This is the final issue of Behavior Follows Rewards. It is about why organizations tend to reward what gets added and rarely reward what gets taken away, with Apple as the example.
Charlie Munger studied incentives all his life and still said he had underestimated them. Sixteen posts in, the same mechanism has run through a bank, a heat subsidy, a welfare transfer and a national health service. Here is what those cases establish — and what is still ahead.
England set a four-hour clock on emergency care and paid hospitals for meeting it. Patients were moved to short-stay units because the transfer stopped the clock, ambulances were held outside, and completed cases spiked in the last twenty minutes. Compliance reached 97.7 percent.
Three years, a reported nine-figure signature, and a golf league most people said could not be built. Everything the 2021 announcement described as the work, Greg Norman delivered. The league still needed something nobody had asked him for in public.
In 1984, NBA Commissioner David Stern announced a fix for tanking. Teams found a way to game it. The NBA has rewritten the rule four times since, and teams gamed every version that has been played. The newest takes effect next season.
In 1988 Vietnam appealed for emergency food aid. In 1989 it exported 1.4 million tonnes of rice and stood third in the world. Resolution 10 had given farm households fifteen-year land contracts and let them keep and sell everything above a threshold.
Britain offered Afghan farmers money to destroy their poppy crops. The reward created a reason to grow more. Everything that followed made it worse.
Brazil wanted children in school. It paid families when they went. The children went. This is what a reward structure looks like when the incentive and the outcome point in the same direction.
What do you call it when the system works exactly as designed?
Eight products per household was the target. Branch staff were measured on accounts opened, tracked daily, with bonuses for hitting the number. Two million accounts were opened that nobody had asked for.
Every year, Amex’s senior executives arrived at bonus season prepared to compete — for capital, recognition, a bigger share. They competed hard. The competition was with each other.
Eddie Lampert believed free markets make companies efficient. So he built one inside Sears — 30 autonomous business units, each competing for the same resources, each with its own P&L. He was right that it would work. He was wrong about what “working” would produce.
