The economy of wrong incentives
Disclaimer
The post is purely my personal opinion. I may be wrong and missing some essential bits and pieces so take it for granted. I still believe that no one does harmful and malevolent actions intentionally. However, our economy is broken, and we praise the activities that are not in favor of consumers more than they should.
Dystopian prologue
I am searching for information online and can't find anything helpful.
I am scrolling the feed and get even further away from the people that matter to me.
I am striving for food; it looks good but does not have nutrients for me.
All of this was built on the wrong incentives.
Anecdotes
Almost everyone had heard the story about the "cobra effect" when the British government in India paid for killed cobras, so entrepreneurial people start to breed them for cash. When the government find out about the scheme and suspend it, the breeders release all the cobras, and the population becomes even bigger[1].
We laugh about this case, and still, we manage to make the same mistake in almost all the spheres of our lives.
Digital world
Language learning
I am very interested in learning languages. When I was a kid, I start to learn a new language every week. They fascinated and inspired me. Just an idea to communicate with people from entirely different cultural contexts inspires me and motivates me for new endeavors.
Most of the apps and language learning classes have a subscription-based model. The revenue is coupled to the fact I keep learning and keep renewing it. Based on that, the most efficient strategy to keep the business running seems to be the opposite of what is in my best interests.
When I choose an app to learn a language, I strive for the fastest and most advanced system to get a certain level of fluency in the shortest period. My goal is utterly opposite from the business goal, and the probability that my aim will be the top goal of the app makers are very low. In my opinion, it is much more likely that they will optimize some other metrics that maximize revenue and postpone my fluency, most likely unintentionally.
Searching online
Searching online becomes a problem. There were no feasible ways to find relevant information on the internet youth, so many different search engines appear. Nowadays, it is super easy to find information that matches what has been requested very precisely but has zero or close to zero value inside. The massive number of articles are made up for search engines. They are structured, have pictures, and the right number of keywords on the page, but they do not contain the most critical part - valuable information for the end-user. The biggest issue is that the content could be harmful. There are thousands and thousands of sites about health issues, and most of them are just made by intelligent people to make some easy cash.
Internet is full of trash, and unfortunately, search engines are entirely wrong in separating content by quality.
The primary business model for search engines is selling advertising. Some search engines are more ethical than others, but it is not the main point here. The real problem is that high quality and precision of search results could decrease ad revenue. When I think about it from the first principles, I see it in the following way. If I get paid for ad clicks, then I want customers to click it more often. The first solution that comes to mind is putting the ads listing in front of the organic search results. What else can I do? If the ads matches are more accurate than organic matches, it should drive the clicks even further. Anything else is floating around? Yes, we can try to mask ad listings so people will often confuse them with organic results.
Social networks
I caught myself sticking and watching some video in my social network feed quite a few times already. The algorithms have learned me well enough and can trigger my interest and hold my attention for a very long period. My main goal of joining the network was to stay in touch with people who matter to me and not stare into some dumb videos in the endless news feed produced by some algorithms.
Social networks sell people's attention to advertisers, they want us to spend as much of our time inside as possible, and in the end, we have fun there instead of using it to keep connections with people. The longer people stay on a site, the more ads they could see and the more revenue it will generate. It sounds like an infinite money-making machine.
Material world
If we think that such things could happen only with digital products, I have terrible news.
Food
When I buy some food, I pay for some size measurement, per kilo, for example. As a food maker, I should be interested in producing as many kilos as possible because I can extract from a single unit of an area, the better for my business.
Well, how can it be done? For example, chickens are sitting in small cages without any ability to move. They get many antibiotics with food to reduce mortality and live for a single reason - to become a portion of food on someone's table. Obvious what kind of impact such food will have on the human body, which is not even talking about the ethical part of the problem.
The interests of breeders contradict the claims of consumers. Interesting, how about the situation with fruits and vegetables.
The constraints for farmers are still in place - to get as much value from the piece of land as possible. How can we do it? First of all, we should increase the fertility of land with a vast amount of fertilizer. The next step would be selection and gene modifications until vegetables become big and bulky. Sure thing, we have to use a lot of chemicals to keep the parasites away. The last piece is probably to make it beautiful and stay fresh as long as possible.
There is no consumer interest in the modern approach to food production on a plate. Food should look good, stay fresh ideally forever, and be heavy to be sold for more.
Gyms
Gyms probably my favorite one. As a value proposition, they sell good health, pretty look, and a healthy body, but they get paid on a subscription model for some reason. What is the perfect client for a gym? The guy or girl who buy a year subscription and use it only once. It is not a thing that was purchased by the customer.
What can we do to fix the situation
The current situation looks terrible, and if we keep iterating a world around us based on wrong incentives, someday we will wake up in a very dark future.
Skin in the game
There is only one solution I see - to align companies' goals with customer goals. If companies risk their revenue if the service is terrible, they will focus on quality. Let's see how we can modernize discussed industries to make them aligned with customers' strives.
Language learning
The most customer-friendly model is "bought once, used forever, refund at any time." The idea sounds crazy, but such a business model will force language makers to build something that minimizes the losses if you think about it. It teaches the language in the fastest possible way because every day, the customer uses the app, and the company is losing money.
Searching online
People should pay for usage, no ads, and only vetted content. No more long articles full of water, only the content that matter.
Social networks
I have to be honest. I don't see a way to make it works. It just looks broken for most of the cases. Some social networks could be treated as news feeds with a fee for getting into topic details, but it is very wage and rough.
Food production
Food should be valued not by weight but by nutrition value it gives to the consumer. The more healthy and beneficial for the customer well being the food, the better. If we push it to extremes, I'd love to eat as little as possible and get as much as possible out of the food.
Gyms
People should pay for the results they want. For example, customers could buy a 6-pack abdominal program, and a personal trainer will make it happen.
Hopeful epilogue
The examples I bring do not mean that described industries are the most affected by the wrong incentives, nor it means they are evil and do something nasty. I used them because they resonate with me, and I don't want them to become worse.
I hope that my observations are wrong, and in essence, everyone is optimizing for customer success, not for revenue.
If you are optimizing for revenue, check if it has the best customer interests in mind, and maybe tomorrow we will wake up in a much better world.
Links
[1] Cobra effect - https://en.wikipedia.org/wiki/Cobra_effect