By age 35, Akinola Bolaji had already spent two decades scamming people online, posing as an American fisherman to con vulnerable widows into sending him money.
The New York Times asked the Nigerian how he felt about causing so much harm to innocent people. He replied:
“Definitely there is always conscience. But poverty will not make you feel the pain.”
Scamming people is easier to justify in your head when you’re starving.
It’s an extreme example of something everyone – you, me, everyone – is susceptible to and more influenced by than we want to admit: Incentives are the most powerful force in the world and can get people to justify or defend almost anything.
When you understand how powerful incentives can be, you stop being surprised when the world lurches from one absurdity to the next. If I asked, “How many people in the world are truly crazy?” I might say, I don’t know, 3%-5%. But if I asked, “How many people in the world would be willing to do something crazy if their incentives were right?” I’d say, oh, easily 50% or more.
No matter how much information and context you have, nothing is more persuasive than what you desperately want or need to be true. And as Daniel Kahneman once wrote, “It is easier to recognize other people’s mistakes than our own.” What makes incentives powerful is not just how they influence other people’s decisions, but how blind we can be to how they impact our own.
A big thing here is recognizing that people are not calculators; they are storytellers. There’s too much information and too many blind spots for people to calculate exactly how the world works. Stories are the only realistic solution, simplifying complex problems into a few simple sentences. And the best story always wins – not the best idea or the right idea, but just whatever sounds the best and gets people nodding their head the most. Ben Franklin once wrote, “If you are to persuade, appeal to interest and not to reason.” Incentives fuel stories that justify people’s actions and beliefs, offering comfort even when they’re doing things they know are wrong and believe things they know aren’t true.
True story about a guy I knew well: A pizza delivery man who became a subprime mortgage banker in 2005.
Virtually overnight he could earn more per day than the earned per month delivering pizza. It completely changed his life.
Put yourself in his shoes. His job was to make loans. Feeding his family relied on making loans. And if he didn’t make those loans someone else would, so protesting or quitting felt pointless.
Everyone knew the subprime mortgage game was a joke in the mid-2000s. Everyone knew it would end one day. But the bar for someone like my friend to say, “This is unsustainable so I’m going to quit and deliver pizza again” is unbelievably high. It would be high for most of us. I didn’t blame him then, and I don’t blame him now.
A lot of people screwed up during the financial crisis. But too many of us underestimate how we ourselves would have acted if someone dangled enormous rewards in our face.
This goes up the food chain, from the broker to the CEO, the investors, the real estate appraiser, the realtor, the house flipper, the politician, the central banker – incentives lean heavily towards not rocking the boat. So everyone keeps paddling long after the market becomes unsustainable.
Sometimes the behaviors and outcomes are more extreme.
The book What We Knew interviews German civilians after World War II, seeking to understand how one of the most civilized cultures turned so sharp, so quickly, and committed the worst atrocities in history:
[Interviewer]: At the beginning of this interview, you said that most grown-ups welcomed Hitler’s measures.
[German civilian]: Yes, clearly. One has to remember that in 1923 we had the inflation … nobody had anything, everybody was unhappy. Then Adolf came to power with his new idea. For most that was indeed better. People who hadn’t had a job for years had a job. And then the people were all for the system.
When someone helps you get out of an emergency situation and into a better life, then you’re going to give them your support. Do you think people would then say, “This is all such nonsense. I’m against that”? No. That doesn’t happen. How things were done later on is something else. But the people at that time were happy, even full of enthusiasm, and they all joined in.
A documentary on the former Mexican drug lord El Chapo visits a poor village in Mexico where the violent, murderous cartel leader was extremely popular and supported by locals. They would do anything to protect him. One of them explained:
You’re talking about people who have almost no income. It was not uncommon for El Chapo to stop and talk to someone and say, “What’s going on in your life?” And the person would say “Oh, my daughter is getting married.” Chapo would say, “I’ll take care of it.” He’d get a big place, provide the band, provide the booze and food and the whole town is invited. The father of the bride says, “Chapo made this possible.”
Everything that the government should be to these people, Chapo was.
In all of these situations you have good, honest, well-meaning people who end up supporting or partaking in bad behavior because the incentives to play along are so strong. And in each there are more than just financial incentives. Incentives can be cultural and tribal, where people support things because they don’t want to upset or become banished from their social group. A lot of people can resist financial incentives; cultural and tribal incentives are more seductive.
Two things stick out here.
1. When good and honest people can be incentivized into crazy behavior, it’s easy to underestimate the odds of the world going off the rails.
Everything from wars to recessions to frauds to business failures and market bubbles happen more often than people think because the moral boundaries of what people are willing to do can be extended with certain incentives.
That actually goes both ways. It’s easy to underestimate how much good people can do, how talented they can become, and what they can accomplish when you view them in an environment where they haven’t yet found their proper positive incentives.
Extremes are the norm.
2. A good question to ask is, “Which of my current views would change if my incentives were different?”
If you answer, “none,” you are likely not only persuaded but blinded by your incentives.