In the book “Freakonomics” by Stephen J. Dubner and Steven Levitt, economics is summarized as consumers’ decisions driven by incentives – basically, economics is understanding why peoples do or do not do certain things. 

With this perspective they share intriguing insights on how incentives play a role in:

• Why do drug dealers still live with their moms?
• Which is more dangerous, a gun or a swimming pool?
• What do schoolteachers and sumo wrestlers have in common?

Incentives impact our decisions, sometimes in large noticeable ways, on a national level, and sometimes in minute ways, on an individual level.

There’s a great lesson to be learned from Starbucks slow success when expanding into China that’s accredited to the understanding of incentives.  

Because of the often single children families in China, there is tremendous pressure on the child to pursue a career that is viewed as successful, worthwhile and carrying on the family legacy.

 A barista at Starbucks did not fall under a dream job for their children for most Chinese parents.

It took Starbucks, over 5 unprofitable years of struggling to expand in China to crack the incentive problem.

Understanding the role that families play and the incentive to drive their children to work somewhere they viewed as prestigious and honorable drove Starbucks to make an important pivot addressing these incentives. They started offering their employees, and their family health care. This was an incredibly valuable tool to the family and added credibility in the eyes of the parents to a career with Starbucks.

A friend of mine was sharing recently how they used human incentives to land a new job with significant benefits to their current one.

Understanding the role incentives play in the hiring process pointed him in the direction of reaching out to executives higher up in the company to ask for advice. This not only showed drove to the executives but opened doors to interviews at that company.

The incentive was taking an interest in the people who you could add value to.

Human decisions impact the economy, environment, you name it.

Pursuing and seeking to understand what incentives are driving those around you provides great opportunity to create more win-win situations.