You're Not Lazy - You're Just Rewarded Wrong - Future IQ

8,788 views Wait, is this logic right? • Aug 01, 2025

Slog Reference: Understanding Incentives

Description

Why is dog poop still all over our streets? Why can’t we clean the Ganga despite all the awareness campaigns? Why do smart people often do dumb things, and why do government offices stay inefficient no matter how many rules we pass? The answer lies in one word: incentives.
In this episode of Future IQ, we dive deep into the unseen force that shapes almost every human action, from corporate boardrooms to dirty streets, from classrooms to government offices. You'll learn why good behavior doesn't always come naturally and why people often act against logic, reason, or even their own values. But more importantly, you’ll discover how smartly designed incentives can fix broken systems, improve lives, and even trick you into doing things you never thought you could stick to.
Yes, incentives aren’t just for governments and corporations. You can actually use the same principles to hack your own behavior. Whether it’s building a gym habit, eating better, staying productive, or managing your money, your brain responds to incentives in predictable ways. And once you learn how to design them, you can steer yourself toward long-term success without relying on motivation or willpower.
We’ll also explore how incentives can backfire, create corruption, and ruin good intentions if they’re misused or misaligned (hello, Goodhart’s Law!). From convict ships in the 1800s to behavioral nudges in public health, this episode is packed with surprising, real-world stories that’ll change the way you look at human behavior.

More videos:
Goodheart's Law: https://youtu.be/OU5W-b_e8a4
Why Ganga is Always Clean, Even With Poop: https://youtu.be/eEfmHpstjSg
Showing Off Is Important: More videos: https://youtu.be/0YEBK7eR3Ek

Hope you enjoyed FutureIQ by Navin Kabra and Shrikant Joshi. Do hit us up on Twitter:
@ngkabra http://twitter.com/ngkabra
@shrikant https://twitter.com/shrikant

Listen it on the podcast provider of your choice: https://tapthe.link/FutureIQRSS

Links& Sources:

Incentives Matter: https://www.econlib.org/library/Columns/y2006/Robertsincentives.html
Taiwan’s Dog Poop Lottery: https://www.bbc.com/news/world-asia-16085792
China’s Lottery Receipt Experiment https://link.springer.com/chapter/10.1057/9781137384843_7
Sweden’s Piano Stairs: https://www.classicfm.com/discover-music/instruments/piano/musical-staircase-experiment/
Navin’s Fake paper: https://smritiweb.com/navin/education-2/how-i-published-a-fake-paper-and-why-it-is-the-fault-of-our-education-system
https://thehealthcareblog.com/blog/2013/10/10/australias-prisoners-dilemma-incentives-matter-in-health-care/ Convicts being shipped to Australia
- https://econforeverybody.com/2023/01/04/incentives-matter/
- https://www.amazon.in/Mixed-Signals-Incentives-Really-Work/dp/B0BT5SK9NV
- https://www.nytimes.com/2012/02/14/opinion/making-good-citizenship-fun.html Making Good Citizenship Fun

#futureiq #incentives #psychologyfacts #lazy

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Understanding Incentives

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Transcript

- Dog poop litters our sidewalks these days and we are not able to fix this problem. Yeah, it's a difficult problem. But Taiwan City was able to fix it. You know how how it has to do with incentive design. Oh, what they did was anyone who turned in dog poop to the government office got a lottery ticket. Okay. And then every once in a while somebody would win that lottery. Okay. Interesting. So for a fairly low price they had people all over the city collecting dog poop. Some of them were owners, some of them were just random people. The amount of dog poop went down by half.

0m 37s Wow. Just give the right incentive. Right. Okay. This is a very powerful technique useful in many other cases. So, China for example, there is one province which significantly increased tax collections by saying that every receipt has a scratch of lottery card on the back. Now, every customer insists on a receipt, tax collection goes up, right? Ho ho ho ho. People of the government and internal revenue systems, income tax department, if you're listening, think about it. It doesn't have to be money either. In Sweden, they wanted people to be healthy. They wanted people to take the stairs. So they installed a piano on the stairs so that when you walk up the stairs, it plays lovely music and the

1m 22s number of people taking the stairs goes up. Yeah. I've seen reals about people going up those piano stairs and having a great time. But I didn't realize it could be that effective. Yeah. Also, it is not just about giving people incentives, right? Missing incentives cause a lot of problems in the world. For example, have you considered why any government office BSNL, LIC, IRCTC is so badly managed compared to very similar organizations in the private sector. Have I considered? Of course, I have considered and that consideration leads to considerable amount of frustration.

1m 57s Yes. The simple reason is that the people in that office cannot be fired, right? So, they have no incentive to improve the service provided. That's a valid point. There is an absolutely valid point there. But all of these seem like obvious examples, right? Let me give something much more substantial, please. In the 1800s, you know, that convicts were being shipped from UK to Australia. Yeah. It was called transportation like transportation. Yeah. So during those voyages, half the convicts used to die. Half of them. I've heard that. Yes.

2m 34s Even for Britain, this was considered inhuman. Yeah. There was public outcry. Laws were passed. For example, requiring there to be doctors on board or that there should be enough lemon lime so that people don't die of scurvy. H made no difference. Really? You know what made a difference? What? Pay per live prisoner. Okay. The ship captains were earlier being paid for the voyage. They had no incentive to keep the prisoners alive. But now when the payment was changed to number of live prisoners who showed up in Australia, it went from 50% to 98%.

3m 14s Wow, that's a huge jump. That's a huge improvement and the amount of payment didn't change. Yeah, right. Because now you're not paying for the voyage, you're paying for the prisoner, the amount still remains the same. But here's the thing. All of these examples that you've given, when I look back at them, they all seem like common sense. Like obviously the ship captains are going to try and keep prisoners alive. They are being paid per life prisoners. Obviously people are going to collect dog poop if there there is a lottery associated with those efforts. And yet after the fact it seems obvious but before the fact it didn't. In fact it took so many years to

3m 50s people to hit upon that incentive right and that's the reason for this episode. Incentives are difficult to understand surprisingly, right? And we will give a lot of examples in this episode. Okay? For example, smart people do dumb things because of hidden incentives. Reasonable initiatives don't work because of misaligned incentives. People do horrible things because of perverse incentives and so on. Right? I am still stuck on the first one. Smart people do dumb things because of incentives. You must have seen a lot of politicians say a lot of dumb things on media, right?

4m 27s Yeah. I can guarantee you that our politicians have some of the highest IQs in the land. Okay. Okay. So then what explains the fact that they're saying dumb things? It is usually because of a hidden incentive that is not visible to you and me, right? Maybe party high command issued a directive for them to say the dumb thing because it energizes the dumb section of their voting block. Or maybe it was intended to bait the opposition into saying an unpopular thing and lose votes. Or maybe it has something to do with the price of membership and group beliefs which we have covered in an earlier episode.

5m 07s Yeah, we'll put a link in the description. Check it out after this. In general, if you see smart people doing things that you don't understand, there is a good chance that there are incentives at play that you are not aware of. Okay, let me take some more examples please. For example, our educational institutions, they are run by really smart people who are making a lot of money and yet they run so badly. Yeah. What's the deal with that? So, let me take an example. Imagine that a software company comes up with some software which really helps the students in learning and understanding things and doing better at exams, learning more, right?

5m 47s That company will never be able to make a sale in the educational institution because the sale needs to happen to the management. Yeah. Okay. Management is not teaching the students. Management doesn't really care about teaching the students. Management only cares about increasing admissions. Yeah. Right. And it is very difficult to increase admissions by saying, "Oh, we have this software which is better." Right? So, management only does things which go towards increasing admissions. Makes sense. Makes sense. By the way, if you are such a software company looking to, you know, sort of reach colleges and audiences, contact us. We're willing to take sponsorships.

6m 27s Yeah. Why are the teachers in our colleges so bad? Right. Um because they are not being paid. Yes, they are not. Which means that people who are really good go and get other jobs elsewhere. Why are the educational institutes not paying the teachers? Because they have no incentive to do that. Paying the teachers more does not increase the number of admissions. True, true, true. So that was misaligned incentives. Another example of misaligned incentives comes from again the educational sector. Okay. You must be aware that there are a whole bunch of fake conferences where completely random papers get published. Okay.

7m 07s I've heard of them. Yes. Thanks to you. Yes. So there was one such fake conference. I knew it's a fake conference and to show that I wrote a fake paper. Okay. The paper was like totally fake. I had put in show dialogues in there and a whole bunch of other things. Okay. And the paper got accepted. Why did they accept my dumb paper? Because you paid them to because they just wanted me to pay 6,000 rupees. Okay. And this made big news. It was all over the newspapers.

7m 37s Yeah. 15 years later, nothing has changed. Why? Because there is no incentive to change it. No, no, it is stronger than that. There is a very strong incentive for multiple parties for such conferences to run. Okay. Ah, the people who organize such conferences, they are making money from the conference. So they want to fist all kinds of incentive to do this. Okay. The students want these conferences to exist because they get dumb papers published. They go on their resume and people in the US don't realize that papers on an Indian students resume mean nothing. Right? The colleges where these conferences are held love these conferences because in their yearly report they can say we had

8m 23s four international conferences this year. Right? I mean who is going to complain? Nobody has an incentive to fix this right. The only thing bad thing that is happening is that India's reputation goes down. But that is such a very fuzzy thing. Nobody has an incentive to work on that specifically and that specifically cannot be claimed to cause India's reputation to go down. So yeah, I completely understand the misalignment of incentives here. Massive misalignment. But enough about our educational institutions which we know is screwed up. Right. Let's go to something that is supposed to work very well like companies. Okay. Here there are clashing incentives. Okay.

9m 02s Okay. For example, a CEO who really wants to incentivize good behavior like teamwork and innovation and quality but is not seeing any of that happen. The reason is clashing incentives because the CEO praises teamwork but promotions are based on individual success. Oh, the CEO praises innovation but any failures are penalized as a result of which nobody wants to take risks with innovation. Correct? CEO praises quality but all the incentives are based on quantity. I am sure there are people out there who are nodding their head vigorously. If you are nodding your head vigorously, comment and let us know. Don't tell us your company name but comment and let us know. Yeah, clashing incentives.

9m 50s absolutely makes sense and I have lived through some of those examples myself so I completely agree with you there but all of these examples that you've given me so far are incentives that don't work please tell me that there can be incentives that do work many for example in Rajasthan to increase vaccination rates they gave free dal and a plate set and that resulted in doubling of full immunization wow schools in our country and many other countries of the world give free lunches resulting in increased attendance, increased education levels and increased many many good things as a result. Right?

10m 29s In fact, I know of stories where parents have sent their kids to school just so that they could have at least one meal a day. It is very painful but it does work. and uh my insurance provider, my health insurance provider gives me a rebate on my insurance premiums, annual insurance premiums based on what my Google fitness app shows. Like if I reach certain levels on my Google fitness app on a daily, weekly basis, I get discounts on my premium. So yeah, that's a good incentive.

10m 57s Yeah, in workplace there are some good examples. Okay, FedEx where every package has to go on time which means that they have to get loaded in the plane on time cannot afford delays and things were getting delayed. Yeah. So what they did was they changed the worker compensation from per shift payment to a payment for certain number of packages loaded along with the incentive that if you finish before time you can go home early. Okay. the speed of loading increased because people did want to go home early, right? A different example is Zapos which after they have hired someone new hire they would offer them $1,000 incentive to leave right away.

11m 41s New hire. Yes. Okay. As a result, only people who really really want to work for Zapos stay and people who are going to get incentivized by a thousand dollars are anyway not good employees. So best way is to get rid of them early for just $1,000 and not cause much more serious problems later on. Right. I mean I can see this thing being game but I understand the intent behind the incentive and the intent is definitely a positive one. Yeah. Another example is speeding on the highway, right? Whatever you do, it was not reducing until the government installed speed cameras with automatic fines.

12m 21s Then it got fixed. Okay. Notice the incentives there. The fines were substantial, so people didn't want to pay that fine. And it was automatic, so there wasn't a cop you could bribe and get away. Both are necessary for this to happen. Yeah, that's a very clean incentive and a very well-designed incentive if I might add. So see, you can notice that some of these incentives are positive and some are negative and you can combine them in interesting ways, right? So there was was a company which instituted a late for work cake.

12m 54s Late for work cake as in how? Anybody who comes late for work has to buy cake for everyone. So every day that they come late. Yes. Wow. What happens is that that person has a negative incentive. Everyone else has a positive incentive to point out you came late, you came late. Right. So combined. Yeah. That's a very interesting I'm actually trying to think of ways in which I can combine these incentives or design these incentives to make my life better. Like my health insurance premium already gave me a reason to do more exercise and more walking and whatnot.

13m 29s But yeah, and one very interesting thing is that many times these incentives don't really have to do with anything you gain in terms of money or cake, right? Sometimes it's just simple status. For example, when hybrid cars first came out, right, the idea was that they use less fuel so that they're good for the environment. And the Honda Civic hybrid, very few people bought it, right? Because saving the environment is kind of a weak. Yeah. At the end of the day, my wallet is more important, the environment sometimes.

14m 03s Correct. But Toyota Prius did the same thing except that they made the car look so different that on the road everyone knows this is a Toyota Prius and this guy is saving the environment. It did extremely well because everyone wanted to show that they care about the environment. Yeah, they didn't want to actually care about the environment by buying a Honda Civic hybrid, but they wanted to show signaling. We've done an episode on that. We'll put links in the description. But here's what I'm getting from all of these examples that these incentives are all about getting something for myself.

14m 35s Not necessarily. Okay. Okay. Intrinsic motivation can also be an incentive. Okay. So blood donation. Okay. It is necessary but it is unpleasant and risky activity right so people don't want to do it. If you pay for blood donation that's not going to work very well either. I mean we do pay for blood donations but that attracts only a certain kind of person and you don't really want that a whole lot either right. Yeah. Yeah. So you know what works very well. You say that we will not pay you for the blood donation. We will donate to a charity for blood donation and suddenly people feel good about that. Even if that is not advertised anywhere that Shriant donated

15m 20s to this charity, right? Still Shri Khant feels good about it. Both donating the blood and money getting donated to a charity that increases the chances of blood donation. Right. Yeah. In fact, uh for a while I used to go out and regularly donate blood on my birthday. I don't know why I stopped it. Maybe it's time to begin that again. But yes, incentives do work except for the time when they get gamed. When he was talking about the FedEx example, the only thing running in my mind is what if FedEx makes the targets unreachable, then nobody can go home on time. You know, it is basically FedEx gaming that system. or in the case of uh

15m 56s Zappos, if people just uh get into Zapos for that $1,000 new higher exit fee or exit package, then that's also gaming the system, right? Yeah. The second one is an excellent example of Goodart's law and we have an entire episode on that which you should check out, right? Yes. But coming back to incentives because it's a complicated thing, I want to summarize the important parts. Okay, please. Incentives are important enough that they drive all human behavior. Okay? But keep in mind that the visible incentive might not always be the same as the real incentive. Right? So you should always analyze the incentives and see what is the real incentive.

16m 41s If you get into the habit of doing this then you will make better decisions. Okay? You can trick yourself with the right incentives, right? That you can say that if I go to the gym, only then am I allowed to see one episode of that trashy cereal, right? And gym going will increase, right? Atomic habits. Yes. And importantly, beware of misused incentives. Yes. Because they will get misused. As Goodart's law has proven time and again. In fact, I heard this somewhere. When you're designing incentives, design them keeping in mind that some sociopaths somewhere will misuse them and that sociopaths may be you yourself when you're designing incentives for yourself. And if you want to know how

17m 25s sociopathically incentives can get misused, we are lining up the next episode about goods law for you. Go check it out. Shriant Naven, Future IQ.