Mar 24, 2023
In today's conversation, I am joined by Dr. Uri
Gneezy. Uri's research focus is on putting behavioral economics to
work in the real world, where theory can meet application. He is
looking for basic research as well as more applied approaches to
topics like incentives-based interventions to increase good habits
and decrease bad ones, Pay-What-You-Want pricing, and the
detrimental effects of small and large incentives. In addition to
the traditional laboratory and field studies, he currently works
with several firms conducting experiments which use basic findings
from behavioral economics to help companies achieve their
traditional goals in nontraditional ways.
You may be familiar with Uri's name because he
coauthored the wildly popular book, The Why Axis with John List,
who was on the show last year talking about his book The Voltage
I have a feeling you're going to really enjoy this
conversation as it is about a topic people in business are
thinking, talking and asking about all the time: incentives. Most
specifically, Uri talks about what happens when we mix our messages
(it happens a lot more often than you realize) and how that impacts
behavior. There are tons of fascinating and practical examples in
the book, and we will talk about a few of them today in the
- [00:42] In today's conversation, I am joined by Dr.
Uri Gneezy. Uri’s research puts behavioral economics to work in the
real world where theory can meet applications.
- [03:15] Uri shares his background and the work he
does in behavioral science. He is a behavioral economist and most
of his work is around how incentives really work and how they can
change the world.
- [05:19] When you give the incentives it is not just
the money, reward, or recognition that you give, you are also
sending a message and telling a story. If you don’t really
understand how the incentive can shape or change the story you
might send the wrong message.
- [07:03] Incentives are not good, wrong, or bad. It
really depends on how you use them.
- [09:25] By changing the incentives from money to an
item like a mug or pen you change the message that supports the
signal that you want to send.
- [11:45] Uri shares about research around donating
- [14:01] In the late ’90s hybrid cars started to pop
up. Toyota won the market with the signal they sent.
- [16:39] Different incentives work on different
people. The incentives don’t have to apply to everyone.
- [18:25] The role of incentives should be to push the
story in the direction you want. Incentives are going to change the
- [21:27] Quality is much harder to control than value
and sometimes it is subjective. How do you incentivize without
damaging the quality?
- [24:30] We really need to be careful about the
incentives we give.
- [27:00] If we want innovation we have to make sure we
don’t punish failure.
- [29:59] If you have an incentive in place, try to
think about it and see if it really sends the message that you want
- [30:51] The fact that you tried incentives and they
didn’t work doesn’t mean that incentives don’t work. It means that
what you tried didn’t work and it is time to try something
- [33:26] You need ways to measure your incentives and
how they are working.
- [36:00] He decided to add cartoons to his book
because they deliver the message better than just reading a long
description and it makes it fun and less boring.
- [38:48] The Coca-Cola story is a very good example of
how the framing of the incentive can give a completely different
- [40:26] Not all incentives are created equal and you
can understand more about them and predict how they will work if
you understand the message they are sending.
- [41:55] Our brains have mental
- [44:30] If you find out what your clients care about
you can use that to create your incentives.
- [46:51] The amount of money really sends a signal but
gifts send a very different signal and meaning.
- [49:36] Make incentives simple. If you have many
incentives, consolidate them. Make sure you align what you do with
the message you want to give.
- [50:52] Melina’s closing thoughts
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