Incentives
One of my friends has a memorable way of describing a negotiation experience that rocked her world. It was an internal negotiation in which she and a global colleague were struggling to agree on a reasonable division of sales credit after their respective teams had closed a historically large deal together.
Both of them had known each other for a while, and each had tremendous respect for the other. But as the negotiation dragged on, each felt as if she was dealing with a completely different person, a monstrous distortion of a once admirable coworker.
Looking back on the experience, my friend said: "I noticed that for me and other sales peers, there were two versions of ourselves on the job: the real self, and the negotiating self."
She came to appreciate the profound importance of incentives, and how challenging it is to resist their potentially nefarious sway on our thoughts and behavior.
This phenomenon plays out more broadly today. No one I know likes the fact that we are becoming more divided politically. And yet the problem continues to intensify.
Once again, it is a question of incentives. As our beliefs and actions become more algorithmically predictable to the institutions that crave our attention, the more reliably these institutions can command and control our attention, thereby increasing their profits.
It's not a conspiracy. It's simply an ambient system of rewards. “Show me the incentive and I’ll show you the outcome,” Charlie Munger once quipped.
Under such conditions, it takes a special kind of person to see reality for what it is, to identify the structural sources of dysfunction. It takes a highly self-aware individual to recognize the extent to which one's own perspective is colored by context. It takes a truly extraordinary leader to question and challenge this state of affairs.
With the launch of the Internet there was tremendous hope in the power and potential of denser worldwide connections. Over time, our digital reality became so immersive that it spawned an unprecedented degree of incentive-based competition.
One of the most important skills today is knowing how to avoid the so-called "fundamental attribution error," or attributing another person's actions to their character or personality when situational factors are more likely the underlying cause.
One of the most important responsibilities of a leader today is to work on noticing, mitigating, and correcting these structural distortions.