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?
Wells Fargo told its employees what the goal was. It told them, separately, how success would be measured and rewarded. The two were not the same.
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.
On a July night in London, spectators watched Olympic athletes serve into the net on purpose. Eight players were disqualified for it. The tournament format had made losing the rational thing to do.
Connecticut doubled its bottle deposit to lift a falling redemption rate. The rate rose. So did the number of containers arriving from states that had never paid the deposit.
The Attorneys General won the fight for transfer freedom. NIL rights had already opened the door. Nobody anticipated what the reward structure would do next.
For the second year running, every finalist in both draws of the world squash championship came from one country. Egypt does not import talent or outspend its rivals. It built a structure that answers one question.
A reader sent me a case. James McDonough lives in Connecticut. He recognized the pattern unfolding in his own backyard and took the time to bring it here. That is precisely the kind of observation this newsletter exists to surface. Thank you, James. In 2024, Connecticut doubled its bottle deposit
Every reward system faces the same risk: the metric can be satisfied without producing what the metric is supposed to measure.