Don McMinn

The incentive super-response tendency was first espoused by businessman Charlie Munger. In short, he said that incentives are the most important element in work for hire and that often people respond to incentives by doing what is in their best interest.  Munger says, “One of the most important consequences of incentive superpower is what I call ‘incentive caused bias.’ A man has an acculturated nature making him a pretty decent fellow, and yet, driven both consciously and subconsciously by incentives, he drifts into immoral behavior in order to get what he wants, a result he facilitates by rationalizing his bad behavior [like a salesman who harms her customers by selling them the wrong product because she gets paid more for selling it, versus the right product]. The power that incentives and disincentives have on the actions of others cannot be overstated.”

For instance, in its early days FedEx struggled with a critical problem. Their reputation depended on delivering packages on time and a key requirement was getting packages loaded on planes during the night. The nightshift workers were paid by the hour for their eight-hour shift. In theory, eight hours was enough time to complete the work. But that wasn’t happening. The night workers did work eight hours but weren’t getting the job done. Then management changed the incentive. Since the goal was to load the planes rapidly, they began paying the night workers for work done; they could go home when the planes were loaded and still get paid for a full eight hours. The new system worked.

Obviously, the theory behind incentives is a large, multifaceted topic. In this post I’m going to focus on one subtlety suggested by the title of this post: never ask a barber if you need a haircut. The lesson is: don’t frame an option in such a way that it will incentivize someone toward a self-serving effect.  

For instance:

Be suspicious of situations in which a vendor’s personal interest may bias his position.

• • Investment advisors often endorse a particular financial product because they will profit most from selling them.
  • A roof contractor may try to sell you a particular type of shingle because he’s overstocked on that product.

In certain instances, avoid paying someone by the hour; if possible agree on a fixed price in advance. When being paid by the hour, lawyers, architects, consultants, accountants, and contractors are incentivized to slow down the tempo of their work.

When interviewing someone for a job, realize that his resume will be biased and even the interview will have vestiges of self-interest. For instance, when interviewing someone for a job, don’t ask “Do you think you can do this job well? or “Do you think you’ll be a good fit in our organizations’s culture?” The average person will respond “yes” to both questions because there’s little incentive to be honest and forthright.

I’ll end with this humorous anecdote.

Patient: Lately I’ve had the feeling that everyone wants to take advantage of me.

Doctor: That’s nonsense.

Patient: Really? Thank you very much, doctor. I feel so much better now. How much to I owe you?

Doctor: How much have you got?

Don’t ask a barber if you need a haircut.

 

Some things are necessary but not sufficient. I learned this phrase about 25 years ago and it has helped me in my personal life and as a leader.

• It speaks of things that are good and essential but by themselves inadequate. 
• It reveals an incomplete perspective: I’m only seeing part of a large picture.
• It can infer laziness or lack of thoroughness: I need to be more diligent and exhaustive.   

Here are some examples:

• You are providing well for your family, but they need more than that. You need to be lovingly involved in their lives.
• You do have a winsome personality, but that’s not enough. You need to be productive. 
• You are productive, but that’s not enough. Your people skills are lacking. 
• Our church does have a good children’s ministry, but we also need a good music ministry.
• Our organization does have a good R&D department, but our manufacturing is lacking.

How can we spot areas in which we’ve done well but are still lacking? One suggestion: identify an area that is going well and probe for ways in which it could be improved. Name the strength, then, use the coordinating conjunction “but” to identify areas that are lacking or incomplete. 

For instance:

• • We have saved adequately for retirement, but we haven’t planned what we’re going to do in retirement. 
  • Our daughter has been accepted into an elite college, but does she have the discipline to make it?

When communicating with others, be careful how and when you use this secondary phrase (But…). If used excessively or at the wrong time, it can lead to frustration and hopelessness, implying that nothing is ever good enough and that regardless of how hard someone tries, it will never be enough. Emphasize the opening thought: “What you have done is good and important; thank you; that’s commendable,” before introducing the second phrase.  

Identify areas in your life where it could be said, “That’s necessary, but not sufficient.”

You must go on. I can’t go on. I’ll go on. —Samuel Beckett

Psychologist Martin Seligman identifies three attitudes—all starting with the letter P—that make it difficult for us to recover from a personal setback.

• Personalization—the belief that we are at fault
• Pervasiveness—the belief that an event will affect all areas of our life
• Permanence—the belief that the aftershocks of the event will last forever

In other words, when responding to a personal problem we often think: 

• It’s all my fault this happened. 
• It will adversely affect my entire life. 
• My life will never be the same again. 

Be aware of these three tendencies and when needed, talk yourself out of them.

For instance, following a difficult divorce, healthy thinking might include:   

• Acknowledge and accept responsibility for your part in the broken relationship, but only your part. Your spouse, other people, and circumstances no doubt influenced the situation, so spread out the culpability. You should bear part of the blame but not all of it.  
• Don’t let the divorce permeate every area of your life. Continue to find meaning in your work. Spend time with friends. Compartmentalize the event and don’t let it soil other areas of life.
• Realize that the divorce need not permanently affect your life. Eventually, the pain and awkwardness will fade. You will survive the divorce and it need not define your life.

If your small business fails, healthy self-talk might sound like this: 

• “If I could do it again, I would avoid the following mistakes…(name them). But, I’ve learned a lot through this setback and I’ll be a better person for it. Statistically, only 30% of new businesses make it past the first three years; if I ever try this again, because of what I’ve learned, I’ll be in that 30%.”
• “My professional life is important, but it’s not the only, or most important part of my life. I’ll continue to spend meaningful time with family and friends, enjoy my hobbies, and start looking for another job.”
• “This failure is not going to define me or determine my future. As the years go by it will become a remote memory with little or no long-term effects.” 

When we mentally and emotionally dismantle these three tendencies and begin to embrace a more positive perspective, we’ll experience relief.

The Blind Men and an Elephant is a parable from India about a group of blind men who are asked to describe an elephant based on touching it, but they’re only allowed to touch one part of the elephant (trunk, leg, ear). Because they describe the elephant based on their partial experience, their descriptions are vastly different (the person who touches the leg thinks the object is a mid-sized tree) and seemingly conflicting. In some versions of the story the men suspect that the others are being dishonest and they come to blows. The moral of the parable is that humans have a tendency to project their partial experiences as the whole truth and discount other people’s partial experiences. 

Indeed, sometimes it’s hard to see all aspects of a complicated situation. 

For instance, during the coronavirus pandemic:

• • A friend of mine, a physician who works in the ICU, was on the front lines of the healthcare challenges. Every day he witnessed the pain, suffering, and death caused by the virus. Unsurprisingly, he was cautious about reopening society too quickly. 
  • Another friend, who owns a small business, has told me, “If the economy doesn’t open up in the next several weeks, my business will go under, my employees will lose their jobs, and I will lose everything.” He favored a quicker resumption of our normal lifestyle. 
  • A man in my church spent his entire career as an engineer at a major HVAC manufacturing company. He holds several patents in the industry. He advised us to not open the church for corporate worship (or any building with a controlled air system) until the pandemic is completely over because the circulation system will keep the virus in the air and the air filters won’t capture the molecules. 

Who’s right?

Most issues, situations, and challenges are multifactorial, which renders simple, one-dimensional explanations incomplete. Additionally, our personal background, experiences, and circumstances influence how we perceive a situation and affects our opinion.

On January 28, 1986, the Space Shuttle Challenger broke apart 73 seconds into its flight, killing all seven crew members aboard. The Rogers Commission, a special commission appointed to investigate the accident, reported that a faulty O-ring had caused the implosion. But there was more to the story. The commission found NASA’s organizational culture and decision-making processes had contributed to the accident, with the agency violating its own safety rules. Since 1977 NASA managers had known that the design of the solid rocket boosters contained a potentially catastrophic flaw in the O-rings, but they had failed to properly address this problem. NASA managers also disregarded warnings from engineers about the dangers of launching in the low temperatures of that morning, and failed to adequately report these technical concerns to their superiors. 

The seemingly straightforward explanation—a faulty O-ring caused the Space Shuttle Challenger to implode—was part of the truth but not all the truth.

It takes a lot of effort to balance our narrow perspectives. Here are some suggestions.

• Be skeptical of simple, unidimensional explanations.
• Seek out multiple perspectives and approaches. 
• Respect the opinions and observations of others unless they are proven to be false. 
• Have less confidence in your own observations and conclusions. 

Economist John Stuart Mill said, “He who knows only his side of the case knows little of that.” Proactively pursue the myriad and often seemingly contradictory aspects of a multidimensional situation.