85 — Incentives That Work: Behavioral Lessons from Uri Gneezy's 'Mixed Signals'

Lenny: 00:00:00

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Hello, everybody. It’s Lenny Murphy with another edition of the Greenbook Podcast. Thank you so much for taking time out of your day to spend it with myself and my guest. And today, this is going to be I think a really, really cool and enlightening conversation because my guest is Dr. Uri Gneezy, a professor of economics and strategy and the Epstein/Atkinson Chair in Behavioral Economics at the Rady School of Management at University of California, San Diego. So, Uri, welcome.

Uri: 00:01:07

Thank you. It’s a very long title.

Lenny: 00:01:08

[laugh] . That’s all right. You know, when you look at my LinkedIn profile, I got all types of stuff too. So, you know.

Uri: 00:01:17

Well, it’s great to be with you.

Lenny: 00:01:17

It’s great to have you here. Thank you so much. And it is a long title because, obviously, you do lots of interesting stuff. So why don’t we, for the audience and even for myself, talk a little bit about your background and your role, and then we can play off from there.

Uri: 00:01:33

Sure. So I’m from Israel, which these days carries a lot of sad aspects to it. I did my undergrad over there then did my PhD in Tilburg in the Netherlands, came back to Israel, spent 5 years in Chicago, and I’m currently in San Diego for the last 17 years already. My research is around behavioral economics, like you said when we chatted before. So Behavioral Economics is basically using economics principle like optimization and marginal thinking as this kind of reason but without assumptions. So traditional economics use strong assumptions that were useful for creating mathematical models. For example, if people are rational, people can calculate everything. People are selfish. All this good stuff that turns out to be useful in some cases, less useful in others. In behavioral economics, at least the way I look at it, we don’t assume things about people. We’d rather go out, collect data, and see how they behave. And that’s particularly important in what I study, which is incentives. Now, incentives clearly matter. They clearly impact the behavior of people, but the nice thing about them is that it doesn’t always influence the behavior of people in the predictive way. So very often I go. I design incentives. I run it. It could be in the real world. It could be in lab. And, surprised by the results, go back to the drawing board, do another round until we find how to optimize it. But incentives clearly work. We need to understand how it works on people—that simplified assumption don’t work. So that’s basically what I study, and I feel lucky because I think it’s interesting what motivates us.

Lenny: 00:03:21

Absolutely. We were chatting beforehand. I’m definitely an amateur fan all the way from, you know, reading Kahneman’s original Thinking, Fast and Slow and the research-based—the idea of, you know, System One versus System Two, when traditionally we’ve always been very System Two oriented. And, you know, I think of this as a bucket of ideas that I think of as implied behavioral science and lots of different dimensions for that. And, from the market research space, obviously, ultimately, our goal is to get people to do stuff, right? So we collect information so the marketers can use it to get people to change their behavior.

Uri: 00:04:00

Exactly. Exactly.

Lenny: 00:04:01

Yes. So, if I was charting this, I would kind of categorize the way that you’re thinking, or I assume you’re thinking about incentives, under kind of a nudge, right? These are nudges of, you know, ways to prompt behavior change. But the word itself, in the market research space, has a very transactional component. It’s a reward process versus a influencing or directional process. And I think that’s a real challenge for our industry. And so let me step back. Sorry. I was excited to talk about this because it’s something I don’t think is talked about that often. When we think about this idea of incentives and rewards, it’s ‘you do what I want you to do, and here, you’re going to get something.’ And then it’s done. There’s no lasting change or engagement as a result of that. Now, is it true that, from your perspective and your area of study, that there is a mechanism of engagement and long-lasting change in thinking about incentives for long-lasting behavior modification? Is that a piece of that?

Uri: 00:05:07

Uh, no.

Lenny: 00:05:09

No [laugh] ?

Uri: 00:05:09

But our behavior is—no, no.

Lenny: 00:05:12

There we go [laugh] .

Uri: 00:05:13

So it’s like—I’m sorry. Maybe it’s that. Like I told you, I’m Israeli, we are not agreeable in this. So ‘no’ on many levels.

Lenny: 00:05:20

[laugh]

Uri: 00:05:21

First of all, I don’t do nudges. So nudges is a seed, and the way it’s being marked is more in, you know, ‘I have this treat. I will, you know, look at the breakfast buffet. I will switch between the tomatoes and the bacon and put the bacon in the back, and obesity will disappear from the room.’ Unfortunately, that’s not the way it works. If you’ll be tired and go to the buffet and you’re indifferent between the bacon and the tomato, maybe the placement of them will be important. If you’re not, you’re just going to reach out. And, in general, nudges have very, very little effect on behavioral—like you said, behavioral change. So I cannot point to one place in which you change behavior. If you think about the classical example like organ donation, it has no effect on organ donation. So default, you know, if you do it between opt-in and opt-out, changes what people mark on the card to donate their organs. But, if you look at the actual behavior later on, there is no effect on that because that’s a much more complex situation. And, in general, especially when you talk about behavior change, exactly like you said and that—or they do it? Do you ever do it? It’s much, much harder than, you know, ‘I’ll do a small treat and then get you to lose 20 pounds’ or to start running or exercise or stop smoking. It’s way more complicated than this. Incentive is a very different thing. Incentive basically runs the world. There is this famous story about the Russian, the Soviet economist that came to London in the ‘80s and asked to meet with guy in charge of bread distribution in London. So the people go, “There is no one. Basically, the idea is that in the way our economy works, the guy that grows the wheat wakes up in the morning and works for a year until—or whatever until they can harvest it because they need to get paid, and the same is true for the truck driver that brings it, and to the baker that wakes up.” You know, all this is just controlled by incentives. In the Soviet Union, the reason it didn’t work is not because they didn’t have incentive. But the incentives were not good, and so that’s why it didn’t work. So incentives are here. It’s not something that we come and introduce incentives. You all have incentive. You woke up this morning, and you’re sitting now and doing this podcast. You have some incentive. My incentive is to spread my ideas, maybe sell some books. I don’t know what are your incentives, but I’m sure that you have some, maybe interesting discussion, maybe get more followers. I don’t know what it is, but we all have incentives. On top of that, you need to introduce incentive. And that’s exactly like what you said. It’s not easy. So think about—I’m 56. Imagine that I go to the doctor, and he tells me, “Oh, you’re overweight. You’re prediabetic. You need to start—walk half an hour a day, and then everything will be better.” And I say, “Sure. I mean, diabetes is a horrible disease. I’ll do everything.” I have strong incentives to avoid it. Then I go back home, and I open up a six-pack and sit in front of Netflix, right? So the question with the things that I’m trying to do is how to get this guy, this 56-year-old overweight guy, to walk half an hour a day. Well, the incentives are already there, right? There is a very strong incentive to do it, not getting diabetes. That’s stronger than any incentive I will ever be able to provide anyone, right? So tell me, you know, how much do I have to pay you in order to get diabetes? There is no amount of money that you can pay me. But, still, we believe that, with incentives, we can change people’s behavior because we are complicated machines, and we don’t always behave in the way that is predicted. So, again, an economist would predict ‘if this will prevent diabetes—that is, following our incentives, this guy is going to walk for hours every day.’ And the reality is not. And the question is can we introduce some incentive to change it?

Lenny: 00:09:05

So that’s actually—that’s a very relevant example because I experienced that. And we’ll share the point. I went to the doctor, and I was overweight, and I was prediabetic and started this keto diet, lost the weight, but it didn’t stick.

Uri: 00:09:18

It’s hard.

Lenny: 00:09:19

And so the incentive—

Uri: 00:09:20

It’s hard.

Lenny: 00:09:20

Yeah. Right. And I think my point, not necessarily about that—it’s about the stickiness of incentives, right, of that behavior change. So is that an area that you explore of—

Uri: 00:09:31

Absolutely. Absolutely. Instead of stickiness, we call it ‘habit formation.’ And how do we get you to actually, you know, you, Lenny, to keep with your diet, the diet that you started. And it turns out that it is extremely hard. In the short run, we can. And we know—so I lost, like, 5,000 pounds in my diet.

Lenny: 00:09:47

[laugh] I did too.

Uri: 00:09:49

Then gained 5,040, right? So that’s a problem.

Lenny: 00:09:52

Yeah.

Uri: 00:09:52

Right?

Lenny: 00:09:53

You know that.

Uri: 00:09:53

Adult life, right? So it’s easy. In some cases, it’s easy to lose weight. But keeping this is hard, right? Sticking with it is very hard. And we understand some of the reasons, right? I want to eat this steak or cake or whatever now, and the punishment for it is later in the future, right? So we are focused on now. We understand this. We understand that evolution made us really chase sugar and fat because there was scarcity of that. Now, there isn’t, but it takes time to adapt, right? So we need it. We understand that genes are important. We understand all these problems, but still, can we get people to do—maybe not to keep all the weight down but to keep somewhat healthier outcome is useful. And, when you think about these things, for example, if I would’ve been your doctor, I would tell you that, “Actually, exercising is easier than losing weight.” Because in order, you know, to lose weight, you need to be good for 24 hour a day, right? You can be good for 23 hours then get home, eat this large piece of cheesecake, and your day is gone, right? With exercising, you need to be good, in a sense, only when you are exercising. So that makes it a bit easier I think, right. A bit more likely to stick in the long run. So, if you can get into your schedule that, you know, on Monday and Thursday morning you go to the gym, that might be easier because the willpower that you have to exercise is for a shorter period than all the time. But those are the kind of things that we try to understand. But, clearly, it’s not something that just—in your case, with the what you described, to change the placement of the tomato and the bacon, and you lose weight. No. You’ll find the bacon. You’ll find your way to the bacon.

Lenny: 00:11:39

You’ll find a way. Yeah [laugh] . Well, in the justification for the—just as an example, right, we can have a whole another conversation about the secrets of weight loss. Like you, I lost a lot, and I put a lot of it back on. But let’s broaden it to the application within, you know, business or within social good because it’s the same principle, right? We have whatever self-destructive tendencies—for whatever we reason we want to, you know, be able to change those things. What are the tips that you’ve learned or a framework to think about, for listeners, to say, okay, you have a desired outcome of a behavior, and, you know, through the lens of incentives, these are the things that you need to pay attention to and try to incorporate into your strategy?

Uri: 00:12:31

Right. So imagine that you want to incentivize people, say, to save energy. First of all, one thing that you should emphasize is the one-time change. All right? So, if you want to save electricity, if I wanted to stay without the AC for a long time in the summer, that’s going to be hard. Because, at some point, you’re going to be tired and your spouse will annoy you or something like that, and you’ll just continue [unintelligible] . But, if you invest some money in insulating your house, for example, that’s going to stay there. All right? So one-time change—that’s always good to do. Another one is to reduce barriers to do something. So, for example, we had success with paying people to go to the gym because, in many cases, you know that that the gym is there. It will take you half an hour to register, and you don’t do it because you’re, “Well, I don’t know. Where do I need to go? Where can I change clothes? When can I, you know—which form do I have to sign? That’s annoying. I’ll just—I’ll do it tomorrow.” And, if I pay you some money to go and do that, after the first few times that you do it, you might develop some kind of habit. And I’ve lowered this barrier for you to go there. And so that’s another example. Another one could be information. So an example that I really like is the recycling of plastic water bottles. That’s one of the worst things that happened to—in terms of the environment—the fact that we can recycle them. Because, you know, if you’re the type of person that doesn’t care about the environment, you’ll just drink it and throw it away. That’s fine. But the people that really care about the environment now see it is a license, as a permit to drink from these plastic bottles because they think, “Oh, anyway, I’m recycling it.” Turns out that the recycle process reduces the damage, but it reduces it by, I don’t know, 20 percent because many of them don’t end up in the recycle but simply in the trash. And, even when they do end up in the right place, there is a loss for the environment by using them. So I think that just providing this information to people who care about the environment might get them to have a reusable bottle instead of the plastic bottle. So information is another one that you can think of. And that, again, this—these are the kind of things that you may be able to achieve with incentives.

Lenny: 00:14:49

So I think to bring it back to kind of the lens of market research as a transactional component, right? What I’ve often though is that the four categories of incentive are either economic, social, entertainment or fun, or altruistic. All right? And you think about those things where people offer, “Hey... do this for us.” You either get information or here is a check or you’ll engage with people, and we tend to—I think not just the market research industry, but many industries—when all you’ve got is a hammer, everything looks like a nail, right? And so we default to the idea of ‘we’re just going to give people money.’ But that is not a motivating factor for engagement or for participation for some chunk of the population. I think about social media platforms, right? They offer all of those things, you know, Facebook, et cetera, et cetera. There’s some components where you can incorporate all of those things, and that keeps you coming back, you know, so. Well, first, what do you—am I right in thinking about those kind of motivational buckets, when you think about incentives, that we have to think about different levers?

Uri: 00:16:01

So I think this time the answer is yes. You know, and not—

Lenny: 00:16:03

Okay. Good. Yeah.

Uri: 00:16:04

That’s better, right?

Lenny: 00:16:05

Yeah [laugh] .

Uri: 00:16:06

I use a different classification. But, in general, you know, in practical terms, it’s the same. So, absolutely, incentive is not just money, right? Money is an easy way to do it, and money could be useful in some cases and could be insulting in other cases, right? If I ask you, “Lenny, can you come help me move my couch? And then I’ll give you $10,” you’ll be insulted by that. If I buy you a beer, you won’t—even if it costs less than $10, you’re not going to be insulted, right? So money carries some kind of meaning. In this case, it could depend on the amount. If I’ll give you $10,000 for helping me moving the couch, you’ll be happy, I think. Now, I don’t know about you. If you want help with moving your couch and are willing to pay $10,000 for it, I’m there.

Lenny: 00:16:46

[laugh]

Uri: 00:16:46

That’s—so—

Lenny: 00:16:48

It’d be a hell of a couch to pay that much, right?

Uri: 00:16:53

Yeah. Right. So the amount of money could also carry some meaning. But, in general, in many cases, it’s better to pay in other ways. So you talked about social incentives. In many cases, we see that paying people to do something, to volunteer, say, we call it [crowds out] . It makes them do it—less likely to do it. So if I asked you, “Lenny, can you come and donate blood?” Maybe you’ll give two hours of your time and do it because it will make you feel good about yourself because you’ll have the work. If I’ll pay you $20 to do this, you’ll say, “Well, for $20, I won’t do it,” right? So I’m paying you money, and it changes the meaning. Now you’re not going to look at it as ‘I did something good.’ You’ll say, “I did it for $20. That’s not worth two hours of my time in the middle,” right? But if I tell you, “Look. If you’ll come, apart from everything, we’ll give $20 to, I don’t know, Make-A-Wish Foundation. I’ll donate this.” So that’s kind of social incentive. And I’ll say, “Wow. That’s great.” Right? So, in this case, instead of paying you the $20, I give it to charity. And that actually helps with convincing you, right? So the interplay of it is really interesting, right? That’s what makes incentives so interesting, I think. And using all of the categories that you mentioned is important. So sometimes money, sometimes I need to give you—something that’s with a blood donation, I can give you a coffee mug with the logo of the blood bank. Then every morning that, you know, I’ll drink coffee, I’ll say, “Wow. Uri, you’re good guy. You donated blood,” right? So that will reinforce the—so money is good in some cases, not good in others. Giving gifts is good in some cases, not in others. Charity might be a better approach in some other cases. So it’s really complicated. Which, again, if you understand all of this, it really helps you order the entire spectrum, which really helps you to try and find what’s going to work in your case.

Lenny: 00:18:41

We’re going to take a quick pause to highlight our podcast partner, Dig Insights. Have you listened to Dig In? It’s the podcast brought to you by Dig Insights, designed for brand professionals that crave innovation inspiration. Each week, Dig invites a business leader onto the podcast to spill the beans on the story behind some of the coolest innovations on the market. Search ‘Dig In’ wherever you get your podcasts. All right. So I’ve got two questions. The first one—and we’ll go with that, and then I’ll ask the second. Whether it was a campaign or project you were directly involved with or not, what do you think of as, “Man... that was the best example of applied incentive strategy that I’ve ever seen?”

Uri: 00:19:28

I think that the answer is clear—reducing smoking. So, if you look from the early 70s—that’s before my time as a researcher—in the US. I live in California. I don’t know the numbers, but it was way over half of the people who smoked. Your teacher in school would probably smoke in front of you. I am old enough to remember flying. I was, you know—I was very young, and so I always sat in the back seat where you were allowed to smoke. So people from business class would come, sit on my lap, you know, smoke on me, and go away, right?

Lenny: 00:20:02

Yep. Smoking in hospitals. Smoking in everywhere, right? And—

Uri: 00:20:05

Right. You’re totally smoking, right. Right.

Lenny: 00:20:08

Right. Right. My parents big ash trays—

Uri: 00:20:11

Exactly.

Lenny: 00:20:11

—sitting in the house.

Uri: 00:20:12

Exactly.

Lenny: 00:20:12

It was a social thing, right?

Uri: 00:20:13

Exactly.

Lenny: 00:20:13

Go ahead.

Uri: 00:20:13

I have ads from the 50s and 60s where doctors recommended pregnant women to smoke because it’s going to relax them. So, from this world, we got to today where almost no one smokes, at least in California. You go to Europe. You go to some places. There are more people are smoking. But, in California, there is—you don’t see people smoking. On my campus, you’re not allowed to smoke. You have to walk, like, 10 minutes in order to smoke a cigarette. And then you think about what made us go there. So, first of all, you know, it was the labels. Then it was the horrible pictures that in some places you have. Then it was you’re not allowed to smoke in the workplace. You’re not allowed to smoke even in the building. You have to go out. You’re not allowed to smoke in bars. You know, all these small steps and of course, of course, of course, the price of cigarettes, which is extremely important because, you know, today I can afford buying a pack in California. I think it costs more than $10. I can afford buying it. But 56-year-old don’t start smoking. It’s 16-year-old will smoking or 15. For them, $10 is a lot of money. When it was $2, they could afford it. When it’s $10, it’s much harder for them. So all these steps of this public policy are—starting in the 70s, I think, really changed the smoking habits of the population. And it took more than 50 years, but it’s there. And I think that I look at all of it as incentive. If I’m not allowed to smoke in the bar, why would I smoke, right? Because smoking—it’s really fun to drink beer and smoke with your friends. But, if I’m not allowed, I look at is as incentive. The price is clearly an incentive. The fact that at my campus you have to walk 10 or 15 minutes in order to smoke, that really increases the cost of smoking, right? So then now people are less likely to do it. All of this—I look at them, all this public policy, as incentive, and it was extremely successful, maybe the most successful public policy I can think of.

Lenny: 00:22:04

Now, the flip side, an example of the application that was effective, but maybe it’d better if it hadn’t have been, maybe a misapplication? Because, I mean, let’s be clear. These, you know—depending upon the intent, understanding how to control the levers of behavior can be done for good, like your example, but sometimes for not so good. So an example where you’re thinking, “Man... I really wish they had not read my book or had not [laugh] , you know, followed through because that wasn’t a great application?”

Uri: 00:22:34

Well, they should’ve read my book, and then they wouldn’t have done it. So I have this small paper about giving fines for parents coming to pick up their kids late. And, recently, I learned about a similar incident from England. So they have this problem that when you go—when you have kids and you want to go on vacation, you have to do it during, say, spring break, and then everyone is out there. So it’s much more crowded, and it costs much more. So people took their kids a week earlier, and it was a much cheaper trip, and it’s much more pleasant because there are less people over there. Other people kids are really annoying. If you go off spring break, it’s good. The schools didn’t like it because the school, you know—they want you to be there. They want the kids to be there when school is on. So what they did, they introduced—if I remember correctly, it was £60 fine if your kid was absent a week before. And then, what you saw is, of course, a much larger fraction of parents taking their kids a week before. Because, for £60, you know, the ticket—the airline tickets are going to be £500 cheaper. And, you know, now, basically you put a price on it. Before that, they didn’t know how bad it is to be absent to go on vacation during the school year. Now you’re telling me that it’s only £60. For £60, I’m willing to pay it and just go. So sometimes, you know, just imposing a fine could have a really negative impact on.

Lenny: 00:23:56

Backfired. I’m willing to pay that.

Uri: 00:23:58

Exactly.

Lenny: 00:23:58

So.

Uri: 00:23:59

No I get a license not to be there.

Lenny: 00:24:01

Right. Right. That’s really, really interesting. All right. So we mentioned your book. Let’s talk about your publishing, you know. Where can folks access you’re thinking and—around all of this?

Uri: 00:24:13

Right. So the book is called Mixed Signals. And the idea is that every incentive that we give sends some signal to the recipient. In the example that I just gave with the schools in England, the signal was ‘it’s okay to go—to be late. You just have to pay £60.’ Before that, I didn’t know how bad it is. Now you’ve told me how bad it is. That’s a signal. And, in general, the book looks at the how, in many cases—it’s called Mixed Signals because, in many cases, I can tell you that I really want to, for example, focus on quality, but then I give you incentive for quantity. Then, you know, you’re going to follow the incentives, and I’m not going to get quality. If I don’t understand it, it’s not enough for me to say something. And it could be that I can tell you I care about the long run, but give me incentives to be—to do well in the short run, again, you’re not going to think about the long run. I can tell you, “be a team player,” but give you individual incentives based on your performance, then why would you do things like mentoring other new employees, right? I can tell you to be creative, but then creativity means that you’re increasing the risk of failure, right? So if you’re increasing this and my incentives are set such that they punish you if you fail, why would you try new things, right? So all these I give—for example, I have many more. All these are examples where I tell you one thing, but then my incentives send you a different signal, and you don’t really what will happen. And, in many cases, companies, employers, parents, whatever, say one thing then set incentives that send different message and are surprised that they don’t get what they expected. So, in general, by the way, the takeaway of the book is very simple. I think that every company should have what I like call a ‘common sense officer.’

Lenny: 00:25:58

[laugh]

Uri: 00:25:58

All right. Exactly. Pick someone from the street that—tell them, “Look. That’s what I’m going to do.” And they can tell you if it made sense or not, right? So make sure that you use common sense to think, “Okay. I’m going to pay you for quantity. What’s going to happen to quality?” Well, [unintelligible] , you know. And, very often, you know, think about in juniors, they don’t have common sense, so they need it.

And then, the second part is this A/B testing kind of culture. It is really important. Because you can set the incentives, and sometimes you send the wrong message that you didn’t think about. Many times, people will find ways to game the system. People are really creative at this. Don’t roll it for the entire operation. Roll it for a small group. See how it works. Tweak it as needed until you are satisfied, and then keep monitoring it with A/B testing routinely because people might learn how to game it even if they didn’t know immediately.

Lenny: 00:26:53

Oh, yeah. I mean, and that is a significant issue in advertising click-fraud, right. We incentivize that in the market research industry—false participants in research studies because we enabled that. We gave them the incentive for the fraud with the focus on speed and scale versus quality.

Uri: 00:27:14

Yes. I think that’s a great example, right, in which—so, in this case, you need to monitor them. You need to audit them. You need to make sure that they don’t give you trash. Otherwise, they will. So you want them to be fast and efficient, right? But you don’t want them to have a way to—of cheating you.

Lenny: 00:27:31

So question, now. You know, the big topic of the year has been the advent of generative AI, right?

Uri: 00:27:39

Yes.

Lenny: 00:27:40

ChatGPT, those type of things.

Uri: 00:27:42

No question.

Lenny: 00:27:43

Yes. And—

Uri: 00:27:44

Flavor of the month, right?

Lenny: 00:27:45

Yeah [laugh] .

Uri: 00:27:47

[crosstalk]

Lenny: 00:27:47

And flavor—

Uri: 00:27:47

You know, it’s—

Lenny: 00:27:48

Yes, a flavor of the last 10 months so far.

Uri: 00:27:51

Right. That’s true.

Lenny: 00:27:52

But—

Uri: 00:27:52

That’s true.

Lenny: 00:27:52

Right. I, personally, have not—I’ve stayed right in tune of watching it, understanding it, seeing what’s going on, but have held back on utilizing many of these tools because I know myself. I don’t want to get lazy, right. I don’t want to outsource some of these, you know, things that I could utilize these tools for. So—and let’s step back for a second. In areas of technological disruption and innovation, that’s great. We’re in one of those periods right now. But what’s your take on the concerns that—

Uri: 00:28:30

I thought you would take it in a different direction about the morality and ethical aspects of that, and I think—

Lenny: 00:28:35

You know, we can talk about that too.

Uri: 00:28:36

No, no. I think that it’s not relevant for us as individuals, right? So it’s like asking if having word processor is ethical because many secretaries are going to lose their job. Or, you know, tractors, are they ethical? Because farmers are, you know—I think, and clearly the copyrights—there a lot of important ethical issues, but that’s not what I’m doing. The question is, is I using it? I’m using it all the time. Now, I know that I have a perfect American accent, but you’d be surprised that I’m not—English is not my first language, and writing is so much easier when you plug in the right prompt into the ChatGPT, right? And so I’m using it. I became what you called lazier than I was, right? I’m lazy to begin with, and I’m lazier now. I’m using it. I think that we need the chance that—I tell you, we lose some of the abilities lower. But I think about my son. He is 20 year old. He’s in college. He is going to lose some of the abilities that we had, right, because he is using it all the time now. There is some abilities that are not that important. The ability to write in cursive, you know, they don’t learn it anymore because they don’t write anymore. They use computers which—or use phone, right, which is fine, right? I think that that’s not—again, it’s not a moral question. It’s technology is changing. They are changing. We might lose some of the ability to—for creative writing. And the world is going to change. From my perspective as an economist, I would ask how will the world change, and what, you know—if I was a marketer, what should I change in what I’m doing in order to address this change? And the change is coming. So I’m lazier than you. I do a lot of—unfortunately, for me, when I wrote this book, this function was not there anymore.

Lenny: 00:30:24

[laugh]

Uri: 00:30:24

If I write another one, it’s going to be—it’s going—you know, ChatGPT is going to be my [unintelligible] .

Lenny: 00:30:29

Well, the laziness is my way of thinking about it for myself because I know that, by my nature, you know, water flows to the lowest point, right?

Uri: 00:30:37

Right.

Lenny: 00:30:38

Please don’t take it as any derogatory thing. And for our listeners—

Uri: 00:30:41

No, no. I am proud of being lazy. I think of laziness—

Lenny: 00:30:43

[laugh]

Uri: 00:30:43

— [crosstalk] a right. So, if you’re not lazy, you know, you can spend all the time doing nonsense work, for example. If you’re lazy enough, you don’t, right? So you have more of your peak—what you’re doing. So I—for me, laziness is not necessarily a negative.

Lenny: 00:30:57

Well, good. All right. So that’s [laugh] , yeah—we can go lots of other places off that, but we’ll leave that one there. So our listeners are primarily folks that work within market research organizations, either on the brand side, you know, P&Gs and those in the world, or on the supplier side. And everybody’s listening, I think, with the intent of thinking about, “How do we take these lessons and apply it to the world of marketing and/or—and marketing insights?” So is there a distillation that you can offer from that particular lens that would be useful to the listeners? Or is your answer, “Go read my book?” And that’s okay too.

Uri: 00:31:38

Well, it’s always—well, buy my book. I don’t care about reading it. Just buy it.

Lenny: 00:31:47

[laugh]

Uri: 00:31:47

So maybe I can give you an example. Because I think that almost everything that you do is—in a company is around marketing, right? So it’s not that one thing is not. So the CEO of Coca-Cola had this great idea. He said, “You can put a thermometer in the vending machine and change the price depending on the temperature outside. On a cold day, we can charge people, say, $1. On a hot day, we charge them $1.50 because people want to buy more.” He introduces this, and everyone was, you know, “junk.” It was, “What are you doing? Are you trying to take advantage of us when we really need your soda cans? That’s when you are raising the price? This is...” In some cases, we are used to it. Airlines use it all the time. Hotels use it all the time. But for this, for some reason, people were upset. What he should have done—and that’s what the marketing people should have told him. “Look. You’re getting it wrong. You should say the regular price is $1.50. And, on a cold day, you’ll get a discount, and it’s going to be only $1.” Now, he’s a great guy. Now Coca-Cola is a great company because they are willing to reduce the price when they can. They give you a discount, right? So the first one, people saw it as a surcharge. The regular price is $1. On a hot day, you charge me $1.50. That’s nasty. This one, which is exactly the same number for exactly the same situation, you give me a discount. You are great, right? So that’s what I think marketing people—that’s when they interact with the incentive, the understanding that incentive tell the story. I look at the circle, and it’s never just a circle, and it comes with a big story around it. And I’m going to use everything that I have, every clue that I have from the environment, in order to construct this story. In many cases, incentives are going to be part of this story. And, if I see that the company is nasty to me, I’ll go to Pepsi. I’ll just take a Pepsi instead of the Coke. But, if they are nice to me, then maybe I’ll reward them by buying their product. And I think that that’s a good connection between understanding that incentive is also part of the marketing.

Lenny: 00:33:45

Yeah. Yeah, absolutely. That’s great. So what have I not asked that I should’ve or that you would like to touch on?

Uri: 00:33:53

Those are two things. So, when I said that I’m Israeli, you should have asked me about the incentives, maybe how it relates to the Israeli conflict, but it’s good that you didn’t because I would start crying because of the situation now. So maybe this part you can cut. Let me answer it differently. That’s not a good way to start to finish the podcast, I think.

Lenny: 00:34:12

No, I’m actually glad you brought it up. I planned on circling back to it because we can’t ignore the world. So we don’t have to dive much deeper into it, but I—it’d—

Uri: 00:34:21

Let me start from the beginning. So, if you think about the Israel situation, it’s really interesting because Israel has the best intelligence in the world. It knows everything that happens on the other side of the Hamas border. And, yet, the real thing that they—that the other side planned for two years with thousands of people, took Israel by complete surprise. How did it happen? So, if you look at it just from an incentive perspective, Israel understood everything about the payoff, you can say, of the other side, of the Hamas. Let’s make it simple. Hamas could have had the status quo, in which from time to time they shoot rocket, nothing too massive. We retaliate, but that’s okay. Then we keep allowing 30 million dollar from Qatar money to go every month into the Gaza Strip. We allow tens of thousands of workers from the Gaza Strip to go into Israel. They are happy because they can maintain the place, that people are happy. Everything is okay. And they knew—everyone knew that they other payoff is Hamas is going to do something really drastic, like they did, and then we’re going to flatten the Gaza Strip. It’s going to be horrible over there, right? We understood the incentives. The—we call it a conception—was that Hamas prefers the first over the second option because that’s how we see the world. If I ask you what do you prefer—what would you prefer, you would tell me, “I prefer the normal life, right. I want to have people will go—kids will go to school. Hospitals will work. People will have money.” It turns out that that wasn’t the case. Hamas preferred the second one—preferred the total war version of it. But the interesting part—a part, you know—we understood the incentive, we just didn’t understand the utility function. But then, once we think about it in incentives term, you know, you see a week before that Hamas made the huge drill of how they were going to take military bases and the settlements and posted it on social media. In Israel, that should’ve been, “Wait a minute. Maybe we are wrong.” No, it’s, “No, actually, yeah, that’s—they’re dong these drill just to keep the façade, right?” We call it confirmation bias, or psychologists call it confirmation bias. Every new information that you had that should’ve had some ‘wait a minute. Something’s wrong—happening,’ was attributed to what we thought, the conception that we had. And that’s, you know—and I think that that was the mistake. So we understood the incentive. We didn’t understand the utility that they put on each one of them. And then we interpreted everything based on the way we wanted to see it—Israel is. And I think that that was the big mistakes in terms of incentives that really led Israel to be surprised by that.

Lenny: 00:36:55

That’s a powerful example, Uri. And I join you in hoping that this situation—I’m not sure when this particular podcast is going to be resolved. Obviously, the whole world is watching this with horror and disgust and fear—and hope that this is resolved in a way that saves more lives than have been lost so far. And, you know, God bless you and your family and anybody else that has been impacted.

Uri: 00:37:22

Thank you.

Lenny: 00:37:23

With that example, I think—as you mentioned, confirmation bias, I think that’s a great warning for everybody to think about with this concept. Like your example with the Coke CEO. Well, yeah, this makes perfect sense if we go in and do this. And we interpret data through our own lens and our own biases, and often the message is something radically different.

Uri: 00:37:43

Exactly. And that goes back to the common sense officer. The common sense officer, if you have put any normal person over there instead of the engineers that can put this thermometer in the vending machine or the economist that advised him, you put a normal person—no, I’ll be pissed off if you’ll increase the price when it’s hot outside. Find a different solution, right? That’s the common sense officer that I talked about that many companies are missing.

Lenny: 00:38:09

Yeah. Well, and it’s, you know—we call it the, you know, the voice of dissent, the out of the box, you know—but somebody to poke. Somebody to poke a hole and say, “Wait. Wait a minute. Are we really thinking about this correctly? Are we interpreting this”—

Uri: 00:38:21

Exactly. Exactly.

Lenny: 00:38:22

—this appropriately?”

Uri: 00:38:23

Exactly. Exactly.

Lenny: 00:38:24

Yeah. No, that’s fantastic. I want to be conscious just of your time and also our listeners. Where can people buy your book? So [laugh] .

Uri: 00:38:36

Yeah. I feel cheesy, like, you know.

Lenny: 00:38:37

No, no, no. Absolutely. Hey...

Uri: 00:38:41

You know, I was selling books. Amazon is a good place that I know of.

Lenny: 00:38:44

Okay. All right. So you can find it on Amazon. And where can people find you and follow you is—because I assume this is what you believe up to now. There is going to be more as you continue to think through this whole process. So where can—

Uri: 00:38:57

No, I’m—

Lenny: 00:38:57

—people follow you?

Uri: 00:38:57

Yeah. I’m not really on social media. I’m always happy to get—to receive emails. So you can—if you google my name, you’ll find my email. And I’m always happy to get feedback, positive or negative, because otherwise I feel as if I’m talking to myself. So getting feedback is great.

Lenny: 00:39:15

It’s great. Thank you so much. This has been a great conversation. I really, really appreciate it. I hope that we have an opportunity for you to come back and participate in other ways. Anything else that you want to put out there before we wrap up?

Uri: 00:39:28

No, it was fun. I really enjoyed it. So thank you.

Lenny: 00:39:31

Good. I’m glad. So that’s time well spent. That’s an incentive.

Uri: 00:39:34

Yes.

Lenny: 00:39:34

Right? Yeah [laugh] . All right. Thank you. Thank you, Uri.

Uri: 00:39:38

Thank you. Thank you.

Lenny: 00:39:39

All right. Big shoutout to our producer, Natalie; our sponsor, Dig Insights; and, of course, thank you for—our listeners for joining us. Otherwise, it would just be, you know, Uri and I talking, which would be a blast, but—

Uri: 00:39:52

It’s fine. It’s—that’s good enough.

Lenny: 00:39:53

Yeah. Yeah. But it’s nice when there’s kind of this eavesdropping thing, you know, of, like, maybe someone else is getting something out of this besides just me. It’s my altruism incentive, you know. I just like helping people, and I hope they get something out of this. And so [laugh] anyway, that’s it for this episode of the Greenbook Podcast. I’ll be back real soon. Thanks a lot. Bye-bye.