Carrots and Sticks

The premise of Yale Law Prof. Ian Ayres' book, Carrots and Sticks* is quite simple, and well articulated by the subtitle: Unlock the Power of Incentives to Get Things Done. 

To expand: Human beings know what is good for them in the long run, but often fall short of achieving such goals because short term, often contradictory rewards loom large in the human psyche.   Weight loss and investing in one's financial future are both great goals, but since their accompanying rewards will only be actualized in the distant future (if at all), the reward of eating a bag of chips now feels more compelling.  Humans love NOW.

To solve this problem -- and counterbalance our predilection for instant gratification -- Ayres suggests we enrol in commitment contracts, solid (and solemn) obligations to ensure we act consistent with our long-term objectives.  On one hand, limiting our ability to act certain ways and thereby take derailing options off the table is nothing new.  Odysseus famously commanded his crew to "bind me hard and fast so I cannot stir from this spot" to ensure he resisted the temptation of the deadly Sirens, and Cortes scuttling his ships upon arrival in Veracruz, Mexico in 1519 required his vastly outnumbered six hundred soldiers to either defeat the Aztecs or die trying.  What Aryes adds to the conversation is a modern, behavioural economic parallel to properly incentivize us to stick to our goals. 

For example, he demonstrates how losses loom larger than positive rewards (about twice as much), and thus a commitment contract that penalizes a person financially every time he smokes is more likely to succeed than one that rewards him for each day he doesn’t. ** He also notes how incentives might not always help with 21st century problems – such as guaranteeing greater creativity in one’s job – but are excellent in helping us overcome 20th century problems of willpower and ego depletion.

Aside from these insights, and a plethora of wonderful examples***, Ayres also introduces us to his website (now app), StickK.  Here, you can create your own commitment contracts.  First, you choose what you want to change in your life.  I committed to walking 10,000 steps everyday.  Next, you pick a referee, someone to whom you report to after fulfilling your commitment (either daily, weekly or project based).  You also have to give your credit card information, which is what elevates one’s good intentions to the weight of a contractual obligation.  If your referee doesn't receive your report, StickK is authorized to take an agreed amount from your credit card; it will either keep the money for itself, donate it to charity of your choosing, or – most effectively – donate it to an anti-charity, an organization that you personally can't stand.  On more than one occassion, I have gotten off the couch to walk around the block to make sure I met my 10,000 steps and avoid subsidizing my anti-charity.

Other options on the app that provide additional motivation include: going public with your commitment, hiring a ‘nagger’ to remind you, enlisting cheerleaders to encourage you.

Are there commitments you've been struggling with? If so, and they can be advanced through specific, quantifiable actions, you migh want to visit StickK as well.

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*Ayres notes the original meaning of “Carrot and Stick” was not reward and punishment.  Yes, the carrot was a positive incentive, in this case to be held in front of a work donkey to get it back in the barn; but the stick was not a punishment but rather the item from which a string was tied to and the carrot dangled from.  The more appropriate metaphor would thus perhaps be the carrot and the whip.

** A number of smoking examples are offered in the book.  In one, a person pledges to pay a friend $5,000 every time he lapses and smokes a cigarette.  In another, a New Zealand executive comes up with an ingenious scheme where he auctions his smoking habit: “I’ve smoked cigarettes for twelve years and I’ve tried all the usual ways to quit smoking. Now that my wife Annabel and I are pregnant with our first child, it’s time to give up once and for all.  I’ve created a listing on the New Zealand online auction site trademe.co.nz, and on Monday 31 March, 2008, the highest bidder will receive a contract written by my lawyer, Chris Hoquard at Dominion Law, in which I hand over my right to smoke to them, and agree to pay them a forfeit of NZ$1000.00 [about $800 USD] per cigarette that I smoke at any time following the auction’s closure.”

*** Other examples include the author himself committing to maintaining a certain weight, promising to pay $500 to another auction winner for each week he goes over that weight.  In other words, he put $26,000 potentially on the line.  In the end, though, he didn’t have to pay a cent, as he never went over.

One of my favorites: A town in Israel gets its residents to voluntarily give their dogs' DNA to an agency that periodically checks dog poop in the local parks.  If the dog’s business was properly deposited in the trash (as confirmed by matching the DNA from the bin with the volunteer collection results), the owner receives praise and rewards.  If poop is found elsewhere, punishments follow.  Results: the town is much cleaner today than previously. 

Zappos offers new employees to quit their jobs for $2000.  Those who took the offer probably were not committed to the company in any event, while those who refused it demonstrated not just to the company but to themselves as well that they really wanted to be there.