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Our Love/Hate Relationship with Carrots and Sticks—A Commentary by Ian Ayres ’86

The following commentary as posted on newyorktimes.com on October 15, 2010.

Our Love/Hate Relationship with Carrots and Sticks
By Ian Ayres ’86

“The honeymoon is over.” These were the words of Alberto Iturra, the leader of a team of psychologists who instituted a series of prizes and punishments to change the behavior of the 33 miners trapped in Chile. The miners have now been pulled up to safety. But during the crisis, the psychologists used incentives to get what they wanted. When the miners did what the psychologists wanted, they were given treats like TV and music. But if miners refused, say, to submit to daily interviews with psychologists, the psychologists would restrict the supply of cigarettes or wine.

Your reaction to this story probably says a lot about where you fall on an important policy and cultural divide. As a society, we have conflicting notions about both the fairness and efficacy of incentives.

If you are viscerally repelled by the story, you can point to several experiments to support the idea that carrots and sticks are often counterproductive. In fact, one of the coolest experiments described in Dan Ariely’s The Upside of Irrationality shows that incentives sometimes backfire.

Ariely (together with his collaborators Nina Mazar, Uri Gneezy and George Loewenstein) arranged to send five economics graduate students from Narayanan University to local villages near Madurai in Southern India. They asked subjects to play a series of game “tasks that demanded attention, memory, concentration, and creativity. We asked them, for example, to assemble puzzles and to play memory games while throwing tennis balls at a target.” They wanted to see how performance was affected by offering rewards of various sizes. As described in this Wired UK write-up of the same experiment:

We promised about a third of them one day’s pay if they performed well. Another third were promised two weeks’ pay. The last third could earn a full five months’ pay.

A key to feasibility is that in rural India “the average person’s monthly spending was about 500 rupees (approximately $11).” (Kindle 296)

They found out that big bonuses didn’t improve performance. “The low-and medium-bonus groups performed the same. The big-bonus group performed worst of all.” Their write up of the experiment as a working paper for the Federal Reserve Bank of Boston concludes, “Our results challenge the assumption that increases in motivation necessarily lead to improvements in performance. In eight of the nine tasks we examined across the three experiments, higher incentives led to worse performance.”

Ariely makes a compelling case that supersized incentives can be cognitively distracting. Subjects who had five months of income on the line had a harder time remembering the order of colors when they were asked to play the classic Simon memory game. They lost fine motor control when asked to “move two rods apart in order to move a small ball as high up as possible on an inclining slope.” (Kindle 321)

The cognitive overload reminds me of Malcolm Gladwell’s essay, The Art of Failure, (which can also be found in Gladwell’s collection, What the Dog Saw). Gladwell draws the useful distinction between panic and choking:

Panic, in this sense, is the opposite of choking. Choking is about thinking too much. Panic is about thinking too little. Choking is about loss of instinct. Panic is reversion to instinct. (Kindle 3454)

Ariely’s subjects were probably choking. They were thinking too much (or thinking about the wrong things, like how terrible they were going to feel if they screwed up on this chance of a lifetime).

Daniel Pink has run with the results of this experiment and others to conclude that incentives are likely to backfire when applied to goals requiring even modest degrees of creativity. In Drive, Pink argues that if-then incentives often destroy creativity. In his compelling TED talk, Pink says that carrots and sticks work well when there is a simple set of rules and a clear destination. But they fail when more complicated forms of problem solving are involved. For example, incentives help people solve Duncker’s candle problem when the instructions give a clearer hint of how to reach a solution. But incentives fail to help when the path to a solution is more opaque. Both Pink and Ariely rail against supersized CEO bonuses because they are unlikely to produce the kinds of creative problem-solving that we want from our corporate leaders.

This is a powerful and compelling message. As I emphasize in my new book, Carrots and Sticks, incentives and commitment devices are tools that at times are best left in the tool box. Because I’m a co-founder of stickK.com, some people think that I’m a rabid advocate of the ever expanding use of commitment devices. Not so. I’m an advocate of finding out what works. Carrots and Sticks devotes a lot of time to examples where incentives backfire and shouldn’t be used. Ariely and Pink have valuable things to say on this topic.

Pink says that “21st century” problems are more likely to require the kind of creative cognitive skills that are disabled by carrots and sticks. I am nodding my head in agreement, but want to quickly add that there still remain today plenty of “20th century problems” where incentives (if properly tailored) can provide plenty of help.

Commitment contracts in particular can help when the problem isn’t a lack of creativity but a lack of willpower. The higher health care costs produced by unhealthy lifestyles are an important social problem. But the individual problems of obesity and smoking are not centrally caused by a lack of patient creativity. These problems are more about distorted incentives. It’s all too easy to put off starting that diet or waiting a bit longer to quit smoking. Dean Karlan’s field experiment on smoking cessation powerfully suggests that commitment contracts can help people stiffen their resolve.

From this perspective, it’s not surprising that a majority of the commitment contracts created at stickK.com concern tasks where cognitive creativity is not a central element, such as committing to updating your will or your wireless router. Commitments to stop procrastinating (and, as I’ll explain in a later post, to stop preproperating) flourish on our site. In fact, I find that making commitments to stop procrastinating on the necessary but annoying tasks of life lets me concentrate my cognitive energies on more creative tasks. I stop worrying about updating my will once I place it in the non-negotiable commitment column (and can instead worry more about where my next idea is going to come from).

At stickK, we also have hundreds of commitments that have important elements of creativity. In the book, I write about Scott Bierko of Yorktown Heights, New York, who put $50 at stake and committed to write 4 songs in 4 weeks. Scott is a children’s singer/songwriter who performs with his wife as “Beth and Scott” at arts and education assemblies in upstate New York. But he committed to write songs for grownups. “It’s something I’ve always wanted to do,” he told me, “and I really felt that stickK was a good way to hold my feet to the fire – to actually fulfill a commitment that I had some inhibitions about.”

Even projects like songwriting that are essentially creative often have discrete subcomponents that are more about execution. Large stakes may distract us when it comes to the cognitive components, but it shouldn’t be surprising that people use stickK to help them finish their dissertations. Committing to put in 40 hours a week in front of your computer or committing to get a draft of chapter 2 to your advisor by the end of the month can help you make progress.

Long before stickK was up and running, Rob Harrison, a lecturer in legal writing at Yale Law School, was using commitment bonds to help students overcome writer’s block. Students gave Rob checks of up to $10,000 written to charity and authorized Rob to mail the checks if they failed to turn in a paper by a particular time. To write a good paper clearly requires a lot of creativity. But for students being forced to crank out a draft, the bigger problem is execution. The great news is that after more than a decade, Rob has never had to mail one of these commitment checks.

In large part because of the success of Drive, the meme “Carrots and sticks don’t work” now has more than 80,000 Google hits. But that’s not the message of either Pink or Ariely (who with Klaus Wertenbroch has also written about the value of incentives in other goal-setting contexts).

Depending on your predisposition, you can point to plenty of studies to at least superficially support almost any visceral reaction to incentives.

This past spring, Pink published an article in The Telegraph with the arresting title, “Forget Carrots and Sticks, They Don’t Always Work.” I know from painful experience that newspaper authors do not get to control their titles. But the Telegraph title does not make a compelling argument. One might as easily argue: “Forget chemotherapy, it doesn’t always work.” The better, but perhaps less arresting, message is that “Carrots and Sticks (like chemotherapy) are powerful medicines that sometimes work.” It behooves us to figure out when.

As for the miners, the biggest benefit of the psychologists’ incentives may have been in harnessing and redirecting the miners’ hatred of incentives. The lead physician for the group explained, as long as the miners’ were shooting arrows at the psychologists, “they don’t start shooting the arrows at each other.”