Incentives

As I tweeted last month: Inverse Law of Usenet Bandwidth: The more interesting your life becomes, the less you post... and vice versa. Jorn Barger, 1994.

Usenet was pretty early version of what is now the web 2.0 world of user generated content. Today's simple corollary is: The more interesting your life becomes, the less you post [on blogs]... and vice versa. This leads to wondering whether the incentive (or reward) for blogging is gratification in boring moments...

There is a question about whether Twittering follows the same pattern. Many folks note that it is so easy to tweet that interesting lives lead to more tweeting. That is for another post.

This blog has been silent for over a week exactly because I have been busy on interesting things, mostly work related, mostly our just completed annual advisory committee meeting. I considered live-tweeting the event for about one nanosecond (talk about a breach of etiquette and career-ending adventure). An example tweet might have been "Partner X now telling LPs that deal Y is going to be worth $1b", and another example would be "Partner X now telling LPs that deal Y better show progress before June 30 or it will be shut down". Last night's dinner tweets would have been interesting too, but I can't even hint at those. You can see why the public twitterstream is not ideal for this kind of commentary!

I did want to mention a couple of interesting articles I gleaned from the twittersphere recently. One talks about the very obvious (to me) comment that even *free* will not get physicians to adopt electronic medical records - see this short post on e-patients. Secondly with an eye to my non-profit volunteer work, consider this WSJ blog post on how increasing the price of membership can increase memberships. In both cases the incentive structure is non-intuitive, or at least against the classical or conventional wisdom.

Incentive compensation (bonus plans) are amongst the most complicated parts of my life as a board member on startups. CEOs and their VPs generally have bonus plans approved by the board (or its compensation committee). It is a cliche that "you get what you pay for" and we have to be excruciatingly careful not to encourage unhelpful outcomes through an inadvertent side-effect of a bonus plan. If we offer a bonus for maintaining a healthy cash balance, the CEO might fire a bunch of people and reduce sales or service levels. If we focus on revenue we may encourage profligate spending and reduce our cash cushion. It gets worse from there. Even the seeming alignment around incentive stock options can lead to problems, and not just those seen on Wall Street.

Incentives in all these areas remain intriguing and annoying because they seem to amplify unexpected behavior as much as desired behavior. Despite the concerns and contradictions, or perhaps because of them, they remain a source of constant interest for me in my venture capital (and venture cyclist) work.