The Myth of Incentivizing

Amy told me about this video a couple of weeks ago and I only watched it last night. Someone ought to make anyone remotely involved with the financial industry look at it. I'm planning on using the ideas here in the classroom, and I hope I'll get better papers because of it.

I think that part of the problem stems from our tendency to extrapolate. Notice Pink says that when it comes to rote, mechanical actions, incentives do work. But just as correlation doesn't mean causation, incentives that work in one case won't necessarily work in another. What this means for the financial services industry is that business has it exactly backwards--if you want actual profits (as opposed to fraud), you don't pay outrageous bonuses. You give the people working for you autonomy and purpose instead.

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