On the Folly of Rewarding "A" While Hoping for "B"

 

Leaving the comforts of suburban San Jose on the West Coast to attend college at the University of Pennsylvania in Philadelphia on the East Coast commenced a phase of life in which the life lessons came fast and furious. I was forced to manage my money and do my own laundry and figure out my weekly schedule. I constantly took in new observations and new lessons about how things work on the streets of West Philadelphia. And I discovered that much of what I learned in high school history class was a sanitized account of a far more earthy and nuanced historical record. When I graduated four years later I was still pretty naive, but I grew so much during that time period because of all the ways I was stretched and challenged during that time.

One of those in-classroom thunderbolts from the sky was the seminal management paper, "On the Folly of Rewarding 'A' While Hoping for 'B.'" Its author, Steven Kerr, cited example after example of claiming to want one thing while actually rewarding a completely different thing. What really blew my mind was that this principle could be found in so many places and was so prevalent. In sports, we all say teamwork and unselfishness is paramount, and yet at the professional level chasing individual accomplishment is what nets the most compensation and attention. In business, we want leaders who think about the long term and about society writ large, but stock prices and executive compensation are based on quarterly performance.

Politics is where this dissonance is most pronounced and problematic. For example, at a federal level, politicians are compelled to invest in fundraising and base-building in order to stay in office, rather than using their office to achieve the greatest public good. 

At a local level, the incentive misalignments are even more pernicious. We wish for our electeds to be public servants, stewarding public resources for the enrichment of a location and its constituents. Almost all who seek office have this positive impulse in them at some level. But staying in office involves securing a sufficient proportion of votes within your jurisdiction. If given a choice of holding your office in a way that allows your constituents to flourish and therefore increase the amount of social mobility they have, including a higher likelihood that they will move to a better neighborhood, and performing in such a way that your constituents stay immobile and loyal, most people would consider the former to be more noble but the system rewards the latter. 

I will leave to you to think about whether and where the folly of rewarding "A" while hoping for "B" occurs in your life. For me, it was a wake-up call that, in just about every facet of life, people respond to incentives, and all too often those incentives are misaligned with how we would actually want people to behave. So what are we to do about this?