July 17, 2020

“I get paid anyway”

Longtime friend of the list Anthony English sent in this stellar example of the misalignment of financial incentives created by hourly billing (shared with permission):

Hey JS,

Just dropped off my 16-year-old daughter at her work at the coffee shop on Saturday morning.

We drove past a field and she said: “oh darn! The football’s on this morning. That means we’ll be busy.

I commented: “great! You’ll make some money.”

She said: “I get paid anyway.” Of course she does! She gets paid for the hours she works.

Misalignment of motivation between the business owner (who wants business) and a casual employee (who works hard, but doesn’t really care about gross revenues, as long as she keeps her job).

Hourly Billing Is Nuts!

AE

Great example!

I am the first to admit that punching the clock at a coffeeshop is meaningfully different from billing by the hour for client work.

But they do have one dynamic in common:

The misalignment of financial incentives.

In either case, you get paid no matter what.

Is this arrangement less risky for you?

Yes, of course.

But with little risk comes a little reward.

Yours,

—J

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