Incentives are for losers

I suspect that the author and many of the commenters have experienced the "bad project manager" effect.

MANY people have dealt with terrible project managers and therefore assume all project managers are bad. This is because great project managers are very rare.

The same is true about incentive schemes. Most of them are improperly designed and/or get hit by Goodheart's law. [0]

As a counter point, this article [1] about designing incentives for farm labor is excellent and shows that with careful thought, incentives can dramatically increase output.

I've also been reading Deming's last book [2] and he is VERY against sales commissions. Some of this is probably bad design (e.g. 100% of the commissions for a sale go to one person) but I do feel he makes a valid point that everyone at a firm should benefit from helping the customer. Highly recommend it as an alternative to the more mainstream business books.

0 - https://en.wikipedia.org/wiki/Goodhart%27s_law

1 - https://archive.is/https://slate.com/culture/2008/08/an-amaz...

2 - https://amzn.to/4wfAAjU

What does this mean

> This is a useful metaphor, because I think at the center of everyone’s psyche is some version of the Big Horrible Fish: some unexamined assumption that, if you fully considered it, would require you to upend a significant portion of your life.

This ties in with the Mental Immune System, and the Emotional Cost theory of perception.

Kudos for the fish analogy though, that's much better.

It's worth thinking about incentives from the standpoint of feedback control theory. Typically, you have an input, an output, a measurement of the output, and an output goal. There is some lag between the input and the output, and there may be lag between the output and the measurement of the output used to drive the controller. The output will oscillate somewhat, more if there is more lag. Too much lag will result in oscillation so bad that convergence never happens. Much of classic control theory is devoted to understanding when that will happen and what to do about it.

Incentive systems often suffer from error and excessive lag between the output and the measurement of the output. This is a known problem in quality control. See Deming, the Toyota Production System, and continuous improvement. Even if you're measuring the desired output in a reasonable way, lag in that measurement will cause oscillation, and may prevent convergence. School grades and work performance reviews are examples of systems with high lag between output and the measurement of output. That happens even if the metrics are good, but not immediate.

If the measurement method is noisy, it may have to be filtered before use. This adds to lag. (Think about how a trailing moving average works.) Many incentive systems also have that property. School tests are intermittent noisy measurements filtered out by averaging.

These are known problems with incentive systems, but not well-known problems. Even if you're measuring the right thing, you can hit these problems.

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