Freakonomics

The book Freakonomics changed everything for me. It taught me about incentives and incentives are everything.

If you’re entering a deal and you don’t know the other party’s incentives, take a step back and consider them first. The person being really friendly in the store is probably trying to sell something because the more they sell, the more money they make. That doesn’t mean you push them away for being greedy, that just means that you take their words with a grain of salt.

Awareness of incentives allows you to see that most decisions are made for a very rational and discernible purpose. Sometimes the decisions that are made suck. They’re bad for the environment, society and workers. But incentives are strong. The decision makers have direct incentive to make a profit, they have very little incentive to save the ice caps.

I’m not saying this is an excusable decision, but I am saying that these are constraints which we have to operate within. Begging them to change their values is one path. Shifting the incentives at play is another. When you look around, you start to see countless problems of misaligned interests. It’s disheartening. But in every problem there lies opportunity.

As world changers, it’s our job to use the power of incentives to change the world for the better.