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Blink 3 of 8 - The 5 AM Club
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Mixed Signals summary
How Incentives Really Work
15 mins
Brief summary
Mixed Signals by Uri Gneezy explores how our behavior can be influenced by varying signals in our environment. Through experiments, the book shows how incentives and social norms can lead to unexpected outcomes, and offers insights into how we can better understand and shape our behavior.
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Mixed Signals
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Key idea 1 of 4
Money isn’t a universal motivator
Incentives play a major role in how we make choices – but our responses to incentives aren’t simple, especially when they come into contact with biases.
Consider the $100 offer again and how people don’t go for the additional $10. What’s happening here is called the “present bias” in which immediate satisfaction usually trumps a delayed gain, especially if that gain is relatively small. The incentive – an extra $10 – just isn’t strong enough when held up against having to wait another day.
There are many more biases and emotions that affect our perception of money as incentives, too. While money can be a powerful motivator, it doesn't always lead to better performance or outcomes. The evidence of this can be seen in professional sports where teams reward players with contracts that include big bonuses tied to what that player does individually. Consider an example from the NFL in which Baltimore Ravens player Terrell Suggs had a contract rewarding him with $5.5 million once he reached a goal of sacks for the year. While Suggs reached his goal, the team overall didn’t finish the season well. While that’s not necessarily his fault, his individual incentive didn’t seem to help the team’s outcome.
Sometimes, using money as an incentive backfires if you set the amount too low. Consider the case of daycares charging parents whenever they’re late picking up their kids. Gneezy began to study this after his own experience. He describes one instance of being late and the embarrassment he felt. The daycare wasn’t yet charging fees, and he felt bad enough already to make sure not to repeat the offense. When the daycare started a fee system, it announced the fee would be about $3 for anyone arriving late by ten or more minutes. Now with a relatively low price tied to being late, parents got the message that it’s not that big a deal – a much smaller deal than they’d originally thought. The fine was so low that the number of late pickups actually increased.
Gneezy also researched other daycares around the world and found that fine structures can work, but the fine must cause a bigger financial hit. Some daycares charge parents $5 for every minute they’re late. Another charges a $20 flat late pickup fee, then tacks on larger amounts in half-hour increments.
Using money as an incentive is tricky in the case of blood donation, too. In his book, The Gift Relationship, Richard Titmuss contrasts how in 1979 people were paid for blood donation in the US versus not receiving compensation in the UK. His research showed that the money-motivated donors were more likely to be drug addicts seeking cash, and therefore the quality of blood collected had a greater likelihood of being infected with hepatitis B. Today, over 75 percent of blood collected in wealthy countries worldwide comes strictly from volunteers. Research has also shown these types of donors are more motivated by things besides money — even something as small as a logo pen.
So why would anyone want a cheap pen over cash? We’ll look at that next.
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What is Mixed Signals about?
Mixed Signals (2023) sheds light on the power of incentives, drawing on behavioral economics research to explore how various factors like money, social status, and external nudges can influence our choices. It explores how incentives often have complex and counterintuitive effects, offering an understanding of these dynamics to improve decision-making and outcomes.
Mixed Signals Review
Mixed Signals (2017) by Uri Gneezy is a thought-provoking exploration of the hidden forces that shape our behavior and decision-making. Here's why this book deserves your attention:
- Through a series of compelling experiments and real-life examples, it uncovers the surprising ways in which our actions can be influenced by seemingly irrelevant factors.
- With its insightful analysis and thought-provoking conclusions, this book challenges our assumptions and sheds light on the complexities of human behavior.
- Revealing the underlying mechanisms behind our choices and actions, it offers valuable insights that have the power to transform how we understand ourselves and our interactions with the world.
Who should read Mixed Signals?
- People interested in improving their decision-making
- Business leaders who want to manage people more effectively
- Anyone looking to better persuade people to take action
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Mixed Signals FAQs
What is the main message of Mixed Signals?
Mixed Signals explores how hidden information influences our decisions, often leading to unexpected outcomes.
How long does it take to read Mixed Signals?
The reading time for Mixed Signals varies, but it typically takes several hours. The Blinkist summary can be read in just 15 minutes.
Is Mixed Signals a good book? Is it worth reading?
Mixed Signals is a thought-provoking book that offers valuable insights into the role of hidden information. It is definitely worth reading.
Who is the author of Mixed Signals?
The author of Mixed Signals is Uri Gneezy.
What to read after Mixed Signals?
If you're wondering what to read next after Mixed Signals, here are some recommendations we suggest:
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- Digital Minimalism by Cal Newport
- The Most Important Thing by Howard Marks
- I Respectfully Disagree by Justin Jones-Fosu
- Meaningful by Bernadette Jiwa
- A Thousand Brains by Jeff Hawkins
- The Hard Thing About Hard Things by Ben Horowitz
- Get Smart! by Brian Tracy