The horizon is not so far as we can see, but as far as we can imagine

Tag: incentives

Lazy V.S. Uninterested & Quiet Quitting

Being lazy and being uninterested are two different things. When I was a kid I was usually reluctant to do most farm work, because it was boring, but would go for 10 miles runs or long runs, or read multiple books in a day (which many people who love farm work would hate doing.)

Most of what passes for lazy is uninterested in drag.

The old maxim: “work is what you wouldn’t do for free” is part of it, but there are four types of activities on this spectrum.

  1. “I enjoy doing it for itself and would do it even if I wasn’t getting anything from doing it.”
  2. “I enjoy it, but wouldn’t do it if I wasn’t getting anything from doing it.”
  3. “I don’t enjoy it or dislike it, but I’m willing to do it because I’m getting something from it.”
  4. “I don’t enjoy it or dislike it, and I won’t do it even if I get something from it absent coercion.”

One is your hobbies, vacations and so on. Two is work you like, which doesn’t also fall into the hobby category. Three is most people’s jobs. Four is things you do because if you don’t do it something bad will happen, usually because someone else will make it happen.

When I was a kid most (not all) farm work fell into category four, and most of the rest fell into category 3. I didn’t ever get paid for any of it, but I used to spend some holidays on an Uncle’s farm, and I liked him, and we’d do the farm work then go do something fun. I was getting something from it.

Most of my jobs have been in category 3: I did them because I needed the money. I’m not working construction or baking or being a bike courier, or painting houses or doing life-insurance back-end administration if someone doesn’t pay me.

Blogging and writing fluctuates between category 2 and 1. Some of it I’d have done (or do) even if I wasn’t getting paid , but some falls into “this pays my bills and I enjoy it, but I wouldn’t write this article if it wasn’t my job.” From about 2004-early 2009 the category 2 blogging also fell into “getting something for it” in the sense that I believed in the Netroots, and that we might get enough political power or influence to make good things happen politically. I would never have worked 70-80 hour weeks at FireDogLake just for the money (which was liveable, but only just), I did it because I believed in the mission and when it became clear just how awful Obama was and that the Netroots was falling apart, I quit, because I hadn’t been doing it mostly for the money.

I’m not entirely sure that laziness exists much. So-called “Quiet Quitting”, where workers refuse to stay late or do extra work is just enforcement of what moderns call “boundaries”, and classifying work as category 3. “I’m not doing more work than you pay me for, because I don’t enjoy it.” High wage workers understand that implicit to their high pay is doing more than is “on spec”, but doing more as a low paid worker, unless you think there’s a chance of meaningful promotions and wages is stupid.

When the people at or near the top get a 100x what the people in the middle get, and 200x what the people at the bottom get, and when most people know they’re never getting to the top and most won’t even get to the middle, and when they don’t share in profits, why should they work hard at jobs they don’t enjoy, or wouldn’t do for free?

I had a friend who, for years, had a rule that he wouldn’t do anything for money he wouldn’t do for free. It eventually broke down because if he’d kept the rule he’d have wound up homeless and then dead. His problem wasn’t super-fussiness, he wanted to do jobs that helped people and used his skills, but our society pays best for doing things that don’t help people. Since helping people is sort of an intrinsic reward (you get to feel good about yourself), we think people should do that form almost nothing, or nothing.

The weird thing is that getting people to do what they enjoy means they do more and better work, and that helping people has strong (econo speak) positive externalities. The more your society is focused on doing things that actually help others in some way, the better it is.

But our society concentrates on negative sum games (we are doing more harm than good, overall) and uses money primarily as coercion, rather than using it to allow people to do good things that they want to do, or are at least willing to do.

I don’t like farm work, but I have known many people who love it and do it for almost no money because they want to be farmers. We take advantage of that sort of impulse, in nurses and care workers and increasingly in teachers. Things that are good are done for cheap, and by less people than want to or than we need doing them, so that we can pay other people well to do things that are bad.

What you want to do absent excessive compensation or e is often a good guide for what you should be doing (not always) is often a good guide not only to what is good for you, but what is good for society and we need more of it, not less.

Many people think this means that important things that need to be done like garbage collection, janitorial labor and sewage work wouldn’t get done, but when Graeber did his research for “Bullshit Jobs” he found many people actually preferred that work because it felt useful, even when it paid less. I recently talked to a woman who works for a real-estate company which runs low-end housing. She used to make much, much more working for high end hotels, but she prefers this, because it feels like she’s helping people. “I’d rather clean someone’s shitty toilet after they’ve moved out than do any more of that bullshit.”

Incentives work, but they work best at getting people to do things which shouldn’t be done in the first place.


Is “Skin in the Game” Good?

So, this is an idea whose time has come, again.

It is only half right.

It is right, somewhat, when it comes to suffering harm if something fails. One of the reasons for the 2008 financial collapse is that most of the actors were rich, and knew that even if their companies failed and were not bailed out, they would be fine.

OTOH, taking massive risks was making them rich. So given the upside was theirs, and the downside wasn’t, there *was* no risk for them, so why not?

And this is before they knew for sure that the government would bail out almost all of the companies.

So, had they had relatively small amounts of money, and thus needed their ongoing salaries, and for their companies not to collapse, the financial collapse might well have not happened.

However to do that meant making sure that they were not reaping so much of the upside of the housing and MBS (mortage backed securities) market.

The less upside they had, the poorer they were, and the more they needed their companies to continue, the more they would have been risk averse.

Alternatively, the credible threat of losing everything they had could have worked, but it had to be credible, and as we see, for most, it did not exist. Threats of future losses don’t work well unless they are near certain: This is well established in criminology, where it is known that how likely one is to be caught and convicted of a crime is far more important than how harsh the punishment will be.

People who think they’ll get away with it, in other words, aren’t scared by “having skin in the game.”

Skin in the game has to be a near certainty to work.

The core issues of making skin in the game work are responsibility, power, and externalities.

A person’s responsibility (consequences/skin) must be equal to their power.

You should only take a hit equal to your responsibility, and your responsibility is NEVER more than how much power you have.

But the hit you take must be equal to all the losses for which you are responsible.

And that is, often and effectively, impossible. The key people behind the financial crisis were responsible for losses far greater than the amount of money they personally possessed. This is particularly true of central bankers like Alan Greenspan and Ben Bernanke, but is also true of Wall Street execs and so on.

Even in an ideal world, they could not take hits equal to the damage they did. The closest  one could come would either be lifetime imprisonment, or death. (Understand, very clearly, that many people died because of the financial crisis and its aftershocks. People who lose their jobs and housing die a lot.)

To make “skin in the game” work requires two things:

1) No one must be in a position to “quit the game” if they win. If the upside is so large that it doesn’t matter if the game continues, people will destroy the game. Understand that if it takes seven years to make enough money to never work again and live a life of luxury, those people WILL do that no matter the consequences after they leave.

2) No one must be isolated from the social consequences of their actions. Money or power must NEVER be able to buy anything that matters: health care, a good education for your kids, skipping security theater, avoiding endemic social violence, or anything else. If the decision will cause bad things to happen to people in society, decision makers must suffer the consequences with those people.

(This means no private schools. No public schools that are better than other public schools. No private jets. No skipping security lines for first class travel. No buying healthcare poor people can’t have. No polluting and not having to suffer the pollution  yourself.)

But even if you put this in place, “skin in the game” has sharp limits to its usefulness.

Skin in the Game Doesn’t Beat the Death Bet or IBG, YBG.

The death bet is a bet that you’ll be dead before the consequences of your decisions occur. Climate change was understood and taught in school as early as the late 70s, but adults in the late 70s bet that they would be dead before it mattered. They were right to make that bet. They didn’t have skin in the game and they never would.

During the 2000s, in the run-up to the financial crisis, the saying when a shitty deal was being cut was “I’ll be gone, you’ll be gone.” Anyone who has worked in a big firm is familiar with how a new executive will change things one way (“Let’s outsource!”) then the next one will change them back (“Let’s bring it in-house, for control!”). They are familiar with how salesmen get almost all their commissions up front, and multi-year sales deals then blow up a few years down the line.

Real skin in the game requires a commitment to go after people who did shitty things in the past and then disappeared. When the Sepoy rebellion happened in India in the 19th century, the British didn’t just blame the current Viceroy, they went after the Viceroy before him, because he had to have screwed up too.

But, at the end of the day, skin in the game only goes so far. People do die (which is why harsher regimes than ours would hit our entire families). People do leave.

And then, there is fact that skin in the game can actually be bad when…

Detachment is needed.

Doctors make better decisions when they have no financial incentives. Those who make more money the more surgeries they do, do more surgeries, needed or not. Those who make more money the more drugs they prescribe, prescribe those drugs.

Those who have no incentive tend to do the right thing by the patient, because, why not? Flat fee suffering person, help them. But they aren’t required to die if the patient dies, the normal human mechanisms of empathy and social bonding work quite fine IF they aren’t overwhelmed by incentives.

This is true also of analysts. The best analysts are generally people who have no skin in the game; no dog in the fight. They may be interested, but they don’t actually care.

Detachment, lack of concern–these things make it possible to see things as they actually are.

Skin in the game works best when it is identical with the largest group that makes sense. Aligning workers with overly precise incentives leads them to ignore possibilities outside those that confer incentives. Whatever the bottom line for them is, they see to it (even by cheating) and they ignore everything else.

The survival and prosperity of a country, a company, a team, or a marriage must be the responsibility of everyone involved, and they must suffer the consequences if it fails equal to their power in that group.

When they don’t, societies fail.

But even this rule is not enough, because we are finite beings. We die. This is the reason for the Iroquois maxim that decisions must be made with the next seven generations in mind. It is why the Ancient Greeks said that a society is great when old men plant trees in whose shade they will never sit.

And to get there requires something more than Skin In The Game.

Or rather, it requires an extended sense of self which our society does not embrace and which it cannot embrace as long as its core moral sentiments and identity are based on individualistic liberalism and the selfish, self-concern that is mandated by capitalist ideology.

Self-interest can only walk so far.

More on that another time.

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