Incentives are overrated

Contrary to common belief, behavior has little to do with incentives. Sure, we often do what incentives dictate. However, just as frequently, we fail to do what incentives would warrant, and sometimes, people even act against their own interests, such as sacrificing their lives for a cause they believe in.

Incentives are not nearly as powerful an explanation as we commonly believe them to be.

A more powerful explanation for our behavior is habits: not just habits of action, but also habits of thinking.

Incentives or habits?

I am not saying incentives are useless or should be ignored; what I'm saying is that incentives are only part of what influences behavior, and by themselves, rarely work unless applied to people who already have the habit you want to encourage.

This is why incentives often motivate senior executives (who already display the desired habit) but much less so junior employees (who first need to develop it).

Hence, when you want someone to do something, you should first ask yourself if they have already demonstrated having had that habit in the past; if so, motivate them with incentives; if not, forget about incentives and work on habit-building first.

(Of course, this is just a heuristic; there will be exceptions, but in general, you will fare better assuming it's always correct and following it directly rather than adopting more complex or tailored evaluations with a higher chance of leading to wasted effort.)

Developing habits

I have already written about developing habits in my 2020 book, "The Control Heuristic," so I won't repeat myself here. However, I want to highlight that there are two types of habits, of action and of thought, and you should consider both.

Habits of action are the ones we all know: brushing teeth after dinner, etc. Habits of thought are just like other habits; they are also routines or reactions to cues, except that they are mental actions instead of physical ones: for example, the mental habit of always asking yourself what's the most efficient and effective way of completing a task before you start working on it. I mention this because, especially in business, too little time and effort is devoted to developing mental habits, despite them having a disproportionate effect on effectiveness for certain roles and tasks.

Thinking about problems of the type "people are doing X too much" or "people are not doing Y enough" as an incentive problem but as a habit problem will bring you several steps closer to the solution.