Breaking the Rules to Do Things Right

"Smoking in the boys' room
Smoking in the boys' room
Now, teacher, don't you fill me up with your rules"
-- Brownsville Station

For nearly 20 years, our leaders decided traditional economic rules didn't apply. It got us into a financial crisis.

Washington and Wall Street rewarded bad behavior instead of giving incentives for doing things right.

I had two relatives who were chain smokers and I offered them an incentive to quit. I agreed to give them $1,000 if they could quit for a year. If they started smoking any time during that year, they had to give me $50.

It worked. Both quit. It has been 20 years and neither took it back up.

It was a great exercise in psychology. I don't think the $1,000 jackpot by itself would have worked. The reward was too far out in the future. The $50 penalty by itself would not have given enough incentive.

It took an unusual combination to make it happen.

Chris Anderson has written two influential books, The Long Tail and Free. Both are on how technology and the future meet. One of the most fascinating points he covers is a topic called, "Reversible Business Models." He credits the term to Derek Strivers, the founder of CD Baby.

The idea is to reverse a traditional business model, such as a bar hiring a band to play for its customers.

Anderson talked about bars in Los Angeles that make bands pay a fee to play for its customers. It works. The band gets exposure, the patrons get entertained and the bar makes a profit on an item that used to be a cost.

Anderson hit on a topic that has plagued professionals and service providers: how to charge for their time and effort.

Pricing for professional services isn't easy. You can charge too little, charge too much or charge for the wrong thing. I've done all three.

People often don't value services that they don't pay for. No matter how valuable the service really is.

More than 20 years ago, I owned part of firm that did political polling. We were ahead of the technological curve and very accurate. We had a number of paying clients, but had several friends running for office who couldn't afford us. Often in doing research, we would find something that could help our friends.

The friends often ignored us while people actually paying for surveys never did.

We noticed that one of my friends had a problem in a geographic area. We told him, but his paid campaign manager had "a gut feeling" we were wrong. My gut feeling was that the campaign manager was an idiot, but the friend was paying him and not paying me. The advice was ignored; our buddy lost that area by a wide margin and the election by a tiny one.

Anderson hits on why some free products are embraced and others are not.

Two of the best ideas are wellness related. Anderson talked about doctors in China who are paid monthly when you are healthy. If you are sick, you don't pay. It is the doctor's job to keep you well.

A similar idea is a gym in Denmark that allows you to attend for free if you show up once a week. If you miss a week, you pay for the entire month. It reminds me of the anti-smoking plan. A combination of penalty and incentive.

The doctors in China and the gym in Denmark are plans to promote physical wellness, but they are also promoting economic wellness. They are developing models that other entrepreneurs will copy.

I've written five best-selling books on topics as diverse as lottery winners, Kentucky's governor, Wall Street and golf. The only common thread is that overwhelming legions of fellow authors hate my marketing strategies.

Most have never written a best-selling book, but are great followers of conventional wisdom. They sit around waiting to be "discovered" by a big time agents and mail out tons of query letters.

I don't have an agent, never sent a query letter, own my own publishing company, spend almost nothing on marketing and my books hit the top of the charts. Like Steve Jobs at Apple, I never do market research. My job is to give people a vision of where they want to be, not find out where they are now.

In business and politics, too many people are worried about what is popular as opposed to what will make things better.

Maybe we should start handing them copies of Chris Anderson's books.