What would you do for a Klondike bar? We have been asking that question of ourselves since 1986. What would you do for a Klondike bar? The marketing campaign pitted the reward of a Klondike bar against the cost of absurd tasks.
Klondike’s website shows videos of people skateboarding, hugging a cactus, cannonballing, doing pushups and tango dancing. The most outrageous is a person throwing a Klondike out of an airplane and another person diving after it. You get that the plane is 10,000 feet in the air, right. Cool video.
A great meme reads, “If Eve doomed the entire human race for an apple, what would she do for a Klondike bar?
For me the task would need to be exceptionally minimal. Perhaps snap my fingers for a few seconds or count to 100. Something very simple. It’s not because I don’t love the dark chocolate coating and delicious, creamy ice cream center. No, I love both of those. The reason you won’t catch me waterskiing through alligators is because I can take a quick drive to my supermarket and buy a six pack for $4.00, $3.50 if they are on sale.
Maybe I’m a spoil sport, or maybe the economic incentive isn’t strong enough.
Welcome to Swimming in the Flood; a podcast where we develop the resilient leader’s mindset by navigating difficult currents in business. My name is Trent Theroux.
In the Journal of Economic Perspectives, Uri Gneezy writes, “the basic law of behavior is that higher incentives will lead to more effort and higher performance.” This seems like a no brainer to all of us. Heck, even my dog knows that the better the treat I give her, the better the trick needs to be.
The downside for many of these incentive based efforts is that without incentives the efforts are distinguished. The dog doesn’t want to roll over without a cookie. People won’t tango without a Klondike dangling over their head.
Let’s take the example of giving blood. I gave blood regularly when I was in my first job. The Rhode Island Blood Bank set up shop in one of the bank’s back offices and the bank gave us the freedom to take half an hour to donate. Perhaps that was an incentive. Skip half an hour of work to give blood. Not that much of an incentive to get pierced and drained. Maybe some people give blood because they crave the apple juice and Fig Newtons the blood bank passed out so you wouldn’t pass out?
I suspect that most people blood for altruistic reasons. They give blood because they want to be a solid citizen and help their fellow man. A small invasion can yield a lifeline to a person in need. Not really an economic incentive, more of a social incentive.
Perhaps that is the construct that we as Developing Resilient Leaders need to seek? Incentives that don’t outwardly feel one sided. An incentive that may have mutual economic benefits but also have solid social benefits.
I am now going to give you my unscientific, non-peer reviewed, resilient leader theory on economic incentives. Are you ready? Got your pencils out? Here’s it is. Plant A Tree. You heard it. Plant A Tree.
The theory is simple. I’m writing this podcast on Earth Day so I’m motivated to create an environmental theme. The Wall Street Journal yesterday published a story detailing a new way for Southern pine tree growers to get paid for their timber: Leave it standing.
President Biden announced today that the United States is committed to cut greenhouse gas emissions in half by 2030. Saying that this step will put us on a path of zero net emissions by 2050. According to myclimate.org, Net zero emission means that all man-made greenhouse gas emissions must be removed from the atmosphere through reduction measures, thus reducing the Earth’s net climate balance, after removal via natural and artificial sink to zero.
The key words in that definition are “via natural and artificial.” This is where the pine tree farmers come in.
Companies eager to offset their emissions are paying Southern timberland owners not to cut more than a million acres of mill-bound pine trees until next year.
The idea is that the longer the timber stands the more carbon the trees can sponge from the atmosphere before becoming two-by fours and telephone poles.
The companies are credited with socking away carbon in wood, measured in metric tons and documented with tradeable assets called carbon offsets. Companies buy offsets to scrub emissions from the carbon ledgers they keep to show investors and customers their pollution reduction efforts. Landowners get a check as long as their trees remain standing.
The pine tree growers must love this situation. Get paid for owning the property and their assets literally grow while they wait to sell. The trees grow in volume each year meaning they will be worth more when they go to market.
The companies in this transaction are heavy hitters like Microsoft and Royal Dutch Shell. Beyond meeting the regulation for carbon reduction they now get to brag that they are helping foster forest growth.
There is a nasty little problem with economic incentives. They have long-term effects. In Gneezy’s essay, he studied the effects of paying students to perform well in math. Students were given a financial incentive to improve their math scores through several grades of school. The researchers found that the students who were paid earned higher grades in math – something we would expect. They also found that their grades in other courses declined – something we may not have expected, but seems logical. Because students were paid to perform in math, they performed in math and did not focus the correct amount of energy into their other studies.
Worse, in the year after the stipend was removed, the student’s math scores fell even lower than in the years before the study. This is a horrible story of economic incentives gone wrong. The incentives we want to design need to consider both short and long-term effects on behavior and performance or ourselves, our families and our work environments.
Let’s go back to the pine tree growers. That deal sounds like a great deal. Corporations who emit too many carbon gasses are able to purchase credits to offset their pollution. They get to tout to their investors that they are “green.” (Do you see my air quotes?) The pine tree farmers are paid to watch their trees get fatter and fatter. Sounds like a great win-win (I hate that phrase). Sounds like a favorable solution for all parties, right? Wrong.
CNBC reported in February, softwood lumber prices are now 112% higher than a year ago and jumped 10% in the last week of the month. Part of the increase is because of higher demand for single family homes. The other component is tightening of supply – enter the pine tree farmers. Isn’t this a wicked web we weave when we incentivize to deceive?
I propose a different type of incentive. I propose a social incentive. This week, let’s all try to do something valuable and socially right: Plant a tree. Big, small, seedling it doesn’t matter. Plant a tree. And, if you send me a video of it – I will send you a dark chocolate Klondike bar!
Folks, thank you for listening to Swimming in the Flood. Resilient leaders face challenging currents and it is tough navigating, but with one tack or another, we can get there together.