On Incentives
If I were to be teleported in a time machine, ten years back or forward, the only lesson I will take with me is the Power of Incentives.
Charlie Munger has a powerful quote about it:
“Show me the incentive and I will show you the outcome.”
Understanding the power of incentives has unlocked many avenues for me. As a parent or as a manager or as an individual contributor, knowing about the incentives help a lot.
(Note that I am talking about incentive as a concept. Not the monetary one when you exceed your quota, as a salesperson.)
As a manager, it is essential to know what are the intrinsic motivations of an individual. Also, as a manager, one has to know what are the immediate goals or milestones to be achieved in a company. Successful management is about aligning organisation’s goals with the aspirations of an individual. Many times in my career I have seen where managers get this wrong. Because of this, people can lose their mojo for work and quit. It is also possible that people are over enthusiastic and work their asses off, but don’t grow or recognised, because of the misalignment with the organisation.
As a parent, I want my kid to eat healthy food and avoid junk. But as an individual, I know the high you get by eating sugar and chocolates. The tricky part is to understand my son’s motivations and align the incentives.
My six-year-old loves running and winning. Every day when I come from my office, he asks me to race for fifty meters with him. Somedays, he wins, and some days I win. One of the things I do with my son is: Tease him that, if he eats more junk food, he will slow down in the race and I will win — it kind of works for now. As a father, I need to imbibe him the benefits eating healthy, but for now, tweaking around this incentives work for me.