It's well written and has good stories. But it's missing structure and any real advice for how to design incentives. You need to read the examples and hope one is close to your particular problem and can be modified to your needs. There's no model or template that the authors have developed that they walk you through to cover most situations. So while the book was fine from a storytelling standpoint it falls short of its own stated goal of helping us put incentives to work in our own lives.
January 19, 2025
Having read some books on behavioral economics previously the nature of the content was not completely new (unlike my experience when I first read 'thinking fast and slow'). I was hooked reading the chapter on Toyota Prius winning the hybrid market. While the other chapters were decently good, they didn't come close to the expectations (I guess the contrast effect is kicking in :P) set early on.
I can't put a finger on what went amiss in the book. At some level, the narrative seemed academic despite Prof. Gneezy insisting their efforts are more towards practical applicability. This is probably because experiments (that involve a control group) can confirm how people tend to behave in the presence of incentives and signals; However, these experimental conditions are far from the messy reality.
I can't put a finger on what went amiss in the book. At some level, the narrative seemed academic despite Prof. Gneezy insisting their efforts are more towards practical applicability. This is probably because experiments (that involve a control group) can confirm how people tend to behave in the presence of incentives and signals; However, these experimental conditions are far from the messy reality.
April 22, 2023
Please don’t waste your time on this one. There is not a single new thought in this entire thing. Oh, and the author still thinks it’s ok in the 2020’s to call a person without a degree a “bad candidate” for hiring.
In the end it just reads as a commercial for his services. Good way to spend his time sitting at home during Covid.
In the end it just reads as a commercial for his services. Good way to spend his time sitting at home during Covid.
October 2, 2023
Really surprised at the praise for this. I didn’t find any of the findings particularly surprising. Everything seemed incredibly superficial and obvious.
Maybe I’ve read too many books in this space. If you’re new to the world of psychology and cognitive biases you might get something out of this as an intro, but otherwise I’d avoid.
Maybe I’ve read too many books in this space. If you’re new to the world of psychology and cognitive biases you might get something out of this as an intro, but otherwise I’d avoid.
June 18, 2023
Incentive play an active role in lot of things around us. This book explain in great details how in different life situation incentives changes the way we think and do things. Lot of examples to understand the power of incentives. Loved reading the book!
August 20, 2023
It'll be an interesting read for somebody who is not very familiar with literature in behavioral economics and wants to understand how incentives can play out in disagreement to their intended purpose. For me, the book was full of the same old stuff, but I still enjoyed reading it as a refresher.
September 30, 2023
I've read a lot about behavioural science and economics so I wasn't expecting a lot of new information. I really appreciated the perspective of 'mixed signals' and sadly, how often I see them. I particularly enjoyed the work on incentives for culture change (and the importance of testing things)
January 15, 2024
Pretty interesting overall. Only one section of the book was a bit hard to get through from an attention standpoint but overall was pretty engaged. Would like to take my learnings into the business world and see how those can effect organizations, whether it’s mine or others
May 16, 2024
Easy breezy beautiful pop economics. Better consumed as an engaging 15 minute TED talk at 1.2x speed. Some good but common Econ case studies about incentives design, good stories for your back pocket.
June 7, 2024
It was amazing to take a look at the results of so many studies in the domain of the social psychology. Presented in quite an entertaining and easy-to-follow manner, the contents can be readily applied in your business or private life.
June 30, 2024
Super cool but there are so many ways to incentivize that i started to forget methods. Loved all the experiment descriptions. Fun and written in a Freakonomics way. Would consider buying the hard copy (read on Kindle) to refer to it in the future.
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