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Should Schools Bribe Kids? Should Asset Managers Bribe Better?

by Mike Ma

I know I am on this purpose and mastery-driven compensation kick in the last few months month, but it's everywhere I look. Time's cover story this month, "Should Kids Be Bribed to Do Well in School?" has a lot of interesting implications for our industry.

They cover the controversial work of Roland Fryer, a Harvard economist, who is testing the effects of paying kids for school performance.

Fryer ran different experiments in paying kids to learn across the in 4 cities. The results are summarized in this graphic:

While I don't want to start a policy debate (Fryer himself has received death threats), it is very interesting to note that the classes in Dallas and Washington had more favorable results. For instance, the Dallas kids had reading scores that went up by .4 standard deviations, the equivalent of 5 extra months of schooling. Why? Because they are incentivizing behaviors, not results.

Kids may respond better to rewards for specific actions because there is less risk of failure. They can control their attendance; they cannot necessarily control their test scores. The key, then, may be to teach kids to control more overall -- to encourage them to act as if they can indeed control everything, and reward that effort above and beyond the actual outcome.

Or this nugget form says Joshua Zoia, who founded the much publicized KIPP Academy:

Our ultimate goal is to get kids to be intrinsically motivated. But we have to get kids hooked in. We have to meet them where they are.

In short, what if we substitute the word "kids" with "employees," can we learn something? Could we do something different in our compensation plans this year or next? To paraphrase Dan Pink, it's scary sometimes to look at what social science knows, and business ignores.

Please feel free to call/write to discuss!